THE CORE OF STRATEGIC MANAGEMENT

TOPIC OUTLINE ➢ “Economic” – The economic segment centers on the

1. Basic Elements of Strategic Management economic conditions within which organizations operate. It
A. Environmental Scanning includes elements such as interest rates, inflation rates,
B. Strategy Formulation gross domestic product, unemployment rates, levels of
C. Strategy Implementation disposable income, and the general growth or decline of the
D. Evaluation and Control economy.
➢ “Social” – Social factors include trends in demographics
ENVIRONMENTAL SCANNING such as population size, age, and ethnic mix, as well as
cultural trends such as attitudes toward obesity and
• a fundamental element of strategic management that involves consumer activism.
the systematic collection, analysis, and interpretation of data ➢ “Technological” – The technological segment centers on
about the external and internal environments affecting an improvements in products and services that are provided by
organization. This process helps organizations anticipate science. Relevant factors include, for example, changes in
changes, identify opportunities and threats, and formulate the rate of new product development, increases in
effective strategies to achieve their goals. automation, and advancements in service industry delivery.
➢ “Environmental” – The environmental segment involves
the physical conditions within which organizations operate.
It includes factors such as natural disasters, pollution levels,
and weather patterns.
➢ “Legal” – The legal segment centers on how the courts
influence business activity. Examples of important legal
factors include employment laws, health and safety
regulations, discrimination laws, and antitrust laws.

3. Porter's Five Forces

➢ Threat of New Entrants: This force examines how easy or
difficult it is for new competitors to enter the industry. High
barriers to entry, such as significant capital requirements or
strong brand loyalty, reduce the threat of new entrants.
➢ Bargaining Power of Suppliers: This force analyzes how
much power suppliers have over the industry. If there are
few suppliers or if they offer unique products, they can exert
more influence, potentially driving up costs for businesses
within the industry.
➢ Bargaining Power of Buyers: This force assesses the
influence customers have on the industry. When buyers
Primary purposes of environmental scanning have many choices or when products are not highly
o Identifying Opportunities and Threats: By analyzing differentiated, their bargaining power increases, pressuring
external factors, organizations can identify new companies to lower prices or improve quality.
opportunities for growth and innovation, as well as potential ➢ Threat of Substitute Products or Services: This force
threats that could impact their operations. considers the availability of alternatives that can replace the
o Informing Strategic Planning: Environmental scanning industry's products or services. A high threat of substitutes
provides valuable information that guides the formulation can limit profitability and market share as customers can
and implementation of strategic plans, ensuring that they switch to alternatives easily.
are aligned with external realities. ➢ Rivalry Among Existing Competitors: This force looks at
o Enhancing Adaptability: Organizations that actively scan the intensity of competition within the industry. High rivalry,
their environment are better equipped to respond to characterized by numerous competitors and slow industry
changes and maintain their competitive advantage. growth, can lead to price wars and reduced profitability.
Components of Environmental Scanning 4. Scenario Planning: Develops multiple scenarios based on
different assumptions about future environmental conditions and
External Environment evaluates potential strategic responses.
o Macroenvironment 5. Surveys and Interviews: Collects qualitative data from
Political and Legal Factors stakeholders, including employees, customers, suppliers, and
Economic Factors industry experts.
Social and Cultural Factors 6. Trend Analysis: Monitors and analyzes trends and patterns in
Technological Factors the external environment to predict future developments.
Environmental and Ecological Factors
Global Factors Challenges in Environmental Scanning
o Microenvironment • While environmental scanning is crucial for strategic
Suppliers and Distributors management, it also presents several challenges:
Competitors o Information Overload
Customers o Uncertainty and Complexity
o Bias and Subjectivity
Internal environment o Resource Constraints
Organizational Structure
Resources and Capabilities STRATEGY FORMULATION
Culture and Values
• a critical process in organizational management that involves
Performance Metrics
defining the direction and scope of an organization over the long
term. It helps in setting goals, identifying resources, and
Methods and Tools for Environmental Scanning
developing plans to achieve competitive advantage.
1. SWOT Analysis: Identifies internal Strengths and Weaknesses,
Key elements of strategy formulation
and external Opportunities and Threats.
o Environmental Scanning
2. PESTEL Analysis: Examines Political, Economic, Social,
Technological, Environmental, and Legal factors in the o Mission and Vision Statements
macroenvironment. Mission Statement: Defines the organization’s
purpose, core values, and target audience. It answers
➢ “Political” – The political segment centers on the role of the question, "Why do we exist?"
governments in shaping business. This segment includes Vision Statement: Describes the desired future state
elements such as tax policies, changes in trade restrictions of the organization. It provides a long-term direction
and tariffs, and the stability of governments. and inspiration for stakeholders.

Alcantara, Lois Claire P.

THE CORE OF STRATEGIC MANAGEMENT
o Strategic Objectives Common Challenges in Strategy Implementation
Key characteristics of strategic objectives include: Resistance to Change
Specific: Clearly defined and unambiguous. Lack of Alignment
Measurable: Quantifiable and trackable. Inadequate Resources
Achievable: Realistic and attainable. Poor Communication
Relevant: Aligned with the organization’s mission Ineffective Leadership
and vision.
Time-bound: Have a defined timeline for
completion.

o Levels of Strategy
- Corporate – level strategy
- Business level – level strategy
- Functional – level strategy

o Analytical Tools and Frameworks

- SWOT Analysis
- PESTEL Analysis
- Porter’s Five Forces
- Value Chain Analysis
- BCG Matrix

o Strategy Formulation Process

- Environmental Scanning
- Mission and Vision Development
- Implementation Planning
- Monitoring and Evaluation

STRATEGY IMPLEMENTATION
• the process of turning strategic plans into actions to achieve the
organization's goals and objectives. It involves the allocation of
resources, the alignment of activities, and the commitment of
personnel to execute the strategic initiatives. Effective strategy
implementation requires a thorough understanding of the
strategy, clear communication, and robust management
practices.

Key elements of strategy implementation

o Organizational Structure
- Hierarchical Structure
- Matrix Structure
- Decentralization
o Resource Allocation
Key steps in resource allocation include
- Budgeting
- Human Resources
- Technology

Change Management Implementing a new strategy often requires

significant organizational change.
o Effective change management involves:
Communication: Clearly communicating the strategy
and its rationale to all stakeholders.
Leadership: Providing strong leadership to guide the
organization through the transition.
Employee Involvement: Engaging employees in the
change process and addressing their concerns.
Training and Development: Providing training to
develop the skills needed to execute the strategy.

Performance Measurement Measuring performance is crucial for

tracking progress and ensuring that the strategy is on track.
o Key elements of performance measurement include:
Key Performance Indicators (KPIs): Defining KPIs that
align with strategic objectives.
Balanced Scorecard: Using a balanced scorecard
approach to measure performance across multiple
dimensions, including financial, customer, internal
processes, and learning and growth.
Regular Reviews: Conducting regular performance
reviews to assess progress and make adjustments as
needed.

Monitoring and Control Continuous monitoring and control are

essential to ensure that the strategy is being implemented effectively.
o It includes:
Progress Tracking: Regularly tracking progress
against the strategic plan.
Feedback Mechanisms: Establishing feedback
mechanisms to identify issues and opportunities for
improvement.
Corrective Actions: Taking corrective actions to
address deviations from the plan.

Alcantara, Lois Claire P.