Strategic Management and Corporate Governance
This section covers Strategic Management and Corporate Governance for the MBA Executive CMB. The exam tests whether you can connect external analysis, internal capabilities and governance controls to defensible strategic choices, not just recite frameworks.
Core rules and concepts
- Strategy is an integrated set of choices about where to compete and how to win. External tools such as PESTEL and Porter's five forces diagnose industry attractiveness; internal tools such as VRIN/VRIO test whether resources are valuable, rare, hard to imitate and organised.
- Corporate strategy adds scope decisions: vertical integration, diversification and M&A. The test is whether the parent adds more value than the businesses would create alone.
- Governance addresses the agency problem between owners and managers. Independent boards, audit committees, separation of CEO and chair, disclosure and incentive alignment are monitoring devices. Shareholder and stakeholder models differ on whose interests directors prioritise.
Worked example
A conglomerate considers buying a logistics firm. The target's standalone ROIC is 9%, WACC is 8%, so it creates little standalone surplus. The parent claims synergies of 2% of sales from shared warehousing. Reason: only synergies that are incremental, achievable and not already priced into the deal create value. If due diligence supports 1.5% net synergies and the price implies a 10% ROIC requirement, the deal destroys value despite strategic fit. The board should challenge assumptions and approve only with a staged integration plan.
Traps
Confusing strategy with a budget or vision statement; assuming related diversification always creates synergy; treating board independence as a checkbox rather than a test of challenge and information quality; ignoring execution risk and incentive effects.