MODULE IN CBME 2 (Strategic Management)

Credits: 3 units

Pre-Requisite: None

I. Lesson Title: Strategic Management

II. Learning Outcomes:

1. Explain the meaning of Strategic Management

2. Understand the Strategic Management Process

III. Lecture

STRATEGIC - Refers to the identification of long-term or overall aims and interests and the
means of achieving them (Oxford Dictionary)

STRATEGIC MANAGEMENT

Definition:
• Strategic Management is defined as the art and science of formulating, implementing and
evaluating cross-functional decisions that enable an organization to achieve its goals and
objectives. (Fed R. David (n.d.).

• While strategy refers to a broad palette of actions that are typically used as a means of competing
effectively versus a hostile environment, strategic management pertains to a process that a firm’s
management can undertake to formulate and eventually implement such strategy (Ilano, 2017).

• Strategic Management is all about identification and description of the strategies that managers can
carry so as to achieve better performance and a competitive advantage for their organization. An
organization is said to have competitive advantage if its profitability is higher than the average
profitability for all companies in its industry.

Strategic management is nothing but planning for both predictable as well as unfeasible contingencies.
It is applicable to both small as well as large organizations as even the smallest organization face
competition and, by formulating and implementing appropriate strategies, they can attain sustainable
competitive advantage.

It is a way in which strategists set the objectives and proceed about attaining them. It deals with
making and implementing decisions about future direction of an organization. It helps us to identify
the direction in which an organization is moving.

Strategic management is a continuous process that evaluates and controls the business and the
industries in which an organization is involved; evaluates its competitors and sets goals and strategies
to meet all existing and potential competitors; and then reevaluates strategies on a regular basis to
determine how it has been implemented and whether it was successful or does it needs replacement.
The standard approach to strategic management involves four steps.

Strategic Management Process

1. Environmental Scanning
a. External Analysis
b. Internal Analysis
2. Strategy Formulation, Evaluation and Selection
3. Strategy Implementation
4. Strategy Review, Evaluation and Control

Strategy Formulation, Strategy Review,

Environmental Strategy
Evaluation and
Evaluation and Implementation
Scanning Selection Control

Figure 5. Strategic Management Process (Flores, 2020)

Expanded further, the strategic management process can look like this:

Figure 6. Detailed Strategic Management Process

(Wheelen & Hunger, 2006)
Process of Strategic Management (Ilano, 2017)

1. Environmental Scanning- Environmental scanning refers to a process of collecting, scrutinizing

and providing information for strategic purposes. It helps in analyzing the internal and external
factors influencing an organization. After executing the environmental analysis process,
management should evaluate it on a continuous basis and strive to improve it.

a. External Analysis – Management needs to assess the environment in which it operates. This
includes the environment at large, such as the economic, demographic, and political situation,
as well as the more competitive environment which includes competitors and potential
substitutes. This is done in order to discover possible opportunities and potential threats ahead
of time.

b. Internal Analysis – Management needs to assess the internal environment of the firm: What are
its competitive advantages or strengths? What are its limitations or weaknesses? Knowing
these will help management understand what it can and cannot do to formulate strategies that
will build competitive advantage

2. Strategy Formulation- Strategy formulation is the process of deciding best course of action for
accomplishing organizational objectives and hence achieving organizational purpose. After
conducting environment scanning, managers formulate corporate, business and functional
strategies.

3. Strategy Implementation- Strategy implementation implies making the strategy work as intended
or putting the organization’s chosen strategy into action. Strategy implementation includes
designing the organization’s structure, distributing resources, developing decision making process,
and managing human resources.

4. Strategy Evaluation- Strategy evaluation is the final step of strategy management process. The
key strategy evaluation activities are: appraising internal and external factors that are the root of
present strategies, measuring performance, and taking remedial / corrective actions. Evaluation
makes sure that the organizational strategy as well as its implementation meets the organizational
objectives.

This four-step process is typical a sequential one. Even The premise of starting out with external
analysis rather than internal analysis has a purpose: It allows the organization to begin strategic
management process with a potentially collaborative exercise—management looking at the outside
world as a team—and therefore boosting teamwork before proceeding to the potentially more divisive
internal analysis, where finger pointing can happen as management struggles to identify sources of
internal weaknesses (Ilano, 2017).

The end result of the strategic management process is ideally the strategic plan, a document which lays
out the strategies that can provide the firm with competitive advantages for years to come.

References:
Davis, B. (2019). 5 Principles of Great Management. The University of Arizona Global Campus.
Retrieved from https://www.uagc.edu/blog/5-principles-of-great-management
Flores, A. (2020). Module in CBME 2 (Strategic Management). Dalubhasaan ng Lungsod ng San
Pablo.
Ilano, A.B., Business Policy and Strategy. First Edition. Manila, Philippines: Rex Bookstore, 2017
Managementstudyguide.com/strategic-management-articles,htm (n.d.).
Retrieved from http://www.managementstudyguide.com.
 MODULE IN CBME 2 (Strategic Management)

Credits: 3 units

Pre-Requisite: None

I. Lesson Title: Key Terms in Strategic Management Part 1

II. Learning Outcomes:

At the end of this lesson, the students will be able to explain:

The meaning of the different key terms used in Strategic Management:

a. Management
1. Definition
2. Functions versus Processes
b. Strategy
1. Definition
2. Hierarchical Levels of Strategy

III. Lecture

Key Terms in Strategic Management

1. Management

Management is the process of getting things done, effectively and efficiently, through and with people.
The functions of Management are: planning, organizing, leading, staffing and controlling.

Planning Organizing Leading Staffing Controlling

Figure 1 Functions of Management

The management process involves five functions (Davis, 2019)

1. Planning: When you think of planning in a management role, think about it as the process of
choosing appropriate goals and actions to pursue and then determining what strategies to use, what
actions to take, and deciding what resources are needed to achieve the goals.

2. Organizing: This process of establishing worker relationships allows workers to work together to
achieve their organizational goals.

3. Leading: This function involves articulating a vision, energizing employees, inspiring and
motivating people using vision, influence, persuasion, and effective communication skills.

4. Staffing: Recruiting and selecting employees for positions within the company (within teams and
departments).

5. Controlling: Evaluate how well you are achieving your goals, improving performance, taking
actions. Put processes in place to help you establish standards, so you can measure, compare, and
make decisions.
 Planning Organizing Leading and Controlling
Staffing

•Strategy •Strategy •Strategy •Strategy

Formulation Implementation Implemetation Evaluation

Figure 2 Management Functions and Process

2. Strategy

Defined as a firm’s theory on how it can gain competitive advantages. (Barney & Heslerly,
2012).

It comes from the Greek word “Strategos” meaning the “the art of the general”. It was
originally used in the military to describe the grand design behind a war or battle (how to
invade territories, how to win a war). Strategy, then, is choosing and implementing the best
possible alternative to attain the organization’s long-term objectives and gain competitive
advantage. (Go, 1992).

The Benefits of Business Strategy (https://www.vlinkd.com)

1. Gives direction –

One of the biggest benefits of a business plan is the direction it can give your organization. Setting out
a well-planned business strategy will ensure your entire organization is working towards the same
goals and instills a sense of shared responsibility amongst employees.

2. Creates a measure for success –

Business strategies allow you to measure your organization’s performance and growth against your
desired goals. Are you achieving what you had hoped to achieve within the stipulated timeframe? If
not, why? Following a business strategy will allow you to measure success and better identify areas
that require improvement in future.

3. Increases adaptability –

In our current innovation-focused society, businesses need to be responsive to change. An effective

business strategy will allow your organization to predict and meet the changing demands of the current
market. By analyzing and reviewing customer’s expectations and needs, businesses can better identify
new market trends and adapt their strategy as required.

4. Drives decisions –

Strategy is what drives decisions in business. By helping organizations identify their strengths and
weaknesses, an effective strategy will help you decide where your efforts and resources are best spent.
These decisions are crucial in ensuring your business has a profitable and sustainable future.
Hierarchical Levels of Strategy

Figure 3. Hierarchical Level of Strategy (Ilano, 2017)

1. Corporate Level

Corporate Level is consists of a Chief Executive Officer (CEO) along with the so-called C-level
positions: Chief Operating Officer, Chief Finance Officer, and so on. They are responsible for the
corporate level strategies (Ilano, 2017)

Note: The CEO is the top decision maker of any firm, whether small or large. His or her
important role is to “THINK”, to have a clear vision and direction for the organization. CEO is
expected to be a generalist who understands all facets of the different businesses and how to
communicate with the heads of each or different businesses and synthesize feedbacks into a unified
whole. CEO reports to a Board of Directors who assess his or her performance.

2. Business Level

The President of a business unit serves as the head and is responsible for the business level
strategies of his or her unit (battle plans, tactics used to fight and beat the competition in the
industry that your company currently participates in). (Ilano, 2017)

The President reports to the CEO.

3. Functional Level

Under the President serve the different Vice Presidents (VPs) who specialize in their own
respective fields of expertise. They are responsible for the implementation of the operational and
functional strategies (strategies pertaining to: manufacturing and operations; marketing, promotion
 and distribution; research and development and technology; human resource and financial). (Ilano,
2017)

4. Operational Level

This level is consists of functional specialists at supervisory levels below the VPs. Strategy is
limited in scope. (Ilano, 2017)

References:
Davis, B. (2019). 5 Principles of Great Management. The University of Arizona Global Campus.
Retrieved from https://www.uagc.edu/blog/5-principles-of-great-management
Flores, A. (2020). Module in CBME 2 (Strategic Management). Dalubhasaan ng Lungsod ng San
Pablo.
Ilano, A.B., Business Policy and Strategy. First Edition. Manila, Philippines: Rex Bookstore, 2017
Managementstudyguide.com/strategic-management-articles,htm (n.d.).
Retrieved from http://www.managementstudyguide.com.
 MODULE IN CBME 2 (Strategic Management)

Credits: 3 units

Pre-Requisite: None

I. Lesson Title: Key Terms in Strategic Management Part 2

II. Learning Outcomes:

At the end of this lesson, the students will be able to explain:

The meaning of the different key terms used in Strategic Management:

c. Strategy
1. Definition
2. Porter’s Criteria for Effective Strategies
d. Competitive Advantage
e. Sustainable Competitive Advantage
f. Strategic Planning

III. Lecture

Porter’s Criteria for Effective Strategies

Michael Porter, recognized as an authority in strategy, noted that strategy should lead to
sustainable competitive advantages. He explained what an effective strategy should and should not
be (Porter, 1966).

1. The strategy should be about operational effectiveness.

Operational effectiveness is all about outperforming competitors by being able to utilize
resources better. But it is not yet strategy.

2. The strategy should be about unique activities.

In a competitive environment, finding a way to do things differently from your competitors, in
a way that allows you gain distinctive advantages.

3. The strategic positions require trade-off.

To get to a place of competitive excellence, you have to learn to sacrifice certain attributes to
be better than others.

4. The strategy should fit the strategist in order to be sustainable.

Firm needs to identify strategies that are a good fit with their culture, organization, and
resources.
a. Culture - strategy should match the organization’s culture including its people.
b. Organization – should also think and consider whether the strategy will be reached by
their capability.
c. Resources – are enough to sustain and continue the strategy they want to implement.

5. The strategy needs to be constantly revisited.

 The environment is ever dynamic. This means that a strategy that once worked may
eventually lose relevance under a changed environment. Therefore, there will be a need to
constantly check one’s strategy to make sure that it is still the best way to achieve what one
wants to achieve.

3. Competitive Advantage

It refers to any edge that a firm has over its competition. It is an edge that ideally will be felt by
consumers, and it answers “Why would I buy from this firm rather than from other firms?”
(Ehmke, 2008).

Examples:
➢ When a firm is consistently outperforming other companies.
➢ When the firm’s profitability is higher than the profitability of all companies in its industry.
➢ When a firm provides the same value as its competitors but at a lower price or charge higher
price by providing greater value through differentiation.

The explicit mention of the term “competitive advantage,” means that a company may not survive
by continuously marketing the same way as in the past. Thus, “sustainable competitive advantage”
should be aimed.

4. Sustainable Competitive Advantage

Company assets, attributes, or abilities that are difficult to duplicate, imitate or exceed, and provide
a superior or favorable long-term position over competitors (Ken Faulken, 2019).

Types and Examples of Sustainable Competitive Advantages

1. Low Cost Provider/ Low pricing
Economies of scale and efficient operations can help a company keep competition out by
being the low cost provider.

2. Market or Pricing Power

A company that has the ability to increase prices without losing market share is said to have
pricing power.

3. Powerful Brands
It takes a large investment in time and money to build a brand. It takes very little to destroy
it. A good brand is invaluable because it causes customers to prefer the brand over
competitors. Being the market leader and having a great corporate reputation can be part of
a powerful brand and a competitive advantage (i.e. Coca-Cola (KO).

4. Strategic assets
Patents, trademarks, copy rights, domain names, and long term contracts would be
examples of strategic assets that provide sustainable competitive advantages. Companies
with excellent research and development might have valuable strategic assets
(i.e. International Business Machines (IBM).
 5. Barriers to Entry
A cost advantage of an existing company over a new company is the most common barrier
to entry. High investment costs (i.e. AT&T (T)) and government regulations are
common impediments to companies trying to enter new markets. High barriers to entry
sometimes create monopolies or near monopolies (i.e. utility companies).

6. Adapting Product Line

A product that never changes is ripe for competition. A product line that can evolve allows
for improved or complementary follow up products that keeps customers coming back for
the “new” and improved version (i.e. Apple iPhone) and possibly some accessories to go
with it.

7. Product Differentiation
A unique product or service builds customer loyalty and is less likely to lose market share
to a competitor than an advantage based on cost. The quality, number of models, flexibility
in ordering (i.e. custom orders), and customer service are all aspects that can positively
differentiate a product or service.

8. Strong Balance Sheet / Cash

Companies with low debt and/or lots of cash have the flexibility to make opportune
investments and never have a problem with access to working capital, liquidity, or solvency
(i.e Nike (NKE). The balance sheet is the foundation of the company.

9. Outstanding Management / People

There is always the intangible of outstanding management. This is hard to quantify, but
there are winners and losers. Winners seem to make the right decisions at the right time.
Winners somehow motivate and get the most out of their employees, particularly when
facing challenges. Management that has been successful for a number of years is a
competitive advantage.

5. STRATEGIC PLANNING

Strategic planning is the development of an organization’s purpose and goals, beyond the
immediate future, and actions to achieve those goals.
The 5 Steps of Strategic Planning
Step 1: Choose a framework.
Your first decision is to pick a strategic planning framework. Working from a specific format will
make it much easier to determine which elements need to be included in your strategic plan.
The Balanced Scorecard, Ansoff Matrix, and Hoshin Planning model are a few examples of
strategic planning frameworks, and each has its strengths. The Balanced Scorecard works for any
organization or industry, whereas the Ansoff matrix is specifically focused on aggressive sales
growth, and the Hoshin model is project-centric. The framework you choose should suit the
structure of your organization.

Step 2: Define your organization’s mission, vision, and values.

This is your “big picture” step, so put on your visionary thinking cap. Now is the time to nail down
the purpose and direction of your organization. It involves three important elements:

• Your mission: It defines why you exist as an organization. Every aspect of your strategic
plan should ultimately tie to your overarching mission.
• Your vision: It tells where you want to be in the future. Your vision should be feasible,
based on ambitious but achievable targets.
• Your values: It states what you stand for as an organization.

No strategy is complete without a mission statement—it is mandatory. Vision and values are also
important, but not integral to a strategic plan.

Step 3: Get into the details of your strategy.

Once you’ve defined your mission, zero in on the details and address the actual components of
your strategic plan. (For the purposes of this article, we’ll use Balanced Scorecard terminology, but
the general concepts are universal.)

You’ll begin by defining your strategic plan’s high-level goals for both individual departments and
the corporation as a whole. Then, create measures (metrics) with targets so you can track and
evaluate progress toward these goals. Finally, develop initiatives, or projects, to drive your
measures and support your goals. Your goals, measures, and initiatives form the backbone of your
strategy. Getting this right is critical to the strategic planning process.
Step 4: Create a reporting process.

Most organizations pull together monthly, quarterly, and annual reports for different audiences
(divisions, executives, boards/councils). At this point in strategic planning, you’ll document the
reports needed and the process to get them created. Your reporting process should outline details
such as the reporting calendar, frequency, owners and stakeholders, and more. The strategic reports
you require should all tie to your strategy—don’t report on something just because “Pat asked for
it.”
Step 5: Communicate with your organization.

This isn’t as much of a final step as a best practice that spans the entire strategic planning process:
Open the lines of communication between your strategy team and the rest of your organization
throughout all four previous steps. Get feedbacks—even using something as simple as a survey—
from department heads and internal stakeholders on everything from the mission statement to the
most important metrics to track, measure, and report.
Senior leadership may think they have these answers, but without asking the people on the ground
doing the day-to-day work, nothing’s certain and your strategy could miss the mark. Department
leads and managers should be given a say in how the strategic plan is defined, and they will be on
board and motivated to improve performance.
Once your strategy is complete, don’t let it sit on a shelf. Put it in play with this guide on how
to execute your strategic plan.

Remember to keep communication flowing even after you’ve wrapped up your strategic
planning—the last crucial piece is to share your finalized strategy. Organizations do this in
different ways. For example, an international financial institution effectively communicated its new
plan to all staff using videos, progress reports, brochures, posters, and its internal corporate social
network. A smaller organization held meetings with each department to review the new strategic
plan and followed up by emailing each department its goals and how each tied to the strategy.
There’s no single right way to communicate, but integrated efforts will ensure the strategic plan is
recognized as part of the organization’s core culture.

Don’t be intimidated by strategic planning. Embrace the process.

References:
Davis, B. (2019). 5 Principles of Great Management. The University of Arizona Global Campus.
Retrieved from https://www.uagc.edu/blog/5-principles-of-great-management
Flores, A. (2020). Module in CBME 2 (Strategic Management). Dalubhasaan ng Lungsod ng San
Pablo.
Ilano, A.B., Business Policy and Strategy. First Edition. Manila, Philippines: Rex Bookstore, 2017
Managementstudyguide.com/strategic-management-articles,htm (n.d.).
Retrieved from http://www.managementstudyguide.com.