MODULE 1 – STRATEGIC MANAGEMENT

1.0 Learning Outcome and Topics

Learning Outcomes
At the end of the topic, as a student you must be able to:
1. Recognize the nature and characterics of Strategic Management
2. Determine the major steps of the Strategic Management Model
3. Apply the guidelines of effective strategic planning
4. Evaluate and formulate vision and mission statement.

Module Topics:
1.1 Nature of strategic Management
1.1.1 Introduction to Strategic Management
1.1.2 Strategic Management Model
1.1.3 Benefits of Strategic Management
1.1.4 Guidelines for Effective Strategic Planning
1.2 Vision and Mission
1.2.1 Vision and Mission Statements
1.2.2 Importance and Characteristics of Vision and Mission Statements

1.1.1 Introduction to Strategic Management

According to Charles Darwin:
"It is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change.“
Businesses faces many situational challenges brought about by changes in its environment, such as the presence of competition, the regulations, cultural
changes, advent of technology, ethical concerns, supply chain and recently the impact of the Covid-19 Global Pandemic which became a global health
issue. It entails a derailment in many business operations both local and international, This phenomenon brought a new normal, that is now considered as
one of the biggest business environment factor that affects the directions of every business, that pose a clear and present danger to the very existence of
business continuity.

In order for every business organization to survive they should be prepared. Positioning the business to all challenges is a must. The common
approach to succeed is to set the direction by means of Strategic Management.

Strategic Management is the art & science of formulating, implementing, and evaluating, cross-functional decisions that enable an organization to achieve
its objectives.

The concept of strategic management is basically deals on strategic plans for the organization towards its envision direction. In essence, the strategic plan is
a company’s game plan.

The term strategic planning originated in the 1950s and was very popular between the mid-1960s and the mid-1970s. During these years, strategic
planning was widely believed to be the answer for all problems. At the time, much of corporate America was “obsessed” with strategic planning. Following
that “boom,” however, strategic planning was cast aside during the 1980s as various planning models did not yield higher returns. The 1990s, however,
brought the revival of strategic planning, and the process is widely practiced today in the business world as part of business strategic management.

Strategic Management achieves a firm’s success through integration of various basic organizational functional units namely:
1. Management
2. Marketing
3. Research and Development
4. Production/Operation
5. Management Information System
6. Finance and Accounting

1.1.2 Strategic Management Model

In developing a strategic plan, there are three important questions to answer in developing a strategic plan, which as follows:
1. Where are we now?
2. Where do we want to go?
3. How are we going to get there?
An organization is always dynamic in its process. Usually a large organizations are more formal and adapting and practicing the strategic management
process.
Below is the Model of the Strategic Management Process developed by Professor Fred David:
Steps in Strategic Management Model
There are 3 major stages and 7 steps which as follows:

Stage 1: Strategic Formulation which includes:

 Step 1: Developing vision and mission statement
Vision Statement refers to "What do we want to become"
Mission Statement - "What is our business"
 Step 2: External environment analysis / Audit external environment which concerns the organizational threats and opportunitites
 Step 3: External environment analysis / Audit internal environment which concerns the organizational strengths and weaknesses.
Step 2 and 3 is popularly known as the SWOT analysis,
 Step 4: Establish long-term objectives
 Step 5: Generate, evaluate & select strategies

Strategy formulation is viewed as the most difficult stage because it includes:

 Mobilization of employees & managers
 Interpersonal skills critical
 Consensus on goal pursuit

Stage 2: Strategy Implementation includes:

 Step 6: Implementing strategies consisting of
1. Annual objectives
2. Policies
3. Employee motivations
4. Resource Allocation

Strategies means by which long-term objectives are achieved.

Annual Objectives means a short-term milestones that firms must achieve to attain long-term objectives
Policies means by which annual objectives will be achieved

Stage 3: Strategy Evaluation known as the final stage which includes:

Step 7: Measure and Evaluate Performance consisting of:
1. Internal review
2. External review
3. Performance metric
4. Corrective actions

The Basic Tenets of Strategic Management are in Strategy formulation:

1. By taking advantage of external opportunities
2. Avoid/minimize the impact of external threats
According to Peter Drucker:
Think through the overall mission of a business. Ask the key question: “What is our Business?”.

The strategic management process attempts to organize quantitative and qualitative information under conditions of uncertainty that includes intuition and
analysis.

Intuition is based on:

 Past experiences
 Judgment
 Feelings

Intuition is useful for decision making in:

 Conditions of great uncertainty
 Conditions with little precedent
 Adapting to Change

An organizations must monitor events during on-going process, internal and external events to apply timely changes.
Strategic Management should be gaining and maintaining a:
Competitive Advantage which refers to "anything that a firm does especially well compared to rival firms”

Achieving Sustained Competitive Advantage can be attained by:

 Adapting to change in external trends, internal capabilities and resources
 Effectively formulating, implementing & evaluating strategies
Strategic Management and attaining competitive advantage needs the Strategists.

Strategists are the individuals who are most responsible for the success or failure of an organization.
Strategists have various job titles, usually top executives of organization such as chief executive officer, president, owner, chair of the board, executive
director, chancellor, dean, or even the entrepreneur.

1.1.3 Benefits of Strategic Management

In these topic we are going discuss the various benefits of strategic management in the organization.

Benefits of Strategic Management includes the following:

1. Proactive in shaping firm’s future
2. Initiate and influence firm’s activities
3. Formulate better strategies
Benefits can be both Financial and Non-Financial
According to Gordon Greenley there are generic Benefits of Strategic Management which as follows:
1. Identification of Opportunities
2. Objective view of management problems
3. Improved coordination & control
4. Minimizes adverse conditions & changes
5. Decisions that better support objectives
6. Effective allocation of time & resources
7. Internal communication among personnel
8. Integration of individual behaviors
9. Clarify individual responsibilities
10. Encourage forward thinking
11. .Encourages favorable attitude toward change.
12. Provides discipline and formality to the management of the business

1.2.1 Vision and Mission Statements

It is especially important for managers and executives in any organization to agree on the basic vision that the firm strives to achieve in the long term.

A vision statement should answer the basic question, “What do we want to become?”

A clear vision provides the foundation for developing a comprehensive mission statement.
Many organizations have both a vision and mission statement, but the vision statement should be established first and foremost. The vision statement
should be short, preferably one sentence, and as many managers as possible should have input into developing the statement.

Here are some of the Vision Statement examples with Author's comment:
1. San Miguel Corporation
We are San Miguel, guided by a strong sense of social, environmental and economic responsibility, our businesses will lead efforts to deliver on national
goals, setting the pace of progress in the Philippines.

Comment: Good Statement, they are engage on related and unrelated diversiified businesses such as manufacturing, construction(MRT and expressway),
gasoline(Petron) ,etc.

2. General Motors’ vision is to be the world leader in transportation products and related services.

Comment: Good statement

3. PepsiCo’s responsibility is to continually improve all aspects of the world in which we operate—environment, social, economic—creating a better
tomorrow than today.

Comment: Statement is too vague; it should reveal beverage and food business

4. Dell’s vision is to create a company culture where environmental excellence is second nature.

Comment: Statement is too vague; it should reveal computer business in some manner; the word environmental is generally used to refer to natural
environment so is unclear in its use here)

5. Procter & Gamble’s vision is to be, and be recognized as, the best consumer products company in the world.

Comment:Statement is too vague and readability is not that good)

What Is Our Business?
Peter Drucker "father of modern management" says that asking the question “What is our business?” is synonymous with asking the question “What is
our mission?” An enduring statement of purpose that distinguishes one organization from other similar enterprises, the mission statement is a declaration
of an organization’s “reason for being.” It answers the pivotal question “What is our business?” A clear mission statement is essential for effectively
establishing objectives and formulating strategies.

Mission statement is sometimes called a creed statement, a statement of purpose, a statement of philosophy, a statement of beliefs, a statement of
business principles, or a statement “defining our business,” a mission statement reveals what an organization wants to be and whom it wants to serve.
All organizations have a reason for being, even if strategists have not consciously transformed this reason into writing.

A business mission is the foundation for priorities, strategies, plans, and work assignments. It is the starting point for the design of managerial jobs
and, above all, for the design of managerial structures. As indicated in the strategic-management model, clear vision and mission statements are needed
before alternative strategies can be formulated and implemented. As many managers as possible should be involved in the process of developing these
statements becausethrough involvement, people become committed to an organization.

1.2.2 Importance and Characteristics of Vision and Mission

Vision and Mission is very important to the success of every organization, here are some of the views on why it is important:

Based on study of Rarick and Vitton found that firms with a formalized mission statement have twice the average return on shareholders’ equity than
those firms without a formalized mission statement have.

King and Cleland recommend that organizations carefully develop a written mission statement in order to reap the following benefits:
 Must be broad but should not be excessively specific nor overly general.
 Should be reconciliatory.
 Short
 Memorable
 Inspiring
 Market focused
 “What do you want to be remembered for?”

A good mission statement comprises nine components, the customers, products or services, market, technology, concept for survival, growth and
profitability, philosophy, self-concept, concern for public image and concern for employees.

Module 1: Summary
All firms have a strategy, even if it is informal, unstructured, and sporadic. All organizations are heading somewhere, but unfortunately some organizations
do not know where they are going. The old saying “If you do not know where you are going, then any road will lead you there!” accents the need for
organizations to use strategic-management concepts
and techniques.

The nature of strategic management provides an insight on a clear direction, particular the application of the strategic management process which is
becoming more widely used by small firms, large companies, nonprofit institutions, governmental organizations, and multinational conglomerates alike.

The vision tells on what the company wants to become and mission statement tells on what is the reason for its existence.

Organizations should take a proactive approach in design the business direction towards its growth by making a difference through competitive advantage.
The Nature of
Strategic
Management
and
Vision &
Mission
 Chapter Objectives

1. Describe the nature and role of vision and mission

statements in strategic management.
2. Discuss why the process of developing a mission
statement is as important as the resulting document.
3. Identify the components of mission statements.
4. Discuss how clear vision and mission statements can
benefit other strategic-management activities.
5. Evaluate mission statements of different
organizations.
6. Write good vision and mission statements.

2-2
INTENDED LEARNING OBJECTIVES:

 The reality of Today’s Business

 The layers of Industrial Revolution
 Define Strategic Management
 Identify the key terms in Strategic Management
 Enumerate the Strategic Management Model
 Discuss the benefits of strategic management
 Identify the reasons why some companies do
not adopt Strategic Planning.
 Know the pitfalls in strategic planning

Ch 1 -3
Strategic Management –
Defined

Art & science of formulating,

implementing, and evaluating,
cross-functional decisions that
enable an organization to achieve its
objectives

Ch 1 -4
Strategic Management

In essence, the strategic plan is a

company’s game plan
Strategic Management
achieves a firm’s success
through integration ––

Management Marketing

Finance/Accounting Production/Operations

Research & Development MIS

Ch 1 -6
Strategy Formulation

Vision & Mission

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection

Ch 1 -7
Issues in Strategy
Formulation

New business
opportunities
Businesses to abandon
Allocation of resources
Expansion or
diversification
International markets
Mergers or joint ventures
Avoidance of hostile
takeover

Ch 1 -8
Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation

Ch 1 -9
Strategy
Implementation

Action Stage of Strategic

Management –

Most difficult stage

Mobilization of
employees & managers
Interpersonal skills
critical
Consensus on goal
pursuit

Ch 1 -10
Strategy Evaluation

Internal Review

External Review

Performance Metrics

Corrective Actions

Ch 1 -11
Strategy
Evaluation
Final Stage of Strategic
Management

Subject to future
modification
Today’s success no
guarantee of future success
New & different problems
Complacency leads to
demise

Ch 1 -12
Prime Task of
Strategic Management

Peter Drucker: -- Think through the

overall mission of a business. Ask
the key question: “What is our
Business?”

Ch 1 -13
Integrating Intuition and
Analysis

The strategic management process

attempts to organize quantitative and
qualitative information under conditions of
uncertainty

Ch 1 -14
Integrating Intuition and
Analysis

Intuition is based on:

 Past experiences

 Judgment

 Feelings

Intuition is useful for decision making in:

 Conditions of great uncertainty

 Conditions with little precedent

Ch 1 -15
Integrating Intuition &
Analysis

Intuition & Judgment

Involve Management at all levels

Influence all Analyses

Ch 1 -16
Integrating Intuition &
Analysis

Analytical Thinking

Intuitive Thinking

Ch 1 -17
Adapting to Change

Organizations must monitor

events
 On-going process
 Internal and external events

 Timely changes

Ch 1 -18
Strategic Management is…….
Gaining and Maintaining Competitive
Advantage

“Anything that a firm does especially

well compared to rival firms”

Ch 1 -19
Achieving Sustained
Competitive Advantage

1. Adapting to change in external trends,

internal capabilities and resources

2. Effectively formulating, implementing &

evaluating strategies

Ch 1 -20
Adapting to Change

Rate & magnitude of change

increasing dramatically

E-commerce

Demographics

Technology

Ch 1 -21
Adapting to Change

Effective Adaptation

Requires long-term focus

Ch 1 -22
Adapting to Change – Key
Strategic Management
Questions
 What kind of business should
we become?
 Are we in the right fields
 Are there new competitors?
 What strategies should we
pursue?
 How are our customers
changing?

Ch 1 -23
Key Terms

Strategists – Firm’s success/failure

Various Job Titles:

•Chief Executive Officer (CEO)
•Chief Strategy Officer (CSO)
•Chief Information Officer (CIO)
•Chief Technology Officer (CTO)
•President
•Owner
•Board Chair
•Executive Director
Ch 1 -24
Key Terms

Vision Statement –
What do we want to become?

Mission Statement –
What is our business?

Ch 1 -25
Key Terms

Opportunities and Threats (External)

 Largely beyond the control of a single

organization

Ch 1 -26
Key Terms

Opportunities & Threats (External)

Analysis of Trends:
• Economic
• Social
• Cultural
• Demographic/Environmental
• Political, Legal, Governmental
• Technological
• Competitors

Ch 1 -27
Key Terms
Opportunities & Threats

Environmental Scanning (Industry Analysis)

 Process of conducting research and

gathering and assimilating external
information

Ch 1 -28
Key Terms
Opportunities & Threats

Basic Tenet of Strategic Management

Take advantage of
External Opportunities

Strategy Formulation

Avoid/minimize impact of
External Threats

Ch 1 -29
Key Terms

Strengths & Weaknesses (Internal)

 Controllable activities performed especially

well or poorly

Ch 1 -30
Key Terms

Strengths & Weaknesses (Internal)

Typically located in functional areas of the firm

• Management
• Marketing
• Finance/Accounting
• Production/Operations
• Research & Development
• Computer Information Systems

Ch 1 -31
Key Terms
Strengths & Weaknesses
Assessing the Internal Environment

Financial Ratios

Performance Metrics
Internal Factors
Industry Averages

Survey Data

Ch 1 -32
Key Terms

Long-term Objectives

 Mission-driven pursuit of specified results

more than one year out

Ch 1 -33
Key Terms

Long-term Objectives

Essential for ensuring the firm’s success

• Provide direction
• Aid in evaluation
• Create synergy
• Focus coordination
• Basis for planning, motivating, and
controlling

Ch 1 -34
Key Terms

Strategies

 Means by which long-term objectives are

achieved

Ch 1 -35
Key Terms

Strategies
Some Examples
• Geographic expansion
• Diversification
• Acquisition
• Market penetration
• Retrenchment
• Liquidation
• Joint venture

Ch 1 -36
Key Terms

Annual Objectives

 Short-term milestones that firms must

achieve to attain long-term objectives

Ch 1 -37
Key Terms

Policies

 Means by which annual objectives will be

achieved

Ch 1 -38
 Comprehensive strategic management model
External
Audit

Chapter 3

Long-Term Generate, Implement Implement Measure &

Vision
Objectives Evaluate, Strategies: Strategies: Evaluate
&
Select Mgmt Issues Marketing, Performance
Mission
Strategies Fin/Acct,
R&D, CIS
Chapter 2 Chapter 5 Chapter 6 Chapter 7 Chapter 8 Chapter 9

Internal
Audit

Chapter 4

Ch 1 -39
Strategic Management Model

Strategic Management Process

 Dynamic & Continuous

 More formal in larger organizations

Ch 1 -40
Strategic Management Model

1. Identify Existing --

• Vision
• Mission
• Objectives
• Strategies

Ch 1 -41
Strategic Management Model

2. Audit external environment

3. Audit internal environment
4. Establish long-term objectives
5. Generate, evaluate & select
strategies
6. Implement selected strategies
7. Measure & evaluate performance

Ch 1 -42
Benefits of Strategic
Management

• Proactive in shaping firm’s future

• Initiate and influence firm’s activities

• Formulate better strategies
•Systematic, logical, rational

Ch 1 -43
Benefits of Strategic
Management

Financial Benefits

• Improvement in sales
• Improvement in profitability
• Productivity improvement

Ch 1 -44
Benefits of Strategic
Management

Non-Financial Benefits

• Improved understanding of competitors strategies

• Enhanced awareness of threats
• Reduced resistance to change
• Enhanced problem-prevention capabilities

Ch 1 -45
Benefits of Strategic
Management (Greenley)

1. Identification of Opportunities
2. Objective view of management problems
3. Improved coordination & control
4. Minimizes adverse conditions & changes
5. Decisions that better support objectives

Ch 1 -46
Benefits of Strategic
Management (Greenley – cont’d)

6. Effective allocation of time & resources

7. Internal communication among personnel
8. Integration of individual behaviors
9. Clarify individual responsibilities
10. Encourage forward thinking

Ch 1 -47
Benefits of Strategic
Management (Greenley – cont’d)

11. Encourages favorable attitude toward

change
12. Provides
discipline and formality to the
management of the business

Ch 1 -48
Vision
and
Mission

Ch 1 -49
What Do We Want to Become?

 A vision statement should answer the basic

question, “What do we want to become?”

2-50
What Do We Want to Become?

 The vision statement should be short,

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

2-51
Vision Statement Examples

2-52
What Is Our Business?

 Mission statement
 a declaration of an organization’s “reason for
being.”
 answers the pivotal question “What is our
business?”
 essential for effectively establishing objectives
and formulating strategies

2-53
Mission Statement

 Mission statement
 reveals what an organization wants to be and
whom it wants to serve
 Also called a creed statement, a statement of
purpose, a statement of philosophy, a statement
of beliefs, and a statement of business principles

2-54
A Comprehensive Strategic-
Management Model

2-55
Vision versus Mission

 Shared vision creates a commonality of

interests that can lift workers out of the
monotony of daily work and put them into a
new world of opportunity and challenge.

2-56
The Process of Developing Vision and
Mission Statements
 Select several articles about these
statements and ask all managers to read
these as background information.
 Ask managers themselves to prepare a vision
and mission statement for the organization.

2-57
The Process of Developing Vision and
Mission Statements
 Merge these statements into a single
document and distribute the draft statements
to all managers
 Process should create an “emotional bond”
and “sense of mission” between the
organization and its employees

2-58
Importance of Vision and
Mission Statements
1. To ensure unanimity of purpose within the
organization
2. To provide a basis, or standard, for
allocating organizational resources
3. To establish a general tone or organizational
climate

2-59
Importance of Vision and
Mission Statements
4. To serve as a focal point for individuals to
identify with the organization’s purpose and
direction
5. To facilitate the translation of objectives into
a work structure
6. To specify organizational purposes

2-60
Characteristics of a Mission Statement

 First, a good mission statement allows for

the generation and consideration of a range
of feasible alternative objectives and
strategies without unduly stifling management
creativity.

2-61
Characteristics of a Mission Statement

 Second, a mission statement needs to be

broad to reconcile differences effectively
among, and appeal to, an organization’s
diverse stakeholders

2-62
Characteristics of a Mission Statement

 Stakeholders
 include employees, managers, stockholders,
boards of directors, customers, suppliers,
distributors, creditors, governments (local, state,
federal, and foreign), unions, competitors,
environmental groups, and the general public.

2-63
Benefits of Having a Clear Mission
and Vision

2-64
A Customer Orientation

A mission statement should:

define what the organization is and what the
organization aspires to be
be limited enough to exclude some ventures
and broad enough to allow for creative growth
distinguish a given organization from all others

2-65
A Customer Orientation

A mission statement should also:

serve as a framework for evaluating both
current and prospective activities
be stated in terms sufficiently clear to be
widely understood throughout the organization

2-66
A Customer Orientation

 A good mission statement reflects the

anticipations of customers.
 The operating philosophy of organizations
should be to identify customers’ needs and
then provide a product or service to fulfill
those needs.

2-67
Mission Statement Components

1. Customers—Who are the firm’s customers?

2. Products or services—What are the firm’s
major products or services?
3. Markets—Geographically, where does the
firm compete?
4. Technology—Is the firm technologically
current?

2-68
Mission Statement Components

5. Concern for survival, growth, and

profitability—Is the firm committed to
growth and financial soundness?
6. Philosophy—What are the basic beliefs,
values, aspirations, and ethical priorities of
the firm?
7. Self-concept—What is the firm’s distinctive
competence or major competitive
advantage?
2-69
Mission Statement Components

8. Concern for public image—Is the firm

responsive to social, community, and
environmental concerns?
9. Concern for employees—Are employees a
valuable asset of the firm?

2-70
Characteristics of a
Mission Statement

2-71
Example Mission Statements

 Pinoy Fleetwood Enterprises will lead the recreational

vehicle and manufactured housing industries (2, 7) in
providing quality products, with a passion for customer-
driven innovation (1). We will emphasize training,
embrace diversity and provide growth opportunities for
our associates and our dealers (9). We will lead our
industries in the application of appropriate technologies
(4). We will operate at the highest levels of ethics and
compliance with a focus on exemplary corporate
governance (6). We will deliver value to our
shareholders, positive operating results and industry-
leading earnings (5).
2-72
Example Mission Statements

 We aspire to make PepsiCo the world’s (3)

premier consumer products company, focused
on convenient foods and beverages (2). We
seek to produce healthy financial rewards for
investors (5) as we provide opportunities for
growth and enrichment to our employees (9),
our business partners and the communities (8)
in which we operate. And in everything we do,
we strive to act with honesty, openness, fairness
and integrity (6).

2-73
Example Mission Statements

 Dell’s mission is to be the most successful

computer company (2) in the world (3) at
delivering the best customer experience in
markets we serve (1). In doing so, Dell will meet
customer expectations of highest quality; leading
technology (4); competitive pricing; individual and
company accountability (6); best-in-class service
and support (7); flexible customization capability
(7); superior corporate citizenship (8); financial
stability (5).

2-74
Example Mission Statements

 Procter & Gamble will provide branded products

and services of superior quality and value (7)
that improve the lives of the world’s (3)
consumers. As a result, consumers (1) will
reward us with industry leadership in sales, profit
(5), and value creation, allowing our people (9),
our shareholders, and the communities (8) in
which we live and work to prosper.

2-75