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Strategic thinking
- Origin is war
Example of strategic thinking:
Steve Jobs, Elon Musk, Oprah Winfrey
- Origin of strategic thinking is war
The art of war
- By ancient military strategist Sun Tzu
- Example of strategic theory
- His brilliance lies in the recognition of the fluid nature of reality and any practitioner of strategy must constantly
adapt it
Key to Sun Tzu’s thinking:
- All plans are temporary
- Plan can become obsolete as soon as it’s crafted
- Decision to position one’s forces depends on two factors:
1. Objective conditions in physical environment
2. Subjective beliefs of competitors in that environment
- Most brilliant plans → spring into being in the dynamic of action & response
- Strategy requires rapid responses to changing conditions based on sound judgment & principle

Michael Porter
- Business is a fertile are to for the development of strategic thinking
- Because in order for your business to survive, you need to be creative and strategize to win over your
competitors
- “Strategy means choosing a different set of activities”
- Doing things differently
- Yes, I agree because if the strategy does not choose the different set of activities, they will choose the common
ways which is useless because others already know your move. That is why strategic thinking anticipates actions
and reactions because they don’t yet know your move.
Peter Ducker
 - Management thinking
- 2 types of thinking
Static thinking
- Think about objects
- Planning around objects
- Easy
- Variables are few and relatively unchanging
Strategic thinking
- Thinking about people
- Difficult
- Anticipating the actions and reactions while preparing

5 strategic thinking competencies

A systems perspective
- Ability to understand implications of strategic actions
Intent focused
- Focus on and leverage all the energies w/ total commitment
Thinking in times
- To hold past, present, and future to make better decision
Hypothesis driven
- Creative and critical thinking are incorporated into strategy making
Intelligent opportunism
- Respond to good opportunities

Strategic management = strategic thinking + strategic planning

Common to the strategic thinker:
- Visionary, envision future

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Strategic planning process(circle)
● Define strategy
● Determine mission
● Identify goals
● Understand internal factors
● Understand external factors
● Perform SWOT analysis

- A model is a template: you use it at the beginning of the planning process.

- The idea behind a model is to tease out the ideas - Tom Wright

Strategic planning models

Strategy map
- Design and communicate organization’s strategies
- Falls under the umbrella of BSC
- Map the specific steps
Balanced scorecard
 - Strives to connect big-picture elements w/ operational elements
- Framework, planning to gather monetary
- Your step is align to the company’s mission
- Pwedeng gamitin sa Non Quantitative goal
- Look at other aspect

SWOT analysis
- Strengths, weaknesses, opportunities, and threats
- Examine both internal and external forces
PEST mode/PEST analysis
- Political, economic, social/sociocultural, and technological
- Looks at elements of the external environment, including forces in its name
- Ex. telecommunication, net
Gap planning
- Distance between how a company is currently performing and its desired goal
- Analysis and evaluation of that difference

Blue ocean strategy

- Emphasizes new markets and uncontested space
- Small company and solo, then nagboom
- Gcash, resin business
- Value innovation
Porter’s five forces
- Looks at 5 competitive forces that are present in very industry
 - Determine strengths & weaknesses, competition in the industry, potential of new entrants into the industry,
power of suppliers, power of customers, and threat of substitute products
- Existing business look at different aspects
- Hotels vs rentals, coffee vs tea, flights vs train

VRIO framework
- Looks at the questions of value, rarity, imitability, and organization concerning the competitive potential of a
company

Other models:
Alignment model
- Align your mission statement w/ available resources
- Effective for business facing internal struggles
Basic model
- “Simple strategic planning model”
- Creating mission statement, goals, & strategies
Inspirational model
- Quick method of strategic planning that begins by coming up w/ a highly inspirational vision for the organization
and the goals to match
Issue-based or goal-based model
- More established businesses
- Incorporates SWOT or other types
- Determine goals, mission statement, action plans
- Identify most important current issues, suggest action plans
Organic model
- Does not follow a set plan
- Evolving and changing as conditions warrant
- Brainstorming, everyone shares vision
- What is happening now
Real-time model
- Strategy is based on what is happening
- Continuous process
- Fluid process
- Works best for companies that operate in a rapidly changing environment
Scenario model
- Plan A, plan B
- What is happening outside, to determine how they can impact
- Identify goals, issues by using scenarios that might arise
- More technique than a model

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Strategy marketing analysis and budgeting
Strategic marketing process
● Strategy
Competitive positioning
Brand strategy
Pricing & distribution channels
● Tools
Naming, messaging, identity, websites, literature, design & copy, vendors, recruiting, customer relationship
management, customer long term value, ROI
● Customer acquisition

Search engine optimization

- Create site, optimize your site para lumabas yung site mo kapag may nagsearch
Search engine maximization
- Nagbayad kay google, para priority yung site mo
Online advertising
- Ex. Yt video add
Social media
- Influencer promote product
- Post IG
Customer retention
- Alagaan ang customer like warranty
Business development
- Expansion, more service
Sales management
- Promotion

Allot 100m for e-commerce, click & collect digital platform

Ayala - respond urgent needs 2.4b, partnered w/ some laboratories, gcash,
To maintain customer:
- Services through online
- Reach out to customers, cashless transaction, online payment
- Brought services to their home
- Affordable insurance - unionbank
- Online factory outlet w/in 3-day sale
- Stimulus payments -
- telemedicine/teleconsultation, eHealth service
- Airasia & agoda team up,
combine/team up
Collaborative business-to-business marketing strategies in a pandemic crisis

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Marketing budget
Consider:
Marketing goals
- Ex. revenue of 1M
Total annual marketing budget
Categories to include
- Ex. what kind of marketing - digital, advertising tv, delivery
Assign budget

Competitive positioning
- How you’ll differentiate your offering and create value for you market
- Ex. biggs’ good food instead fast food
- Known for something
Market profile → size of company, stage of growth
Customer segments
→ group of prospects w/ similar wants & needs
Demographic
- Age, education, income, family size, race, gender, occupation, nationality
Behavioral
- Purchase, consumption, lifestyle, usage
Psychographic
- Lifestyle, personality traits, value, opinions, interests
Geographic
- Needs, preferences, interests, based on location

Marketing strategy
Website design
- Blog, responsive web design
Brand strategy
- Graphic design, logo design, packaging, sales collateral, booth
Digital marketing
- Content marketing, social media, email marketing, webinar production

● market segmentation
- Objective setting
- Identify customer segments
- Segmentation strategy
- Execute & monitor

Competitive analysis → SWOT of company

Method for delivering value → how you deliver value to your market at the highest level
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Financial analysis in production portfolio management
Product management
- On-going activity from the collection of ideas for new product to the maintenance of existing products or the
abandonment of products from the range

Two divisions of product management

● New product development
● Current mix

Financial aspects of the product life cycle

1. Pre-launch phase
- Incurring cost today to get the benefit later on: discounted cash flow
Risk and uncertainty
Risk - company has the experience to assign probabilities to future events
Uncertainty - does not have the experience to do so

Payoff matrix - like probability but this is on table

Game theory - try to project what the competitor doing - watch beautiful minds

Criterion of regret
Optimism maximax

2. Introductory phase
- Anticipate losses at the start
- Creating awareness cost → more on promotion, before lumabas sa market, grabe yung promotion
para pag launch may pera na yung tao at makabili
3. Growth phase
- Short term
- Cost volume profit analysis → ilan yung quantity or what will be the profit if you sell the certain
quantity
4. Maturity phase
- Cost volume profit analysis best short term analysis tool
- Reinvestment
- Market stretching → repackage, modify, ipack w/ other
- Decreasing demand of product/service
- Peak ang sale almost the same sa growth phase =
- May cost na sa operation/support - defect, malfunction, call if pwedeng may mag ayos
- Lolobo yung expenses sa maturity
5. Decline phase
- Real art to be able to know when to withdraw a product from the market
- Reluctant to phase out
- Consider to totally [hase out or continue
- Product review team
 - focust(market segment)

Tools and technique:

Activity-based costing - every activity may particular cost
Segmental contribution report - like margin report, report is need per segment. Revenue - variable cost
Return on capital
Payoff matrix
Return on asset
Economic value added - product nagcapitalize
Probability
Game theory
Contribution to resource ratio
After sales support - additional cost on repairs, may service pa na ipprovide ang company? Warranty
Free riders

Goal
Maximize the value of the portfolio
Achieving the right balance of mix projects and linking the portfolio to the business’ strategy

Pag may strong economy, company focuses on innovation

Economic downfall,

Product abandonment approaches(for products in the decline phase)

● Product review teams
- Identify weak products, evaluation, develop phasing out program
● Contribution to resources ratio
- To assist in product abandonment decisions
- Updates cost accounting system
- Relies on marketing performance data for its inputs

Methods of dropping product lines

- Sell off the line to a competitor or someone who wants to get into business
- Stop making it
- Put a large across-the board price increase

Consequences of dropping a product line

- Loss of contribution
- debtor s in that line turn to cash
- Purchase of raw material and direct labor is stopped and saves more cash
- Total operations becomes less complex and more savings

Packaging
- As a promotional tools

After sales service

 - Part of augmented product
- warranty

PRICING METHODS AND STRATEGIES

Prices must be reasonable
Pricing policies must seek to reconcile the conflicting needs
Pricing decision is a complex one

Internal lower limit

Upper limit
Elasticity of demand
- price and demand
- Elastic demand curve —> small change lower in price big change in demand
- Inelastic demand curve —> big change in price higher small change in demand ex luxury brands

Pricing methods
Cost-plus pricing
- profit margin 30%
- 200% more than cost skimming
- -80% market penetration
- Manufacturer you know the cost
Target pricing
- SP - %rate of return = target cost
- Finding cost add % of rate of return = target price
- Forecast on a particular period
- Does not look outside base mainly on cost not on market
Competitive based pricing
- look at competitors price
- Head on
- +%
- -%
- External factors is considered
- Highly competitive markets
- Does not allow to build on their products unique strength, adjust for their unique weaknesses
Customer(valu) based pricing
- look at competitor but also customer
- Based on value
- Contextual
- Product has several value
- Cost value - sun of all cost, exchange value- customer willing to pay; use value - function, esteem value -
offered beyond the use value, logo
- Strategy:
- High esteem, average esteem, low esteem
Profit = exchange value + cost value
Exchange value = use value + esteem value

Pricing strategies
Skimming (short term profit maximisation
- down curve
- New products w/ unique character
- Demand curve is relatively inelastic
- Price kept high - demand can be held w/in the limits of production
- Market is effectively segmented on an income/price basis
- Income is very high initially
- Used for uncertain future demand, quick investment recovery, hedge againsts seeting a bad price
Penetration (short term low price market prenetration$
- both new and existing product
- Keen competition and price sensitive demand
- Prices kept deliberately low in order to capture a good slice of the market
Product-line pricing
- part of penetration strategy
- Used separately need not apply only to new products
- Based on different product pull others
- Make brand familiar
Variable pricing
- penetration
- Prices may vary: seasons, regionability, raw material availability
- Year profit is seen as a whole, product is expected to return an average profit
Odd pricing
- customer based pricing
- Psychologically based method
- Cents difference of pricing yet big impact
Prestige pricing
- psychologically based
- Price is taken as an indicate of quality
- Price is very high
- High exchange value and image building promotion has given it a very high esteem value
Price cutting
- Elastic demand curve
- Most frequently encountered in the struggle against competition
- Steak a march on the competitor
- Negative approach
- Can result to degenerate into a price war, cut price
Harvesting
- wants to abandon the product
- Large across the board price increase instead of stopping production
- Maximize cash flow and profit in the short run

Financial implication of pricing strategies

- strategies are related to market share
 - Management accountant and product manger should monitor the market situations closely:
- What market share objective options they have
- Apply pricing strategy
- Financial implications

How to use CVP analysis and linear programming in pricing

Risk averse pricing strategies
● cost oriented risk averse pricing strategies
Delayed quotation pricing
- manufactures of custom made products adopt this method
- Final price is quoted only when the item hss reached the stage of finished product
- Lawyer
Elimination of low margin products and customers
- using pareto analysis or 80/20 rule
Adoption of escalator clauses
- prices increased automatically based on previously agreed formula
- Alleviate risks involved in cost increases
- Cable manufacturing
- Effective use depend on willingness of customers

● Selling related
Unbundling of services
- major product mya have been priced to include special peripheral equipment or replacement parts
- Sum of the prices may exceed the old single price
Reduce cash and quantity discounts
- discounts represent direct reductions in gross margins earned by sellers
Elimination of price shading
- where reductions from list price is made as a result of negotiations between buyer and salesmen
- Firms use a one price policy;
- Maintain gross margins, centralize control over pricing
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steps in setting a pricing policy
1. selecting the pricing objective
- survival → price at very affordable price
- max current profit → hindi masyadong profitable
- max market share → makuha yung 60%, offer at a high price w/ initial loss, then offer at lower cost
- product-quality leadership →
2. determining demand
- price sensitivity
- price elasticy
3. estimating costs
- variable cost → cost per piece
- fixed cost → pwedeng malaro, vital
- cost set the floow → target costing
4. analyzing competitors’ costs, prices, and offers
- charge more
- the same
- less than the competitor
- ex. less price kapag baguhan
5. selecting a pricing method
- markup pricing - nakuha 50 binenta 60
- target return pricing
- perceived-value pricing - how the customer perceived the product
- value pricing - know that the product is worth enough so high price
- going rate pricing - inooffer ni competitor
 - auction-type pricing - may product and set up a floor price and anyone can beat the price
6. selecting the final price
- impact of other marketing activities - may advertisement ba/
- company pricing policies(penalty charges) - ano yung policy ng company sa pricing
- gain and risk sharing pricing (savings by buyer) - ref may inverter, indirect benefit, high price kasi may
benefit
- impact of price o other parties(distribution & dealers) → may product ioofer sa agent, mall,store,or
networking. may share sa ooffer-an mo.

promotional pricing
- special event pricing
- cash rebates
- longer payment terms
- psychological discounting

differentiated pricing
- customer-segment pricing - different price for students
- product-form pricing
- image pricing
- channel pricing
- location pricing
- time pricing
initiating and responding to price changes
- initiating price cuts
- initiating price increases
challenges:
- accounting beyond numbers
- pricing is not tied up with cost,beyong cost/computation ang pricing
- pricing as an strategy

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Promotion: push strategy and human resource management
Promotion mix
Advertising
Promotion
Direct marketing
Personal selling

Objective:
Make sell

Push strategy
- Creates awareness
 - Ex. financial institutions → BDO nagbbranch out every city, reduce amount in opening account
- Supermarket → membership card, raffles
- Shopping → free shipping, vouchers, cashback
- Entertainment → free trial, netflix, student discount on spotify
- Airline → piso deals

Role of management accountant in push strategy

- Nagmamanage ng risk
- Decisions in budgeting
- If profitable ang certain strategy

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Pull strategy & integrated marketing communication
Mixture of different marketing strategies → integrated marketing communication
Pull strategy

- Shows that they have good product

Sample:
Apple company - provide high end product

Goal
Integrated marketing communication → company image ← customer
- Brings out the image of company

Role of management accountant

● Evaluate cost benefit rule - cost and benefit - benefit is higher than cost
● Check the combination of IMC to profit and budget

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Control measures
- Service-cost trade-off or trade-off → max customer service and min distribution cost
- Level of service → # of days to deliver an order
 - Distribution cost accounting?

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Performance valuation and strategic financial structures
Financial structure
- How assets is financed by debt and equity
- Mixture of debt and equity
- Sourcing of funds
- Funds to operate; equity or debt

Leverage
- Use of other’s people money for operation
Advantage
- Tax savings kasi interest expense is tax deductible
- Kapag walang capital or nangangailanga
- Ownership equity - maintained
High leverage
- Aggressive
- Source of fund 10% equity and 40% debt
Low leverage
- Small debt

Risk
- May debt, di na meet ang target, nonpayment of debt and return
- Accumulate compounding cost like penalty
Valuation
- POV of investors - positive/negative and high leverage
 - Pwedeng matakot of possible default in payment

Financial performance
- Ipapakita yung earnings each ratio on equity
- May effect and pagkakaroon ng debt

Discount rate

Bank
- Do not need high capital? Kaya mababa ang debt ratio

Fgen
- Renewable energy
Cebu pacific
- High debt
- Buy additional plane = cater more passengers
- Lower price, more passenger

Risk management
Concept of risk has 3 elements:
1. The perception that something could happen
2. The likelihood of something happening
3. The consequences if it happens

Risk appetite
- Level of risk that an entity is prepared to tolerate
Business risk identification
● Strategic - risk of planning failure
- Poor market strategy, acquisition strategy
● Financial - risk of financial controls failing
- Treasury risks
- Lack of counterparty and credit assessment
- Fraud and its control
Weekly troubleshooting in 9 key areas
1. Monitoring systems
- Give early warning of trouble spots in your operations
2. Graphical representations
- To get a quick visual idea of how things are going
3. Financial checklist
- Cash on hand - cash is company's lifeblood
- Drowning in order bu deteriorating cash position
4. expenses
- Rising expenses usually go hand in hand w/ rising sales
- Compare expenses against sales orders
5. receivables
- Lengthening receivables is problem in small company
 - Preoccupied w/ dozen other pressing problems, take longer pay their bills
- Have adequate warning like weekly receivables for 30 or fewer days
6. Marketing checklist
- Customer inquiries - good measure of how successfully your company is promoting, advertising, selling
7. Sales order
- Its easy enough to forget how vital new orders are
- Weekly update forces u to pay some attention
- Unexpected rise in orders meant hat u should consider stepping up operations to meet the demand
8. Conversion ratio
- Measures your effectiveness in converting inquiries into sales
- Decline ration means your promotional efforts are being directed at wrong market
9. Check both variables
- If inquiries are increasing at the same time the ratio is falling = prospects aren’t being converted into
customers at earlier rates
10. Supply chain checklist
- Turnaround time - some don’t bother to monitor turnaround time
- It is the ave amount of time from when sales orders are written to when they are shipped
- Backlog - orders are simply coming in faster than your staff can handle them, may lead to cancelled
orders
- Time required to receive ordered items - the amount of time between placing purchase orders for supplies
and receiving the goods
Predictors of corporate failure
● Keeping your finances from the brink
Original z-score
- Created by edward L. altmas at NYU
-