College of Business and Accountancy

BASIC CONCEPTS OF

STRATEGIC
MANAGEMENT
Prof. Francis S. Castil, MBA,AFBE
 The Study of Strategic Management
Globalization and Environmental
Sustainability: Challenges to Strategic
Management
THE STARTUP GLOBAL issue
GUIDE ENVIRONMENTAL sustainability issue
Creating a Learning Organization
Basic Model of Strategic Management
TOPICS TO BE COVERED Initiation of Strategy:Triggering Events
The StrategicAudit:Aid to Strategic
Decision-Making
Strategic
Management
Model
 STRATEGIC MANAGEMENT

IS A SET OF MANAGERIAL DECISIONS

AND ACTIONS THAT DETERMINES THE
LONGRUN
PERFORMANCE OF A CORPORATION.
It includes environmental scanning (both external and internal), strategy formulation
(strategic or long-range planning), strategy implementation, and evaluation and control. The
study of strategic management, therefore, emphasizes the monitoring and evaluating of
external opportunities and threats in light of a corporation’s strengths and weaknesses.
Originally called business policy, strategic management incorporates such topics as strategic
planning, environmental scanning, and industry analysis.
PHASES OF STRATEGIC
MANAGEMENT

Phase 1—Basic financial planning

Phase 2—Forecast-based planning
Phase 3—Externally oriented (strategic)
planning:
Phase 4—Strategic management
BENEFITS OF STRATEGIC
MANAGEMENT
A clearer sense of strategic vision for the firm.
A sharper focus on what is strategically important.
Improved understanding of a rapidly changing
environment
GLOBALIZATION AND ENVIRONMENTAL
SUSTAINABILITY: CHALLENGES TO STRATEGIC
MANAGEMENT

Globalization, the integrated internationalization of

markets and corporations, has changed the way
modern corporations do business.
GLOBAL ISSUE
Regulatory Risk: Companies in much of the world are already subject to the Kyoto Protocol, which
requires the developed countries (and thus the companies operating within them) to reduce
carbon dioxide and other greenhouse gases by an average of 6% from 1990 levels by 2012.
Supply Chain Risk: Suppliers will be increasingly vulnerable to government regulations leading to
higher component and energy costs as they pass along increasing carbon-related costs to their
customers.
Product and Technology Risk: Environmental sustainability can be a prerequisite to profitable
growth
Litigation Risk: Companies that generate significant carbon emissions face the threat of lawsuits
similar to those in the tobacco, pharmaceutical, and building supplies (e.g., asbestos) industries
Reputational Risk: A company’s impact on the environment can heavily affect its overall
reputation. The Carbon Trust, a consulting group, found that in some sectors the value of a
company’s brand could be at risk because of negative perceptions related to climate change.
Physical Risk: The direct risk posed by climate change includes the physical effects of droughts,
floods, storms, and rising sea levels. Average Arctic temperatures have risen four to five degrees
Fahrenheit
 THEORIES OF ORGANIZATIONAL
ADAPTATION
Institution theory, in contrast, proposes that organizations can and do adapt
to changing conditions by imitating other successful organizations.
The strategic choice perspective goes one step further by proposing that not
only do organizations adapt to a changing environment, but they also have the
opportunity and power to reshape their environment.
Its argument that adaptation is a dynamic process fits with the view of
organizational learning theory, which says that an organization adjusts
defensively to a changing environment and uses knowledge offensively to
improve the fit between itself and its environment.
 CREATING A LEARNING
ORGANIZATION
Learning organizations are skilled at four main activities:
Solving problems systematically
Experimenting with new approaches
Learning from their own experiences and past history as well as from the
experiences of others
Transferring knowledge quickly and efficiently throughout the organization
BASIC MODEL OF
STRATEGIC
MANAGEMENT

Environmental scanning
Strategy formulation
Strategy implementation
Evaluation and control
BASIC ELEMENTS OF THE STRATEGIC
MANAGEMENT PROCESS
Strategic
Management
Model
ENVIRONMENTAL
SCANNING
Environmental scanning is the monitoring, evaluating, and
disseminating of information from the external and internal
environments to key people within the corporation. Its
purpose is to identify strategic factors—those external and
internal elements that will determine the future of the
corporation. The simplest way to conduct environmental
scanning is through
SWOT analysis.
Environmental
Variables
STRATEGY FORMULATION
Strategy formulation is the development of long-range plans for the effective management of
environmental opportunities and threats, in light of corporate strengths and weaknesses (SWOT).
It includes defining the corporate mission, specifying achievable objectives, developing
strategies, and setting policy guidelines.

Mission- An organization’s mission is the purpose or reason for the organization’s existence. It
tells what the company is providing to society—either a service such as housecleaning or a
product such as automobiles.

Objectives- are the end results of planned activity. They should be stated as action verbs and
tell what is to be accomplished by when and quantified if possible.

Strategies- A strategy of a corporation forms a comprehensive master plan that states how the
corporation will achieve its mission and objectives.

Policies- A policy is a broad guideline for decision making that links the formulation of a strategy
with its implementation.

Big Spark Solutions | 2020

STRATEGY FORMULATION
The typical business firm usually considers three types of strategy: corporate, business, and
functional

Corporate strategy describes a company’s overall direction in terms of its general attitude
toward growth and the management of its various businesses and product lines. Corporate
strategies typically fit within the three main categories of stability, growth, and
retrenchment.

Business strategy usually occurs at the business unit or product level, and it emphasizes
improvement of the competitive position of a corporation’s products or services in the
specific industry or market segment served by that business unit

Functional strategy is the approach taken by a functional area to achieve corporate and
business unit objectives and strategies by maximizing resource productivity.
STRATEGY IMPLEMENTATION
Strategy implementation is a process by which strategies and policies are put into action
through the development of programs, budgets, and procedures

A program is a statement of the activities or steps needed to accomplish a single-

use plan. It makes a strategy action oriented.

A budget is a statement of a corporation’s programs in terms of dollars. Used in

planning and control, a budget lists the detailed cost of each program

Procedures, sometimes termed Standard Operating Procedures (SOP), are a system

of sequential steps or techniques that describe in detail how a particular task or job
is to be done.
EVALUATION AND CONTROL
Evaluation and control is a process in which corporate activities and performance results are
monitored so that actual performance can be compared with desired performance.

Performance is the end result of activities.70 It includes the actual outcomes of the
strategic management process. The practice of strategic management is justified in
terms of its ability to improve an organization’s performance

FEEDBACK/LEARNING PROCESS - As a firm or business unit develops strategies,

programs, and the like, it often must go back to revise or correct decisions made
earlier in the process
STRATEGIC DECISION MAKING
The distinguishing characteristic of strategic management is its emphasis on strategic decision
making. As organizations grow larger and more complex, with more uncertain environments,
decisions become increasingly complicated and difficult to make

WHAT MAKES A DECISION STRATEGIC:

Rare: Strategic decisions are unusual and typically have no precedent to follow.
Consequential: Strategic decisions commit substantial resources and demand a
great deal of commitment from people at all levels.
Directive: Strategic decisions set precedents for lesser decisions and future
actions throughout an organization.
MINTZBERG’S MODES OF STRATEGIC DECISION MAKING
According to Henry Mintzberg, the three most typical approaches, or modes, of strategic decision
making are entrepreneurial, adaptive, and planning (a fourth mode, logical incrementalism,
was added later by Quinn)

Entrepreneurial mode: Strategy is made by one powerful individual. The focus is on

opportunities; problems are secondary. Strategy is guided by the founder’s own vision of
direction and is exemplified by large, bold decisions.
Adaptive mode: Sometimes referred to as “muddling through,” this decision-making mode is
characterized by reactive solutions to existing problems, rather than a proactive search for new
opportunities
Planning mode: This decision-making mode involves the systematic gathering of appropriate
information for situation analysis, the generation of feasible alternative strategies, and the
rational selection of the most appropriate strategy.
Logical incrementalism: A fourth decision-making mode can be viewed as a synthesis of the
planning, adaptive, and, to a lesser extent, the entrepreneurial modes. In this mode, top
management has a reasonably clear idea of the corporation’s mission and objectives, but, in its
development of strategies, it chooses to use “an interactive process in which the organization
probes the future, experiments and learns from a series of partial (incremental) commitments
rather than through global formulations of total strategies
STRATEGIC DECISION-MAKING PROCESS: AID TO BETTER
DECISIONS
Good arguments can be made for using either the entrepreneurial or adaptive modes (or logical
incrementalism) in certain situations
Evaluate current performance results in terms of (a) return on investment, profitability, and
so forth, and (b) the current mission, objectives, strategies, and policies
Review corporate governance—that is, the performance of the firm’s board of directors and
top management.
Scan and assess the external environment to determine the strategic factors that pose
Opportunities and Threats.
Scan and assess the internal corporate environment to determine the strategic factors that
are Strengths (especially core competencies) and Weaknesses
Analyze strategic (SWOT) factors to (a) pinpoint problem areas and (b) review and revise the
corporate mission and objectives, as necessary
Generate, evaluate, and select the best alternative strategy in light of the analysis
conducted in step 5.
Implement selected strategies via programs, budgets, and procedures.
Evaluate implemented strategies via feedback systems, and the control of activities to ensure
their minimum deviation from plans.
Strategic Decision-
Making Process
 THE STRATEGICAUDIT:AID TO
STRATEGIC DECISION-MAKING
The strategic decision-
making process is put into
action through a technique
known as the strategic audit.
A strategic audit provides a
checklist of questions, by
area or issue, that enables a
systematic analysis to be
made of various corporate
functions and activities.
 OPEN
FORUM
THANK
YOU