PMD 305 ADVANCED BUSINESS AND MANAGERIAL ETHICS

JOURNAL CRITIQUE
A Literature Review of Corporate Governance

RIZALDY V. MAYPA

SUBMITTED TO:

DR. MYRNA S. VIADO

Professor

SUMMER 2017
PMD 306 ADVANCED STRATEGIC PLANNING

JOURNAL CRITIQUE
Business-Level Strategy

RIZALDY V. MAYPA

SUBMITTED TO:

DR. MYRNA S. VIADO

Professor

SUMMER 2017
Title : A Literature Review of Corporate Governance
Author : Humera Khan
Source : 2011 International Conference on E-business, Management and
Economics IPEDR Vol.25 (2011) (2011) IACSIT Press, Singapore

References : Berle, A. A. and Means, G. C. (1932), The Modern Corporation and

Private Property,Macmillan, NY.
Himmelberg, C.P., R.G. Hubbard and D. Palia. (1999),
Understanding the determinants of Ownership and the link
between Ownership and Performance, Journal of Financial
Economics 53, 353-384.
Jensen, M.C. and W.H. Meckling. (1976), Theory of the Firm:
Managerial Behaviour, Agency Costs and Ownership
Structure, Journal of Financial Economics 3 (4), 305-360.
La Porta, R., Lopez-De-Silanes, F. and Shleifer, A. (2000),
Investor protection and corporate governance, Journal
of Financial Economics, vol. 58, no. 1-2, pp. 3-27.

Summary :
The importance of corporate arises in modern corporations due to the
separation of management and ownership control in the organizations. The interests
of shareholders are conflicting with the interests of managers. The principal agent
problem is reflected in the management and direction related problems due to the
differential interests of firms stakeholders. There is not a single definition of corporate
governance rather it might be viewed from different angles. Berle and Means (1932)
and the even earlier Smith (1776). Zingales (1998) defines corporate governance as
allocation of ownership, capital structure, managerial incentive schemes, takeovers,
board of directors, pressure from institutional investors, product market competition,
labour market competition, organisational structure, etc., can all be thought of as
institutions that affect the process through which quasi-rents are distributed (p. 4).
Garvey and Swan (1994) assert that governance determines how the firms top
decision makers (executives) actually administer such contracts (p. 139). Shleifer and
Vishny (1997) define corporate governance as the ways in which suppliers of finance
to corporations assure themselves of getting a return on their investment (p.737).
OECD in 1999 defined corporate governance as "Corporate governance is the system
by which business corporations are directed and controlled. The corporate governance
structure specifies the distribution of rights and responsibilities among different
participants in the corporation, such as, the board, managers, shareholders and other
stakeholders, and spells out the rules and procedures for making decisions on
corporate affairs. By doing this, it also provides the structure through which the
company objectives are set, and the means of attaining those objectives and
monitoring performance. Oman (2001) defined corporate governance as a term refers
to the private and public institutions that include laws, regulations and the business
practices which governs the relationship between the corporate managers and the
stakeholders. The Ministry of Finance, Singapore defines corporate governance as
the processes and structure by which the business and affairs of the company are
directed and managed, in order to enhance long term shareholder value through
enhancing corporate performance and accountability, whilst taking into account the
interests of other stakeholders. Good corporate governance therefore embodies both
enterprise (performance) and accountability (conformance). (Fin, 2004, pp 13-14). La
Porta, Silanes and Shliefer (2000, 2002) view corporate governance as a set of
mechanisms through which outside investors (shareholders) protect themselves from
inside investors (managers). The Organization for Economic Cooperation and
Development provides another perspective by stating that corporate governance is
the system by which business corporations are directed and controlled. The corporate
governance structure specifies the distribution of rights and responsibilities among
different participants in the corporation, such as the Board, managers, shareholders
and other stakeholders, and spells out the rules and procedure for making decisions
on corporate affairs. By doing this, it also provides the structures through which the
company objectives are set, and the means of attaining those objectives and
monitoring performance.

In this review which is a collection of volume of research on corporate

governance the significance of effective corporate governance is being evident. The
aim of the review done is to check the effectiveness of corporate governance and its
effective mechanism in running and managing the business operations. The issue of
ownership and control and the principal-agent problem and its effect on corporate
governance is the main area of research in this review. The findings of the most studies
show that effective corporate governance reduces the ownership and control problems
and draws a clear line between the shareholder and the manager. Finally from the
discussion from all articles this review provides a general overview of principal-agent
problem and ownership and control for the researchers and academic practitioners in
the domain of corporate governance.

Insight/Reflection :
Our society has become a culture of bl ame. For obvious reasons, we tend to
seek a culprit for every mishap, and companies are no different; undesired
outcomes invariably result in finger-pointing.

Corporate strategy, the overall plan for a diversified company, is both the
darling and the stepchild of contemporary management practicethe darling because
CEOs have been obsessed with diversification since the early 1960s, the stepchild
because almost no consensus exists about what corporate strategy is, much less
about how a company should formulate it.

A diversified company has two levels of strategy: business unit (or competitive)
strategy and corporate (or companywide) strategy. Competitive strategy concerns how
to create competitive advantage in each of the businesses in which a company
competes. Corporate strategy concerns two different questions: what businesses the
corporation should be in and how the corporate office should manage the array of
business units.

Corporate strategy is what makes the corporate whole add up to more than the
sum of its business unit parts. The track record of corporate strategies has been
dismal. I studied the diversification records of 33 large, prestigious U.S. companies
over the 19501986 period and found that most of them had divested many more
acquisitions than they had kept. The corporate strategies of most companies have
dissipated instead of created shareholder value.

The need to rethink corporate strategy could hardly be more urgent. By taking
over companies and breaking them up, corporate raiders thrive on failed corporate
strategy. Fueled by junk bond financing and growing acceptability, raiders can expose
any company to takeover, no matter how large or blue chip.

Recognizing past diversification mistakes, some companies have initiated

large-scale restructuring programs. Others have done nothing at all. Whatever the
response, the strategic questions persist. Those who have restructured must decide
what to do next to avoid repeating the past; those who have done nothing must awake
to their vulnerability. To survive, companies must understand what good corporate
strategy is.

Corporate strategy, the overall plan for a diversified company, is both the
darling and the stepchild of contemporary management practicethe darling because
CEOs have been obsessed with diversification since the early 1960s, the stepchild
because almost no consensus exists about what corporate strategy is, much less
about how a company should formulate it.

A diversified company has two levels of strategy: business unit (or competitive)
strategy and corporate (or companywide) strategy. Competitive strategy concerns how
to create competitive advantage in each of the businesses in which a company
competes. Corporate strategy concerns two different questions: what businesses the
corporation should be in and how the corporate office should manage the array of
business units.

Corporate strategy is what makes the corporate whole add up to more than the
sum of its business unit parts. The track record of corporate strategies has been
dismal. I studied the diversification records of 33 large, prestigious U.S. companies
over the 19501986 period and found that most of them had divested many more
acquisitions than they had kept. The corporate strategies of most companies have
dissipated instead of created shareholder value.
 The need to rethink corporate strategy could hardly be more urgent. By taking
over companies and breaking them up, corporate raiders thrive on failed corporate
strategy. Fueled by junk bond financing and growing acceptability, raiders can expose
any company to takeover, no matter how large or blue chip.

Recognizing past diversification mistakes, some companies have initiated

large-scale restructuring programs. Others have done nothing at all. Whatever the
response, the strategic questions persist. Those who have restructured must decide
what to do next to avoid repeating the past; those who have done nothing must awake
to their vulnerability. To survive, companies must understand what good corporate
strategy is.
Title : Business-Level Strategy
Author : Dr. Alan S. Gutterman
Source : Gutterman, A. (2009). Organizational Management and Administration:
A Guide for Managers and Professionals. Thomson West, 2012.

References : Jones, G. Organizational theory, design and change (5th Ed.) Upper
Saddle River, N.J.: Pearson/Prentice Hall, 2007

Summary :
Growth is a key goal and objective for emerging companies and management
must carefully determine the best way to combine the core competencies within a
firms functional departments to provide the firm with the best opportunity for achieving
and sustaining a competitive advantage in its chosen environment. This report focuses
on the process of setting business level-strategy, which includes (1) selecting the
domain(s) in which the firm will be competing for scarce resources (e.g., capital,
personnel, technology, inputs and customers) and (2) positioning the firm in each
chosen domain so that its function-based core competencies are most effectively
leveraged to establish a competitive advantage. The overall goal of business-level
strategy is to protect the firms position in its current domain and, if possible, enlarge
the domain in which the firm can operate with a competitive advantage.

Senior executives and managers involved in the development and

implementation of business-level strategies are tasked with identifying the core
competencies within the various functional departments of the company and
combining them in a way that provides the company with the best opportunity for
achieving and sustaining a competitive advantage in its chosen environment.
The key choices that must be made when setting business-level strategy
include: (1) selecting the domain(s) in which the company will be competing for scarce
resources (e.g., capital, personnel, technology, inputs and customers) and (2)
positioning the company in each chosen domain so that its function-based core
competencies are most effectively leveraged to establish a competitive advantage.
The overall goal of business-level strategy is to protect the companys position in its
current domain and, if possible, enlarge the domain in which the company can operate
with a competitive advantage. The tools available to business-level strategists are
created at the functional level and may include core competencies in one or more key
functional areas such as manufacturing, HR, materials management, sales and
marketing and/or R&D.

Insight/Reflection :
In my report, I have presented the business level strategy of Apple. I would
focus my insights here and what I learned about the business-level strategy and apply
it accordingly with regard to the abovementioned journal.

My report illustrated the application of the major analytical strategic frameworks

in business studies such as SWOT, PESTEL, Porters Five Forces, Value Chain
analysis and McKinsey 7S Model on Apple. Moreover, the report contains analyses of
Apple leadership, organizational structure and organizational culture. The report also
comprised discussions of Apple marketing strategy and addresses issues of corporate
social responsibility. This company has experienced a lot of rip and tides throughout
the years but definitely it is after all the products over-all functionality, consistency and
design that seals the deal.

Apple business strategy can be classified as product differentiation in design

and functionality. Apple business strategy also includes building and expanding its
own retail and online stores and its third-party distribution network to effectively reach
more customers and provide them with a high-quality sales and post-sales support
experience. As part of its business strategy, Apple continues to expand its platform
for the discovery and delivery of third-party digital content and applications through the
iTunes Store. An intensive international market expansion is another important aspect
of Apple business strategy.

According to its business strategy, Apple has adapted advanced features and
capabilities of its products and services as bases of its competitive advantage. The list
of innovations introduced by Apple include, but not limited to the introduction of iPad,
the first device of its kind that stored thousands of songs with a simple shuffle
capabilities through songs, development Macintosh, the first computer to use a
graphical user interface and the launch of iMac that ripped up the computer design
rule book, doing away with dull beige boxes and instead replacing them with fun,
translucent machines in shades such as Bondi Blue that hinted at the aesthetic Apple
would become so well-known for.
 Apple devices and software sync easily and work well with each other.
Applications work on multiple Apple devices at the same time and there is no much
difference in user interfaces; however the same items do not pair with products of
other companies, thus creating the likes of a closed ecosystem. Apples ecosystem
creates switching costs for its customers to the competition. The ecosystem also
provides the opportunities to leverage relationships with existing customers to offer
other products and services.

First mover advantage is another element of Apple competitive advantage. It

has to be stated that Apple competitive advantage may be challenging to be sustained
for long-term perspective. Specifically, the management may fail in terms of ensuring
the addition of innovative features and capabilities in new versions of its products, thus
compromising its competitive advantage. However, Apple has pulled up its strings for
an edge in the recent times.