Strategic Management Overview

Strategic Management

• Strategic Management is the process of formulating, implementing, and evaluating cross-functional decisions that enable organizations to achieve their goals.
• Basic Elements of Strategic Management:
  • Environmental Scanning: Analyzing external threats and opportunities.
  • Strategy Formulation: Creating long-term plans to manage environmental factors.
  • Strategy Implementation: Taking action to achieve organizational goals.
  • Evaluation and Control: Assessing the strategy's effectiveness.
• Mission: The organization's purpose and reason for existence.
• Objectives: Planned outcomes and goals.
• Strategies: Broad plans outlining how to achieve the mission and objectives, maximizing competitive advantages.
• Policies: Comprehensive guidelines for decision-making, linking strategy formulation and implementation.
• Strategic Management Model: Provides a framework for understanding how strategic management operates at the company level.
• Types of Analysis:
  • External environmental analysis
  • Internal organizational analysis
  • Industrial analysis

Drawbacks of Strategic Planning:

• Can be difficult and time-consuming.
• Immediate results may not be achieved.
• May limit organizations to rational and risk-free options.

Levels of Strategy:

• Corporate Strategy: Defines the general direction for the growth of multiple businesses, creating a unified vision and mission.
• Business Unit Strategy: Determines how a company should compete in a specific market to gain a competitive advantage.
• Functional-Level Strategies: Support business unit strategies and are focused within specific departments.

Business Unit Strategies:

• Cost Leadership: Gaining competitive advantage with the lowest operational cost among competitors.
• Differentiation Strategy: Offering unique and superior products for a competitive advantage.
• Focus Strategy: Targeting a specific or narrow market segment or customer group.
• Stability Strategy: Maintaining existing strategies, avoiding drastic changes.
• Growth Strategy: Achieving a higher market share than currently held.

Growth Strategies:

• Market Penetration: Increasing market share through intensive marketing efforts.
• Market Development: Introducing products into new markets (untapped or competitor-dominated).
• Product Development: Introducing new products to existing markets.
• Diversification: Expanding into new industries with unrelated products.
  • Horizontal Diversification: Providing new products unrelated to current offerings, but relevant to existing customers.
  • Concentric Diversification: Offering new products to new or existing markets, with technological similarities to existing products.
  • Conglomerate Diversification: Expanding into completely new markets with unrelated products to reach new customer bases.
• Vertical Integration: Controlling input manufacturing or output distribution along the supply chain.
  • Forward Integration: Owning or controlling product distribution downstream in the value chain.
  • Backward Integration: Owning or controlling input suppliers upstream in the value chain.

Turnaround Strategies:

• Revenue-Increasing Strategies: Increasing market share with new customers to generate higher profits.
• Cost-Cutting Strategies: Focusing on cost reduction to improve profitability.
• Asset-Reduction Strategies: Selling non-essential assets to improve financial position.
• Downsizing Strategies: Reducing workforce and operations to improve efficiency.
• Exit Strategies: Selling the company or parts of it to an investor or another company.

Exit Strategies:

• Divestiture: Selling assets, product lines, or subsidiaries for cash or securities.
• Liquidation: Shutting down operations and selling remaining assets to pay off debts.

Strategic Alliances:

• Mutual beneficial partnerships to offer new products and expand into new markets.

Joint Ventures:

• Special partnerships between two or more entities to undertake a specific project.

Licensing:

• Agreements where a licensor grants a licensee access to intellectual property rights (patents, trademarks, etc.) for a fee or royalty.

Outsourcing:

• Transferring non-core business processes to a service provider.

Finance (BUS3)

• Corruption: Illegal and unethical acts involving misuse of power for personal gain.
• Types of Corruption:
  • Bribery
  • Embezzlement
  • Nepotism
  • Kickbacks
  • State capture
• Anti-Graft and Corruption Efforts:
  • Criminalization of bribery (active and passive)
  • Anti-Money Laundering Act
  • Revised Penal Code
  • Practices Act

Government Initiatives:

• Procurement reform
• Improvement of Business Ethics
• Unified Code of Conduct for Business
• Code of Ethics for the Philippine Business
• The Consumer Act of the Philippines
• The Food, Drug, and Cosmetics Act
• The Intellectual Property Code of the Philippines

Risk Management:

• Risk Assessment: Identifying, analyzing, and evaluating potential risks.
• Business Risk: Potential threats that could negatively impact an organization's performance.
• Types of Business Risk:
  • Default Risk
  • Liquidity Risk

Risk Identification Methods:

• Objective-Based Risk Identification
• Scenario-Based Risk Identification
• Taxonomy-Based Risk Identification
• Common Risk Identification
• Risk Charting

Business Risk Assessment Elements:

• Identification, characterization, and assessment of threats.
• Assessing the vulnerability of critical assets to threats.
• Determining the risk level.
• Identifying risk reduction strategies.
• Prioritizing risk reduction measures.

Investment Risks:

• Various risks associated with different types of investments.

Stakeholder Interests:

• Identifying the interests of those affected by the activities of a business.

Unified Code of Conduct for Business:

• Purposes:
  • Establish ethical standards for business conduct.
  • Promote responsible and sustainable business practices.

Obligations (BLAW)

• Individual Obligation: One obligor and one obligee.
• Collective Obligation: Two or more debtors and/or two or more creditors.
• Joint Obligation: Each party is responsible for a proportionate share of the obligation.
• Solidary Obligation: Each debtor is responsible for the entire obligation, and each creditor can demand the full amount from any debtor.

Types of Solidary Obligations:

• Passive Solidarity: Solidarity on the part of the debtor.
• Active Solidarity: Solidarity on the part of the creditor.
• Mixed Solidarity: Solidarity on the part of both the debtor and the creditor.

Sources of Solidary Obligations:

• Conventional Solidarity: Agreed upon by the parties.
• Real Solidarity: Imposed by the nature of the obligation.
• Legal Solidarity: Imposed by law.

Legal Ties in Solidary Obligations:

• Uniform: All parties are bound by the same stipulation.

• Non-Uniform: Parties are not subject to the same stipulation.

• A solidary creditor can take actions that benefit other creditors but cannot do anything that would harm them.