STRATEGIC MANAGEMENT 1-5.pdf

LESSON 1 ⮚ transaction activity seeking wealth or ongoing profit BUSINESS IN 21C >Understanding the 21st century Business Environment WHAT DO WE WANT OUR BUSINESS TO?...

LESSON 1 ⮚ transaction activity seeking wealth or ongoing profit BUSINESS IN 21C >Understanding the 21st century Business Environment WHAT DO WE WANT OUR BUSINESS TO? What is Business? ⮚ To survive and to ensure “GROWTH” with ‘PROFIT’ in the ‘LONG RUN’ COVID19 impact on business The 4th Industrial Revolution and VUCA GROWTH OPPORTUNITIES IN THE POST CORONA WORLD WHY DO YOU MAJOR IN MARKETING MANAGEMENT? 3D Printing Cyber Security Drop Shipping Do you like MONEY? AI IT Equipment Virtual or Augmented Reality THE PHILIPPINES BILLIONAIRE LIST 2024 Digital Signiture Gaming Grocery Hans Sy Ramon Ang Harley Sy Cloud Computing Online Retail Coffee Manufacturer Enrique Razon Jr. Andrew Tan Henry Sy Jr Video Conference Streaming Herbert Sy Lucio Tan Teresita Sy-Coson Manuel Villar VUCA (Volatility, Uncertainty, Complexity, Ambiguity) Condition and Situation: Chaotic World (Environment) BUSINESS is an economic activity which involves regular production and or exchange of goods and services with the main purpose of earning profits through the 4TH INDUSTRIAL REVOLUTION satisfaction of human wants. A fundamental change in the way we live, work and relate to one another. ⮚ the activity of buying and selling goods and services (Cambridge Dic) How well can you predict the outcome of your actions? COMPLEXITY VOLATILITY ⮚ the regular production of purchase and sale of goods undertaken with an Multiple key Rate of change objective of earning profit and acquiring wealth through the satisfaction of decision factors human wants (Stephenson) AMBIGUITY UNCERTAINTY Lack of clarity about meaning of an Unclear about the present BUSINESS refers to a form of activity conducted with an objective of earning profit event for the benefit of those whose behalf the activity is conducted (Dicksee) How much do you know about the situation? VOLATILITY ⮚ Human activity directed towards producing or acquiring wealth through Unexpected and unstable challenges over unknown duration buying and selling of goods (Lewis Henry) No trends but fad ⮚ a business, also known as an enterprise, agency, or a firm, is an entity UNCERTAINTY involved in the provision of goods, services, or both to consumers (Sullivan; Less understanding on the cause and effect Arthur; Steven) Change is possible but not a given ⮚ COMPLEXITY THE PURPOSE OF BUSINESS... The situation has many interconnected parts and variables ⮚ is to create and keep a customer Required volume and nature of information is overwhelming to process ABIGUITY THE VALUE OF BUSINESS AND MANAGEMENT Unclear relationships >Understanding Business and Value No precedents exists : Face totally the unknown Value Pricing Thermometer Value Customer Perceived Value Marketing INDUSTRIAL REVOLUTION Exchange Value A fundamental change in the way we live, work and relate to one another, even the Use Value change of philosophy and politics Sign Value Needs, Wants, and Problem Recognition ⮚ Industry 1.0 (18C) - based on the introduction of mechanical production equipment driven by water and steam power ‘engine’ VALUE PRICING THERMOMETER ⮚ Industry 2.0 (19C-20C) - based on mass production achieved by division of 4. OBJECTIVE VALUE labor concept and the use of electrical energy (ELECTRICITY) 3. PERCEIVED VALUE ⮚ Industry 3.0 (20C) - based on the use of electronics and IT to further -Price of Substitutes automate production processes (COMPUTING) -Communication Effort ⮚ Industry 4.0 (21C) - based on the use of cyber physical system [A.I deep 2. PRODUCT PRICE learning, Big data, Internet of Things, 3D printer, and Bio: Genetic Engineering] (INTELLIGENCE) 1. COST OF GOODS SOLD - Operation, logistics, procurement, CHALLENGE OF STRATEGIC MANAGEMENT and many more [EFFORT] Only 16 of the 100 largest U.S. companies at the start of the 20th century is identifiable today in the 21st century THE VALUE During the first 10 years of 21st century, more than 50 thousand businesses Competitive advantage over competitors: to earn (or has potential to earn) filed for bankruptcy only in U.S., what more in other countries a persistently higher rate of profit The value of a product TO SURVIVE AND TO ENSURE ‘GROWTH’ WITH ‘PROFIT’ IN THE ‘LONG RUN’ > Mental Estimation made and perceived in consumer mind What do we want our business to? > The total amount (i.e. total revenue) that customers are willing to pay for the products CREATE AND SUSTAIN COMPETITIVE ADVANTAGE GLOBALLY > The Value = Perceived Benefits/Perceived Cost What should we do? > Subjective by a function of consumers’ estimation SELL MORE BUY LESS To The source of the competitive advantage can be seen from discrete generate more profit and investment activities of a firm and how they interact with one another to create the value of the product WHY SHOULD I BUY YOUR PRODUCT? Million Dollar Question wherein the business and value is identified WHAT IS CUSTOMER PERCEIVED VALUE? LESSON 2 Customer Perceived Value is the difference between the prospective customer’s evaluation of all the benefits and all the costs of an offering and the perceived USE VALUE alternatives. The utility of consuming a good BENEFIT COST > How much a property is worth to a ‘particular’ person Product Benefit (Quality) Monetary Cost > Also called subjective value, value in use, utility value Service Benefit Time Cost The satisfying power of a good or service in classical political economy Personal Benefit Energy Cost SIGN VALUE Image Benefit Psychological Cost The value accorded to an object because of the prestige (social status) that it imparts upon the possessor, rather than the material value and utility derived from the function and the primary use of the object. ACTUAL VALUE AND PERCEIVED VALUE Both require ‘COST’ JEAN BAUDRILLARD Value and Cost are not a zero sum game French sociologist, philosopher, cultural theorist, political commentator, Actual value and perceived value are not the same. They show synergy and photographer. (1927-2007) effect Synergy: The combined effect of individuals in collaboration that exceeds the sum of “We live in a world where there is more and more information, and less and less their individual effects (Stephen Covey) meaning.” DEFINITION OF MARKETING He is best known for his analyses of media, contemporary culture, and The process of planning and executing the conception, pricing, promotion, and technological communication, as well as his formulation of concepts such distribution of ideas, goods, and services to create exchanges that satisfy individual as simulation and hyper reality. and organizational objectives. (AMA) CONSUMING SIGN >Updated Definition in 21st Century Consumption becomes the leading device through which individuals Marketing is an organizational function and a set of processes for creating, construct THEIR IDENTITIES. communicating, and delivering VALUE to customers and for managing customer relationships in ways that benefit the organization and its stakeholders. THE VALUE IN BUSINESS VALUE Exchange Value Use Value Sign Value EXCHANGE VALUE How much a property is worth to the ‘average’ person who ‘might’ buy it. Also called objective value, market value (Quantitatively different) The exchange value of a commodity for Karl Marx is not identical to its price, but represents rather what (quantity of) other commodities it will exchange for, if traded. Exchange value forms the substance of money, and exchange value is wealth. (Karl Marx)  ⮚ A method of classifying human needs and motivations into five categories in ascending order of importance. PROBLEMS STRATEGY IS CLOSED TO NEEDS, WANTS, AND PROBLEM SOLUTION BUT NOT THE Perceived gap between the existing state and a desired state, or a deviation SAME from a norm, standard, or status quo. > Although most problems turn out to have standard solutions, difficulties NEEDS arise where such means are either not obvious or are not immediately Needs are distinguished from wants because a deficiency would cause a available clear negative outcome, such as dysfunction or death. > Therefore, let your customer clearly know you have the right solution Need is defined as goods or services that are required. This includes the > Solving the problem results to satisfying your customers need for food, clothing, shelter, and healthcare. These are the things you Consider the augmented product concept The fundamental needs of need in order to live. customers Understanding them and your solution WANTS “a desire for a specific product or service to satisfy an underlying need” UNSATISFIED NEEDS Demand: are wants for specific products backed by an ability to pay. When the current product/service is not satisfying the need When the consumer is running out of a product or service NEEDS When another product/service seems superior to the one currently being Understand the fundamental need of your client used. Hierarchical: lower needs must be met before upper needs can be met. UNFILLED WANTS >Customers are willing to pay more on satisfying their needs in higher When a current product is not performing properly hierarchy. When the consumer is running out of a product >However, satisfying basic needs are essential NEEDS When another product seems superior to the one currently used For a consumer to consider a brand, it must satisfy some need. Countries, cultures, and segments have different needs LESSON 3 CONCEPT OF STRATEGY MASLOW’S HIERARCHY OF NEEDS > Understanding the concept of strategy Strategy Role of a manager in Strategic Management Tactic  Strategy vs. Tactic Building firm’s strategy AS A MANAGER Strategic Hierarchy Remember the authority and responsibility Corporate Strategies > Business is not a game like ‘Monopoly’ or ‘Blue Marble’ > DIE or SURVIVE: The survival of the fittest STRATEGY > Remember that as a manager, you have the sole responsibility on your STRATEGOS (Greek) staffs, organization, and your society > Stratos (multitude, army) + ago (guiding, moving, and leading) > Stratiyeia (command of a general) WHAT IS TACTIC? > Strategie (art of a general) “A tactic is a plan of action made up before or during the game, to take advantage of In Military our own strengths and protect our own weaknesses.” > Strategy: Overall plan for deploying the existing resources to establish a WHAT are you going to do? favorable position Supporters need something to do. Call to > Tactic: A scheme for a specific plan Action is key. Actions must be meaningful and commensurate with ability Each strategy should have multiple tactics. Be creative. War on MAP - plan on pages dealing with the allocation of the resources to win “Tacticsinvolve the use of armed forcesin the engagement,strategy isthe use of (Military School) engagement forthe object of war. ”(Causewitz on Strategy) “Strategy setsthe point when,the place where, and the force with which the battle STRATEGY VS. TACTICS isto be fought”(OnWar, Carl Von Clausewitz) STRATEGY Strategy Tactics In Military Overall plan for deploying the existing A scheme for a specific “The true aim ofstrategy is notso much to seek battle asto seek a strategic situation resources to establish favorable plan so advantageousthatifit does not ofitself produce the decision, its continuation by position battle issure to achieve this. ” (Strategy,B.H.Liddell Hart) Relatively Long term base At the moment Planning process Contact process WHAT IS STRATEGY? War on paper Action of the war Strategy is an integrated set of choices about: Doing the right things Doing things right > BATTLEFIELDS: products, customers, geography (WHERE) Seeking victory before the battle The battle > WEAPON: source of competitive advantage (HOW) OBJECTIVE: WHAT YOU SPECIFICALLY WANT TO ACHIEVE Strategy is a set of policies designed to achieve a sustainable competitive advantage (HOW) STRATEGY: HOW YOU WOULD LIKE TO ACHIVE IT Time bound > Relatively long-term TACTICS: WHAT YOU ARE GOING TO DO (ASK OTHERS TO TAKE ACTION AS WELL) > Based on the Vision/Goal WHAT DO YOU THINK OF STRATEGY? BUILDING THE FIRM’S STRATEGY IS Where to win or achieve your goal (VISION) To choose the business, activities, and market in which the firm intends to > Define the industry we want to belong or penetrate compete > Physical market (industry) and conceptual market To allocate resources among them in order to maintain and develop them > Where do we want to go? An effort of deliberate search for a plan of action that will develop a How to win or achieve your goal (VISION) business’s competitive advantage. >How are we going to get there? STRATEGIC HIERARCHY > Strategic Business Planning CORPORATE STRATEGY The organization needs > Where to win > Industry Analysis > Definition of the business > Growth/ Stability/ Retrenchment strategy THE VISION BUSINESS UNIT STRATEGY What the organization wishes to become and where the organization seeks > How to win to go > Generic strategies Components of vision in a wider concept > Relative strategies and tactics > The purpose of existence FUNCTIONAL STRATEGY > The Mission > Relative strategies and tactics > The Guiding principles (Values) > The Vivid image of the organization’s future CORPORATE STRATEGIES Top level management formulate for overall organization > Fundamental frame of all corporate activities DEVELOPING A STRATEGIC VISION > Top to Down Involves thinking strategically about > Line of sight: Communication (Share) > Firm’s future business plans Must be answered when design strategies: > “Where” to go > In what industry should we be operating? Tasks include > Where do we want to go (what do we want to be)? > Creating a roadmap of the future It depends on the outcome of strategic analysis > Deciding future business position to stake out > Down to Top > Providing long-term direction > Giving firm a strong identity LESSON 4 COMPONENTS OF STRAMA – 1 COMPONENTS OF GOOD VISION > Understanding different components of strategic management Flowery words on the wall, desk, and bulletin board Vision Versus Developing a Strategic Vision > SMART (Specific, Measurable, Attainable, Relevant, and Time bound) Components of Vision > Attractive to all members in the organization (Motivate...) Mission > Agreement and commitment in the organization Mission Statement > Plugged in Value The right vision enables K.R.A and its importance > Determine the strategy KPI and its characteristics > Set strategic initiatives > A;lign the organization COMPONENTS OF A STRATEGY The vision of what the organization wants must be set with the full Strategy is a direction/ plan directed for people in the organization to awareness of reality implement The importance of ASSESSMENT > Vision, Mission, and Value > Clearly define the problem before seeking a solution > K.R.A and KP > Good assessment is the foundation of a successful operation To build up proper ASK YOURSELF THESE QUESTIONS Note: A company’s mission is NOT to make a profit! --”What will we do to make a profit? ▪ What is the VISION? ▪ Why we need ‘the VISION’ at this moment? DEFINING THE MISSION A review of your organization’s mission includes: ▪ Is the VISION clear to all members within the organization? > A statement of your unique identity: the primary result you exist > A description of the basic functions you should perform: the businesses ▪ Does the VISION provide motivation? you should be in ▪ Focus enough? > A determination of your approach to performing your functions: the principles and practices which should guide your decisions FACTORS TO CONSIDER The purpose of a company or organization ▪ Vision for No. 1 or Vision for Chasers The framework or context within which the company’s strategies are formulated ▪ Industry > Define a company and distinguish it from the competitors ▪ Corporate Vision vs. Functional Vision > Communicate its goals and values > Guide the actions of the organization > Line of sight/ alignment > Provide a path, and guide in decision making > Mission and Vision can be more SMART and practical ▪ Vision should be grounded on ‘Strategic Analysis’ (Internal analysis + CRITICISM ON MISSION STATEMENTS External analysis) No purpose that to gain publicity > Plug in 86% of the organizations have a mission statement but many companies in > Follow the market dynamics quite different industries, firms have very similar mission statements. Time and effort could be used more effectively elsewhere in the business MISSION Mission (statement): A simple (neat) statement that explains your MISSION VS. VISION company’s goal A mission statement focuses on current A vision concerns a firm’s future > A summary of what your company does for its customers, employees, business activities “who we are and business path “where we are going” and owners. what we do” > Explains how you do what you do Current product and service Market to be pursued > Focuses on why our company does what it does. offerings Future technology Customer needs being served product-customer focus MISSION STATEMENT Technological and business Kind of company that Define current business activities capabilities management is trying to Highlights boundaries of current business create Conveys HOW TO WRITE DOWN? > Who we are, Ask yourself three fundamental questions > What we do, and 1. What does your business do? How does it do it? And why? > Where we are now 2. Hold a brainstorming session Company specific, not generic so as to give a company its own identity 3. Narrow down your choices Refine your words into sentences 4. Review what you have written  Maintenance VALUE Operations The operating philosophies or principles that guide an organization’s Finance internal conduct as well as its relationship with its customers, partners, and shareholders Good measurement systems do not just measure things done according to the Find the core value in the mission statement organizational chart. Good systems measure things done to satisfy stakeholders K.R.A Definition KEY PERFORMANCE INDICATORS > Key Results Area The essence of measuring the performance (Result) > General areas of outputs or outcomes for which the department’s role is >“Key” means that this measure has been pinpointed so carefully that responsible management knows precisely what to do. > Primary responsibilities of an individual, the core area which each person > “Performance” is the result or activity we are looking for that fits into is accountable for. K.R.A strategic goals Enables you to take ownership of your job and to accept responsibility for > “Indicator” is a gauge or a measure that reports information. those areas in which achieving results are your responsibility > Measures are developed to capture both the input and output elements of a business system. IMPORTANCE OF K.R.A Set goals and objectives - Performance Management CHARACTERISTICS OF KPI Prioritize their activities, and therefore improve their time/work Goals, not statements management Challenge the status quo Clarify roles of department or individual Require little or no explanation Focus on results rather than activities Consistent with the vision and mission Align their roles to the organization’s business or strategic plan SMART Promote an environment of self-management EXAMPLES LESSON Customers Product/ service 5-------------------------------------------------------------------------------------------------------------- Public/ society/ natural environment ----------------------------------------------------- Marketing Human Resources COMPONENTS OF STRAMA – 2 Production THOUGHTS WITHOUT CONTENT ARE EMPTY, INTUITIONS WITHOUT CONCEPT ARE BLIND (Immanuel Kant; The Critique of Pure Reason) RESEARCH WITHOUT STRATEGY AND OBJECTIVES IS EMPTY STRATEGY WITHOUT REASEARCH AND ANALYSIS IS BLIND. INDUSTRY ANALYSIS Documented investigation and analysis of a market that is used To determine the attractiveness of a market and to understand its evolving opportunities and threats as they relate to the strength and weaknesses of the firm. To inform a firm’s strategic planning activities and decision making Usually covers Market size, growth rate, and profitability Distribution channels Industry cost structure and competition Customer trends WHY DO YOU (A FIRM) WANT TO EXECUTE INDUSTRY ANALYSIS? WHEN DO YOU (A FIRM) SHOULD EXECUTE INDUSTRY ANALYSIS? TO SET UP STRATEGY How can we set up the best strategy which fit on my firm, under the current business environment? Decision making through INTUITION or INSIGHT We need something to help intuition or insight SIMPLY TRY TO FIND OUT HOW TO WIN... WHAT IS YOUR COMPETITIVE ADVANTAGE IN THE TARGET MARKET AGAINST OTHER COMPETITORS? COMPETITIVE ADVANTAGE An advantage over competitors gained by offering consumers greater value than competitors offer Set of factors or capabilities that allows firms to consistently outperform their rivals Second objective is to allow firms to enjoy sustained levels of high performance When a firm earns higher economic profit than the average in its industry Profitability depends on market level economics (the 5-forces) and firm’s value creation relative to competitors Value Creation depends on cost position relative to competitors and benefit position relative to competitors SOURCE OF COMPETITIVE ADVANTAGE “Expertsin businessstrategy hold dif ering views aboutthe exact nature and sources of competitive advantage.Most would agree, however,that competitive advantage must be based on cost dif erentiation factors. ”(Michael Porter) GENERIC STRATEGY THROUGH COMPETITIVE ADVANTAGE HISTORY OF INDUSTRY ANALYSIS ▪ Offered a two-year course in Business Policy designed to integrate knowledge gained in functional areas like accounting, finance, and operations ▪ Promoted the idea that managers should be trained strategically and not be just functional administrators ▪ Looked at problems faced by managers ▪ Stated that “an analysis of any business problem shows not only its relation to other problems in the same group; but also the intimate connection among groups” ▪ On what basis must any one company compete with others in a particular industry? ▪ Does a firm’s strategy match its competitive environment? ▪ What kind of things must it have to be competent? To compete? ▪ How should a firm size up in the competitive environment? ▪ Every business, every sub-unit of the organization, and every individual must have a clearly defined set of purposes or goals which keeps it moving in a “deliberate chosen direction” ▪ Prevents company from drifting into undesired directions THE CONCEPT OF CORPORATE STRATEGY (KENNETH R. ANDREWS) Corporate strategy is the pattern of decisions in a company that determines and revealsits objectives, purposes, or goals, producesthe principal policies and plansfor achieving those goals, and definesthe range of businessthe company isto pursue,the kind of economic and human organization itis orintendsto be, and the nature ofthe economic and non-economic contribution itintendsto make to its shareholders, employees, customers, and communities”(pp.18-19) IGOR ANSOFF ▪ Father of Strategic Management ▪ Recognized the need for strategic planning in complex and turbulent times ▪ Defined common thread as the firm’s “mission” or its ▪ Company’s new products must fit the firm’s commitment to exploit an existing need in the distincitive competence market as a whole ▪ New products must have a “common thread” with company’s other existing products ANSOFF’S PRODUCT/MISSION MATRIX ▪ Matching the company’s strengths (distinctive competence) and weaknesses with opportunities and threats (risks) that it faced in the market place ▪ SWOT was born THE RISE OF STRATEGY CONSULTANTS WHY HIRE BUSINESS STRATEGY CONSULTANTS? MCKINSEY & COMPANY, 1970 ▪ Help firms find “meaningful quantitative relationships” ▪ Specialist with Huge data ▪ Recommended a formal with chosen market base strategic planning system which divides the company ▪ Good strategy must be based ▪ Objective Validity into “natural business units” primarily on logic, not on ▪ Out of the Box thinking and ▪ Firm should be organized on experience derived from intuition methodologies more strategic lines with ▪ The accelerating rate of ▪ Political Issues greater concern for external conditions rather than change have rendered internal controls customary management ▪ Firm should be more ▪ habits and organizations future-oriented inadequate INDUSTRY ATTRACTIVENESS BUSINESS STRENGTH MATRIX FOUR PHASES OF STRATEGY, 1979 ▪ Successful companies pass through four basic stages ▪ They grapple with increasing levels of dynamism, multi-dimensionality, and uncertainty ▪ They become less amenable with quantitative analysis MICHAEL PORTER, 1980 ▪ Released his landmark book, COMPETITIVE STRATEGY, which contained the structural analysis of industry attractiveness. ▪ For the “average” competitor, there are “five forces” that provides understanding of the attractiveness of an industry environment PORTER’S FRAMEWORK INDICATES:  ▪ Industry consists of a set of interacting but unrelated buyers, sellers, substitutes, and competitors; ▪ the wealth accrues to players that are able to erect barriers against competition and potential entrants, or the source of value is a structural advantage; ▪ uncertainty is sufficiently low that you can predict participants’ behavior and choose strategy correctly. THE VALUE NET, 1990 ▪ Process of creating value in the marketplace involved four types of players - the customer, suppliers, competitors, and complementors BARRY NALEBUFF ▪ Practical importance evident in strategic alliances and partnerships COMPETITIVE COST ANALYSIS  ▪ Strategists turned to cost analysis as basis for analyzing competitive positions ▪ Attention paid to disaggregating businesses into component activities or processes ▪ Particular activities might be shared across businesses ▪ There was a bigger menu of cost drivers than just experience MCKINSEY’S BUSINESS SYSTEM PORTER’S VALUE CHAIN MODEL COMPETITIVE ADVANTAGE CONCEPT, 1985 ▪ Porter’s suggested analyzing cost and differentiation via the “value chain” ▪ Emphasized regrouping of functions into activities actually preformed to produce, market, deliver, and support products ▪ Linked activities and connected value chain to determinants of competitive position PORTER’S VALUE CHAIN ▪ Competitive advantage can be understood by looking at a firm as a whole ▪ Stems from many activities a firm performs in designing, producing, marketing, delivering, and supporting its product ▪ Each activity can contribute to a firm’s relative cost position ▪ Creates a basis for differentiation CUSTOMER ANALYSIS  ▪ Analyzing relative costs was accompanied by increased attention to customers in analyzing competitive position. ▪ Attaining low costs and offering low prices were always the best way to compete ▪ Differentiated ways of competing might let business command a price premium by improving customer performance and reducing costs 1995 ONWARDS ▪ Improving individual activities or processes, or ▪ Re-engineering recombining them is another approach to enhancing ▪ Downsizing competitive position ▪ Business System Re-design ▪ Resource-Based View ▪ “Benchmarking” ▪ Balance Scorecard ▪ TQM movements ▪ Blue Ocean Strateg STRATEGY ANALYSIS ▪ The strategic analysis is concerned with understanding the strategic position of an organization ▪ The main factors of the strategic analysis > THE ENVIRONMENT: provide on one hand threats upon the firm, and the same environment provide opportunities. > THE RESOURCES: provide tools to answer the environmental challenges, and determine strengths and weaknesses of the organization. > CULTURE AND EXPECTATIONS: determine values and expectations of those who have power in and around the organization