CBM 121 (7708) STRATEGIC MANAGEMENT Prof.

Restie Torres

CHAPTER 1 - STRATEGIC PROCESS AND

PURPOSES

Strategic management is the long-term aim of

an organization. Strategic management is about
handling the entirety of an enterprise. This
requires the degree to which activities meet the
strategic needs of the policy of the organization.

Strategic management is the overall long-term Strategic planning is the practice of organizing
goal of control of the organization. It differs from scheduling tasks concerning roles and resources
strategy, the whole method of a company in within a given timeline to achieve the
managing activities to achieve the long-term organization's goals.
objective. The organization's policy must be used
to guide and align sub-strategy formation at Strategic Planning – for executive or senior
different parts of the organization. management to schedule strategic management
decisions in advance. It is a structured, systematic
Strategic Management Process: method that offers a sequenced structure or
organizational template for an organization to
1. Situation Analysis
move towards a long-term goal.
POST : Purest, Purpose, Objectives and
Situation Analysis – Evaluates an organization’s
Tactics
current external and internal situations; these are
used to develop strategic objectives. (External,
Internal, Strategic Objectives)
Understood to put of strategic management:
2. Strategy Formulation
1. All tasks must be planned properly.
Strategy Formulation – The strategy used to
achieve strategic goals is conditioned by the scale 2. Plans must be implemented so that
and nature of an organization’s activities, whether people are working on these plans.
Single Business, Multi-Business(Corporate), or
Global in orientation. (Business-level, Corporate- 3. Work must monitor, and progress must
level, Global-level) review.

3. Implementation 4. Necessary action must take to account

for any deviation from the plan.
Implementation – Involves coordinating change
management and strategic monitoring through 5. Organizations must have structures and
strategic performance management, including management systems to ensurethe above
feedback and learning. (Implementation, Control, work in practice.
Leadership)
6. Everybody must be involved in these
structures and systems.

In addition to these management principles,

baldrige specifies that strategic plan should have:

1. A defined strategy,

2. Action plans derived from this strategy,

CBM 121 (7708) STRATEGIC MANAGEMENT Prof. Restie Torres

3. Awareness and recognition of the and business model of an organization. Otherwise,

differences between short- and longer- the overall purpose and strategy for achieving it
term plans, should be stable enough to provide an
organization with a consistent basis for decision-
4. An approach for developing strategy making. When circumstances are stable, it is
based on an organization's external through progress that strategic change takes
environment and internal strategic place.
resources,
Continuous improvement is organizational
5. An approach for implementing action learning, which promotes and incrementally
plans that consider an organization's key increases the efficiency and satisfaction of the
processes and performance measures, customer in everyday management, according to
and the organization's strategic requirements.

6. An approach for monitoring and The continuous change is gradual and is focused
evaluating organizational performance on progress. Those are usually motivated by a
concerning the strategic plan need for day-to-day management to maintain and
boost efficiency and consumer satisfaction. The
Strategic change is a phase of fundamental principle is tore main within the core value-
transition that takes a company to a new creating areas of an organization's stable business
sustainable competitive position, which is likely to model. To ensure a company remains fit for
entail changes to the current strategy. purpose, many primary performance measures
(KPIs) are set out, along with the plans and
Strategic change is a structural transition, aimed priorities to achieve them, usually in the form of a
at bringing an organization to a new success role. business plan. These are often misunderstood as
It works by concentrating time and money on a strategic plans, but they are really about
few critical success drivers or strategic goals to improving operational effectiveness to the extent
bring a company to a new desired state and that the KPIs drive best practices. While essential
marketplace. So, a strategy designed to achieve a to sustaining strategy, daily management's
future vision of the state guides the direction of substance may not be very different from that of
change. It demands a small number of strategic rivals
goals that senior managers can manage
realistically. Given the demands on top Competitive strategy is a method at the
management in terms of attention and time, company level intended to retain a competitive
keeping strategy simple and not getting edge over rivals and future rivals.
embroidered in too much detail is essential.
The competitive strategy gives a company an
According to Jack Welch(2005) edge in achieving above-average profits in its
industry by generating unique value relative to
former General Electric chief executive, a that provided by its rivals. It needs a long-term
strategy is a provisional course of action often strategic plan that is sustainable. Its function is to
revisited and redefined by the leadership integrate and organize the activities of those
according to changing market conditions. It is organizations which distinguish the organization
really an iterative process. It is in line with the from rivals in what it does and what it offers. A
view of Henry Mintzberg that strategy is a sense of sustainable competitive advantage is not merely
where you are heading. In other words, what path doing similar activities better than rivals: it is
you and your company are taking to push your making those activities impossible for competitors
company forward. Generally, it should be episodic to replicate at an equal price.
to make major strategic adjustments. This usually
happens when external and often internal
challenges and opportunities call for immediate,
dramatic improvements to the current strategy
CBM 121 (7708) STRATEGIC MANAGEMENT Prof. Restie Torres

STRATEGY Mission statement

the strategy concept is central to strategic - Explains why an organization.

management, but like strategic planning, it is only - It explains the scope of what an
a part of strategic management. organization does and will typically have a
rationale for explaining how it adds value
to stakeholders.
- The importance of stakeholders is
essential to the mission.

ESSENTIAL SUMMARY
 Purpose is the reason for the organization Values statement
and its overall goals.
 Explains why an organization.
 Vision statement is the organization’s
 expected collective norms and behavioral
statement of its desired future state or
standards for managers and the workforce
ideal.
in an organization.
 Mission is the organization’s statement of
 values are the principles under which
its overriding purpose, such as the value it
people operate, while the value is a
creates for its stakeholders and other
product of that operate. Value statements
responsibilities.
should be crafted to preserve social
 Values are the organization’s statement of
capital by stressing the principles on
its expected collective norms and
which most working relationship rely,
behaviours and will include its overall core
confidence, fairness, support, and
business methodologies and management
honesty.
philosophies.
 The core values of an organization make
up its basic strategic understanding.
Collins stresses the importance of a
THE THREE DIMENSIONS OF culture of self-disciplined people adhering
ORGANIZATIONAL PURPOSE to a consistent system where they have
the freedom and responsibility to act.

Vision statement

- May expand as a declaration of intent in

the form of a text. Typically, they are short
and memorably ambitious but not
overblown.
- Should provide the underlying rationale
for the change and make sure the reasons
for the change and the specific
consequences for action are clear.
- Should be sufficiently thrilling and
motivating to inspire people to seek
possibilities and reconsider their jobs.
- Simple 'big idea'-something that changes
an organization.
CBM 121 (7708) STRATEGIC MANAGEMENT Prof. Restie Torres

Chapter 2 - The External Environment

3. SOCIAL – These factors scrutinize the
PESTLE Framework social environment of the market, and
gauge determinants like cultural trends,
A PESTLE analysis studies the key external factors demographics, population analytics, etc.
(Political, Economic, Sociological, Technological, a. Population growth rate
Legal and Environmental) that influence an b. Age distribution
organization. c. Safety emphasis
d. Health consiousness
- the most comprehensive and used e. Lifestyle attitudes
approach for grouping and reviewing f. Cultural barriers
macro-environment trends in strategic
management. 4. TECHNOLOGICAL – These factors pertain
- it allows a company to form an impression to innovations in technology that may
of the factors that might impact a new affect the operations of the industry and
business or industry. the market favorably or unfavorably.
a. Technology incentives
b. Level of innovation
c. Automation
d. R&D activity
e. Technological change
f. Technological awareness

5. LEGAL – There are certain laws that affect

the business environment in a certain
country while there are certain policies
that companies maintain for themselves.
a. Discrimiation laws
b. Antitrust aws
c. Employment laws
1. POLITICAL – These factors determine the d. Consumer protection laws
extent to which a government may e. Copyright and patent laws
influence the economy or a certain f. Health and safety laws
industry.
a. Government policy 6. ENVIRONMENTAL – These factors include
b. Political stability all those that influence or are determined
c. Corruption by the surrounding environment.
d. Foreign trade policy a. Weather
e. Tax policy b. Climate
f. Labour law c. Environmental policies
g. Trade restrictions d. Climate change

2. ECONOMICAL – These factors include all

those that influence or are determined by
the surrounding environment.
a. Economic growth
b. Exchange rates
c. Interest rates
d. Inflation rates
e. Unemployment rates
CBM 121 (7708) STRATEGIC MANAGEMENT Prof. Restie Torres

The PESTLE Process

1. Someone should be in-charge of the 1. INTRODUCTION – Industry competitors

process, including meetings and seek to develop the winning technology/
discussions. business.
2. Before starting, think through the process 2. GROWTH – Industry products gain
and be clear what the objectives of the acceptance and rapid growth in product
PESTLE analysis. demand attract new competitors.
3. Keep it simple; do not get bogged down in 3. MATURITY – The market stabilizes as
detail so that the big picture gets lost. demand level off the industry is now
4. Involve a balance of pessimists and dominated by a few large competitors.
optimists; include outsiders with different 4. DECLINE – Demand for industry product
perspectives and beware of vested declines, competition increases, failing
interests and groupthink. competitors either exit the market or are
5. Agree on appropriate sources and check acquired by rival firm.
inside the organization first for
information.
Do industry life cycle models work?
6. Keep it simple; do not get bogged down in Answer: an industry life cycle model helps
detail so that the big picture gets lost. strategists identify the opportunities and threats
7. Identify the most critical factor issues for that characterize different industry environments.
strategy
8. Produce a discussion document for
broader circulation. 5 Competitive Forces
9. Use feedback and follow-up checks on
A model that identifies and analyzes five
actions and keep all PESTLE participants
competitive forces that shape every industry and
informed on a follow-up to encourage
helps determine an industry's weaknesses and
continual dialogue.
strengths.
10. Decide which issues to monitor on an
ongoing basis; link to existing in-house
processes for monitoring and reviewing
change, especially for planning.

Industry life cycle

The industry life cycle likens the life of an

industry to a living organism: markets expand over 1. Threat Of New Entry – This force
time, eventually maturing and finally declining. considers how easy or difficult it is for
The life cycle has introduction, growth, maturity, competitors to join the marketplace.
and decline stages 2. Threat Of Substitute – This force studies
how easy it is for consumers to switch
from a business’s product or service to
that of a competitor.
3. Bargaining Power of Supplier – This force
analyzes how much power a business’s
supplier has and how much control it has
over the potential to raise its prices,
which, in turn, lowers a business’s
profitability.
CBM 121 (7708) STRATEGIC MANAGEMENT Prof. Restie Torres

4. Bargaining Power of Customers – This • Suppliers have the potential to

force examines the power of the integrate forward and enter a
consumer, and their effect on pricing and customer's market.
quality.

8 Sources of Barriers To Entry

Hyper Competition – A condition of rapidly
1. Supply-side economies of scale escalating competition based on price-quality
2. Demand-side benefits of scale positioning, competition to create new know-how
3. Customer switching costs and establish first-mover advantage, competition
4. Capital requirements to protect or invade established product or
5. Incumbency advantages geographic markets, and competition based on
6. Unequal access to distribution channels deep pockets and the creation of even deeper
7. Restrictive government policy pocketed alliances.
8. Expected retaliation
STRATEGIC FIT – This is the matching the
opportunities of the external environment with an
organization's internal capabilities.
Bargaining Power of Customers – Customers
are few and buy in quantities that are mainly
about the size of suppliers.

• The industry's products are

standardized or undifferentiated.

• Customers have low switching

costs in changing suppliers.

• Customers can produce the

product themselves if a supplier is
too costly.

Bargaining Power of Supplier – Supply is more

concentrated than the industry's customers.

• Suppliers are not dependent upon

a single industry for their
revenues.

• Suppliers have customers with

high switching costs and close
supply chain relationswith
customers.

• Suppliers with differentiated

products and services are
dependent on
individualcustomers.

• Suppliers have products and

services for which there are no
substitutes.