Strategic management is the process of Substitutes are products or services from other
planning, implementing, and evaluating industries that can replace yours. High threat if
decisions that enable an organization to achieve substitutes are cheaper or better (e.g., Zoom
its long-term goals. replacing business travel).
To set direction for the organization. To align 5️⃣ Rivalry Among Existing Competitors
resources (people, money, time) with objectives.
High rivalry reduces profitability. Factors: Number
To gain a competitive advantage in the
of competitors, rate of industry growth, level of
market. To adapt to change in the business
product differentiation
environment.
6. Example — Milk Tea Industry in the
This process helps organizations achieve their
Philippines
desired results, leading to corporate profitability
and growth. It looks at both the internal strengths Opportunities: Youth-driven demand, social
and weaknesses of a company and the external media influence, low entry cost. Threats:
opportunities and threats in the market. Oversaturation, price competition, changing
tastes.
The Industry-Based Model is one of the
external approaches. Five Forces Analysis:
It was popularized by Michael Porter in the o New Entrants: High (low barriers, easy to
1980s through his Five Forces Framework, start).
which became the foundation for industry
analysis. o Supplier Power: Moderate (tea and tapioca
suppliers available but few premium
The model assumes: sources).
External industry conditions are predictable o Buyer Power: High (many alternative
enough to guide decision-making. brands).
PESTEL (Political, Economic, Social, o Substitutes: High (coffee shops, fruit
Technological, Environmental, Legal) for broader
shakes).
trends.
o Rivalry: Very high (hundreds of shops in
1️⃣ Threat of New Entrants
urban areas).
Measures how easy it is for new competitors to
Resource-Based Model: In contrast, this model
join the market.
emphasizes a company's internal strengths and
High threat if: Low start-up cost, few regulations, unique resources. It asks: "What do we have that
easy access to distribution. Low threat if: High no one else does, or what do we do better than
capital requirement, strong brand loyalty, anyone else?"
government protection.
Types of Resources
2️⃣ Bargaining Power of Suppliers
1. Tangible Resources – Physical and financial
Suppliers have power when there are few of them assets
and they control essential inputs. Strong supplier
o Example: Factories, machinery, vehicles,
power can raise costs and squeeze profits.
cash reserves, land
3️⃣ Bargaining Power of Buyers
2. Intangible Resources – Non-physical, often
Buyers have power if they can easily switch to more valuable in the long run
competitors, buy in large volumes, or have many
o Example: Brand reputation, trademarks,
alternatives. Strong buyer power pushes prices
company culture, patents, customer
down.
loyalty
4️⃣ Threat of Substitutes
3. Human Resources – Skills, expertise, and
knowledge of employees
o Example: Experienced engineers, Forecasting and planning strategies involve
innovative marketing team proactively anticipating future trends and
developing plans based on those predictions.
The VRIO Framework While adaptation is reactive, forecasting and
A tool to check if a resource or capability gives planning are proactive. Companies try to predict
sustainable competitive advantage: what will happen (forecasting) and then create
detailed blueprints (planning) to prepare for those
V – Valuable: Does it create value or future scenarios or to shape them.
lower costs?
Why R&D Matters
R – Rare: Is it uncommon in the industry?
Identifies emerging customer needs and
I – Inimitable: Is it hard or costly for wants. Creates innovative products that stand
competitors to copy? out. Helps adapt to market changes before
competitors do
O – Organized: Is the company
structured to use it effectively? Without R&D → Products become obsolete
Strategic Management Challenges With R&D → Company stays relevant and
competitive
Earning Above-Average Returns: This simply
means making more profit than your competitors, Smartphone companies launch new features
or more than the average for your industry. It's a yearly because customers expect innovation.
constant battle to optimize costs, increase sales,
and deliver value that customers are willing to Research: Study customer behavior, market
pay for. trends, and competitor products. Development:
Turn ideas into products that solve real problems.
1. Achieving Competitive Advantages: This Testing & Feedback: Improve before launching
refers to having something unique that makes to the public
your business better than the competition.
Why are these so challenging? Profit is the lifeblood of any company
The Ever-Changing Global Market: This Satisfied customers → Repeat purchases →
means that a strategy that worked yesterday Steady revenue
might not work tomorrow. Companies have to Loyal customers → Free word-of-mouth marketing
be incredibly agile and ready to adapt.
Unhappy customers → Loss of sales & market
Intense Competition: This global share
competition pushes everyone to be more
efficient, more innovative, and more In the long run, profitability isn’t just about
customer-focused. making sales — it’s about building trust,
satisfying customers, and leading the market
The Need for Constant Innovation They through innovation.
need to continuously innovate – coming up
with new products, new services, or even new Strategic Vision is a clear mental picture of
ways of doing business. where the company wants to go in the future. It
uses the firm’s unique resources (what it has)
This means strategy isn't just one and core competencies (what it does best) to
department's job. It's not just about achieve long-term goals in a competitive
marketing, or just about finance, or just about environment.
operations. Instead, it ties together every
single part of the organization. It's where Strategic Intent means a deep, shared
the company wants to go, what it wants to commitment across all levels of the organization
achieve, and what it wants to become. toward a specific performance target. It’s not
just about having a vision; it’s about pursuing it
Strategic adaptation is about a company's relentlessly. "how" – how will we get there?
ability to adjust its plans and actions in response
to changes in the external environment.
Without intent, vision stays as words; without
vision, intent becomes unfocused effort.
Strategic Vision describes where the
company wants to go in the future.
Strategic Intent captures the commitment of
the organization to achieve that vision, often over
the long term.
Strategic Mission takes both and translates
them into clear, actionable directions.
It provides a general description of what
the company does, who it serves, and how
it does it.
It guides the firm in product/service
development, customer targeting, and
operational focus.
It must be rooted in the company’s
core competencies—those unique
strengths that give it an advantage in the
market.
