Strategic Management PDF

STRATEGIC MANAGEMENT management, and high degrees of quality are logical responses of companies. In short, the name of the game...

STRATEGIC MANAGEMENT management, and high degrees of quality are logical responses of companies. In short, the name of the game today is tougher and smarter competition, quantitative and TOPIC 1 qualitative organizational changes, and sustainable competitive advantage. In this hyper- STRATEGIC MANAGEMENT MODEL competitive environment, only the most adaptive and nimble organizations will survive. Thus, there is the need to strategize. Strategic management model - determines the development of strategies required to define an organization's mission and accomplish it. The process of strategic management Strategic management - is a continuous process of strategy creation. It involves strategic has five components – situation analysis, strategic decision making, strategy formulation, processes like strategic analysis and decision-making, strategy formulation and strategy implementation, and strategy evaluation or control. implementation, and strategy control with the primary objectives of achieving and maintaining better alignment of corporate policies, priorities, and success THE REALITY OF DYNAMISM Strategic analysis - consists of a systematic evaluation of variables currently existing in the The 21st century epitomizes the reality of dynamism. In fact, today's milieu is in a state of external and internal environments while strategic decision-making is deliberately bringing fluidity. It is not static. Rather, changes and fluctuations are constantly happening in the together the right resources for the right markets at the right time, Strategy formulation is surroundings. These actualities are characterized by the occurrence of phenomenal designing strategies on the business and corporate levels. Strategy implementation is situations, continuous challenges, and triggering forces that provoke corresponding employing these crafted strategies to achieve organizational set goals and objectives reactions. The certainty of change is universal and this foregone conclusion is largely while strategic control is the application of an appropriate monitoring and feedback experienced by all nations and peoples—whether developed undeveloped, large or system. It is defined as the science of creating, executing, and evaluating cross-functional small, powerful or weak. As a result, the current landscape of competition is highly decisions to enable an organization to achieve its goals and objectives, the components threatening and daunting. With an environment that is characterized by unpredictability of the strategic management process have to be effective. drive, pursuit and transformation, and volatility is a ruthless reality. Impermanence and unpredictability are certainties. Nothing is stable; neither regularity a logical expectation. If strategic analysis is accurately conducted, organizations can develop strategic Competition has gone beyond nations, peoples, cultures, geographic frontiers, and intelligence. Like an antenna, strategic intelligence is the capability of an industries. As the global economy expands, blurring boundaries, any business needs to organization to possess relevant and related knowledge, abilities, foresight, and create its own impact in any part of the world. Thus, it is urgent for organizations and systems pressing thinking, challenges such that it is able to assess its own strengths businesses to strategize and vulnerabilities, the confronting the organization, as well as the trends and opportunities existing in the environment. HYPER-COMPETITION If strategic decision-making is correctly effected, organizations can acquire the Hyper-competition is a fundamental feature of the new economy. As the word implies capability of thinking strategically. Strategic thinking is the cognitive process of carries a note of overexcitement and agitation. Hyper-competition occurs when product competently and analytically weighing factors and arriving at critical decisions in or service offerings and technologies are so new that standards become unstable and the context of the current milieu of which an organization is part. competitive advantage not sustainable. It is a condition where strategic maneuverings If strategy formulation is uniquely designed and effectively communicated, have escalated to bigger business exposure, more sophisticated marketing positioning, organizations have greater possibilities of attaining organizational competitiveness. aggressive selling, and innovative products and services. Doing business has become Organizational competitiveness pertains to the ability of any business or company intense and more deliberate. It seems like a big waste not to discern and take advantage to utilize its resources optimally and sustainably for maximum performance and of every opportunity. The business atmosphere is characterized by activities such as productivity. outdoing each other, surpassing sales, taking competitors by surprise, capturing a bigger If strategy implementation is efficiently employed, organizations can achieve market share, winning the business battle, and seizing the number one slot. In a strict sense, comparative advantage. Comparative advantage refers to the ability of an hyper-competition is a situation where both globalization and technology collaborate to organization to produce a particular good or services at lower marginal and create a heightened cut-throat situation. It means that businesses compete with each opportunity costs than its competitors. other whether they have same products, similar products, substitute products, and If strategic control is productively monitored, organizations can realize strategic different products. Competitors continuously strive to outplay and outsmart each other. performance. Strategic performance is the accomplishment of a high level of They need to devise ways and means to survive and deal with this super competitive and productivity that is characterized by efficiency in the context of lean and turbulent reality. New value creation, competitive pricing, innovation in supply chain quantifiable management  STRATEGIC PLANNING Oftentimes, the word strategic planning is more popular than strategic management. Essentially, these two words are the same. In terms of purpose, both strategic management and strategic planning have the same goals and objectives, that is, the device strategic mode of preparing, addressing, and steering organizations to where they want to go. Particularly, both undertakings and a strategic position of organizations preferred choices, furthermore, both strategic management and strategic planning use the same processes to attain their goals. Hence, strategic planning is defined as a continuous, repetitive, and competitive process of setting the goals and objectives that an organization aims to attain, defining the means to achieve them, and assessing the best way to realize them in the context of the prevailing environment while measuring performance set standards, and periodically but continuously conducting reassessments. STRATEGIC PLANNING EXHIBITS THE FOLLOWING PROPERTIES 1. It generates the blueprint of what organizations intends to accomplished. 2. The strategic plan presents the grand scheme of the organization and outlines all the set activities, ranging from the organizational to the Department that level. It formalizes all plans with respect to type and extent. 3. It is the process of developing in strategic fit between the organization's goals and capabilities in the context of changing opportunities. 4. It is a process that involves carefully delineated steps. As stated in the definition, strategic planning is structured, in that it begins with reviewing the environment, setting goals, adopting and monitoring strategies, and continuously redesigning them as the needs arise. 5. It is proactive, in that it is written in the context of anticipated future realities. Strategic planning does not make future decisions. Instead, plans are made in anticipation of future changes and developments. 6. It is a philosophy because it involves a dynamic way of conducting and managing an organization. Strategic planning involves a unique way of thinking and doing things better. The strategic management model shows the relationships between and among the input, 7. It links the organizational plan with functional and operational plans. process, and output. The input in this model includes organizational variables like 8. It is intricately interwoven within the defined managerial functions of organizing, management and employees, financial resources, facilities and equipment, directing, stuffing, and controlling. Although strategic planning is strictly formal and infrastructures, and processes. The strategic management process consists strategic separate function of management, it is subtly intertwined in all the other functions and analysis, strategic decision making, strategy formulation, strategy implementation, and responsibilities of a manager. In other words, no manager can fully accomplish his/her strategic control. When these specific processes are executed and manage creatively, responsibilities effectively if strategic planning is disregarded or overlooked. distinctly, and strategically, timidly achieve organizational success. In particular, the output 9. It necessitates the leadership and support of top management and, at the same time, is exhibited in the strategic intelligence acquired, strategic thinking more developed, employee participation and commitment. Successful implementation of strategic organizational competitiveness advantage, and strategic performance obtained by the planning is largely dependent on responsibility, support, and sustained leadership organization.  coupled with acceptance and involvement of employees. There should be synergetic Strategic alignment plays a critical role for the sustainability of a strategy. For any strategy interrelationships between departments and intra relationships within departments. to be successful and sustainable, an organization must develop an offering that attracts buyers; it must create a business model that enables the company to make money out of TYPES OF STRATEGIC PLANS its offering; and it must motivate the people working for or with the company to execute There are two principal types of plans: the strategy. Based on the above-mentioned context, strategic alignment is the process of working with various teams and individuals to connect their efforts to the organization’s 1. Medium/Long-range Plan - prepared in the context of the coming 3 to 5, 10 or overall goals. To be effective, alignment must begin at the top with senior leaders who more years period. It describes the major factors or forces that affect organization’s share the enterprise strategy throughout the organization. long-term objectives, strategies, and resources required. 2. Annual/Yearly Plan – short term; succinctly describes the organization's present In high-performing, strategically aligned organizations, every team member has: situation, its goals and objectives, strategies, monitoring mechanisms, and the Understanding of the overall enterprise strategy budget for the year ahead. Knowledge of where they fit into that strategy Whether the plan is long range or annual, it can be strategic when the organization Understanding of why their work matters in the bigger strategic picture formulates its action plans and takes advantage of opportunities in the constantly When organizations have strategic alignment, every member of the team is on the changing environment while maintaining a tactical alignment between the organization’s same page and can make decisions and take actions that are consistent with the goals, capabilities, and opportunities. overall strategy. NEEDS FOR TRATEGIC PLANNING While good strategy content is based on a compelling value proposition for buyers Why is there a need for strategic planning? As earlier stated, the reality of dynamism, with a robust profit proposition for the organization, sustainable strategy execution is complexity, and hyper-competition characterizes today's environment. To survive, based largely on a motivating people proposition. Motivating people requires more organizations need to carefully plan their strategic approaches. Therefore, strategic plans than overcoming organizational hurdles and winning people’s trust with fair process. have to be prepared purposefully for effective and efficient implementation, thus, leading BENEFITS OF STRATEGIC ALIGNMENT to the attainment of their set objectives. The benefits of designing and putting into effect a strategic plan cannot be overemphasized. Strategically aligned organizations operate more efficiently and achieve better outcomes because their teams are working on common goals and objectives. STRENGTHS AND LIMITATIONS OF STRATEGIC PLANNING Improved efficiency STRENGTHS: A strategic plan helps to define the direction in which an organization must - Organizations that understand the importance of strategic alignment travel, and aids in establishing realistic objectives and goals that are in line with the vision tend to be more efficient. Wasting time on efforts that don’t match the and mission charted out for it. But it also creates a sense of collaboration and collective organization’s strategic goals leads to inefficiency and a lack of responsibility. It helps organizations to stay focused. When clearly, and proactively productivity. However, when teams are strategically aligned, everyone undertaken, it provides leverage and competitive advantage to the organization. It is on the same page about which projects are worthy of investment makes things happen. because everyone is working towards a unified goal. As a result, teams LIMITATIONS: Strategic planning requires lot of knowledge, training and experience. work more effectively and wasted efforts are minimized. Working more Managers should have high conceptual skills and abilities to make strategic plans. If they efficiently and effectively can lead to an increased confidence in do not have the knowledge and skill to prelate strategic plans, the desired results will not strategic investments. It creates more confidence in decisions around be achieved. These limitations of planning include issues such as uncertainty, complexity, allocating resources, because there’s an understanding that those and resource constraints, which can affect the accuracy and effectiveness of a plan. resources will be used to achieve strategic outcomes. Additionally, the changing nature of the environment, as well as unforeseen events, can Increased focus on driving value also impact the success of a plan. - Strategic alignment helps teams see the bigger picture so they can understand how their work fits into the company strategy. Strategically aligned teams focus on creating value rather than output. That means STRATEGIC ALIGNMENT: THE KEY TO SUCCESSFUL BUSINESS STRATEGY the work is furthering company goals and driving value for the  company, rather than simply producing work for the sake of advancements. This dynamism requires businesses to be flexible and adaptive productivity. in their strategies. Companies that effectively respond to changes gain competitive advantages. Similar to the natural environment, the external As a result of this focus, it’s easier for strategically aligned organizations to business environment changes regularly due to the vast influence of factors. quickly identify high-value projects and low-value ones. This also helps to The factors constantly change the character and shape of the environment. ensure that time and resources are spent delivering work that makes sense For instance, there was a period when the filming industry made a fortune by from a strategic point of view. Teams can prioritize important work more selling music CDs. Currently, the filming business makes more money from easily, and deprioritize or abandon work that doesn’t make sense streaming songs on music platforms such as Spotify and YouTube. strategically. That way, they’re better equipped to focus on driving business Complexity: Multiple factors and their interactions create a complex value while helping to avoid sunk costs due to strategic drift landscape for businesses to navigate. This complexity can stem from both Better planning and work delivery internal dynamics and the external competitive landscape, requiring - Aligned teams have a better understanding of company goals, businesses to employ sophisticated analytical tools to understand and predict decision-makers can focus on the steps, practices, and deliverables environmental impacts. The business environment includes various conditions, that contribute to the long-term organizational strategy when planning factors, influences, and events from multiple sources. It is hence, difficult to for the future. grasp all the factors that affect a specific environment at a particular time. For example, book publishers could not envision that print books could face a decline in demand after the mobile phone release. Furthermore, strategic alignment makes sure teams are aligned to common goals, Multi-faceted: The business environment's dynamism and complexity empowering them to make rapid decisions that help reach those goals. That autonomy continuously change its character and shape. Many observers may view the and understanding of their work’s value to the organization can also create more changes very differently. Therefore, a different observer may perceive a motivated teams. particular environmental change as a chance or opportunity to diversify, while someone else may view the change as a threat. For instance, LCDs and Plasma In a rapidly changing business environment, successful enterprises often need to be flexible TVs paved the way for LEDs. Some producers saw this as an opportunity to start and adaptable. Strategic alignment allows every team member to make adjustments in making LEDs instead of Plasmas and LCDs. Currently, LEDs are paving the way response to market changes without compromising productivity or efficiency, because for 3D TVs. This means that, depending on the manufacturer's view or they remain focused on strategic goals. perception, the producer may use the opportunity to either view it as a threat or produce new products. The reason for this is that teams constantly measure successes from the perspective of enterprise goals. Strategically aligned organizations can update practices and respond to Interrelatedness: Different segments of the environment are interconnected, changes with nimbleness and agility. meaning changes in one area can affect others. For instance, a regulatory change in technology could impact product development, affecting TOPIC 2 marketing strategies and customer interactions. Relativity: It varies from region to region and country to country, influenced by CHALLENGES IN THE EXTERNAL ENVIRONMENT local conditions and cultural aspects. What works in one geographical area In a bad economy, even the most successful businesses may not survive. The external may not work in another, necessitating localized business strategies. environment refers to the factors that affect a company's operations. The external business ENVIRONMENTAL SCANNING environment constitutes business environmental factors such as political, economic, social, and global factors. These factors are the main influences that affect the stockholder's and Environmental scanning refers to the process of collecting data about the business business owners' business decisions. For example, a case where the government changes environment (e.g., customers, competitors, or market trends) using various technologies the laws concerning the numbers and types of imported goods can increase the and tools. importation tax, making a massive difference in the viability of many businesses. The business environment consists of various characteristics such as: This technique aims to provide information that will let companies make better strategic decisions and adapt to changing market conditions. This, in turn, will help them take Dynamic nature: it is constantly changing, influenced by various external advantage of the opportunities that arise and minimize emerging threats, which will factors like market trends, economic policies, and technological contribute to their overall success. It is the study and interpretation of the forces existing in the external and internal environments. The external environment includes social, transporting goods from their production site to their destination, that is, ultimate economic, political, technological, and environmental forces that may influence an buyers. There are marketing service agencies such as marketing research firms, organization, an industry, or an any entity. The competitive environment covers consulting firms, advertising agencies which assist a business firms in targeting, competitors, suppliers, customers, stakeholders, culture, and the government. promoting and selling its products to the right markets. Environmental scanning is carefully monitoring the surroundings with the end goal of Competitors: Business firms compete with each other not only for sale of their ascertaining early indications of prospects and challenges that may influence the products but also in other areas. Absolute monopolies in case of which competition organization’s present and future plans. is totally absent are found only in the sphere of what are called public utilities such as power distribution, telephone service, gas distribution in a city etc. More BUSINESS ENVIRONMENT (External Micro and External Macro) generally, market forms of monopolistic competition and differentiated oligopolies The business environment refers to the external elements and conditions that affect the exist in the real world tasks, operations, and performance of the company. It includes financial, mechanical, External Macro Environment political, legal, social, and ecological components. The impact of these variables on organizational well-being can result in both opportunities and challenges. Controlling the Apart from micro-environment, business firms face large external environmental forces. business environment is essential for organizations to adapt, make sound decisions on The external macro environment determines the opportunities for a firm to exploit for appropriate matters, and keep up with the industry’s commitment. promoting its business and also presents threats to it in the sense that it can put restrictions on the expansion of business activities. The macro-environment has thus External Micro Environment both positive and negative aspects. An important fact about external macro- Micro external forces have an important effect on business operations of a firm. environmental forces is that they are uncontrollable by the management of a firm. Components of micro environment are: Suppliers, Customers, Marketing Intermediaries, Because of the uncontrollable nature of macro forces, a firm has to adjust or adapt and Competitors. However, all micro forces may not have the same effect on all firms in itself to these external forces. External macro-environmental factors are classified into: the industry. Economic environment, Social environment, Political and legal, Technological and Demographic environments. Suppliers: An important factor in the external environment of a firm is the suppliers of its inputs such as raw materials and components. A smooth and efficient working Economic Environment: A company’s economic environment includes factors of a business firm requires that it should have ensured supply of inputs such as raw such as economic growth, inflation, unemployment rates, exchange rates, and materials. If supply of raw materials is uncertain, then a firm will have to keep a market demand. These factors deeply affect various aspects of business large stock of raw materials to continue its transformation process uninterrupted. operations such as costs, consumer behavior and profitability. Effective This will unnecessarily raise its cost of production and reduce its profit margin. To strategies, identifying opportunities, and taking risks are essential for companies ensure regular supply of inputs such as raw materials some firms adopt a strategy to remain competitive in this environment. For Example, the global financial of backward integration and set up captive production plants for producing raw crises of 2008 deeply affected the Business Environment. During the global materials themselves. financial crisis of 2008, companies faced more expenses, tighter credit Customers: The people who buy and use a firm’s product and services are an conditions and financial uncertainty, which led to lower sales and profitability. important part of external micro-environment. Since sales of a product or service is The economic situation has compelled businesses to adopt severe measures, critical for a firm’s survival and growth, it is necessary to keep the customers dismiss employees, and reconsider their plans. It had a significant impact on satisfied. To take care of customer’s sensitivity is essential for the success of a both the economic and financial sectors, leading to bankruptcies and business firm. With increasing globalization and liberalization, the customers’ restructuring. In short, the crisis had significantly affected business activities and satisfaction is of paramount importance because the consumers have the option decision-making. of buying imported products. Therefore, to survive and succeed a firm has to make Social Environment: Consumer behavior, preferences and demographics in the continuous efforts to improve the quality of its products. market are influenced by the social environment of business. This environment Marketing Intermediaries: In a firm’s external environment marketing intermediaries provides insights that aid in creating personalized marketing plans for specific play an essential role of selling and distributing its products to the final buyers. customers. Hence, the interaction between brands and customers is heavily Marketing intermediaries include agents and merchants such as distribution firms, influenced by factors like beliefs, language, and lifestyle, necessitating wholesalers, retailers. Marketing intermediaries are responsible for stocking and adaptation in marketing. For Example, the increasing significance of sustainability and environmental awareness is affecting the social environment  of companies. As consumers become more environmentally conscious, they business firms. Since new workers are recruited from outside the firm, expect companies to adopt sustainable practices. Therefore, several demographic factors are considered as parts of external environment. businesses adopt environmental practices such as utilizing eco-friendly THE SWOT ANALYSIS materials and supporting social causes. Harmonizing these values not only boosts the company’s reputation but also provides it with a competitive edge in the market. Political Environment: Political Environment include government initiatives and policies that affect the business sector, such as political transformations and public cohesion. It influences the business’s productivity and includes regulations, import/export policies, and investment rules. To remain competitive in political climates, it is essential for businesses to understand this environment SWOT Analysis is a tool that can help you to analyze what your company does best now, and develop strategies. Businesses are closely related to the government. The and to devise a successful strategy for the future. SWOT can also uncover areas of the political philosophy of the government wields a great influence over business business that are holding it back, or that your competitors could exploit if you don't protect policies. the business. A SWOT analysis examines both internal and external factors – that is, what's Legal and Regulatory Environment: The legal and regulatory framework going on inside and outside your organization. So, some of these factors will be within your encompasses the legislation, rules, and procedures that organizations must control and some will not. In either case, the wisest action you can take in response will adhere to. Moreover, avoiding penalties and protecting one’s reputation and become clearer once you've discovered, recorded and analyzed as many factors. SWOT finances is crucial when communicating these changes. Regulatory measures Analysis is instrumental in strategy formulation and selection. It is a strong tool, but it involves promote innovation and growth while safeguarding the interests of society and a great subjective element. It is best when used as a guide, and not as a prescription. individuals. Successful businesses build on their strengths, correct their weakness and protect against Technological Environment: Technology in business encompasses the internal weaknesses and external threats. They also keep a watch on their overall business constantly evolving technological advancements that influence operating environment and recognize and exploit new opportunities faster than its competitors. procedures and customer communication. This includes the integration of new technologies such as artificial intelligence and digital platforms, which have Strengths are features that organizations possess, thus, giving it significant the potential to streamline processes and increase customer engagement. advantage over others. Acknowledging these developments can provide a competitive advantage Weaknesses are characteristics that plays organizations at the advantage relative and facilitate expansion in the digital environment. The use of a superior to others and may just be limitations or vulnerabilities of organizations. technology by a firm gives it a competitive advantage over its rival firms. The Opportunities are possibilities in the external environment that organizations can use of a particular technology by a firm for its transformation process exploit to their advantage. determines its competitive strength. In this age of globalization, the firms have Threats are challenges in the external environment that can cause problems to compete in the international markets for sales of their products. The firms organizations. which use outdated technologies cannot compete globally. Therefore, technological development plays a vital role in enhancing the competitive PESTLE ANALYSIS strength of business firms. For Example, the rise of Amazon as a leading e- commerce platform is evidence of the technological advancements that have transformed retail, including online payment systems, logistics, and data analytics. Their advanced algorithms personalize product recommendations and efficient delivery options, influences traditional retailers to adapt to the digital market. Demographic Environment: Demographic environment includes the size and growth of population, life expectancy of the people, rural-urban distribution of population, the technological skills and educational levels of labor force. All A PESTLE analysis which is sometime called as a PEST studies the key external factors these demographic features have an important bearing on the functioning of (Political, Economic, Sociological, Technological, Legal and Environmental) that influence an organization. It can be used in a range of different scenarios, and can guide people environment gives them a competitive edge over other players and helps in professionals and senior managers in strategic decision-making. This is essentially a bird’s strategic decision-making. eye view of business conduct because we broadly look at certain macro factors which TOPIC 3 have a lot of influence on the wellbeing of a certain business or a certain industry. Managers and strategy builders use this analysis to find where their market currently is. It CHALLENGES IN THE INTERNAL ENVIRONMENT also helps foresee where the organization will be in the future. THE INTERNAL ENVIRONMENT PESTLE analysis consists of various factors that affect the business environment. It is a macroeconomic tool used to understand specifically the external environment of the Aside from understanding the developments and changes occurring in the global greater environmental analysis. Each letter that you see in the acronym stands for a certain environment, organizations need to understand the internal environment, or better factor. These factors can affect every industry or organization directly or indirectly. The referred to as the local milieu. The internal environment is the setting in which an letters in PESTLE (also written PESTEL), denote the following things: organization locally exists. As one studies in local environment, there are existing unique and interrelated variables that directly affect any organization or business. Understanding these variables is essential if one has to conduct his organization successfully. These areas are government, culture, the stakeholders, competitors, suppliers, customers, and the community. GOVERNMENT: THE BUSINESS CARETAKER The government is the sole legitimate institution tasked with overseeing organizational operations in the country. In implementing these administrative functions and responsibilities, the government undertakes the following: 1. Provides the needed infrastructure a. physically in the form of roads, bridges, electricity, and water services b b. technologically through information technology infrastructure and communication facilities c. economically by providing availability of loans, banking services, low interest rates, and tax incentives d. socially through housing, welfare, waste management policies, community PESTLE analysis gives the businessman a chance to view the business prospects through service, and societal responsibilities the lens of the entire economy. It helps comprehend the business position taking into e. politically in terms of peace, security, stability, and governance account all the macroeconomic forces. It works as: 2. Create an atmosphere of fair and robust competition among industry and company players, monitors and regulates monopolies and oligopolies, and Evaluation framework- PESTLE analysis helps a company weigh its performance by eliminates unfair and illegitimate practices. looking into the broad political, economic, social, technological, legal, and 3. Formulates business policies, implements business operating guidelines, and environmental factors influencing it. It helps a business gauge the favorable regulates the conduct of business activities such as payment of taxes, health and conditions in its launch stage, entry-stage into a new market or during its lifecycle. safety practices in food, manufacturing, construction, and other service industries, Mapping technique: The analytical framework gives a bird-eye view of the ensures quality of products and services, and mandates minimum wages of company’s present stance and a sneak peeks into the future trends. These insights employees, and their fair and adjust treatment. also help the business to make decisions concerning the near future and plan its course of action for the long term. CULTURE: A communal Convergence Strategic planning tool: The study of PESTLE elements makes the corporations It is widely accepted that an organization’s culture is comprised of shared values, aware of the environment they are operating in. Better know-how of this underlying perceptions, feelings and behaviors as well as observational artifacts – such as dress code, symbols and stories. But what happens when these cultural components vary – across an organization and/or across groups of people? A nation’s culture is the 1. Complementary competition. Some companies appear to compete with communal aggregation and convergence of the country’s philosophy, beliefs, traditions, themselves. For capturing a larger market, they produce the same products, use values, attitudes, aspirations, and practices that have historically evolved since a nation’s different brand names, and target different market segments. An example is a real inception. The Philippine has its own culture – a culture that has greatly influence by diverse estate company that sells low-cost housing to target markets, classes C and D, and cultures: Chinese, Japanese, Spanish, and American. Through many years of national average cost housing to middle income class families. growth and development, this culture has been shaped by environmental variables 2. Collaborative competition. Similarly, there are companies whose relationships happening within and outside the country and until today, continuous to change, mature among each other are strategic and cooperative. Examples are the oil companies and transform. Such evolution has nurtured in the Filipino certain distinct beliefs, traditions, in the country. They are in “friendly” competition. and practices like bayanihan, resiliency, pakikisama, and the like. 3. Corrupted competition. Lastly, some companies produce “fake” products. They compete with legitimate businesses by boldly and unethically transgressing the STAKEHOLDERS: The business investors intellectual property rights of other companies through plagiarism, duplication, Organization exist because there are individuals who are willing to take the risks, invest and false branding. They produce and sell these products at low prices. their capital, and engage in business activities in exchange for a return. This return in CUSTOMERS: The business challenge investments is profit. Stakeholders are business investors. Some are involved in the conduct of their business while others prefer to be silent investors. Stakeholders are assets to the Competitors continuously compete to capture a bigger share of the market. Customers country. They provide opportunities for exchange of products and services. They initiate make the market. They are the very reason why companies pursue new product business operations and compete among themselves. They boost and energize economic developments and differentiate their existing products and services. Customers are the activity, provide employment to the community, and help the government by paying focus of company’s business plans and programs and the thrust of their strategies. Without business taxes. Without them, a country is paralyzed. While owners of businesses are the consumers, companies have no reason to exist. Because of the changing needs, wants, direct stakeholders, others are indirect stakeholders. These are individuals that stand to demand, and sophisticated lifestyles of consumers, there is an exigent need to employ benefit from the investments of the owners. They are employees, the government, and the various approaches to ensure their patronage and customer loyalty. Consumer behavior community. is a marketing reality that is difficult to discern, understand, and study with definiteness. The following facts on customer approval, customer patronage, and customer loyalty can COMPETITORS: The business threats help address this “uncertainty. There are various forms of competitions as well as several types of competitors. Competition is an economic scenario were nations, communities, organizations, companies, and individuals offer and sell their products and services. Competitors continuously strive to outplay and outsmart each other, hoping to get a larger share of the target market. They fall in different categories. 1. Same products. They are companies who sell exactly the same products or offer the same services. They are direct competitors. Examples are Unilever and Procter and gamble. Both are engaged in the same line of business and they sell the same products. 2. Similar products. They are companies who sell similar products. Tea and coffee are similar products. 3. Substitute products. Some companies sell substitute products. For example, the At the very least, any product or service should provide customer satisfaction. In other competitors of marketplaces are fast food centers who sell primary cooked food, words, any product must fulfill its intended use, and that is to attract customers and gain and secondly, convenience. Instead of going to the market to buy meat, fish, and customer approval. For example, a shampoo should be able to clean the hair. It should vegetables, they now go to fast food centers for their meals. satisfy the minimum requirement of cleanliness. 4. Different products. Still, there are companies who sell different products but market However, customer satisfaction is not enough. More than this, emphasis is now on customer to the same market segments. delight, a condition where customers become excited over the products or the services Competitors also differ with respect to the strategies they adopt offered. Customer delight may come from experiencing quality service, product excellence, product versatility, or any attribute that will greatly gratify and create a distinct stakeholders, customers, competitors, and suppliers have a societal responsibility to help impact on them. Attaining this level will assure customer patronage. In other words, aside the deprived and marginalized poor improve and attain quality life. Communities need to from cleaning the hair, a shampoo can delight its customers with other added attributes be a consideration of any organization in terms of its social responsibility. like fragrance, smoothness, and softness. PORTER’S FIVE FORCES MODEL The last level of customer behavior is customer intimacy. Customer intimacy refers to the Organizations, particularly businesses, are the lifeblood of any nation. They sustain the relationship between the company and the customers. This is best described as warm, continued existence and staying power of the countries. As drivers of survival, growth, and complimentary, supportive, and “businesslike” personal. Customer intimacy is manifested development, businesses create and energize the pulse of selling, producing, venturing, in varied forms like sending birthday cakes, cards or sharing one’s expertise with a and transacting activities. Companies, corporations, conglomerates, partnerships, “customer” who is in bad financial shape. transnationals, multinationals, enterprises, firms, and organizations are entities engaged in In addition to being pleased with the product, customer continue supporting the product. trade and commerce. As players, in any economy, they are essentially competitors. Call Customer intimacy seals customer patronage or better referred to as customer loyalty. In them by any term; competition is the name of the game. effect, the relationships between the owner and the customers are strategies that can help keep a product’s staying in power and competitiveness. SUPPLIERS: The business partners In an environment characterized by cut-throat competition, business must produce quality products. This degree of quality is greatly dependent on several variables, one of which is the supplier component. Doing business involves supplier-customer relationship. By definition, suppliers refer to individuals and companies engage in the delivery of raw material, machinery, technology, labor, expertise, skills, and other forms of services. They are essentially business partners. Without them, certain products cannot be produced, and some services cannot be rendered. The supplier component is important for the following reasons: 1. It is responsible for the quality of the products produced and the services rendered. If the supplier is not managed well, it may result in the delivery and sale substandard raw materials, low quality equipment and machinery, diluted admixtures of metals and chemicals, decrease in the number of delivered items, and deficiency in weight, size, and number of units of delivered items. 2. It affects continuity in operational processes (e.g. production, scheduling, and delivery). Delays in delivery schedules may cause inventory problems like stockouts, work stoppages, and work force displacement. COMMUNITY: The business concern TOPIC 4 The community is the intermixture of peoples coming from all walks of life with different BUSINESS STRATEGIES “provincial or city cultures”, different values, attitudes, aspirations, traditional beliefs, standards of living, family backgrounds, religions, and educational attainments. It is Business strategy is vital for any company seeking to grow its business in a strategic manner. essentially heterogeneous but characteristically homogeneous in its end goal of attaining It refers to a clear set of plans, actions and goals that outlines how a business will compete quality life. As such, the community in principle is the rationale of the “business framework”. in a particular market, or markets, with a product or number of products or services. It is It is the very reason why stakeholders invest their capital and venture into business. It nothing but a master plan that the management of a company implements to secure a provides opportunities for business to thrive. A community must be self-reliant. In instance competitive position in the market, carry on its operations, to please customers and to when a community is not able to attain this level of self-sufficiency, the government, achieve the desired ends of the business. VALUE CHAIN Supply Management Supply management is now a popular term used for purchasing which was formerly termed as procurement. It is a key business function that is responsible for (1) identifying material and service needs, (2) locating and selecting suppliers; negotiating and closing contacts; (3) acquiring the needed materials, services, and equipment; (4) monitoring inventory stock (5) tracking supplier performance. In this stage, it is important to create “value” by establishing and managing supplier relationships, identifying strategic sources, accurately forecasting demand requirements, and understanding inventory management. Thus, the goal of supply management is to obtain the right materials by meeting quality requirements in the right quantity, for delivery at the right time and the right place, from the right source, with the right service, and at the right price. Sourcing and ordering Value chain is a general term that refers to a sequence of interlinked undertakings that an organization operating in a specific industry engages in. It is a step-by-step business model Steps to take when an organization needs to source out raw materials or parts: for transforming a product or service from idea to reality. It looks at every phase of the 1. Specify the need clearly by writing down the details. Normally the stock business from the time of procurement of raw materials to the time its products reach its keeping unit (SKU) is coded with brief but complete details like date, eventual end users or consumer. In other words, it describes the full range of activities identification number, the originating department, the account to be charged, which are required to bring a product or service from conception, through the different complete description of the raw material/service, date needed, any special phases of production (involving a combination of physical transformation and the input of instruction, and signature of authorized person making the request. various producer services), delivery to final consumers, and final disposal after use. If an 2. Identify and analyze possible sources of supply. Generally, more than one organization wants to be profitable, it must sell value to its buyers – value that is worth supplier should be considered. The criteria of choosing suppliers are sound paying for. On that context, businesses have to pay closer attention to where their raw business sense and attitude, good record of accomplishment, sound financial material comes from, how they are produced, how finished products are stored and base, suitable technical capability, quality orientation, customer service transported, and what the company end products users are really looking for. mentality, and effective logistical arrangements. SUPPLY CHAIN MANAGEMENT 3. Ask potential suppliers for their respective quotations, proposals, and bids. 4. Compare and evaluate submitted documents, then select suppliers. Both A supply chain is the network of those involved with the production and distribution of a buyers and suppliers agree and determined the terms of the contract. company’s products. Supply chains involve a multitude of activities, people, entities, 5. Prepare, place, follow up, and expedite the purchase order. The purchase information and resources. They incorporate many steps and processes used to deliver order is a written requisition placement to purchase supplies. products or services to the marketplace. Supply chain management is the vital process of 6. Confirm that the order placed has actually arrived in good condition and at planning, tracking and perfecting how goods move throughout the system. Maintaining the quantity. Forward the shipment to its destination, properly document and strong links within your supply chain impacts business costs and profitability. As such, register the receipt, and forward it to the accepting party. everyone involved needs to be well informed and understand their role within supply chain 7. Invoice, clearing, and payment follows. operations. o Inventory management It consists of the following: Another facet of supply management is inventory management. The role of inventory is to buffer uncertainty. It includes all purchase materials and goods, partially completed materials and components parts, and finished goods. There are four broad categories of inventories: 1. All processed purchase input of raw materials for manufacturing. Companies purchase supplies for any of the following reasons: to avail the quantity discounts,  to anticipate future price increases, to safeguard against supplier problems, to Marketing and Sales minimize transportation costs, and to avoid supply shortage. Supply chain management traditionally has focused on sourcing components, materials 2. Work-in-process (WIP) and other supplies as well as distribution. Marketing plays an increasingly important role in 3. Finished goods includes all completed products to shipment the process; it balances procurement by providing essential demand information and 4. Maintenance, repair, and operating supplies (MRO) include the materials and building the relationships that help improve the efficiency of supply chain operations. The supplies used when producing the products but are not parts of the products. right product, the right message, to the right audience, at the right time. Production and operations Promotion Production and operations are processes that transform operational input into output to The relationship between logistical planning and promotional campaigns is no satisfy consumer needs and requirements. This transformational process consists of exception to this. Often implemented as a key marketing strategy, promotions manufacturing and assembly. have proved particularly successful in helping companies attract new customers, retain existing clients, try out new product concepts, and respond to the ever- Manufacturing is the process of producing goods using people or machine resources. It changing demands of the consumer. New locations may require new distribution commonly refers to industrial production where raw materials are converted into finished partners, new quality assurance, and in some cases, new customs management. goods. Assembly is the process of putting together raw materials into a desired output. The earlier logistics teams are brought into planning discussions, the sooner the Quality raw materials and parts, efficient production layouts and processes, and promotion can go from concept to reality. employees with skills and motivation are essential to effective transformational processes. Selling Once achieved, value can be generated through appealing product designs, quality and Selling does not mean only taking money and giving goods. It has broad meaning reliability, efficient service performance, accessible location site, attractive store displays, in supply chain management, in which include the activities such as selling goods, affordable prices, and good customer service. identifying potential customers, creating demand, providing information and The logistics services to buyers. The goals of selling chain management business strategy includes the following: Logistic is a popular term in supply chain management, logistics management includes 1. Engage your prospects and turn them into customers the supervision of certain sequential processes. It focuses on the daily operations 2. Make ordering process easy for the customer concerning the final product of the organization while its aim is to allocate the right 3. Add value for the customer amount of a resource at the right time. It is also ensuring that it gets to the set location in a 4. Coordinate team selling proper condition while delivering it to the correct internal or external customer. Logistics is also able to create visibility within an organization’s supply chains, provide data on real- GROWTH STRATEGIES time movements and therefore advise on and implement change that directly affects the The adoption and implementation of a growth strategy is one of the most important organization as a whole. These include warehousing, scheduling, dispatching, considerations for every organization. Particularly, growth strategies are carefully studied transportation, and delivery and deliberately carried out by organizations for the following reasons: they want to survive the hypercompetitive environment and not perish; they want to increase their earnings or income; they want to create their advantage among competitors; or they want to increase their market leadership in a given industry. These broad growth strategies can be any of the following: market penetration, market development, product development, and diversification.  Market penetration suggests that for an organization to increase its growth, market penetration can be actualized by selling more of its current products/services to its current customers or buyers. It is the least risky for any company to pursue. For example: if we are selling a six-pack of coca – cola, then we can push for a 12- pack, 24-pack, and so on. Market development is the process where a company can sell more of its current products by seeking and tapping new markets. It is a little more challenging. For example: if a company has a chicken fast-food chain in Luzon, then it can open new outlets in Visayas and eventually, in Mindanao. Another example: Leading footwear firms like Adidas, Nike, and Reebok, which have entered international The introduction stage is the period of launching the product for acceptance. In markets for expansion. These companies continue to expand their brands across this phase, the product is new; hence, there is a need to create awareness. new global markets. That's the perfect example of market development. In the Strategies include promotions, giving discounts, and market development. context of retail: Free trials, targeted content marketing, advertising, and Depending on the type of product, the acceptance phase may either be short or experimenting with pricing strategies can be a useful part of your marketing long. development strategy, as they can encourage non-users in your existing market to The growth stage is the phase where the product gains acceptance by the become customers. consumers. In this stage, sales and profit slowly increase and emphasis is now on Product development is an internal growth strategy where the company sells new continuous market development and improvement. Competition is more products to an existing market. In this strategy, there is a need for the organization challenging at this stage. Here, the organization can focus on branding, building to be more creative in coming up with differentiated products and services. The customer loyalty, and promoting repeat business through customer patronage. product or services need not be new in its truest essence but instead, may be the results of product/service enhancement, redesign, or reinvention. For example: a The maturity stage is the period where the product has reached its penultimate level. Here, the established product trends to remain steady and the number of company develops a versatile shampoo product that can be used without wetting competitors increases. Although sales and profits generally reach their peak, it is in the hair – this a joke example. this phase where the company should start reinventing its products to maintain Diversification is a product/service mix growth strategy that involves creating their current levels. Product differentiation is recommended in this stage, as well as differentiated products for a new customer. In short, it is new products for a new efficient operations and formulation of creative marketing strategies. customer. Oftentimes, it is going to another product/service area that is NOT related to one’s current business or operations. For example: In 2001, Apple The decline stage is the period where the product begins to reach or is reaching launched the iPod and subsequent iTunes software (2003). Later, Apple would truly its lowest point. Here, sales and profits decline and price competition is intense. A hit the diversification jackpot with the launch of the revolutionary iPhone in 2007. company can choose to keep the status quo, reduce prices to generate more sales, consolidate with other companies, or simply exit the market. Implementing LIFE CYLCLE STRATEGIES strategies like product reinvention and aggressive marketing can be helpful. The term product life cycle refers to the length of time a product is introduced to consumers TOPIC 5 into the market until it's removed from the shelves. This concept is used by management and by marketing professionals as a factor in deciding when it is appropriate to increase CORPORATE STRATEGIES advertising, reduce prices, expand to new markets, or redesign packaging. The life cycle Corporate Strategy is the strategy level that concerns itself with the entirety of the of any product/services refers to the lifespan that a commodity/service undergoes from its organization, where decisions are made with regard to the overall growth and direction of introduction stage to its growth, maturity, and decline stages. While a product undergoes a company. It takes a portfolio approach to strategic decision making by looking across its life cycle, external and internal forces in the environment affect the product ranging all of a firm’s businesses to determine how to create the most value. In order to develop a from customers’ expectations, technological development, and competition to other corporate strategy, firms must look at how the various business they own fit together, how wide-ranging issues and challenges. Not all products follow the S – shaped product life they impact each other, and how the parent company is structured, in order to optimize cycle curve. Some products are briefly introduced but die quickly. Others stay in the human capital, processes, and governance. Corporate strategies are arguably the most maturity stage for a long time. Some enter the decline stage and then are recycled back essential and broad-ranging strategy level within an organizational strategy. As business into the growth stage through strong promotion and repositioning. focuses on developing their degree of internal competitiveness, companies adapt external growth strategies. These are alternative modes of addressing the challenges Allowing for the balance between risk and return to exist by separating confronting organizations. Hence, we are going to deal on the following strategies: responsibilities Integrative growth strategies and Boston Consulting Group Model or the BCG Matrix. Developing centers of excellence Determining the appropriate delegation of authority What are the Components of Corporate Strategy? Setting governance structures There are several important components of corporate strategy that leaders of Setting reporting structures (military / top-down, matrix reporting) organizations focus on. The main tasks of corporate strategy are: C. Portfolio Management Portfolio management looks at the way business units complement each other, A. Allocation of Resources their correlations, and decides where the firm will “play” (i.e. what businesses it will The allocation of resources at a firm focuses mostly on two resources: people and or won’t enter). capital. In an effort to maximize the value of the entire firm, leaders must determine Corporate Strategy related to portfolio management includes: how to allocate these resources to the various businesses or business units to make Deciding what business to be in or to be out of the whole greater than the sum of the parts. Determining the extent of vertical integration - the firm should have Key factors related to the allocation of resources are: Managing risk through diversification and reducing the correlation of results People across businesses Identifying core competencies and ensuring they are well distributed Creating strategic options by seeding new opportunities that could be across the firm heavily invested in if appropriate Moving leaders to the places they are needed most and add the most Monitoring the competitive landscape and ensuring the portfolio is well value (changes over time, based on priorities) balanced relative to trends in the market Ensuring an appropriate supply of talent is available to all businesses D. Strategic Tradeoffs Capital One of the most challenging aspects of corporate strategy is balancing the tradeoffs between risk and return across the firm. It’s important to have a holistic Allocating capital across businesses so it earns the highest risk-adjusted view of all the businesses combined and ensure that the desired levels of risk return management and return generation are being pursued. Analyzing external opportunities (mergers and acquisitions) and allocating Below are the main factors to consider for strategic tradeoffs: capital between internal (projects) and external opportunities. Managing risk B. Organizational Design Firm-wide risk is largely depending on the strategies it chooses to pursue Organizational design involves ensuring the firm has the necessary corporate True product differentiation, for example, is a very high-risk strategy that structure and related systems in place to create the maximum amount of value. could result in a market leadership position or total ruin Factors that leaders must consider are the role of the corporate head office Many companies adopt a copycat strategy by looking at what other risk- (centralized vs decentralized approach) and the reporting structure of individuals takers have done and modifying it slightly and business units – vertical hierarchy, matrix reporting, etc. It’s important to be fully aware of strategies and associated risks across the Key factors related to organizational design are: firm Head office (centralized vs decentralized) Some areas might require true differentiation (or cost leadership) but other Determining how much autonomy to give business units areas might be better suited to copycat strategies that rely on incremental Deciding whether decisions are made top-down or bottom-up improvements influence on the strategy of business units The degree of autonomy business units have is important in managing this risk Organizational structure (reporting) Generating returns Determine how large initiatives and commitments will be divided into smaller projects Higher risk strategies create the possibility of higher rates of return. The Integrating business units and business functions such that there are no examples above of true product differentiation or cost leadership could redundancies provide the most return in the long run if they are well executed.  Swinging for the fences will lead to more home runs and more strikeouts, A. Backward Integration is another integrative acquisition growth strategy where the so it’s important to have the appropriate number of options in the organization buys one of its suppliers. An organization may carry out backward portfolio. These options can later turn into big bets as the strategy integration to better control its supply chain and ensure a more reliable or cost- develops. Incentives effective supply of input. Furthermore, the organization can eliminate inefficiencies Incentive structures will play a big role in how much risk and how much to secure quality output or according to set conformance standards. The return managers seek organization can apply product and process strategies so that the right products It may be necessary to separate the responsibilities of risk management are produced, and the right services are rendered at the right time. Effective and return generation so that each can be pursued to the desired level backward integration can help increase the profitability of an organization and It may further help to manage multiple overlapping timelines, ranging thus, create competitive advantage. For example, if Nokia is a manufacturer of from short-term risk/return to long-term risk/return and ensuring there is mobile phones, it can buy its supplier of phone cases. appropriate dispersion. B. Forward Integration is carried out when the integration buys distribution companies that are part of its distribution chain. In effect, the organization is able to remove INTEGRATIVE GROWTH STRATEGIES the intermediary, thus, eliminating distribution costs. Forward integration allows an Integrative growth strategies are essentially external growth strategies, involve investing the organization to reinvent its marketing outlook and redesign its marketing strategies. resources of the organization in another company or business to achieve growth goals. An For example, an organization engaged in garment manufacturing can buy retail integrative growth strategy is a growth strategy that emphasizes blending businesses outlets that are displaying and selling their clothing lines to help increase their sales. together through acquisitions and mergers which includes horizontal integration and THE BOSTON CONSULTING GROUP MODEL vertical integration. Vertical integration and horizontal integration are business strategies that companies use to consolidate their position among competitors. A BCG matrix is a model used to analyze a business’s products to aid with long-term strategic planning. The matrix helps companies identify new growth opportunities and Horizontal integration is a strategy where the organization acquires another competing decide how they should invest for the future. Most companies offer a wide variety of business. There are varied reasons for undertaking horizontal integration. First, organizations products, but some deliver greater returns than others. The BCG matrix gives the business may employ horizontal integration to eliminate real or potential competitors because a framework for evaluating the success of each product to help the company determine some competitors can present themselves as deadly threats to an organization. For which ones they should invest more money into and which they should eliminate example, Jollibee purchased Mang Inasal for fear of losing their market share in the fast- altogether. It can also help companies identify a new product to introduce to the market. food industry. Another possible reason is the desire of the organization to simply expand its The matrix is divided into four quadrants based on market growth and relative market reach, expand its market demographically, and maintain its market status as a market share. leader, market challenger, or a market follower. Lastly, an organization may undergo horizontal integration to help increase its revenues. The BCG model has been used since 1968 to help companies gain insights on what products best help them capitalize on market share growth opportunities and give them Vertical integration is the process of consolidating into an organization other companies a competitive advantage. More than 50 years after its inception, the BCG matrix model involve in all aspects of a products or a services process from raw materials to distribution. remains a valuable tool for helping companies understand their potential. It is an integrated growth strategy adopted by an organization to gain control over its suppliers and distributors, increase the company’s market share, minimize transaction, and In this four-quadrant BCG matrix template, market share is shown on the horizontal line (low inventory costs, and ensure adequate stocks in the retail stores. Vertical integration can left, high right) and growth rate is found along the vertical line (low bottom, high top). The either be backward or forward. four quadrants are designated Stars (upper left), Ques