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The Strategic Planning Process

In the 1970's, many large firms adopted a formalized top-down strategic planning model. Under this model, strategic planning became a deliberate process in which top executives periodically would formulate the firm's strategy, then communicate it down the organization for implementation. This process is most applicable to strategic management at the business unit level of the organization. For large corporations, strategy at the corporate level is more concerned with managing a portfolio of businesses. For example, corporate level strategy involves decisions about which business units to grow, resource allocation among the business units, taking advantage of synergies among the business units, and mergers and acquisitions. In the process outlined here, "company" or "firm" will be used to denote a single-business firm or a single business unit of a diversified firm. Mission A company's mission is its reason for being. The mission often is expressed in the form of a mission statement, which conveys a sense of purpose to employees and projects a company image to customers. In the strategy formulation process, the mission statement sets the mood of where the company should go. Objectives Objectives are concrete goals that the organization seeks to reach, for example, an earnings growth target. The objectives should be challenging but achievable. They also should be measurable so that the company can monitor its progress and make corrections as needed. Situation Analysis Once the firm has specified its objectives, it begins with its current situation to devise a strategic plan to reach those objectives. Changes in the external environment often present new opportunities and new ways to reach the objectives. An environmental scan is performed to identify the available opportunities. The firm also must know its own capabilities and limitations in order to select the opportunities that it can pursue with a higher probability of success. The situation analysis therefore involves an analysis of both the external and internal environment. The external environment has two aspects: the macro-environment that affects all firms and a micro-environment that affects only the firms in a particular industry. The macroenvironmental analysis includes political, economic, social, and technological factors and sometimes is referred to as a PEST analysis.

An important aspect of the micro-environmental analysis is the industry in which the firm operates or is considering operating. Michael Porter devised a five forces framework that is useful for industry analysis. Porter's 5 forces include barriers to entry, customers, suppliers, substitute products, and rivalry among competing firms. The internal analysis considers the situation within the firm itself, such as: Company culture Company image Organizational structure Key staff Access to natural resources Position on the experience curve Operational efficiency Operational capacity Brand awareness Market share Financial resources Exclusive contracts Patents and trade secrets A situation analysis can generate a large amount of information, much of which is not particularly relevant to strategy formulation. To make the information more manageable, it sometimes is useful to categorize the internal factors of the firm as strengths and weaknesses, and the external environmental factors as opportunities and threats. Such an analysis often is referred to as a SWOT analysis. Strategy Formulation Once a clear picture of the firm and its environment is in hand, specific strategic alternatives can be developed. While different firms have different alternatives depending on their situation, there also exist generic strategies that can be applied across a wide range of firms. Michael Porter identified cost leadership, differentiation, and focus as three generic strategies that may be considered when defining strategic alternatives.

Porter advised against implementing a combination of these strategies for a given product; rather, he argued that only one of the generic strategy alternatives should be pursued. Implementation The strategy likely will be expressed in high-level conceptual terms and priorities. For effective implementation, it needs to be translated into more detailed policies that can be understood at the functional level of the organization. The expression of the strategy in terms of functional policies also serves to highlight any practical issues that might not have been visible at a higher level. The strategy should be translated into specific policies for functional areas such as: Marketing Research and development Procurement Production Human resources Information systems In addition to developing functional policies, the implementation phase involves identifying the required resources and putting into place the necessary organizational changes. Control Once implemented, the results of the strategy need to be measured and evaluated, with changes made as required to keep the plan on track. Control systems should be developed and implemented to facilitate this monitoring. Standards of performance are set, the actual performance measured, and appropriate action taken to ensure success.

Dynamic and Continuous Process The strategic management process is dynamic and continuous. A change in one component can necessitate a change in the entire strategy. As such, the process must be repeated frequently in order to adapt the strategy to environmental changes. Throughout the process the firm may need to cycle back to a previous stage and make adjustments. Drawbacks of this Process The strategic planning process outlined above is only one approach to strategic management. It is best suited for stable environments. A drawback of this top-down approach is that it may not be responsive enough for rapidly changing competitive environments. In times of change, some of the more successful strategies emerge informally from lower levels of the organization, where managers are closer to customers on a day-to-day basis. Another drawback is that this strategic planning model assumes fairly accurate forecasting and does not take into account unexpected events. In an uncertain world, long-term forecasts cannot be relied upon with a high level of confidence. In this respect, many firms have turned to scenario planning as a tool for dealing with multiple contingencies.

Brief History Of Apple Inc

Apple AAPL +3.43% sells millions of iPhones, iPads and Macintosh computers stamped Made in China. But it wasnt always that way. The company, which famously started out building computers in a garage in Silicon Valley, once employed thousands of Americans to build its computers in places like Texas, Colorado and California. In light of todays news that Apple is planning to bring some production of its Mac computers to the U.S., heres a brief look at the companys history in U.S. manufacturing: 1980: Newly public Apple, gearing up for the release of the Apple II, announces plans to open a 150,000 square-foot manufacturing plant in Carrollton, Texas, and a 43,000 square-foot plant in Cork, Ireland. 1981: Apple opens a plant in Singapore to manufacture circuit boards. 1983: Apple opens a highly automated plant in Fremont, Calif., to manufacture the first Macintosh computers. It also said it would shut down a pilot factory in Cupertino, Calif., which made the Lisa computer, and move that production to Carrollton and Cork. 1985: As part of a bigger restructuring that includes 1,200 layoffs, Apple closes three of six manufacturing sites, including the Carrollton site, a site in Garden Grove, Calif., that made keyboards and mouse devices, and a small parts plant in Ireland. 1991: Apple opens a 360,000 square-foot facility in Fountain, Colo., to manufacture subassemblies and finished computers. By 1996, the site employs about 1,100 people. 1992: Apple opens a computer assembly plant in Elk Grove, Calif., moving to an area less prone to earthquakes than its plant in Fremont. The Elk Grove and Fountain plants produce most of the Apple computers sold in North America for several years. 1994: Apple announces plans to expand its manufacturing operations in Elk Grove, adding a 200,000-square foot facility to manufacture logic boards and add 300 jobs. 1996: With its sales slumping and losses mounting, Apple sells its Fountain plant to contract manufacturer SCI Systems SANM +0.36%. It marks the first time another company manufactures a large number of Apples computers. SCI agrees to make Macs at the site for three years. 1996: As part of a reorganization, Apple also shifts circuit board assembly from its Elk Grove site to its sites in Singapore and Cork, as well as subcontractors. 1997: Apple sells some circuit board assembly assets from its Singapore plant to a Singapore contract manufacturer. The following year it sells circuit board assembly assets

in Cork to the same firm. 1999: Apple cuts 400 of 1,400 jobs at its Cork manufacturing facility, which makes computers for European markets. Subcontracts production of iMacs to a plant owned by LG Electronics 066570.SE -1.36% in Wales. 2004: Apple shuts down its last U.S. manufacturing line in Elk Grove, laying of 235 fulltime workers. By this time most of Apples manufacturing takes place at factories in China. Many are operated by subcontractor Foxconn, a unit of Hon Hai Precision Industry Co. 2317.TW -0.24%, which also assembles its iPhones and iPads.

Mission Statement: Apple Inc. ignited the personal computer revolution in the 1970s with the Apple Inc. II and reinvented the personal computer in the 1980s with the Macintosh. Today, Apple Inc. continues to leadthe industry in innovation with its award-winning computers, OS X operating system and iLife andprofessional applications. Apple Inc. is also spearheading the digital media revolution with its iPodportable music and video players and iTunes online store, and has entered the mobile phone marketwith its revolutionary iPhone. (Investor Relations FAQ, para. 33) Starting from 1970s, Apple Inc. started to lead with its new innovative strategies. With differentproducts and services, today Apple Inc. continues to maintain its global image and lead the technologyindustry with its original style. With new digital media Apple Inc. has created a revolution with its uniquestyle starting with music devices to more sophisticated mobile phones.

Vision Statement:

An Apple computer on every desk Steve JobsApple Inc. states its vision very clearly. They have changed our life with their products andservices. They really have demonstrated the world, that a human has a strong capacity to create hugethings with a big impact.

Values and /or Guiding Principles: According to Bruce MacVarish, the following guiding principles help Apple in its strategy. 1.Don't follow your Customers; Lead them Apple Inc. follows the strategy, which implies that consumers cant tell you what they want from a product. Instead this, they need to be shown, a superior alternative. Apple Inc.Company distinguishes itself, as a business that creates those alternatives. 2.Temper Engineering with Art Most of the companies try to be like Apple Inc. They tap to organize the creativeprocess, but in most of the cases they fail. Devices with high technology performance are builtby engineers and also are designed by them. Sometimes, they tend to design products in theirown way of using them. This unfortunately demonstrates why a typical device is filled with a lotof confusing features. 3.Focus on the Few to sell to the Many Apple Inc. is focused on selling just few products in each category, rather than othercompanies who sell dozen of models at any given time. Instead of trying to satisfy every taste,Apple Inc. tries to narrow it down. 4.Be your own toughest Critic What contributes to Apple Inc. success is that, apart from beating competitors, is itsattempt to beat itself. As management guru Peter Drucker noted long ago, Your being the one who makes your products, process, or service obsolete is the only way to prevent your competitor from doing so. With this strategy to beat itself, Apple Inc. beat the competitors too. 5.Clear your mind and "Think Different" Jobs say-Design is a fundamental soul that expresses itself through an end result the product. The motto Think Different explains everything. Apple Inc.s ability to think differently about itself has kept this company at the head of the pack and has helped to

createits unique operating style. 6.Build your Innovation infrastructure and Fortress Apple Inc. has expanded its organizational hierarchies. Most of the decisions at AppleInc. come from Steve Jobs and his immediate deputies. Ordinary employees are given cleardirectives and supervision. On the other hand, people who demonstrate talent are given afreer hand, regardless of job title. 7.Cultivate your "Creatives" - the Innovation Elite The Creatives is a specific group, which is referred to productive employees, which are provided with a meticulous care. Apples organizational structure is one of the companys most formidable assets. 8.Institutionalize your "Creatives" Steve Jobs seem to have learned how to change his aggressive personality to a sensible one with a great effect. Even though hes still an essential part of Apple Inc.s success, the company has treated many of Jobs values so that now Apple Inc. is far less dependent on him. 9.Innovation is not Invention Creating something new of value is innovation. On the other hand, disruptiveinnovations are business model innovations that incorporate five, six or eight different types of innovation. Apple Inc. came up with a legal/ business innovation (the iTunes store) and a greatindustrial design (the iPod). This is what makes Apple Inc. a powerful disruptive innovation. 10. Organize Something At 21st century, markets, networks and communities can organize economic activitiesand drive disruptive innovations. Using these (markets, networks and communities) to re-organize inefficient industry models, while empowering end users created to Apple Inc. anumber of innovative business models and designs. 11. MRD + ERD + URD Apple Inc. has these three evaluations required to start a product idea. MRD- Marketing requirement document ERD- Engineering requirement document URD- User-experience requirements documentThe documents are reviewed by a

committee of executives, and if approved, a budget isassigned to the design, and a team leader is chosen. The team focuses on expanding the threerequirement documents. They plan on how to cope with marketing, engineering, and user-experience needs.

Corporate Goals and Objectives To expand their sales to customers who have not yet own any Apples products. 1.Apple Inc. plans to keep creating and releasing computers and consumer electronicsthat are more user-friendly. (Training and Development Program for Apple Inc., page 7) 2.Apple Inc. will focus more opening more stores even on international locations tohelp increase in sales. (Training and Development Program for Apple Inc., page 7)3. Another objective of Apple is innovation. Steve jobs in one of his famous quotes said: Pretty much, Apple and Dell are the only ones in this industry making money. They make it by being Wal-Mart . We make it by innovation. (Jobs, Brainy Quotes, sec.2

Corporate culture Apple was one of several highly successful companies founded in the 1970s that bucked the traditional notions of what a corporate culture should look like in organizational hierarchy (flat versus tall, casual versus formal attire, etc.). Other highly successful firms with similar cultural aspects from the same period include Southwest Airlines and Microsoft. Originally, the company stood in opposition to staid competitors like IBM by default, thanks to the influence of its founders; Steve Jobs often walked around the office barefoot even after Apple was a Fortune 500 company. By the time of the "1984" TV ad, this trait had become a key way the company attempted to differentiate itself from its competitors.According to a 2011 report in Fortune, this has resulted in a corporate culture more akin to a startup rather than a multinational corporation. As the company has grown and been led by a series of chief executives, each with his own idea of what Apple should be, some of its original character has arguably been lost, but Apple still has a reputation for fostering individuality and excellence that

reliably draws talented people into its employ. This was especially after Jobs' return. To recognize the best of its employees, Apple created the Apple Fellows program, awarding individuals who made extraordinary technical or leadership contributions to personal computing while at the company. The Apple Fellowship has so far been awarded to a few individuals including Bill Atkinson, Steve Capps, Rod Holt, Alan Kay, Guy Kawasaki, Al Alcorn, Don Norman, Rich Page, and Steve Wozniak. Apple is also known for strictly enforcing accountability. Each project has a "directly responsible individual," or "DRI" in Apple jargon.As an example, when iOS senior vice president Scott Forstall refused to sign Apple's official apology for numerous errors in the redesigned Maps app, he was forced to resign. Numerous employees of Apple have cited that projects without Jobs' involvement often take longer than projects with his involvement. At Apple, employees are specialists who are not exposed to functions outside their area of expertise. Jobs saw this as a means of having best-in-class employees in every role. For instance, Ron Johnson who was Senior Vice President of Retail Operations until November 1, 2011, was responsible for site selection, in-store service, and store layout, yet he had no control of the inventory in his stores (which is done company wide by then-COO and now CEO Tim Cook who has a background in supply-chain management). This is the opposite of General Electric's corporate culture which has created well-rounded managers. Under the leadership of Tim Cook who joined the company in 1998 and ascended to his present position as CEO, Apple has developed an extremely efficient and effective supply chain which has been ranked as the world's best for the four years 2007 2010[citation needed]. The company's manufacturing, procurement and logistics enables it to execute massive product launches without having to maintain large, profit-sapping inventories; Apple's profit margins have been 40 percent compared with 1020 percent for most other hardware companies in 2011. Cook's catchphrase to describe his focus on the company's operational edge is Nobody wants to buy sour milk. The company previously advertised its products as being made in America up to the late 1990s, however as a result of outsourcing initiatives in the 2000s almost all of its manufacturing is now done abroad. According to a report by the New York Times, Apple insiders "believe the vast scale of overseas factories as well as the flexibility, diligence and industrial skills of foreign workers have so outpaced their American counterparts that Made in the U.S.A. is no longer a viable option for most Apple products". Unlike other major US companies, Apple has a relatively simple compensation policy for executives, which does not include perks that other CEOs enjoy such as country

club fees and private use of company aircraft. The company usually grants stock options to executives every other year. Market Growth Apple Inc.s Market started growing in 1997 then decreased slightly, until 2000. From then on it is steeply growing. Starting in the U.S., after the comeback of Steve Jobs, Apple started selling overseas aswell. Since many of Apples parts and products are produced outside the U.S. (Europe and Asia), not only are the production costs lower, but Apple also got to have better insights in those markets.Other than that it must be said that since Apples market is growing, the market titan Windows haslost market, the graph below shows the differences over the past years.

Important to know, are also Apples biggest markets worldwide, for the iPhone and iTouch it is surprisingly not the U.S. as many might thing, and not only not first but as the coming chart will showU.S. is the smallest market for those two products

SWOT Analysis SWOT stands for Strengths, Weaknesses, Opportunities and Threats, and is very important of finding out where a business currently is and where it could be tomorrow. In order to find out Apples position and define the strategy to be used, internal factors (strenghts and weaknesses) and externalfactors (opportunities and threats) are analyzed. Strengths: iTunes is a marvelous revenue source, since it also sells its own tool, the iPod; and isaccessible on Windows as well. For every hardware Apple Inc. produces its own software as well, and is master of expertisefor both.

Apples price area level provides it with enough room to avoid price competition. Apples so much appealing design, is also easy to use. Low debt- gives more space to control finance The good brand loyalty of Apple Computers Mergers with Intel Computers since 2006 High developed Research & Development department Steeply growing market The services/products offered by Apple are original, meaning many people will return toApple to obtain them. Weaknesses: Weaknesses of a company or business are the negative elements that could be improved becausethey are under the control of that business. Weaknesses also express the disadvantages to competitionthat might not let the business meet the objectives. Weak relationship with market titan Microsoft Technological products as Apples have extremely short lifecycles, this implies that the development and production of new products and services has to be constant Low presence in advertising other than products placement in publishing and educationalareas Very little market share compared to main competitor Microsoft Opportunities: Opportunities are external factors that influence the companys current and future position; theyare presented as offers, trends, needs that promise beneficial outcomes for the company. The production of computer anti-viruses, which are increasing on PCs Large and increasing population resulting in more potential customers of tomorrow Increasing bonds and partnerships with other companies Increasing online sales

Most demanded and sold Apple products are laptops, therefore producing more types tomeet as many needs as possible

Threats: Threats are negative external factors the company has no control over. In cases of threats most and best a company can do is identify them and prepare scenarios of how threats can be turned beneficial or at least do no harm to the company. In the Laptop market Apple has very strong competition from Dell, HP, Sony and Toshiba Media piracy: iPod users illegally downloading music for free instead buying at iTunes Its product expensiveness threatens Apple being undercut by low-cost imports. The long lasting economic recession, which might influence Apples sales in the near future Windows 7 (software), which after the flop of vista is gaining more and more market share The very high speed of technology development

PEST Analysis The PEST analysis helps determine the current situation of Apple Inc., identifying potentialinfluences of the political, economic, social and technological sectors; and have a glimpse into the futureof Apple inc. Political Influences: It is reported that in 2007 52% of sales of Apple were from outside America. Bad internationalrelations, wars and terrorism might influence Apple in a huge manner; moreover these are all factorsApple has no ability to control.Apple Inc. produces many of its parts and products outside the U.S., like Ireland, Czech Republic,Korea, China, and Cork. Political Conflicts between the U.S. and any of these states may have awfuloutcomes for Apple Inc. Economic Influences:

The global economic depression might have immense impact on Apple Inc. The inflation rate is high, while consumers incomes didnt have significant changes, moreover the unemployment rate has increased, leading consumers to spend less, especially on luxury products, as Apple products might be viewed.Even though the U.S. dollar has lost value, Apple Inc. is not as endangered economically. Thecorporation has purchased itself foreign currency, to minimize the economic effects of inflation on Apple Inc. It needs to be said that the U.S. dollars depreciation has in fact increased Apples revenue in the international market. Social Influences: Globalization includes the interaction of people worldwide, for which technology plays the main role. Todays World cannot be imagined without technological devices as Computers, mobile phones etc. Apple is the globally seen as the King of technology, not because of most usage, but quality anddesign.Another big social influence is the music industry, which over the last decade has become virtualand set its market to the cyberspace. Apple having developed the biggest virtual media store, iTunes, iswell ahead any other competition of this direction. Web piracy might be a threat, but most governmentspunish those behaviors. All in all, Apples image also portrays the modern individuals lifestyle, combining functionality with design, leading to brand identification and loyalty. Therefore social influences have positive effectson Apple Inc. Technological Influences: The technology market for computers and mobile phones has become huge, adding morecompetition in the market. Also technology innovations and changes are almost as fast as light,therefore the products lifecycle is very short

Governance
Apple's Board of Directors oversees the Chief Executive Officer and other senior management in the competent and ethical operation of Apple on a day-to-day basis and assures that the long-term interests of shareholders are being served. To satisfy the Board's duties, directors are expected to take a proactive, focused approach to their positions, and set standards to ensure that Apple is committed to business success through the maintenance of high standards of responsibility and ethics. The Board has adopted the following committee charters and governance guidelines that, in conjunction with Apple's articles of incorporation and bylaws, form the governance framework for Apple. The governance structure is designed to foster principled actions,

effective decision-making and appropriate monitoring of both compliance and performance.

Corporate Governance Guidelines


The Board of Directors (the Board) of Apple Inc. (the Corporation) has adopted these governance guidelines. The guidelines, in conjunction with the Corporations articles of incorporation, bylaws, and the charters of the committees of the Board, form the framework of governance of the Corporation. The governance structure of the Corporation is designed to be a working structure for principled actions, effective decision-making and appropriate monitoring of both compliance and performance. I. The Role of the Board of Directors The Board oversees the Chief Executive Officer (the CEO) and other senior management in the competent and ethical operation of the Corporation on a day-to-day basis and assures that the longterm interests of the shareholders are being served. To satisfy its duties, directors are expected to take a proactive, focused approach to their position, and set standards to ensure that the Corporation is committed to business success through the maintenance of high standards of responsibility and ethics. II. Director Qualifications The Nominating and Corporate Governance Committee is responsible for reviewing the qualifications of potential director candidates and recommending to the Board those candidates to be nominated for election to the Board. The Nominating and Corporate Governance Committee will consider the individuals background, skills and abilities, and whether such characteristics qualify the individual to fulfill the needs of the Board at that time. The Board should monitor the mix of skills and experience of its directors in order to assure that the Board has the necessary tools to perform its oversight function effectively. Shareholders also may nominate directors for election at the Corporations annual meeting of shareholders by following the provisions set forth in the Corporations bylaws, whose qualifications the Nominating and Corporate Governance Committee will consider. Candidates should be selected for, among other things, their independence, character, ability to exercise sound judgment, diversity, age, demonstrated leadership, skills, including financial literacy, and experience in the context of the needs of the Board. III. Director Independence It is the policy of the Corporation that the Board consist of at least a majority of independent directors who either meet or exceed the independence requirements of the NASDAQ Stock Market (NASDAQ). The Board will consider all relevant facts and circumstances in making a determination of independence for each director and may consider, as appropriate, imposing independence requirements more stringent than those required by NASDAQ. IV. Director Service on Other Public Company Boards Serving on the Corporations Board requires significant time and attention. Directors are expected to spend the time needed and meet as often as necessary to discharge their responsibilities properly. A director who also serves as the CEO of the Corporation

should not serve on more than two boards of other public companies in addition to the Corporations Board. Directors other than the CEO of the Corporation should not serve on more than four boards of other public companies in addition to the Corporations Board. V. Ethics and Conflicts of Interest The Board expects its directors, as well as officers and employees, to act ethically. Directors are expected to adhere to the Corporations Business Conduct Policy and the Guidelines Regarding Director Conflicts of Interest. VI. Director Orientation and Continuing Education The Corporation will provide new directors with materials, briefings and additional educational opportunities to permit them to become familiar with the Corporation and to enable them to perform their duties. Directors also are encouraged to visit the Corporations facilities and meet with Corporation employees throughout their tenure on the Board. In addition, directors are encouraged to attend accredited director education programs at the Corporations expense. VII. Term of Office Directors serve for a one-year term and until their successors are elected. There are no limits on the number of terms that a director may serve. The Board believes the Corporation benefits from the contributions of directors who have developed, over time, increasing insight into the Corporation. The Nominating and Corporate Governance Committee reviews periodically the appropriateness of each directors continued service. VIII. Retirement Policy A director may not stand for re-election after age 75, but need not resign until the end of his or her term. IX. Director Resignations, Retirements and Refusals to Stand for Re-Election A director who intends to resign or retire or refuses to stand for re-election to the Board must submit written notice to the General Counsel of the Corporation. For resignations and retirements, the director must state the effective date of the resignation or retirement. For resignations, the director also must state that the director has no disagreement with the Corporations operations, policies or practices or, if the director has such a disagreement, the director must describe the disagreement. For refusals to stand for re-election, the director must state when the election in question will occur. X. Directors Who Change Their Present Job Responsibilities Each director who retires or substantially changes his or her principal occupation or business association from the position he or she held when initially elected to the Board shall tender his or her resignation to the Board at the time of such change by sending written notice to the General Counsel of the Corporation. The Board does not believe that a non-employee director in this circumstance necessarily should be required to leave the Board. Instead, the Board believes that the Nominating and Corporate Governance Committee should review each situation and make a recommendation to the Board as to the continued appropriateness of Board membership under the new circumstances. XI. Director Responsibilities The fundamental role of the directors is to exercise their business judgment to act in what they reasonably believe to be the best interests of the Corporation and its shareholders. In fulfilling that responsibility, directors reasonably may rely on the honesty and integrity of

the Corporations senior management and expert legal, accounting, financial and other advisors. Annual Meeting Attendance: All directors are expected to attend the Corporations annual meeting of shareholders. Scheduling of Board Meetings and Attendance: The Board will meet at least four times per year. Directors are expected to prepare for, attend and participate in all Board and applicable committee meetings, and to spend the time needed to meet as often as necessary to discharge their obligations properly. Agenda: At the beginning of each year the Board will set, to the extent foreseeable and practicable, a schedule of agenda items to be discussed during the year. Any director may suggest items to be included on the agenda or raise subjects at a Board meeting that are not on the agenda for that meeting. An agenda for each Board meeting, along with information and data that is important to the Boards understanding of the business to be conducted at the Board meeting, should be distributed to directors in advance of the meeting so that Board meeting time may be focused on questions that the Board has about the materials. Certain matters may be discussed at the meeting without advance distribution of written materials, as appropriate. XII. Chairman of the Board and Chief Executive Officer The Board regularly evaluates whether or not the roles of Chairman of the Board and CEO should be separate and, if they are to be separate, whether the Chairman of the Board should be selected from the non-employee directors or be an employee of the Corporation. The Board believes these issues should be considered as part of the Boards broader oversight and succession planning process. XIII. Co-Lead Directors and Executive Sessions The Board expects to hold executive sessions without the presence of management, including the CEO and other non-independent directors, at least four times per year. In general, the Board reserves time following each regularly scheduled meeting to allow the independent directors to meet in executive session. The executive sessions shall be led by the Chairman of the Board if one has been elected. If a Chairman of the Board has not been elected, the Board will appoint a Lead Director or Co-Lead Directors to conduct executive sessions and for such other purposes as the Board finds appropriate. If more than one Lead Director is appointed, the Board may prescribe different responsibilities to each Co-Lead Director. XIV. Communication with Stakeholders The Board believes that management speaks for the Corporation. Individual directors occasionally may meet or otherwise communicate with various constituencies that are involved with the Corporation, but it is expected that directors would do this with the knowledge of management and, in most instances, absent unusual circumstances or as contemplated by the committee charters, at the request ofmanagement. XV. Board Committees Standing Committees: The Board currently has a Nominating and Corporate Governance Committee, an Audit and Finance Committee and a Compensation Committee. From time to time, the Board may form new committees as it deems appropriate. Independence and Qualifications of Standing Committee Members: All of the members of the standing committees will meet the then-effective criteria for independence established by NASDAQ and, in the case of the Audit and Finance Committee, the Sarbanes-Oxley Act of 2002 and the independence definition set forth in Rule 10A-3(b)

(1) of the Securities Exchange Act of 1934, as amended. The members of these committees also will meet the other membership criteria specified in the respective charters for these committees. At least one member of the Compensation Committee will not serve simultaneously on the Audit and Finance Committee. Standing Committee Member Assignments and Rotation: The Nominating and Corporate Governance Committee makes recommendations to the Board concerning the structure and composition of the Board committees. The Board will designate the chair, committee members and, where applicable, alternate standing committee members, by the vote of a majority of the directors. From time to time, there will be occasions on which the Board may want to rotate standing committee members, but the Board does not believe that it should establish a formal policy of rotation. Standing Committee Charters: Each standing committee will have its own charter. The charter will set forth the purpose, authority and responsibilities of the standing committee in addition to the qualifications for standing committee membership. Meeting and Agenda: The chair of each standing committee will determine, in consultation with the appropriate standing committee members and members of management, and in accordance with the standing committees charter, the frequency and length of standing committee meetings and the standing committees agenda. Each standing committee will establish, to the extent foreseeable and practical, a schedule of agenda items to be discussed during the year. The schedule for each standing committee will be furnished to the full Board. XVI. Director Access to Officers and Employees Directors are encouraged to talk directly with any officer or employee of the Corporation. Senior officers are invited to attend Board meetings from time to time to provide additional insight into the items being discussed. XVII. Director Compensation The Compensation Committee will review the form and amount of director compensation annually and recommend any changes to the Board. Non-employee directors are expected to receive a substantial portion of their annual retainer in the form of equity. Employee directors are not paid additional compensation for their services as directors. XVIII. Board Evaluation The Board should undertake an evaluation of the Board, its Committees and each member at least annually to determine whether it and its members and committees are functioning effectively. The Nominating and Corporate Governance Committee is responsible for coordinating and overseeing the annual Board evaluation process in accordance with the charter and principles of that committee. XIX. Management Review and Succession Planning The Compensation Committee should conduct, and review with the Board, an annual evaluation of the performance of all executive officers, including the CEO. The Compensation Committee is expected to use this review in the course of its deliberations when considering the compensation of the CEO and senior management. The Board also reviews the CEO performance evaluation to ensure that the CEO is providing effective leadership of the Corporation. As part of the annual evaluation, the Board and the CEO should conduct an annual review of management development and succession planning for senior management, including the CEO.