Strategic analysis (07)

Question 1

What is Strategic Analysis?

Answer 1

Strategic analysis is the process of conducting research into the environment that
the business operates in, and into the business itself, to help form future strategies.

Effective strategic analysis will lead to clearer and more relevant objectives, better
quality decisions and less risk for the business as it is better prepared for the future.

Question 2

What are the three ways where a business define their purpose?

Answer 2

1) Vision
2) Mission
3) Values

Question 3

What is Vision?

Answer 3

A vision is a statement about what a business ultimately wants to accomplish, and
it captures the aspirations of the business.

It is concerned with what the business seeks to create, and typically expresses an aspiration that will enthuse, gain
commitment and stretch performance.

Question 4

Note:

Employees in visionary companies tend to feel part of something bigger than
themselves.

An inspiring vision helps employees find meaning in their work.

Beyond monetary rewards, it allows employees to experience a greater sense of purpose,
and have an intrinsic motivation to make the world a better place through their
work.

This in turn leads to better work performances.

Question 5

What is Mission?

Answer 5

A mission, also known as mission statements, describes what a business actually
does, and why it does it.

It aims to provide employees and stakeholders with clarity about what the business is fundamentally there to do.

Question 6

Note:

Mission statements are not meant to be detailed working objectives, but they help
to establish what the business is about in the eyes of stakeholders.

However, mission statements are often criticised for being too vague and general, and is a
public relations exercise to make stakeholders feel good about the business.

Question 7

What are Values?

Answer 7

Values define the ethical standards and norms that should govern the behaviour of
individuals within the business.

Values communicate the underlying and enduring core principles that guide the strategy of the business, and define the way that the business should operate.

Question 8

Note:

Strong values play two important functions.

Firstly, the ethical standards and norms underlay the vision and provide stability to the strategy, thus laying the foundation for long-term success.

Secondly, once the business is pursuing its vision and mission in its quest for competitive advantage, values serve as guardrails to keep the business on track.

Question 9

What is Corporate governance?

Answer 9

Corporate governance is concerned with the structures and systems of control by
which managers are held accountable to stakeholders of the business.

It is a system of mechanism to direct and control a business to ensure that it pursues its strategic
goals legally and successfully.

In light of corporate governance, business ethics and corporate social responsibility become an increasing area of focus for many businesses.

Question 10

What is the importance of Corporate governance?

Answer 10

Corporate governance is important for the following reasons:

 Shareholder recognition.

During Annual General Meetings (AGMs), minority shareholders are brushed aside to make way for the interests of majority shareholders and the board of directors. Good corporate governance ensures
that all shareholders have a voice and can participate at AGMs. This is critical in
maintaining the share price of the business.

 Stakeholder interests.

Taking time to address the concerns of stakeholders can help the business establish a positive relationship with the community and the media.

 Prevent lawsuits.

Unethical behaviour to earn higher profits can result in legal
problems. For example, underpaying and abusing employees, or causing harm
to the environment can result in massive lawsuits. A code of conduct regarding
ethical decisions should be established for the entire board of directors.

 Promote shareholder trust.

Financial statements and annual reports should be
prepared without exaggeration or ‘creative’ accounting. Attempts to falsify
financial records could cause the business to be investigated and charged.
Hence, business transparency is crucial in promoting shareholder trust.

Question 11

What is Business ethics?

Answer 11

Business ethics is an agreed-upon code of conduct in business, based on societal
norms.

It lays the foundation for behaviour that is consistent with the principles, norms, and standards of business practice that have been agreed upon by society.

Business ethics goes beyond legal issues. Ethical conduct builds trust among individuals and promotes confidence in business relationships.

Question 12

What are Ethical issues?

Answer 12

An ethical issue is an identifiable problem, situation, or opportunity that requires a person to
choose from among several actions that may be evaluated as ethical or unethical.

Ethical issues include conflict of interest, as well as fairness and honesty among others.

Question 13

What is Conflict of interest?

Answer 13

A conflict of interest exists when an employee must choose whether to advance his or her self interests, or those of others.

Question 14

What are some issues related to Fairness and Honesty?

Answer 14

 Dishonesty.

This is usually associated with a lack of integrity, lack of disclosure
and lying. An example would be theft of office supplies such as stationery and
post-it notes, although some employees may steal expensive equipment such
as laptops and mobile phones.

 Competition.

Businesses may try to gain control over markets by using
questionable practices that harm competition. For example, the merger of Grab
and Uber in 2018 was deemed to be anti-competitive and the two companies
were fined a total of $13 million in Singapore.

 Disclosure.

This relates to the disclosure of potential harm caused by product
use. For example, the United States Food and Drug Administration (FDA) was
concerned that some energy drinks combined caffeine and alcohol, and the
caffeine could dull the effects of alcohol. This led to overindulgence by some
consumers who became ill. Due to the safety concerns, FDA deemed that
caffeine is an ‘illegal addictive’.

Question 15

Business ethics Evaluation

Answer 15

Maintaining a strict ethical code of conduct in decision-making can be expensive for businesses in the short term.

For example, disclosing the harmful effects of a product can result in a large decrease in sales revenue.

However, in the long term, a business can benefit substantially by acting ethically.

For example, ethical businesses are more likely to be awarded government contracts, and potential well-qualified employees may be attracted to work for companies that are renowned for their business ethics.

Question 16

What are the common methods in which a business carries out CSR?

Answer 16

 Reduce carbon footprint
 Improve employment policies
 Participate in fair competition
 Donate to charities
 Volunteer in the community
 Craft company policies that benefit the environment
 Invest in socially and environmentally conscious projects

Question 17

TBC