[STRAMA] PRELIMS

Strategic Management

• The ongoing process of planning, monitoring, and assessing everything necessary for an organization to meet its goals.

• Core Objectives:

  • Achieving competitive advantage.

  • Ensuring long-term sustainability.

  • Aligning internal resources with external opportunities.

Environmental Scanning

• SWOT and PESTEL

Strategy Formulation

• Developing vision, mission, and specific objectives.

Strategy Implementation

• Putting the plan into action (resource allocation).

Strategy Evaluation

• Measuring performance and making corrective adjustments.

Policy Analysis

• A systematic technique for evaluating existing or proposed policies to determine their effectiveness and impact.

• Purpose:

  • To solve wicked problems (complex, social, or organizational).

  • To provide evidence-based recommendations to decision-makers.

Strategic Management

• Achieving a competitive goal.

• Action-oriented (The “How”).

• High (Adapts to market shifts).

• External and future-facing.

Policy Analysis

• Creating rules for decision-making.

• Principle-oriented (The “What is allowed”).

• Lower (Provides consistent “guardrails”).

• Internal & Process-facing.

The Rational-Comprehensive Model

• A linear 5-step process:

  • Define the problem.

  • Establish evaluation criteria (cost, equity, feasibility).

  • Identify policy alternatives.

  • Evaluate alternatives against criteria.

  • Recommend the best policy.

Incrementalism

• Making small, “mudding through” changes rather than radical shifts.

Policy as an Enabler

• Policies ensure that the strategy is executed consistently across the organization.

Strategic Decision Making

• A process of understanding how decisions interact and their impact on the organization to gain an advantage.

• Wrong decisions taken at the wrong time may result in catastrophic consequences.

  • In other words, the power of strategic thinking lies in combining the power of the right decision with the right time. 

The Physical Environment

• It is the first layer of the environment.

• The three elements:

  • Physical Resources

  • Climate

  • Wildlife

The Societal Environment

• Changes in the physical environment have an impact on the social environment.

Social Forces

• Resulting from human interactions that can influence the thoughts, behavior, attitude, actions, and even beliefs and customs of the people.

• Trend in using of social media as a medium of communication.

• There is a thin line delineating social forces and cultural forces called sociocultural forces.

• Includes:

  • Values

  • Traditions

  • Literacy level

  • Consumer psychology

Political Forces

• Political systems, political parties, and other related political groups that influence the political stability of a country.

• Includes:

  • Trade regulations

  • Taxation

  • Government stability

  • Unemployment

  • Worker’s benefits

  • Election practices

Cultural Forces

• Refer to the integrated characteristics of a group of people or an ethnic group in a particular society.

  • Religion

  • Language

  • Beliefs

  • Customs

  • Education

• These forces have a significant influence on any entrepreneurial endeavor because of our cultural diversity.

Economic Forces

• Primarily caused by changes or movements in the Philippine economy that have direct or indirect effects on the entrepreneurial venture.

  • Interest rates

  • Inflation rates

  • Employment

  • Exchange rates

Legal Forces

• Directly involved in the legislation and interpretation of laws and ordinances directly affecting the business.

  • Product control, pricing, and labeling

  • Health and safety of the workers

  • Administration of the election process

  • Advertising and promotion

  • Exercise of profession

  • Education administration and fees

Technological Forces

• Trends and developments in computer and information technology that have an impact on business.

  • Internet

  • Social media

  • E-commerce

  • Technological advancement

  • Technological infrastructure

Environmental Scanning

• Refers to gathering, critical evaluation, and utilization of information on events and activities and their personal relationship with the physical, societal, and industry environments.

• Identifies the expected threats and opportunities existing in the environment.

• It helps define the future path of the business.

• Assist in the formulation of the most appropriate entrepreneurial strategies.

Suppliers

• Provide required materials, parts, or services to the business.

Customers

• Buyers of goods or services produced or rendered by the business.

Employees

• Workers of the business who are highly responsible for the production of goods or the delivery of services to the customers.

Government

• Handles the particular affairs of the country.

Competitors

• Produce or sell similar products or services.

• Can be direct or indirect.

Creditors

• Refers to banks, financial institutions, and financial intermediaries engaged in the lending of money.

SWOT Model

• Analysis of the external and internal environment

• By George Albert Smith Jr. and Roland Christensen

Strengths

• Capabilities

• Greatest advantage

• Business opportunities

• Internal

• Positive

Weaknesses

• Deficiencies

• Disadvantages

• Poor areas of the business

• Internal

• Negative

Opportunities

• Potential in terms of growth

• Exploited

• Looking into a new venture

• External

• Positive

Threats

• External events

• Harmful in achieving the objectives

• External

• Negative

Forces of Competition Model

• Known as the 5 Forces of Competition by Michael Porter.

Environmental Scanning

• The process by which business leaders monitor both internal and external environments to identify opportunities, threats, and emerging trends.

• This involves observing competitors, customers, industry shifts, and broader macroeconomic factors.
  

Innovation

• A new and improved way of doing things, something novel and useful (Anderson, Potocnik, & Zhou, 2014).

• The conversion of a new idea into revenues and profits (Lafley & Charan, 2008).

• Transforming an idea into a commercially successful product (Ip, 2016).

• The transformation of knowledge into new products and processes (Porter & Stern, 1999).

• The process of translating an idea into a commercially viable customer value proposition (Chandy & Tellis, 1998).

Strategic Innovation

• Defy what seemed impossible in their individual silos, coalesce on a shared vision and an execution roadmap, and work to bring to life a new business creation and innovation.

• This is about re-imagining your growth strategy.

• A strategy of breaking rules.

Value Innovation

• A concept that makes the competition irrelevant by offering fundamentally new and superior buyer value in existing markets and by enabling a quantum leap in buyer value to create new markets.

3 Key Elements to Strategic Innovation

1. Fundamental Reconceptualization of the Business Model

2. Reshaping of Existing Markets

3. Dramatic Value Improvements

First Element

• Fundamental reconceptualization of the business model.

Second Element

• The reshaping of existing markets.

Third Element

• Dramatic value improvements for customers.

Fundamental Reconceptualization of the Business Model

1. What business we are in? Who are the customers? How do we achieve value?

2. Asking above questions make managers to look at their tacit rules and underlie the way business is run in their industry

3. Strategic innovators take guard against established mental models and tacit industry rules.

4. They ignore what they are and focus on what they can be!

Reshaping of Existing Markets

1. Strategic innovators look across substitute markets and across substitute strategic groups.

2. While conventional strategic logic focuses on fighting for market share in existing markets, strategic innovators create new market space.

3. Conventional logic focuses on outperforming competition, strategic innovators seek radically superior value to make competition irrelevant (Hamel 1998)

4. Strategic innovators do not try to adapt to external trends but actively participate in shaping markets and external trends over time.

Dramatic Value Improvements

1. Strategic innovation is not about marginal or incremental improvements but about achieving quantum leaps in value.

2. Strong emphasis on value puts customers at the center of strategic thinking.

3. Conventional focus on retaining the existing customers tends to promote hesitancy to challenge the status quo for fear of losing or dissatisfying existing customers.

4. Strategic innovation follows non-customers closely to provide unusual insights into trends and changes (Geroski 1998).

Vision Statement

• “What do we want to become?”

• Should be short, preferably one sentence, and as many managers as possible should have input into developing the statement.

• Should reveal the type of business the firm engages in.

Mission Statement

• “What is our business?”

• A declaration of an organization’s reason for being.

• It is essential for effectively establishing objectives and formulating strategies.

• It reveals what an organization wants to be and whom it wants to serve.

• It is also called a creed statement, a statement of purpose, a statement of philosophy, a statement of beliefs, and a statement of business principles.

Customers

• Who are the firm’s customers?

Products or Services

• What are the firm’s major products or services?

Markets

• Geographically, where does the firm compete?

Technology

• Is the firm technologically current?

Survival, growth, and profitability

• Is the firm committed to growth and financial soundness?

Philosophy

• What are the basic beliefs, values, aspirations, and ethical priorities of the firm?

Self-concept (distinctive competence)

• What is the firm’s major competitive advantage?

Public Image

• Is the firm responsive to social, community, and environmental concerns?

Employees

• Are employees a valuable asset of the firm?

BCG Matrix

• This consists of four quadrants with a market share on the x-axis and a market growth rate on the y-axis.

• Each group has its specific set of distinctive qualities.

Dogs

• Business units or products with a low market share and at a low rate of growth.

• Products that fall into this category show poor performance and are at the end of their lifecycle.

• Although these can sustain themselves, they will never move into the stars’ quadrant as these products provide low or negative financial returns.

• Products in this quadrant are typically seen as cash traps since companies have capital invested in them while generating little or no revenue.

• Thus, firms can sell, liquidate or rebrand these products or business units.

  • In some cases, these can bring profit for an extended time or serve as a response to competitors’ moves.

• Moreover, these products can be complementary to other offerings.

• Therefore, companies need to conduct deeper analysis to ensure that these are not candidates for investment and can be sold.

Cash Cows

• These are products or business units with high market share but low market growth.

• These products are market leaders that produce higher revenue than they require to keep the business operating.

• These are typically associated with well-established and mature products, often in markets with high barriers to entry.

  • Hence, these products need less investment to maintain market share.

• Companies value possessing them because of their ability to generate income.

• These provide the resources to cover a business’s operating expenses, finance R&D, invest in new products, and distribute dividends to stakeholders.

• Companies should take advantage of these as long as possible.

• Since cash flow patterns for these assets are incredibly predictable, it is easy to estimate their value.

• Besides, it allows businesses to maintain the existing level of productivity and finance stars and question marks that have the potential to turn into cash cows in the future.

Question Marks

• Sometimes called problem children or wild dogs, are products or business units with a low market share that operate in a high-growth market.

• Often, startups or new lines of business may fall into this category.

• As a result, these products often demand significant financial resources to increase their market share.

• If a company manages to achieve this objective, question marks can turn into stars.

• Conversely, these products or business units will become dogs when market growth slows.

• When the transition from a question mark to a star is doubtful, companies should weigh up divesting these assets and reallocating funds among other portfolio brands.

• Nevertheless, organizations should conduct a detailed analysis to understand whether these products require investments to increase market share.

• Businesses should frequently examine question marks to determine whether they are worth maintaining.

Stars

• These are products or units with a high market share that bring the most profit to the company.

• These products are a company’s most valuable asset at the forefront of the product line. Often, monopolies and first-to-market items are also referred to as stars.

• If these products maintain their positions as market leaders, they can eventually turn into cash cows when the market’s growth rate slows down.

• These have significant growth potential that might be used to increase the operating income in the future.

• Thus, the fundamental component of BCG’s strategy is to invest in these.

• This asset generates high income.

• However, it also requires considerable funds to maintain its position in the target market, keep a competitive edge, and accelerate growth.

Public Policy

• Other term for policy analysis

Growth Share Market

• Other term for BCG Matrix

Rivalry Among Existing Competitors

• Number of competitors

• Diversity of competitors

• Industry concentration

• Industry growth

• Quality differences

• Brand loyalty

• Barriers to exit

• Switching costs

Threat of New Entrants

• Barriers to entry

• Economies of scale

• Brand loyalty

• Capital requirements

• Cumulative experience

• Government policies

• Access to distribution channels

• Switching costs

Bargaining Power of Buyers

• Number of customers

• Size of each customer order

• Differences between competitors

• Price sensitivity

• Buyer’s ability to substitute

• Buyer’s information availability

• Switching costs

Bargaining Power of Suppliers

• Number and size of suppliers

• Uniqueness of each supplier’s product

• Focal company’s ability to substitute

Threat of Substitute Products

• Number of substitute products available

• Buyer propensity to substitute

• Relative price performance of substitute

• Perceived level of product differentiation

• Switching costs