Strategic Management PDF

**STRATEGIC MANAGEMENT** **TOPIC 1** **STRATEGIC MANAGEMENT MODEL** **Strategic management model** - determines the development of strategies required to define an organization\'s mission and accomplish it. The process of strategic management has five components -- situation analysis, strategic d...

**STRATEGIC MANAGEMENT** **TOPIC 1** **STRATEGIC MANAGEMENT MODEL** **Strategic management model** - determines the development of strategies required to define an organization\'s mission and accomplish it. The process of strategic management has five components -- situation analysis, strategic decision making, strategy formulation, strategy implementation, and strategy evaluation or control. **THE REALITY OF DYNAMISM** The 21st century epitomizes the reality of dynamism. In fact, today\'s milieu is in a state of fluidity. It is not static. Rather, changes and fluctuations are constantly happening in the surroundings. These actualities are characterized by the occurrence of phenomenal situations, continuous challenges, and triggering forces that provoke corresponding reactions. The certainty of change is universal and this foregone conclusion is largely experienced by all nations and peoples---whether developed undeveloped, large or small, powerful or weak. As a result, the current landscape of competition is highly threatening and daunting. With an environment that is characterized by unpredictability drive, pursuit and transformation, and volatility is a ruthless reality. Impermanence and unpredictability are certainties. Nothing is stable; neither regularity a logical expectation. Competition has gone beyond nations, peoples, cultures, geographic frontiers, and industries. As the global economy expands, blurring boundaries, any business needs to create its own impact in any part of the world. Thus, it is urgent for organizations and businesses to strategize **HYPER-COMPETITION** **Hyper-competition** is a fundamental feature of the new economy. As the word implies carries a note of overexcitement and agitation. Hyper-competition occurs when product or service offerings and technologies are so new that standards become unstable and competitive advantage not sustainable. It is a condition where strategic maneuverings have escalated to bigger business exposure, more sophisticated marketing positioning, aggressive selling, and innovative products and services. Doing business has become intense and more deliberate. It seems like a big waste not to discern and take advantage of every opportunity. The business atmosphere is characterized by activities such as outdoing each other, surpassing sales, taking competitors by surprise, capturing a bigger market share, winning the business battle, and seizing the number one slot. In a strict sense, hyper-competition is a situation where both globalization and technology collaborate to create a heightened cut-throat situation. It means that businesses compete with each other whether they have same products, similar products, substitute products, and different products. Competitors continuously strive to outplay and outsmart each other. They need to devise ways and means to survive and deal with this super competitive and turbulent reality. New value creation, competitive pricing, innovation in supply chain 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 qualitative organizational changes, and sustainable competitive advantage. In this hyper-competitive environment, only the most adaptive and nimble organizations will survive. Thus, there is the need to strategize. **Strategic management** - is a continuous process of strategy creation. It involves strategic processes like strategic analysis and decision-making, strategy formulation and implementation, and strategy control with the primary objectives of achieving and maintaining better alignment of corporate policies, priorities, and success **Strategic analysis** - consists of a systematic evaluation of variables currently existing in the external and internal environments while **strategic decision-making** is deliberately bringing together the right resources for the right markets at the right time**, Strategy formulation** is designing strategies on the business and corporate levels**. Strategy implementation** is employing these crafted strategies to achieve organizational set goals and objectives while **strategic control** is the application of an appropriate monitoring and feedback system. It is defined as the science of creating, executing, and evaluating cross-functional decisions to enable an organization to achieve its goals and objectives, the components of the strategic management process have to be effective. - If strategic analysis is accurately conducted, organizations can develop **strategic intelligence**. Like an antenna, strategic intelligence is the capability of an organization to possess relevant and related knowledge, abilities, foresight, and systems pressing thinking, challenges such that it is able to assess its own strengths and vulnerabilities, the confronting the organization, as well as the trends and opportunities existing in the environment. - If strategic decision-making is correctly effected, organizations can acquire the capability of thinking strategically. **Strategic thinking** is the cognitive process of competently and analytically weighing factors and arriving at critical decisions in the context of the current milieu of which an organization is part. - If strategy formulation is uniquely designed and effectively communicated, organizations have greater possibilities of attaining organizational competitiveness. **Organizational competitiveness** pertains to the ability of any business or company to utilize its resources optimally and sustainably for maximum performance and productivity. - If strategy implementation is efficiently employed, organizations can achieve comparative advantage. **Comparative advantage** refers to the ability of an organization to produce a particular good or services at lower marginal and opportunity costs than its competitors. - If strategic control is productively monitored, organizations can realize strategic performance. **Strategic performance** is the accomplishment of a high level of productivity that is characterized by efficiency in the context of lean and quantifiable management  The strategic management model shows the relationships between and among the input, process, and output. The input in this model includes organizational variables like management and employees, financial resources, facilities and equipment, infrastructures, and processes. The strategic management process consists strategic analysis, strategic decision making, strategy formulation, strategy implementation, and strategic control. When these specific processes are executed and manage creatively, distinctly, and strategically, timidly achieve organizational success. In particular, the output is exhibited in the strategic intelligence acquired, strategic thinking more developed, organizational competitiveness advantage, and strategic performance obtained by the organization. **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. 7. It links the organizational plan with functional and operational plans. 8. It is intricately interwoven within the defined managerial functions of organizing, directing, stuffing, and controlling. Although strategic planning is strictly formal and separate function of management, it is subtly intertwined in all the other functions and responsibilities of a manager. In other words, no manager can fully accomplish his/her responsibilities effectively if strategic planning is disregarded or overlooked. 9. It necessitates the leadership and support of top management and, at the same time, employee participation and commitment. Successful implementation of strategic planning is largely dependent on responsibility, support, and sustained leadership coupled with acceptance and involvement of employees. There should be synergetic interrelationships between departments and intra relationships within departments. **TYPES OF STRATEGIC PLANS** There are two principal types of plans: 1. **Medium/Long-range Plan** - prepared in the context of the coming 3 to 5, 10 or more years period. It describes the major factors or forces that affect organization's long-term objectives, strategies, and resources required. 2. **Annual/Yearly Plan** -- short term; succinctly describes the organization\'s present situation, its goals and objectives, strategies, monitoring mechanisms, and the budget for the year ahead. Whether the plan is long range or annual, it can be strategic when the organization formulates its action plans and takes advantage of opportunities in the constantly changing environment while maintaining a tactical alignment between the organization's goals, capabilities, and opportunities. **NEEDS FOR TRATEGIC PLANNING** **Why is there a need for strategic planning?** As earlier stated, the reality of dynamism, complexity, and hyper-competition characterizes today\'s environment. To survive, organizations need to carefully plan their strategic approaches. Therefore, strategic plans have to be prepared purposefully for effective and efficient implementation, thus, leading to the attainment of their set objectives. The benefits of designing and putting into effect a strategic plan cannot be overemphasized. **STRENGTHS AND LIMITATIONS OF STRATEGIC PLANNING** **STRENGTHS**: A strategic plan helps to define the direction in which an organization must travel, and aids in establishing realistic objectives and goals that are in line with the vision and mission charted out for it. But it also creates a sense of collaboration and collective responsibility. It helps organizations to stay focused. When clearly, and proactively undertaken, it provides leverage and competitive advantage to the organization. It makes things happen. **LIMITATIONS:** Strategic planning requires lot of knowledge, training and experience. Managers should have high conceptual skills and abilities to make strategic plans. If they do not have the knowledge and skill to prelate strategic plans, the desired results will not be achieved. These limitations of planning include issues such as uncertainty, complexity, and resource constraints, which can affect the accuracy and effectiveness of a plan. Additionally, the changing nature of the environment, as well as unforeseen events, can also impact the success of a plan. **STRATEGIC ALIGNMENT: THE KEY TO SUCCESSFUL BUSINESS STRATEGY** **Strategic alignmen**t plays a critical role for the sustainability of a strategy. For any strategy 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 its offering; and it must motivate the people working for or with the company to execute 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 overall goals. To be effective, alignment must begin at the top with senior leaders who share the enterprise strategy throughout the organization. In high-performing, strategically aligned organizations, every team member has: - Understanding of the overall enterprise strategy - Knowledge of where they fit into that strategy - Understanding of why their work matters in the bigger strategic picture - **Improved efficiency** - Organizations that understand the importance of strategic alignment tend to be more efficient. Wasting time on efforts that don't match the organization's strategic goals leads to inefficiency and a lack of productivity. However, when teams are strategically aligned, everyone is on the same page about which projects are worthy of investment because everyone is working towards a unified goal. As a result, teams work more effectively and wasted efforts are minimized. Working more efficiently and effectively can lead to an increased confidence in strategic investments. It creates more confidence in decisions around allocating resources, because there's an understanding that those resources will be used to achieve strategic outcomes. - **Increased focus on driving value** - 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 the work is furthering company goals and driving value for the company, rather than simply producing work for the sake of productivity. As a result of this focus, it's easier for strategically aligned organizations to quickly identify high-value projects and low-value ones. This also helps to ensure that time and resources are spent delivering work that makes sense from a strategic point of view. Teams can prioritize important work more easily, and deprioritize or abandon work that doesn't make sense strategically. That way, they're better equipped to focus on driving business value while helping to avoid sunk costs due to strategic drift - **Better planning and work delivery** - Aligned teams have a better understanding of company goals, decision-makers can focus on the steps, practices, and deliverables that contribute to the long-term organizational strategy when planning for the future. Furthermore, strategic alignment makes sure teams are aligned to common goals, empowering them to make rapid decisions that help reach those goals. That autonomy and understanding of their work's value to the organization can also create more motivated teams. In a rapidly changing business environment, successful enterprises often need to be flexible and adaptable. Strategic alignment allows every team member to make adjustments in response to market changes without compromising productivity or efficiency, because they remain focused on strategic goals. 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 changes with nimbleness and agility. **TOPIC 2** **CHALLENGES IN THE EXTERNAL ENVIRONMENT** In a bad economy, even the most successful businesses may not survive. **The external environment refers to the factors that affect a company\'s operations**. The external business 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 business owners\' business decisions. For example, a case where the government changes the laws concerning the numbers and types of imported goods can increase the importation tax, making a massive difference in the viability of many businesses. The business environment consists of various characteristics such as: - **Dynamic nature**: it is constantly changing, influenced by various external factors like market trends, economic policies, and technological advancements. This dynamism requires businesses to be flexible and adaptive in their strategies. Companies that effectively respond to changes gain competitive advantages. Similar to the natural environment, the external business environment changes regularly due to the vast influence of factors. The factors constantly change the character and shape of the environment. **For instance**, there was a period when the filming industry made a fortune by selling music CDs. Currently, the filming business makes more money from streaming songs on music platforms such as Spotify and YouTube. - **Complexity**: Multiple factors and their interactions create a complex landscape for businesses to navigate. This complexity can stem from both internal dynamics and the external competitive landscape, requiring businesses to employ sophisticated analytical tools to understand and predict environmental impacts. The business environment includes various conditions, factors, influences, and events from multiple sources. It is hence, difficult to 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. - **Multi-faceted:** The business environment\'s dynamism and complexity continuously change its character and shape. Many observers may view the changes very differently. Therefore, a different observer may perceive a 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 TVs paved the way for LEDs. Some producers saw this as an opportunity to start making LEDs instead of Plasmas and LCDs. Currently, LEDs are paving the way for 3D TVs. This means that, depending on the manufacturer\'s view or perception, the producer may use the opportunity to either view it as a threat or produce new products. - **Interrelatedness:** Different segments of the environment are interconnected, meaning changes in one area can affect others. For instance, a regulatory change in technology could impact product development, affecting marketing strategies and customer interactions. - **Relativity**: It varies from region to region and country to country, influenced by local conditions and cultural aspects. What works in one geographical area may not work in another, necessitating localized business strategies. **ENVIRONMENTAL SCANNING** Environmental scanning refers to the process of collecting data about the business environment (e.g., customers, competitors, or market trends) using various technologies and tools. 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 advantage of the opportunities that arise and minimize emerging threats, which will 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, economic, political, technological, and environmental forces that may influence an organization, an industry, or an any entity. The competitive environment covers competitors, suppliers, customers, stakeholders, culture, and the government. Environmental scanning is carefully monitoring the surroundings with the end goal of ascertaining early indications of prospects and challenges that may influence the organization's present and future plans. **BUSINESS ENVIRONMENT (External Micro and External Macro)** The business environment refers to the external elements and conditions that affect the tasks, operations, and performance of the company. It includes financial, mechanical, political, legal, social, and ecological components. The impact of these variables on organizational well-being can result in both opportunities and challenges. Controlling the business environment is essential for organizations to adapt, make sound decisions on appropriate matters, and keep up with the industry's commitment. **External Micro Environment** Micro external forces have an important effect on business operations of a firm. Components of micro environment are: **Suppliers, Customers, Marketing Intermediaries, and Competitors**. However, all micro forces may not have the same effect on all firms in the industry. - **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 of a business firm requires that it should have ensured supply of inputs such as raw materials. If supply of raw materials is uncertain, then a firm will have to keep a large stock of raw materials to continue its transformation process uninterrupted. This will unnecessarily raise its cost of production and reduce its profit margin. To ensure regular supply of inputs such as raw materials some firms adopt a strategy of backward integration and set up captive production plants for producing raw materials themselves. - **Customers:** The people who buy and use a firm's product and services are an important part of external micro-environment. Since sales of a product or service is critical for a firm's survival and growth, it is necessary to keep the customers satisfied. To take care of customer's sensitivity is essential for the success of a business firm. With increasing globalization and liberalization, the customers' satisfaction is of paramount importance because the consumers have the option of buying imported products. Therefore, to survive and succeed a firm has to make continuous efforts to improve the quality of its products. - **Marketing Intermediaries**: In a firm's external environment marketing intermediaries play an essential role of selling and distributing its products to the final buyers. Marketing intermediaries include agents and merchants such as distribution firms, wholesalers, retailers. Marketing intermediaries are responsible for stocking and transporting goods from their production site to their destination, that is, ultimate buyers. There are marketing service agencies such as marketing research firms, consulting firms, advertising agencies which assist a business firms in targeting, promoting and selling its products to the right markets. - **Competitors:** Business firms compete with each other not only for sale of their products but also in other areas. Absolute monopolies in case of which competition 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 generally, market forms of monopolistic competition and differentiated oligopolies exist in the real world - **Economic Environment**: A company's economic environment includes factors such as economic growth, inflation, unemployment rates, exchange rates, and market demand. These factors deeply affect various aspects of business operations such as costs, consumer behavior and profitability. Effective strategies, identifying opportunities, and taking risks are essential for companies to remain competitive in this environment. For Example, the global financial crises of 2008 deeply affected the Business Environment. During the global financial crisis of 2008, companies faced more expenses, tighter credit conditions and financial uncertainty, which led to lower sales and profitability. The economic situation has compelled businesses to adopt severe measures, dismiss employees, and reconsider their plans. It had a significant impact on both the economic and financial sectors, leading to bankruptcies and restructuring. In short, the crisis had significantly affected business activities and decision-making. - **Social Environment**: Consumer behavior, preferences and demographics in the market are influenced by the social environment of business. This environment provides insights that aid in creating personalized marketing plans for specific customers. Hence, the interaction between brands and customers is heavily influenced by factors like beliefs, language, and lifestyle, necessitating 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 expect companies to adopt sustainable practices. Therefore, several businesses adopt environmental practices such as utilizing eco-friendly 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 and develop strategies. Businesses are closely related to the government. The political philosophy of the government wields a great influence over business policies. - **Legal and Regulatory Environment:** The legal and regulatory framework encompasses the legislation, rules, and procedures that organizations must adhere to. Moreover, avoiding penalties and protecting one's reputation and finances is crucial when communicating these changes. Regulatory measures promote innovation and growth while safeguarding the interests of society and individuals. - **Technological Environment**: Technology in business encompasses the constantly evolving technological advancements that influence operating procedures and customer communication. This includes the integration of new technologies such as artificial intelligence and digital platforms, which have the potential to streamline processes and increase customer engagement. Acknowledging these developments can provide a competitive advantage and facilitate expansion in the digital environment. The use of a superior technology by a firm gives it a competitive advantage over its rival firms. The use of a particular technology by a firm for its transformation process determines its competitive strength. In this age of globalization, the firms have to compete in the international markets for sales of their products. The firms which use outdated technologies cannot compete globally. Therefore, technological development plays a vital role in enhancing the competitive 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 these demographic features have an important bearing on the functioning of business firms. Since new workers are recruited from outside the firm, demographic factors are considered as parts of external environment. **THE SWOT ANALYSIS** **SWOT Analysis** is a tool that can **help you to analyze what your company does best now, and to devise a successful strategy for the future**. SWOT can also uncover areas of the business that are holding it back, or that your competitors could exploit if you don\'t protect the business. A SWOT analysis examines both internal and external factors -- that is, what\'s going on inside and outside your organization. So, some of these factors will be within your control and some will not. In either case, the wisest action you can take in response will become clearer once you\'ve discovered, recorded and analyzed as many factors. SWOT Analysis is instrumental in strategy formulation and selection. It is a strong tool, but it involves a great subjective element. It is best when used as a guide, and not as a prescription. Successful businesses build on their strengths, correct their weakness and protect against internal weaknesses and external threats. They also keep a watch on their overall business environment and recognize and exploit new opportunities faster than its competitors. - **Strengths** are features that organizations possess, thus, giving it significant advantage over others. - **Weaknesses** are characteristics that plays organizations at the advantage relative to others and may just be limitations or vulnerabilities of organizations. - **Opportunities** are possibilities in the external environment that organizations can exploit to their advantage. - **Threats** are challenges in the external environment that can cause problems organizations. **PESTLE ANALYSIS** A **PESTLE analysis** which is sometime called as a PEST studies the key external factors (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 professionals and senior managers in strategic decision-making. This is essentially a bird's eye view of business conduct because we broadly look at certain macro factors which 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 also helps foresee where the organization will be in the future. **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 greater environmental analysis. Each letter that you see in the acronym stands for a certain factor. These factors can affect every industry or organization directly or indirectly. The letters in PESTLE (also written PESTEL), denote the following things: **PESTLE analysis** gives the businessman a chance to view the business prospects through the lens of the entire economy. It helps comprehend the business position taking into account all the macroeconomic forces. It works as: - **Evaluation framework**- PESTLE analysis helps a company weigh its performance by looking into the broad political, economic, social, technological, legal, and environmental factors influencing it. It helps a business gauge the favorable conditions in its launch stage, entry-stage into a new market or during its lifecycle. - **Mapping technique**: The analytical framework gives a bird-eye view of the company's present stance and a sneak peeks into the future trends. These insights also help the business to make decisions concerning the near future and plan its course of action for the long term. - **Strategic planning tool**: The study of PESTLE elements makes the corporations aware of the environment they are operating in. Better know-how of this environment gives them a competitive edge over other players and helps in strategic decision-making. **TOPIC 3** **CHALLENGES IN THE INTERNAL ENVIRONMENT** **THE INTERNAL ENVIRONMENT** Aside from understanding the developments and changes occurring in the global environment, organizations need to understand the internal environment, or better referred to as the local milieu. The **internal environment** is the setting in which an 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 service, and societal responsibilities e. politically in terms of peace, security, stability, and governance 2. **Create an atmosphere of fair and robust competition among industry and company players, monitors and regulates monopolies and oligopolies, and eliminates unfair and illegitimate practices.** 3. **Formulates business policies, implements business operating guidelines, and regulates the conduct of business activities such as payment of taxes, health and safety practices in food, manufacturing, construction, and other service industries, ensures quality of products and services, and mandates minimum wages of employees, and their fair and adjust treatment.** **CULTURE: A communal Convergence** It is widely accepted that an organization's culture is comprised of shared values, 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 communal aggregation and convergence of the country's philosophy, beliefs, traditions, values, attitudes, aspirations, and practices that have historically evolved since a nation's inception. The Philippine has its own culture -- a culture that has greatly influence by diverse cultures: Chinese, Japanese, Spanish, and American. Through many years of national growth and development, this culture has been shaped by environmental variables happening within and outside the country and until today, continuous to change, mature and transform. Such evolution has nurtured in the Filipino certain distinct beliefs, traditions, and practices like bayanihan, resiliency, pakikisama, and the like. **STAKEHOLDERS: The business investors** **Organization exist because there are individuals who are willing to take the risks, invest their capital, and engage in business activities in exchange for a return. This return in 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 country. They provide opportunities for exchange of products and services. They initiate business operations and compete among themselves. They boost and energize economic activity, provide employment to the community, and help the government by paying business taxes. Without them, a country is paralyzed. While owners of businesses are the direct stakeholders, others are indirect stakeholders. These are individuals that stand to benefit from the investments of the owners. They are employees, the government, and the community. **COMPETITORS: The business threats** 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 competitors of marketplaces are fast food centers who sell primary cooked food, and secondly, convenience. Instead of going to the market to buy meat, fish, and vegetables, they now go to fast food centers for their meals. 4. **Different products**. Still, there are companies who sell different products but market to the same market segments. 1. **Complementary competition**. Some companies appear to compete with themselves. For capturing a larger market, they produce the same products, use different brand names, and target different market segments. An example is a real estate company that sells low-cost housing to target markets, classes C and D, and average cost housing to middle income class families. 2. **Collaborative competition**. Similarly, there are companies whose relationships among each other are strategic and cooperative. Examples are the oil companies in the country. They are in "friendly" competition. 3. **Corrupted competition**. Lastly, some companies produce "fake" products. They compete with legitimate businesses by boldly and unethically transgressing the intellectual property rights of other companies through plagiarism, duplication, and false branding. They produce and sell these products at low prices. **CUSTOMERS: The business challenge** Competitors continuously compete to capture a bigger share of the market. **Customers** make the market. They are the very reason why companies pursue new product developments and differentiate their existing products and services. Customers are the focus of company's business plans and programs and the thrust of their strategies. Without consumers, companies have no reason to exist. Because of the changing needs, wants, demand, and sophisticated lifestyles of consumers, there is an exigent need to employ various approaches to ensure their patronage and customer loyalty. Consumer behavior 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 help address this "uncertainty.  At the very least, any product or service should provide **customer satisfaction**. In other words, any product must fulfill its intended use, and that is to attract customers and gain customer approval. For example, a shampoo should be able to clean the hair. It should satisfy the minimum requirement of cleanliness. However, customer satisfaction is not enough. More than this, emphasis is now on **customer delight**, a condition where customers become excited over the products or the services offered. Customer delight may come from experiencing quality service, product excellence, product versatility, or any attribute that will greatly gratify and create a distinct impact on them. Attaining this level will assure customer patronage. In other words, aside from cleaning the hair, a shampoo can delight its customers with other added attributes like fragrance, smoothness, and softness. The last level of customer behavior is **customer intimacy**. Customer intimacy refers to the relationship between the company and the customers. This is best described as warm, complimentary, supportive, and "businesslike" personal. Customer intimacy is manifested in varied forms like sending birthday cakes, cards or sharing one's expertise with a "customer" who is in bad financial shape. In addition to being pleased with the product, customer continue supporting the product. Customer intimacy seals customer patronage or better referred to as customer loyalty. In 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** The community is the intermixture of peoples coming from all walks of life with different **"provincial or city cultures"**, different values, attitudes, aspirations, traditional beliefs, standards of living, family backgrounds, religions, and educational attainments. It is essentially heterogeneous but characteristically homogeneous in its end goal of attaining quality life. As such, the community in principle is the rationale of the "business framework". It is the very reason why stakeholders invest their capital and venture into business. It provides opportunities for business to thrive. **A community must be self-reliant. In instance when a community is not able to attain this level of self-sufficiency, the government, stakeholders, customers, competitors, and suppliers have a societal responsibility to help the deprived and marginalized poor improve and attain quality life**. Communities need to be a consideration of any organization in terms of its social responsibility. **PORTER'S FIVE FORCES MODEL** Organizations, particularly businesses, are the lifeblood of any nation. They sustain the continued existence and staying power of the countries. As drivers of survival, growth, and development, businesses create and energize the pulse of selling, producing, venturing, and transacting activities. Companies, corporations, conglomerates, partnerships, transnationals, multinationals, enterprises, firms, and organizations are entities engaged in trade and commerce. As players, in any economy, they are essentially competitors. Call them by any term; competition is the name of the game. **TOPIC 4** **BUSINESS STRATEGIES** **Business strategy** is vital for any company seeking to grow its business in a strategic manner. It refers to a clear set of plans, actions and goals that outlines how a business will compete in a particular market, or markets, with a product or number of products or services. It is nothing but a master plan that the management of a company implements to secure a competitive position in the market, carry on its operations, to please customers and to achieve the desired ends of the business. **VALUE CHAIN**  **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 for transforming a product or service from idea to reality. It looks at every phase of the business from the time of procurement of raw materials to the time its products reach its eventual end users or consumer. In other words, it describes the full range of activities which are required to bring a product or service from conception, through the different phases of production (involving a combination of physical transformation and the input of various producer services), delivery to final consumers, and final disposal after use. If an organization wants to be profitable, it must sell value to its buyers -- value that is worth paying for. On that context, businesses have to pay closer attention to where their raw material comes from, how they are produced, how finished products are stored and transported, and what the company end products users are really looking for. **SUPPLY CHAIN MANAGEMENT** A supply chain is the network of those involved with the production and distribution of a company's products. Supply chains involve a multitude of activities, people, entities, information and resources. They incorporate many steps and processes used to deliver products or services to the marketplace. Supply chain management is the vital process of planning, tracking and perfecting how goods move throughout the system. Maintaining strong links within your supply chain impacts business costs and profitability. As such, everyone involved needs to be well informed and understand their role within supply chain operations. It consists of the following: **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** 1. Specify the need clearly by writing down the details. Normally the stock keeping unit (SKU) is coded with brief but complete details like date, identification number, the originating department, the account to be charged, complete description of the raw material/service, date needed, any special instruction, and signature of authorized person making the request. 2. Identify and analyze possible sources of supply. Generally, more than one supplier should be considered. The criteria of choosing suppliers are sound business sense and attitude, good record of accomplishment, sound financial base, suitable technical capability, quality orientation, customer service mentality, and effective logistical arrangements. 3. Ask potential suppliers for their respective quotations, proposals, and bids. 4. Compare and evaluate submitted documents, then select suppliers. Both buyers and suppliers agree and determined the terms of the contract. 5. Prepare, place, follow up, and expedite the purchase order. The purchase order is a written requisition placement to purchase supplies. 6. Confirm that the order placed has actually arrived in good condition and at the quantity. Forward the shipment to its destination, properly document and register the receipt, and forward it to the accepting party. 7. Invoice, clearing, and payment follows. - Inventory management 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 minimize transportation costs, and to avoid supply shortage. 2. Work-in-process (WIP) 3. Finished goods includes all completed products to shipment 4. Maintenance, repair, and operating supplies (MRO) include the materials and supplies used when producing the products but are not parts of the products. **Production and operations** Production and operations are processes that transform operational input into output to satisfy consumer needs and requirements. This transformational process consists of manufacturing and assembly. **Manufacturing** is the process of producing goods using people or machine resources. It commonly refers to industrial production where raw materials are converted into finished goods. **Assembly** is the process of putting together raw materials into a desired output. **Quality raw materials** and parts, efficient production layouts and processes, and employees with skills and motivation are essential to effective transformational processes. Once achieved, value can be generated through appealing product designs, quality and reliability, efficient service performance, accessible location site, attractive store displays, affordable prices, and good customer service. **The logistics** Logistic is a popular term in supply chain management, **logistics management includes the supervision of certain sequential processes.** It focuses on the daily operations concerning the final product of the organization while its aim is to allocate the right amount of a resource at the right time. It is also ensuring that it gets to the set location in a 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-time movements and therefore advise on and implement change that directly affects the organization as a whole. **These include warehousing, scheduling, dispatching, transportation, and delivery** **Marketing and Sales** Supply chain management traditionally has focused on sourcing components, materials and other supplies as well as distribution. Marketing plays an increasingly important role in the process; it balances procurement by providing essential demand information and building the relationships that help improve the efficiency of supply chain operations. The right product, the right message, to the right audience, at the right time. - **Promotion** The relationship between logistical planning and promotional campaigns is no exception to this. Often implemented as a key marketing strategy, promotions have proved particularly successful in helping companies attract new customers, retain existing clients, try out new product concepts, and respond to the ever-changing demands of the consumer. New locations may require new distribution partners, new quality assurance, and in some cases, new customs management. **The earlier logistics teams are brought into planning discussions, the sooner the promotion can go from concept to reality.** - **Selling** Selling does not mean only taking money and giving goods. It has broad meaning in supply chain management, in which include the activities such as selling goods, identifying potential customers, creating demand, providing information and services to buyers. The goals of selling chain management business strategy includes the following: 1. Engage your prospects and turn them into customers 2. Make ordering process easy for the customer 3. Add value for the customer 4. Coordinate team selling **GROWTH STRATEGIES** The adoption and implementation of a growth strategy is one of the most important considerations for every organization. Particularly, growth strategies are carefully studied 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 markets for expansion. These companies continue to expand their brands across new global markets. That\'s the perfect example of market development. In the context of retail: Free trials, targeted content marketing, advertising, and experimenting with pricing strategies can be a useful part of your marketing development strategy, as they can encourage non-users in your existing market to become customers. - **Product development** is an internal growth strategy where the company sells new products to an existing market. In this strategy, there is a need for the organization to be more creative in coming up with differentiated products and services. The 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 company develops a versatile shampoo product that can be used without wetting the hair -- this a joke example. - **Diversification** is a product/service mix growth strategy that involves creating differentiated products for a new customer. In short, it is new products for a new 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 launched the iPod and subsequent iTunes software (2003). Later, Apple would truly hit the diversification jackpot with the launch of the revolutionary iPhone in 2007. **LIFE CYLCLE STRATEGIES** **The term product life cycle refers to the length of time a product is introduced to consumers 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 advertising, reduce prices, expand to new markets, or redesign packaging. The life cycle of any product/services refers to the lifespan that a commodity/service undergoes from its introduction stage to its growth, maturity, and decline stages. While a product undergoes its life cycle, external and internal forces in the environment affect the product ranging from customers' expectations, technological development, and competition to other wide-ranging issues and challenges. Not all products follow the S -- shaped product life cycle curve. Some products are briefly introduced but die quickly. Others stay in the maturity stage for a long time. Some enter the decline stage and then are recycled back into the growth stage through strong promotion and repositioning. - **The introduction stage** is the period of launching the product for acceptance. In this phase, the product is new; hence, there is a need to create awareness. Strategies include promotions, giving discounts, and market development. Depending on the type of product, the acceptance phase may either be short or long. - **The growth stage** is the phase where the product gains acceptance by the consumers. In this stage, sales and profit slowly increase and emphasis is now on continuous market development and improvement. Competition is more challenging at this stage. Here, the organization can focus on branding, building customer loyalty, and promoting repeat business through customer patronage. - **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 competitors increases. Although sales and profits generally reach their peak, it is in this phase where the company should start reinventing its products to maintain their current levels. Product differentiation is recommended in this stage, as well as efficient operations and formulation of creative marketing strategies. - **The decline stage** is the period where the product begins to reach or is reaching its lowest point. Here, sales and profits decline and price competition is intense. A company can choose to keep the status quo, reduce prices to generate more sales, consolidate with other companies, or simply exit the market. Implementing strategies like product reinvention and aggressive marketing can be helpful. **TOPIC 5** **CORPORATE STRATEGIES** **Corporate Strategy is the strategy level that concerns itself with the entirety of the organization, where decisions are made with regard to the overall growth and direction of a company**. It takes a portfolio approach to strategic decision making by looking across all of a firm's businesses to determine how to create the most value. In order to develop a corporate strategy, **firms must look at how the various business they own fit together, how they impact each other, and how the parent company is structured, in order to optimize human capital, processes, and governance.** Corporate strategies are arguably the most essential and broad-ranging strategy level within an organizational strategy. As business focuses on developing their degree of internal competitiveness, companies adapt external growth strategies. These are alternative modes of addressing the challenges confronting organizations. Hence, we are going to deal on the following strategies: **Integrative growth strategies and Boston Consulting Group Model or the BCG Matrix.** **What are the Components of Corporate Strategy?** There are several important components of corporate strategy that leaders of organizations focus on. The main tasks of corporate strategy are: A. **Allocation of Resources** The allocation of resources at a firm focuses mostly on two resources: people and capital. In an effort to maximize the value of the entire firm, leaders must determine how to allocate these resources to the various businesses or business units to make the whole greater than the sum of the parts. **Key factors related to the allocation of resources are:** **People** - Identifying core competencies and ensuring they are well distributed across the firm - Moving leaders to the places they are needed most and add the most value (changes over time, based on priorities) - Ensuring an appropriate supply of talent is available to all businesses **Capital** - Allocating capital across businesses so it earns the highest risk-adjusted return - Analyzing external opportunities (mergers and acquisitions) and allocating capital between internal (projects) and external opportunities. B. **Organizational Design** Organizational design involves ensuring the firm has the necessary corporate structure and related systems in place to create the maximum amount of value. Factors that leaders must consider are the role of the corporate head office (centralized vs decentralized approach) and the reporting structure of individuals and business units -- vertical hierarchy, matrix reporting, etc. **Key factors related to organizational design are:** **Head office (centralized vs decentralized)** - Determining how much autonomy to give business units - Deciding whether decisions are made top-down or bottom-up - influence on the strategy of business units **Organizational structure (reporting)** - Determine how large initiatives and commitments will be divided into smaller projects - Integrating business units and business functions such that there are no redundancies - Allowing for the balance between risk and return to exist by separating responsibilities - Developing centers of excellence - Determining the appropriate delegation of authority - Setting governance structures - Setting reporting structures (military / top-down, matrix reporting) C. **Portfolio Management** Portfolio management looks at the way business units complement each other, their correlations, and decides where the firm will "play" (i.e. what businesses it will or won't enter). **Corporate Strategy related to portfolio management includes:** - Deciding what business to be in or to be out of - Determining the extent of vertical integration - the firm should have - Managing risk through diversification and reducing the correlation of results across businesses - Creating strategic options by seeding new opportunities that could be heavily invested in if appropriate - Monitoring the competitive landscape and ensuring the portfolio is well balanced relative to trends in the market D. **Strategic Tradeoffs** 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 view of all the businesses combined and ensure that the desired levels of risk management and return generation are being pursued. **Below are the main factors to consider for strategic tradeoffs:** **Managing risk** - Firm-wide risk is largely depending on the strategies it chooses to pursue - True product differentiation, for example, is a very high-risk strategy that could result in a market leadership position or total ruin - Many companies adopt a copycat strategy by looking at what other risk-takers have done and modifying it slightly - It's important to be fully aware of strategies and associated risks across the firm - Some areas might require true differentiation (or cost leadership) but other areas might be better suited to copycat strategies that rely on incremental improvements - The degree of autonomy business units have is important in managing this risk **Generating returns** - Higher risk strategies create the possibility of higher rates of return. The examples above of true product differentiation or cost leadership could 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, so it's important to have the appropriate number of options in the portfolio. These options can later turn into big bets as the strategy develops. Incentives - Incentive structures will play a big role in how much risk and how much return managers seek - It may be necessary to separate the responsibilities of risk management and return generation so that each can be pursued to the desired level - It may further help to manage multiple overlapping timelines, ranging from short-term risk/return to long-term risk/return and ensuring there is appropriate dispersion. **INTEGRATIVE GROWTH STRATEGIES** **Integrative growth strategies** are essentially external growth strategies, involve investing the resources of the organization in another company or business to achieve growth goals. An integrative growth strategy is a growth strategy that emphasizes **blending businesses together through acquisitions and mergers which includes horizontal integration and vertical integration**. Vertical integration and horizontal integration are business strategies that companies use to consolidate their position among competitors. **Horizontal integration** is a strategy where the organization acquires another competing business. There are varied reasons for undertaking horizontal integration. First, organizations may employ horizontal integration to eliminate real or potential competitors because some competitors can present themselves as deadly threats to an organization. For example, Jollibee purchased Mang Inasal for fear of losing their market share in the fast-food industry. Another possible reason is the desire of the organization to simply expand its reach, expand its market demographically, and maintain its market status as a market leader, market challenger, or a market follower. Lastly, an organization may undergo horizontal integration to help increase its revenues. **Vertical integration** is the process of consolidating into an organization other companies involve in all aspects of a products or a services process from raw materials to distribution. 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 inventory costs, and ensure adequate stocks in the retail stores. Vertical integration can either be backward or forward. A classic example is that of the Steel Company, which not only bought iron mines to ensure the supply of the raw material but also took over railroads to strengthen the distribution of the final product. The strategy helped Steel Company produce cheaper steel and empowered it in the marketplace. **Types of vertical integration strategies: Backward and the Forward integration** A. **Backward Integration** is another integrative acquisition growth strategy where the organization buys one of its suppliers. An organization may carry out backward integration to better control its supply chain and ensure a more reliable or cost-effective supply of input. Furthermore, the organization can eliminate inefficiencies to secure quality output or according to set conformance standards. The organization can apply product and process strategies so that the right products are produced, and the right services are rendered at the right time. Effective backward integration can help increase the profitability of an organization and thus, create competitive advantage. For example, if Nokia is a manufacturer of mobile phones, it can buy its supplier of phone cases. 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 the intermediary, thus, eliminating distribution costs. Forward integration allows an organization to reinvent its marketing outlook and redesign its marketing strategies. For example, an organization engaged in garment manufacturing can buy retail outlets that are displaying and selling their clothing lines to help increase their sales. **THE BOSTON CONSULTING GROUP MODEL** 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 decide how they should invest for the future. Most companies offer a wide variety of products, but some deliver greater returns than others. The BCG matrix gives the business a framework for evaluating the success of each product to help the company determine which ones they should invest more money into and which they should eliminate altogether. It can also help companies identify a new product to introduce to the market. The matrix is divided into four quadrants based on market growth and relative market share. 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 a competitive advantage. More than 50 years after its inception, the BCG matrix model remains a valuable tool for helping companies understand their potential. In this four-quadrant BCG matrix template, market share is shown on the horizontal line (low left, high right) and growth rate is found along the vertical line (low bottom, high top). The four quadrants are designated Stars (upper left), Question Marks (upper right), Cash Cows (lower left) and Dogs (lower right). **Place each of your products in the appropriate box based on where they rank in market share and growth. Where you set the dividing line between each quadrant depends in part on how your company compares to the competition**. Here is a breakdown of each BCG matrix quadrant. **Relative Market Share** = % market share of Company A\'s product divided by the market share of the largest competing product. The market growth rate is this year's industry sales minus the past years industry sales. **Stars quadrant** The business units or products with the best market share and generating the most cash are considered Stars. Monopolies and first-to-market products are frequently termed Stars too. However, because of their high growth rate, Stars consume large amounts of cash. This generally results in the same amount of money coming in that is going out. Stars can eventually become Cash Cows if they sustain their success until a time when a high-growth market slows down. High Growth, High Share. A key tenet of a BCG strategy for growth is to invest in "stars" as they have high future potential. **Cash Cows quadrant** A Cash Cow is a market leader that generates more cash than it consumes. Cash Cows are business units or products with a high market share but low growth prospects. Cash Cows provide the cash required to turn a Question Mark into a market leader, cover the administrative costs of the company, fund research and development, service the corporate debt, and pay dividends to shareholders. Low Growth, High Share. Companies are advised to invest in cash cows to maintain the current level of productivity or to "milk" the gains passively. **Dogs' quadrant** Dogs, sometimes also referred to as Pets, are units or products with a low market share and low growth rates. They frequently break even, neither earning nor consuming much cash. Dogs are generally considered cash traps because businesses have money tied up in them, even though they bring back almost nothing in return. Low Share, Low Growth. Companies should liquidate, divest, or reposition these "dogs." These business units are prime candidates for divestiture. **Question Marks quadrant** These parts of a business have high growth prospects but a low market share. They consume a lot of cash but bring little in return. Question Marks lose a company money. However, since these business units are growing rapidly, they have the potential to turn into Stars in a high-growth market. High Growth, Low Share. Companies should invest in or discard these "question marks," depending on their chances of becoming stars - to invest if the products have potential for growth, or to sell if they do not. **The Bottom Line** The BCG Growth-Share Matrix is a business management tool that allows companies to identify the aspects of their business that should be prioritized and which might be jettisoned. By constructing a 2x2 table along the dimensions of growth and market share, a company\'s businesses can be categorized into one of four classifications: \"stars,\" \"pets,\" \"cash cows,\" and \"question marks.\"