The Levels of Strategy
1. Business-Level Strategy
This strategy focuses on how a company competes within a specific
industry or market. It's about understanding how to gain a competitive edge and
sustain it. It answers questions like:
How do we compete?
Example: A coffee shop might decide to compete by offering unique blends
and a cozy atmosphere that attracts customers looking for a special coffee
experience.
How do we gain and sustain competitive advantage?
Example: The coffee shop could gain an advantage by sourcing rare coffee
beans and using them to create exclusive drinks, which helps them stand out from
other coffee shops.
2. Functional Level Strategy
This strategy supports the business-level strategy by focusing on specific
functions or departments within the company. It aims to improve operational
effectiveness.
Example: In the coffee shop, the functional-level strategy might involve the
training of baristas to ensure they can consistently make high-quality drinks and
provide excellent customer service (Human Resource Management). This supports
the business strategy of offering a unique coffee experience.
3. Corporate Level Strategy
Is about making big decisions that shape the direction of the entire
company. It deals with where the company operates and how it allocates resources
across different areas.
Simple Definition: Corporate-level strategy is the plan for deciding which
industries or markets a company should be in and how to manage its different
parts to achieve its long-term goals.
Example: Imagine a company like Apple. At the corporate level, Apple
decides to focus on technology and consumer electronics. This means they might
invest in developing new gadgets like iPhones and iPads and sell off unrelated
businesses, like their old server farms. They allocate resources to different
products and markets based on this strategic focus to ensure long-term growth and
success.
Mintzberg’S 5 P’S of Strategy
Henry Mintzberg proposed that strategy can be understood in several ways,
each suited to different situations. Here are the 5 P’s:
Plan
Definition: This is the most traditional view of strategy—carefully planned out
in advance.
Example: A company might plan to enter a new market by conducting
research, creating a detailed entry strategy, and setting specific goals before
launching.
Ploy
Definition: A tactic used to outmaneuver competitors or disrupt their plans.
Example: A smartphone manufacturer might release a new model just before
a competitor’s anticipated launch to steal attention and market share.
Pattern
Definition: Strategy that emerges from consistent behavior over time, whether
planned or not.
Example: A restaurant might develop a reputation for excellent customer
service simply because its staff consistently provide it, even if it wasn’t an explicitly
planned strategy.
Position
Definition: The company’s stance in the marketplace relative to competitors
and market demands.
Example: A luxury car brand positions itself as a premium choice, focusing on
high-quality materials and exclusive features to differentiate from standard car
brands.
Perspective
Definition: How a company views and interprets its environment and market,
which influences its strategy.
Example: A tech company might see the market as rapidly evolving and
therefore focus on innovation and adaptability to stay ahead of competitors.
RUDIMENTS OF STRATEGIC MANAGEMENT
Strategy According to Authors
1. Alfred Chandler (1962)
Definition: Strategic management involves determining an organization’s long-
term goals, adopting actions to achieve these goals, and allocating resources
accordingly.
Elements:
Ascertaining Goals: Identifying what the organization aims to achieve in
the long term.
Adoption of Courses of Action: Deciding on the strategies and actions
needed to achieve these goals.
Allocation of Resources: Assigning the necessary resources (e.g.,
finances, personnel) to implement the strategies.
Example: A tech company might set a goal to become a leader in artificial
intelligence. It would then create a plan to invest in R&D and hire experts in the
field, allocating significant resources to these areas.
2. Glueck and Jauch (1984)
Definition: Strategic management is a stream of decisions and actions that
develop effective strategies to achieve corporate objectives.
Concept: This definition emphasizes the continuous nature of strategic
management, involving ongoing decision-making and action to develop and
refine strategies.
Example: A retail chain might regularly assess market trends and consumer
behavior, adapting its strategy by opening new stores in high-growth areas and
closing underperforming ones.
3. Johson and Scholes (2002)
Definition: Strategic management includes understanding the organization’s
strategic position, making future-oriented strategic choices, and implementing
these strategies.
Elements:
Understanding Strategic Position: Analyzing where the organization
currently stands in the market.
Making Strategic Choices: Deciding on the future direction based on
the analysis.
Turning Strategy into Action: Implementing the chosen strategies
effectively.
Example: An automotive company might assess its market position (e.g.,
declining sales in traditional cars) and decide to focus on electric vehicles, then
execute this strategy by developing new electric models and expanding charging
infrastructure.
4. Dess, Lumpkin and Taylor (2005)
Definition: Strategic management involves analysis, decisions, and actions to
create and sustain competitive advantages.
Concept: This definition highlights the importance of maintaining a competitive
edge through strategic actions.
Example: A software company may analyze competitors’ strengths and
weaknesses, decide to innovate in user interface design, and take action by
launching a groundbreaking product that distinguishes it from rivals.
Dimensions of Strategic Management
The dimensions of strategic management cover various aspects that
contribute to the effectiveness of managing and executing strategies within an
organization. Here's a detailed breakdown of each dimension with examples:
1. Leadership
Definition: Leadership is crucial in strategic management as it involves
setting the vision, guiding the organization, and inspiring employees.
Characteristics:
a. Vision: Leaders create a clear and compelling vision for the future. Example:
Elon Musk's vision for Tesla to accelerate the world's transition to sustainable
energy.
b. Proactivity: Leaders anticipate future challenges and prepare the organization
accordingly. Example: Satya Nadella’s proactive move at Microsoft to pivot
towards cloud computing.
c. Visibility and Engagement: Leaders are actively involved and ensure that
employees understand and align with the vision. Example: Tim Cook regularly
communicates Apple’s strategic goals and values to employees.
d. Leading by Example: Leaders embody the values and policies they promote.
Example: Patagonia’s founder Yvon Chouinard exemplifies environmental
stewardship.
e. Trust and Empowerment: Leaders delegate responsibilities and encourage
employee growth. Example: Google’s management style that fosters innovation
by allowing employees to pursue projects of their choice.
f. Teamwork: Leaders work alongside employees to foster a collaborative
environment. Example: Zappos’ approach of involving leadership in day-to-day
customer service tasks to boost team morale.
2. Culture and Values
Definition: This dimension involves the alignment of organizational culture
and values with the strategic goals. Example: A Filipino food franchise business
promotes a culture of customer service excellence, making sure that staff treat
customers like family. Employees are trained to address customers’ needs
proactively, reflecting the company's core value of "hospitality" in every interaction.
4. Strategic Thinking and Planning
Definition: This dimension focuses on the process of developing effective
strategies through thoughtful planning and analysis. Example: A local supermarket
chain notices that more Filipinos are turning to online shopping for groceries. The
management team strategizes to launch an online platform and offers delivery
services in order to adapt to this change, planning not just for short-term gains but for
the future shift in consumer behavior.
4. Alignment
Definition: Alignment refers to how well all elements of the organization are
directed towards the strategic goals.
Characteristics:
a. Consistency: Ensuring all aspects, such as policies and procedures, align with
the strategy. Example: A university in the Philippines launches a new program
to improve its research output. The administration aligns all departments by
allocating funds, providing faculty training, and encouraging research
collaboration, ensuring that the university's research goals are understood and
supported by all.
b. Avoiding Chaos: Preventing misalignment that leads to wasted resources.
Example: Streamlining processes and goals to avoid conflicts and inefficiencies,
as seen in Toyota’s Lean Manufacturing system.
5. Performance Measurement
Definition: Measuring performance involves assessing strategic results that
align with the organization's goals through metrics that reflect strategic goals, not just
operational tasks. Example: A government housing agency sets a strategic goal of
building affordable housing in different provinces. They track performance not just
based on the number of houses built but also on factors like project completion time,
cost efficiency, and the satisfaction levels of the new homeowners.
6. Performance Management
Definition: This dimension focuses on using performance metrics effectively
for decision-making
Utilization of Data: Applying performance data to improve strategies and
operations. Example: A local hospital collects patient feedback on the quality of care
and tracks wait times for doctor appointments. Based on the data, they implement
improvements, such as increasing the number of available doctors during peak
hours, improving service delivery, and reducing patient wait times.
7. Process Improvement
Definition: Identifying and improving key processes to support strategic
goals.
Characteristic:
Strategic Focus: Aligning process improvements with strategic objectives.
Example: A local milk tea shop in the Philippines notices that preparing drinks takes
too long during peak hours, causing customer dissatisfaction. The owner decides to
streamline the preparation process by pre-portioning ingredients, which speeds up
service and improves customer satisfaction.
8. Sustainability of Strategic Management
Definition: Ensuring the long-term viability of strategic management
practices.
Characteristics:
a. Focus on Vision: Maintaining focus on strategic vision and plans. Example: A
Filipino NGO focused on reducing plastic waste sustains its efforts by keeping
the public engaged through continuous awareness campaigns, regular clean-up
drives, and partnerships with schools and businesses to promote eco-friendly
practices. Their consistent focus on reducing plastic consumption ensures their
strategy remains effective over time.
b. Momentum: Keeping momentum in strategic initiatives through effective
communication and motivation. Example: Regular updates and recognition
systems to sustain efforts
The Need for Strategic Management and Its Benefits
1. Becoming Proactive Rather Than Reactive: Strategic management enables
organizations to anticipate changes and opportunities rather than waiting to react
to them. By being proactive, businesses can influence their future outcomes.
Example: A local Filipino restaurant, sensing the growing trend in food delivery
apps, decides to partner with platforms like GrabFood and Foodpanda before
their competitors do. By proactively joining these platforms, they capture a larger
market and ensure they stay relevant in the digital age.
2. Efficient Resource Allocation: Strategic management ensures that a company
uses its resources—money, people, and materials—efficiently, avoiding waste
and ensuring optimal productivity.
Example: A sari-sari store owner in a barangay decides to stock products based
on the buying habits of the local community. Instead of overstocking items that
don't sell well (like luxury items), they focus on fast-moving goods like rice,
sardines, and instant noodles, ensuring resources are spent wisely.
3. Preparation for Anticipated Changes: Strategic management helps firms
forecast potential changes in the business environment and develop plans to
address them.
Example: A local cooperative anticipates the upcoming typhoon season and
develops a strategy to stockpile essential goods, ensuring they can serve their
members even when supply chains are disrupted. By preparing early, they
prevent shortages and continue providing essential services during emergencies.
4. Better Response to Environmental Changes: Strategic management enables
organizations to quickly adapt to changes in their external environment, such as
competition, economic shifts, or customer preferences.
Example: A local Filipino business that sells organic vegetables notices an
increase in demand for healthier food options due to rising health
consciousness. To respond to this trend, they expand their product line to
include more organic and plant-based options, staying ahead of the competition
and growing their market share.
5. Clearer Objectives and Direction: Strategic management gives all employees
and stakeholders a clear understanding of the company’s goals and how their
actions contribute to these objectives.
Example: A public school in a provincial town develops a clear strategy for
improving student performance by focusing on teacher training and the use of
technology in classrooms. Teachers understand their roles, and students benefit
from improved teaching methods. With a clear plan, the entire school moves in
the same direction towards better academic results.
6. Minimizing Mistakes and Unpleasant Occurrences: Strategic management
includes risk assessment and scenario planning, which helps organizations avoid
mistakes and unforeseen problems.
Example: A Filipino construction firm planning to build houses in an earthquake-
prone area strategically incorporates stronger building materials and ensures
compliance with updated safety regulations. By foreseeing potential issues, they
minimize the risk of construction failures, avoiding costly mistakes that could
occur if these risks were ignored.
The Benefits of Strategic Management
Strategic management helps organizations navigate a dynamic environment,
seize opportunities, and counteract threats. It also provides a structured approach for
decision-making, contributing to long-term success.
1. It Reduces Uncertainty: Strategic management allows managers to anticipate
changes, assess risks, and develop plans to address them. This reduces
uncertainty and helps organizations be better prepared for challenges.
Example: A rice farming cooperative in the Philippines anticipates changes in
weather patterns due to climate change. Through strategic planning, they invest
in more resilient rice varieties and irrigation systems to mitigate the impact of
droughts and floods, reducing uncertainty about future harvests.
2. It Facilitates Control: Planning ensures that all employees and departments
work towards the same organizational goals. This unified direction makes it
easier for managers to maintain control over operations and ensure that efforts
are aligned with the company’s vision.
Example: A retail chain in the Philippines implements a strategic plan to expand
to more provinces. Each branch follows the same guidelines for customer
service, inventory management, and marketing, ensuring consistency in
operations and control over quality as the business grows.
3. It Facilitates Measurement: Strategic management provides clear objectives
and performance standards, which serve as benchmarks for measuring success.
This allows companies to assess whether they are meeting their goals or need to
adjust their strategies.
Example: A local fast-food franchise in the Philippines sets a goal of increasing
customer satisfaction scores by 15% within the year. By measuring customer
feedback monthly, they can track their progress and make necessary
improvements, ensuring they stay on track toward their objective.
4. It Results in Financial Benefits: Research shows that companies with strategic
planning tend to be more profitable and successful. Through better decision-
making and resource allocation, strategic management leads to improved sales,
profitability, and productivity.
Example: A small garment manufacturing business in the Philippines adopts a
strategic plan focused on improving production efficiency and targeting new
export markets. As a result, their sales increase, and they gain higher profit
margins by reducing production costs and expanding their customer base
internationally.
5. It Gives Non-Financial Benefits: Aside from financial gains, strategic
management also offers other advantages that contribute to long-term
sustainability and organizational effectiveness.
a) Better Awareness of Threats: Example: A local tourism company in
Palawan is aware of environmental concerns and the risk of over-tourism.
By incorporating sustainable tourism practices into their strategy, they
mitigate potential backlash from environmental groups and ensure long-term
viability.
b) Better Understanding of Tactics Employed by Competitors: Example: A
startup tech company in Metro Manila monitors the marketing strategies of
their competitors through market research. This allows them to differentiate
their services and offer something unique, staying ahead of the competition.
c) Preparedness for Change: Example: A bakery in Cebu anticipates the rise
of healthier food trends, such as gluten-free and vegan products. They
adjust their product offerings accordingly, ensuring they remain competitive
as consumer preferences shift.
d) Enhanced Prevention of Problems: Example: A real estate developer in
the Philippines includes risk management in their strategic plan. By
identifying possible issues such as regulatory changes or delays in
construction, they put preventive measures in place, reducing the likelihood
of costly setbacks.
e) Increased Interaction Among All management Levels: Example: In a
family-owned manufacturing business, strategic management encourages
regular meetings between top management and middle managers. These
interactions foster better communication and ensure that everyone is
working towards the same strategic goals.
f) Increased Discipline and Order: Example: A Philippine-based BPO
company adopts a structured strategic plan that includes clear protocols for
handling customer complaints. This leads to more disciplined processes,
ensuring that complaints are resolved efficiently, maintaining client
satisfaction and service quality.
