MODULE I

Introduction to Strategic Planning

and Management
Introduction to Strategic Planning and Management

Overview of the Module

The first module deals with the basic concepts of Strategic Planning and
Management. You are about to know more of the topics which you might have heard
commonly during your earlier years in your course. These terms include strategizing,
strategic, vision, mission etc. Don’t worry this first module does not require to have
the strategic plan that you are expected to submit before the semester ends. Oops!
Spoiler Alert. Yup, you read it right. You will be preparing a simple strategic plan for
a company or an organization. But don’t think of it too much. Let us first talk about
the fundamentals of the course.
In this module you will learn about the following topic:
 Fundamentals of Strategic Planning, Strategic Management and
Strategic Leadership
 Strategizing
 Strategic Planning Process
By the end of the module for each of the topic you are expected to:
 Explain the basic concepts of strategic planning, strategic management
and strategic leadership
 Understand and explain the four ways of effective strategizing
 Describe and explain the strategic planning process

So are you ready? Let’s get started! ●

Activity
Let us have an activity before we get started with the discussion.

Activity
FACT or BLUFF.
If the statement is correct write the word Fact but if the statement is incorrect write
the word Bluff in the space provided.
Strategic management is equivalent with strategic leadership
Strategic Planning is costly.
Vision is the state of the organization that it wants to achieve in the future.
Objectives supports directly the vision
Mission is much broader than the vision
Strategic decisions making is the process of setting of goals and identifying
the best way to achieve it.
Delegation of authority is important in strategic leadership.
Rational strategizing requires people to be creative in the organization.
SWOT stands for Strengths, Weakness, Threats and Obstacles.
Long term plans usually cover a year.

Write down the vision of Bicol University:

Discussion
I know some of you have took ABM in their Senior High and somewhat have an idea
of the things that we will discuss under this module. For the first topic, this will
present the definitions of the terms before we advance to the other topics.

LESSON I
Fundamentals of Strategic Management
Strategic Planning and Management are essential components of businesses,
nowadays. They become crucial in the world of business and the fast-changing world
in which we live and work.
Building a sound business strategy is an imperative requirement, only recently
we have witnessed the closure of ABS-CBN and consequently reinvented the
Kapamilya Channel to continue its broadcasting business undertaking. In global
scenario, we have seen British brand, House of Fraser, go into administration because
of poor strategy and other brands such as Debenhams have recreated themselves and
also improved their digital offering, something House of Fraser have failed to do.
Another example is Nokia, who fell behind to the innovations and forward-thinking
of competitors, like Apple and Samsung.
Thus, Strategic Planning and Management deal with the basic question why
and how firms can achieve sustained competitive advantage and how they can
translate competitive advantage into superior financial performance.

Strategic Planning And Management – Definitions And Features

Planning comes ahead of management. This is basic! Let’s take these
scenarios, imagine a ship without a ruder, it will just go around circles; a traveller
without a map, he’ll probably go round-and-round the bush; and an organization
without a plan, hmmm... chaotic, isn’t? You bet it right!

Strategic Planning – Definition, Strategic Plan, and Strategy Map

What is Strategic Planning?
Okay, let’s tackle first Strategic Planning. According to Balanced Scorecard
Institute, Strategic Planning is an organizational management activity that is used to
set priorities, focus energy and resources, strengthen operations, ensure that
employees and other stakeholders are working toward common goals, establish
agreement around intended outcomes/results, and assess and adjust the
organization’s direction in response to a changing environment. It is a disciplined
effort that produces fundamental decisions and actions that shape and guide what an
organization is, who it serves, what it does, and why it does it, with a focus on the
future.
Therefore, Strategic Planning is the process of documenting and
establishing a direction of your business by assessing both where you are and where
you’re going.
Effective strategic planning articulates not only where an organization is going
and the actions needed to make progress, but also how it will know if it is successful.

What is a Strategic Plan?

A Strategic Plan is a document used to communicate with the organization
the organizations goals, the actions needed to achieve those goals and all of the other
critical elements developed during the planning exercise.
This means that a strategic plan gives you a place to record your mission,
vision, and values, as well as your long-term goals and the action plans you’ll use to
reach them.
Further so, a well-written strategic plan can play a pivotal role in your small
business’s growth and success because it tells you and your employees how best to
respond to opportunities and challenges.

What is a Strategic Map?

A Strategy Map is a simple graphic that shows a logical, cause-and-effect
connection between strategic objectives. It is one of the most powerful elements
associated with the balanced scorecard methodology, as it is used to quickly
communicate how value is created by the organization.
Strategy mapping can vastly improve any strategy communication effort.
Most people are visual learners and so a picture of your strategy will be understood
by many more employees than a written narrative. Plus the process of developing a
strategy map forces the team to agree on what they are trying to accomplish in
simple, easy-to-understand terms.
With a well-designed strategy map, every employee can see how they
contribute to the achievement of the organization’s objectives.
Here’s an example of a Strategy Map for Workforce Improvement.

Source: https://www.strategymapexample.com/strategy-map-for-workforce-improvement.htm

Strategic Management – Definitions, Role, and Importance

What is Strategic Management?
Now, let’s have a thought on Strategic Management. There are ambiguities of
definition as defined by varied authors as follows:
1. According to the GISMA Business School, Strategic Management is the
formulation and implementation of the goals and initiatives involved in the
strategies, laid out by the stakeholders of an organisation. In simpler words, to
ensure wise decision-making processes, it is important that strategies are in place
to support the business functions and operations.

2. From the viewpoint of TechTarget, Strategic Management is based around an

organization's clear understanding of its mission; its vision for where it wants to
be in the future; and the values that will guide its actions. That means, the
process requires a commitment to strategic planning, a subset of business
 management that involves an organization's ability to set both short- and long-
term goals. Strategic planning includes the planning of strategic decisions,
activities and resource allocation needed to achieve those goals. Having a
defined process for managing an institution's strategies will help organizations
make logical decisions and develop new goals quickly in order to keep pace with
evolving technology, market and business conditions. Strategic management
can, thus, help an organization gain competitive advantage, improve market
share and plan for its future.

3. In the lens of Indeed Career Guide, Strategic Management refers to the strategic
use of a business's resources to reach company goals and objectives. In this
thought, strategic management requires reflection on the processes and
procedures within the organization as well as external factors that may impact
how the company functions. The process of strategic management should
guide top-level actions and decisions. Companies of all sizes and in all
industries can benefit from the practice of strategic management. Hence,
strategic management is the sum of strategic planning and strategic thinking where
strategic planning refers to the identification of achievable goals and strategic
thinking is the ability to identify the needs of the organization to achieve the
goals identified through strategic planning.

Therefore, Strategic Management entails evaluating business goals, the

organization’s vision and objectives as well as the future plans. In furtherance, a
strategic management process is employed to ensure that the business runs effectively
and efficiently. Communicating this strategy internally and externally is crucial for
success, in order for both staff and the organization to understand the purpose and
direction along with external parties understanding what you as an organisation
stands for.

The Role of Strategic Management in Business

Now, what do you think is the role of strategic management in business?
Strategic management is a broad term that includes innovative thinking, a
strategic planning process and operational strategizing.
Strategic business management, more specifically, relies largely on research. It
is imperative that for a business strategy to be successful, customers’ opinions,
employees’ contribution and the industry’s best practices are all taken into account.
A common way to encourage strategic business management, is to incorporate
a lot of planning into board meetings, have trustees with valued and varied
experience, and to carefully consider the impacts of decisions on each business
function within the organization.
Annual plans for businesses are often put together, but within the 21st
century, it is important to be flexible and adapt to changing environments and
demands.

The Importance of Strategic Management in Business

On its essence, why is strategic management important in business?
The main importance of strategic business management is to assist the
business’ profit and decision making, yet its functions can also be broken down.
Here are some reasons why strategic management is a crucial business practice
as suggested by GISMA Business School:
Planning: This is an essential management tool for any company. The main
task in the strategic planning process is predicting future trends that will help the
business in building In order to make this happen, strategic planning tools need to be
used instead of simple planning processes.
Forward Thinking: Through a well thought out strategy, you will be able to
draw up clear, long term goals. These goals are important so that you have a distinct
idea of how to move forward which can prove beneficial for an organisation’s overall
growth.
Resource Allocation: The tough aspect of strategy management is that you are
pushed to make choices under pressure, often with limited resources. Strategy
management teaches you to ensure the company’s resources, in terms of products
and services, are used wisely and vested in the most promising opportunities. This is
why a good strategy manager will tell you that less is more, as long as it is the best.
Strengths and Weaknesses: No one knows a business better than its owner,
who will be able to recognise the strengths and weaknesses of their company.
However, just being aware of the shortcomings and strong points of a business is not
enough. Strategic planning is employed to bridge the gap between the capability void
and the strength of a company.
Environmental Impact: When running a business, you must know how your
business impacts the environment and vice-versa. Strategy management involves
being aware of the future potential shifts in the market that may affect the business
and its environmental impacts.
Basic Steps in Strategic Planning and Management?
There are many different frameworks and methodologies for strategic
planning and management. While there are no absolute rules regarding the right
framework, most follow a similar pattern and have common attributes.
Many frameworks cycle through some variation on some very basic phases like:
1. Analysis or assessment, where an understanding of the current internal and
external environments is developed;
2. Strategy formulation, where high level strategy is developed and a basic
organization level strategic plan is documented;
3. Strategy execution, where the high level plan is translated into more operational
planning and action items; and
4. Evaluation or sustainment / management phase, where ongoing refinement and
evaluation of performance, culture, communications, data reporting, and other
strategic management issues occurs.

The details on the Strategic Management Process will be further discussed in the
later sessions.

What is Strategic Leadership?

According to Kruse (2013) Leadership has the characteristics that is considered to
be on the “not” aspect description in management.
Leadership has nothing to do with seniority or one’s position in the hierarchy of a
company. It is not a guarantee that the ones who belongs to the top paying positions
are capable or having the leadership skills. Position and pay are not factors in
leadership.
Leadership has nothing to with titles. This is similar to the first descriptions. Title
will not make you a leader. One can lead without have a title.
Leadership had nothing to do with personal attributes. IT has nothing with the
attribute of being charismatic or being an extrovert. The word leader is not
considered as an adjective.
Leadership isn’t management. The terms are not similar or means the same.
Managers or managing deals with the resources and get things done while leadership
or leading is focus on leading the people.
In short, Leadership is considered as a process of influencing people socially and
maximized the efforts of others in achieving the goal.
The definition highlights key points about leadership:
Leadership comes from the social influence rather than the power or authority
Leadership ask others to comply and thus they don’t need to be directly
reporting
Personal traits and attributes, positions or titles is not mentioned in defining
leadership
The goal is emphasized to be realized in leadership
The most important thing is that in the definition by Kruse it gives the insight
that the efforts are maximized.

Strategic Leadership
The definition of Strategic Leadership is focused on the managers’ capability
to realized the strategic vision of the organization through his/ her influence to other
people.
It can also be defined as a management as a strategy to manage employees. In
which it is done by affecting the members of the organization to implement the
organizational change.
Strategic leaders are also described as leaders that makes the organizational
structure, distribute resources and conveys the strategic vision. These leaders also
work in an ambiguous environment with hardships as they come to realize the vision
along with challenges within and outside the organization.
Strategic leadership aims for strategic productivity and develop an
environment wherein the members of the organization are anticipate the needs in
their respective job (being proactive). The leaders also encourage the employees to
push through with their ideas. They also believe more in the implementation of
reward and incentive system to motivate productivity and quality among the
employees for better organizational outcomes.
Meanwhile, the functional strategic leadership is more about inventiveness,
perception and planning to assist an individual in making the objectives and goals of
the organization come true.
The strategic leadership needs to forecast and understand work environment.
It needs to be objective and capability to look at the whole picture.
 The following are the traits/ characteristics/ features and qualities that the
strategic leaders has in leading to have greater performance:
Loyalty. Leaders who are powerful and effective manifests their loyalty to the
end goals of the organization through their words and actions.
Keeping them updated. Leaders who are both effective and efficient are
needed to be updated with what is happening within their organizations. They should
have connection whether formal or informal to get information for their
organization.
Judicious use of power. Leaders should make use their power and should not
power trip. They should know how to sell their ideas rather than forcing their ideas
to others. They should also convey their ideas gradually.
Have wider perspective/outlook. Leaders should have the knowledge and
skills that is needed in their specialization.
Motivation. Leaders should have the passion for the work and does not
consider only the compensation and authority. They should also have the drive to
achieve their goals using their energy and persistence.
Compassion. Leaders should also consider the perspective of the people that
is working within the organization. Their voices should also be heard during decision
making process.
Self-control. Leaders must have the ability to control their own personal
intentions and moods. They must always practice calmness and most especially
thinking before acting.
Social skills. Leaders should be able to have interpersonal skills. They are
expected to be well versed in approaching others– being friendly and sociable.
Self-awareness. Leaders must have the capability to know and process his/ her
own mood and emptions and its impact to others.
Readiness to delegate and authorize. Leaders must have effective skill in
delegating. They should be aware of the fact that there is a need for delegation to
avoid overloading or tasks and responsibilities in the leader. They should also
appreciate that the authority they give to the subordinates will also give them the
power to decide.
Articulacy. Leaders are considered to be strong if they are able to relay
properly to the members of the organization about the vision. This is to boost the
members of the organization.
 Constancy/ Reliability. Leaders should be consistent in conveying the vision
and make it as an organizational culture.
Thus, strategic leaders create, conveys, passionately delivers the vision persistently.

LESSON II
How are you doing so far? Well you are not yet far, I am telling you. You are just in
the introductory part. Hope you have gained some information from the previous
lesson. There will be an assessment after the topics has been discussed. (Alert again
● ) So let us go to our next discussions.

Strategizing

Strategy – Definitions And Features

Strategy, defined
Considering the etymology of the word Strategy, it is derived from the Greek
words stratçgos/stratus, meaning army and ago, meaning leading or moving.
A Strategy is an action that managers take to attain one or more of the
organization’s goals. It is a general direction set for the company and its various
components to achieve a desired state in the future. Strategy results from the detailed
strategic planning process.
Strategy is all about integrating organizational activities and utilizing and
allocating the scarce resources within the organizational environment so as to meet
the present objectives. While planning a strategy it is essential to consider that
decisions are not taken in a vacuum and that any act taken by a firm is likely to be
met by a reaction from those affected, competitors, customers, employees, or
suppliers.
Likewise, a Strategy can also be defined as knowledge of the goals, the
uncertainty of events, and the need to take into consideration the likely or actual
behavior of others.
Therefore, a Strategy is the blueprint of decisions in an organization that
shows its objectives and goals, reduces the key policies, and plans for achieving these
goals, and defines the business the company is to carry on, the type of economic and
human organization it wants to be, and the contribution it plans to make to its
shareholders, customers and society at large.

Features of Strategy
In order to best determine the future direction of your business or company,
it helps to understand where you are positioned in the market having in mind the
best move to make.
Here are some key features of strategy to ponder on:
1. Strategy is significant because it is not possible to foresee the future
not unless you are the famous Nostradamus or the fiction character of Harry
Potter having foresights of what is going to happen in the future. Without a
perfect foresight, the firms must be ready to deal with the uncertain events
which constitute the business environment.
2. Strategy deals with long term developments rather than routine
operations, i.e. it deals with probability of innovations or new products, new
methods of productions, or new markets to be developed in future.
3. Strategy is created to take into account the probable behavior of
customers and competitors. Strategies dealing with employees will predict the
employee behavior.
In this context, it is important to note that Strategy is a well-defined roadmap
of an organization because it defines the overall mission, vision and direction
of an organization.

The objective of a strategy is to maximize an organization’s strengths and to

minimize the strengths of the competitors.

Strategy, in short, bridges the gap between

“where we are” and “where we want to be”.

Here are some key features of strategy to ponder on:

1. Strategy is significant because it is not possible to foresee the future not
unless you are the famous Nostradamus or the fiction character of Harry
Potter having foresights of what is going to happen in the future. Without a
 perfect foresight, the firms must be ready to deal with the uncertain events
which constitute the business environment.

2. Strategy deals with long term developments rather than routine operations,
i.e. it deals with probability of innovations or new products, new methods of
productions, or new markets to be developed in future.

3. Strategy is created to take into account the probable behavior of customers

and competitors. Strategies dealing with employees will predict the employee
behavior.

In this context, it is important to note that Strategy is a well-defined roadmap

of an organization because it defines the overall mission, vision and direction of an
organization.
The objective of a strategy is to maximize an organization’s strengths and to
minimize the strengths of the competitors.
Strategy, in short, bridges the gap between “where we are” and “where we want to
be”.

STRATEGIZING
Strategizing, defined
Strategic planning and management are best associated to strategizing,
organizing, and implementing in order to give emphasis on practical business
application.
As coined by Eduardo A. Morato, Jr. in his book Strategic Planning and
Management, Strategizing is about setting institutional goals and finding the best
means to reach those goals. It bridges the chasm between where an organization is
today and where it wants to be tomorrow. Therefore, strategies are the best means
by which an organization can achieve its desired ends.
Approaches to Strategizing
There are four (4) Approaches in Strategizing that could be adopted as follows:
1. Adaptive Strategizing;
2. Ideological Strategizing;
3. Creative Strategizing; and
4. Rational, Sequential, and Analytical Strategizing.
Now, let’s take these one-by-one.
Adaptive or Incremental Strategizing
By and large, organizations usually do not undergo a rigorous process of
setting goals or even formulating strategic plans. They just take opportunities as they
come their way, make quick assessments of risks attendant to those opportunities and
determine their preferred courses of action according to certain criteria they have set.
In this modality, strategies sprout naturally as the market situation unfolds and
as the organization’s capacity to carry out new strategies develops.
Let’s take this as an example, The Scooby Company producing diamond rings
find the demand for the product increasing. In reaction, it expands plant capacity so
as to accommodate the growing demand. The company keeps on increasing capacity,
like adding more product lines and services, depending on the market response to its
initial offerings.
In metaphoric view, Adaptive Strategies may resemble to a chess game
between two eager rivals, each one provoking or reacting to other in tactical moves
that proceed from a set game plan. This means, as a strategist, you have to learn the
Art of War in business in order to achieve gains amidst a stiffer competition.
Take note that strategies emerge naturally in the course of running a business or a
development institution. We can label this approach as “Incremental Strategizing” or
the Strategy of Muddling Through. It is opportunistic and situational by nature. A
lot of organizations take this approach, preferring it to more formal strategy
formulation methods. That is why Adaptive Strategizing is differentiated as the
strategy formation process.

Ideological Strategizing
Certain organizations exist because they espouse a definite set of beliefs,
philosophies, principles, and ideologies. They basically adhere to a prescribed way of
living life, often translating the way into clear-out policies, norms of behaviour, and
codes of conduct.
All strategies are formulated towards perpetrating the organization’s dogmas.
Members of the organization are committed to spreading the good news or winning
converts to the fold. This is called the Ideological Strategizing. Essentially, this
approach works towards attaining the avowed philosophies, principles, and policies
of the organization.
 Political and religious organizations are the usual proponents of ideological
strategies although cause-oriented people’s organizations, non-government entities,
and even principle-centered business establishments espouse this approach.

Ideological –driven organizations often have strong cultures and governing bodies
to ensure doctrinal purity. This allows them to send their people out as missionaries
to far-flung areas in order to propagate the faith.

Creative Strategizing
There are organizations that pursue strategies in a very creative and unorthodox
manner. Their all-consuming passion is to invent new products and services,
innovate on their processes, and discover new markets. Some organizations
deliberately try to make themselves obsolete by introducing revolutionary
technologies. While others push the creative issue by stipulating that 50% or even
more of their sales should come from new products or services in next five years.
Creative strategists put themselves a cut above the rest. They have huge research
and development budgets to produce miracle drugs, rocket science gizmos, and
competitor-killing services.
Creative strategizing relies on creative people, creative thinking process,
organizational environments conducive to creativity, and hefty resources committed
to research and development.
Creative people can produce outstanding strategies and innovative ideas if they are
encouraged to adopt creative thinking processes such as brainstorming, synectics (a
problem-solving technique that seeks to promote creative thinking, typically among
small groups of people of diverse experience and expertise), and lateral thinking (the
solving of problems by an indirect and creative approach, typically through viewing
the problem in a new and unusual light), among others. These techniques either
generate a lot of ideas or produce different, unique ones.
Creative strategizing methods thrive best in an environment made conducive to
creativity.
Note: The first three (3) strategizing approaches generally follow the intuitive,
emotional, holistic, and creative functions of the right brain. Strategies are not
normally formulated. Rather, they emerge naturally in the course of an organization’s
development (adaptive strategizing) or they spring from values (ideological
strategizing) or sprout from innovative insights (creative strategizing).
 Rational, Sequential, and Analytical Strategizing
The fourth method takes on a more rational, sequential, and analytical
approach. It adopts a logical step-by-step process and relies more on the faculties of
the left brain.
Rational Strategizing, as the term implies, uses the science of correct
reasoning. It posits that inductive or deductive thought processes must follow a
sequential, linear pattern. It relies heavily on analyzing causes and their effects to
enable the strategist to predict what consequences will happen as a result of certain
human interventions.
The rational approach relies heavily on charting trends, recognizing patterns,
and mapping out possible scenarios with hope of forecasting outcomes as events
unfold.
There are two (2) sequential processes taken in the rational approach such as:
1. Top-down Sequence; and
2. Bottom-up Sequence.

The Top-down Sequence

The first sequence is from the top to the bottom or called as the Top-down
Sequence.
In the top-down sequence, the strategist draw a clear picture of where he wants
the organization to go. This is the organizational vision. A Vision is an idealized
state desired three, five or ten years down the strategic road.
The strategist then articulates the reason for being basic purpose for
establishing the organization. This is called the Mission Statement. Core Values
often accompany the mission statement.
From the vision and mission, the strategist goes further down to Objectives,
which are measurable end-results that determine the organization is getting closer or
farther from its goals.
Each objective is then translated in to Key Result Areas (KRAs) where
specific manifestations that the objective is being attained.
The KRAs, which are qualitative statements, are then quantified into no-
nonsense Performance Indicators (PIs), which are quantitatively specified.
Based on the PIs, the organization then generates Alternative Strategies
which can be employed to achieve this PIs.
 The strategies are broken down into Action Programs which are, in turn,
cascaded into Group Activities and Individual Tasks.

Finally, the resources required to deliver the Strategies, Programs, Activities, and
Tasks (SPATs) are spelled out.

The Bottom-up Sequence

The second sequence usually taken in the rational approach is from the
bottom going on top or called as Bottom-up Sequence.
The strategist grounds the organization to the realities of the environment it
operates in. There are two grounding environments – the External Environment
which is the area, industry or sector affecting or being affected by the organization;
and the Internal Environment, which is the organization itself.
The Internal Environment is composed of the resources, manpower,
systems, processes, capabilities and constraints of the organization.
In the second sequence, the strategist must be able to determine the
opportunities and threats (OT) in the External Environment in relation to its
vision, mission and objectives (VMO).
The strategist must also be able to distill the strengths and weaknesses (SW) of
the organization according to the same vision, mission and objectives.
Next, the strategist compares and associates the opportunities and threats
(OT) from the external environment with the strength and weaknesses (SW) of the
internal environment in relation to the vision, mission and objectives (VMO) of the
organization.

The result of this juxtaposition is the SWOT matrix shown in Diagram 1

The SWOT matrix displays four possible combinations which can be used to
generate strategic options. There are:

1. Strength-Opportunities (S-O) Strategic Options. Ask the question: How

can strength take advantage to the opportunities?
 2. Strengths-Threats (S-T) Strategic Options. Ask the question: How can
strengths be used to counteract threats that tend to hinder the attainment of
objectives (VMO) and the exploitation of opportunities?

3. Weakness-Opportunities (WO) Strategic Options. Ask the question: How

can weaknesses be overcome to take advantage of or exploit the
opportunities?

4. Weaknesses- Threats (W-T) Strategic Options. Ask the question: How can
weaknesses be overcome to counteract threats that tend to hinder the
attainment of the objectives (VMC) and exploitation of opportunities?

The strategic options are then evaluated according to criteria set by

organization, which are derived from the vision, mission and objectives, KRAs and
PIs formulated.

A decision is then made. This decision is further subjected to criticism by

asking what can go wrong with it in order to develop contingencies.
After the strategic choice is made and contingency planning is done, there is a need
to translate the strategy (ies) chosen into action programs, activities, tasks and
resource requirements (SPATRes).
The top-down and the bottom-up can be used together. The top-down
approach is employed to set high aspirations and to dream of challenging possibilities.
The bottom-up approach is used to anchor the organization on the realities of
the marketplace and the existing capabilities and constraints of the company.
Sometimes, the dreaming become too far-fetched from reality. Sometimes,
the strategist does not dream enough and is too bogged down by prevailing
conditions. A healthy dose of top-down and bottom-up planning is encouraged.
The top-down and bottom-up approaches are illustrated in the Diagram 2.

Internal Environment Strengths Weaknesses

Assessment
1. 1.
2. 2.
3. 3.
4. 4.
External Environment
5. etc. 5. etc.
Assessment
Opportunities S-O W-O
1.
2. Strategic Options Strategic Options
3.
4.
5. etc.
Threats S-T W-T
1.
2. Strategic Options Strategic Options
3.
4.
5. etc.

The SWOT Matrix

Fourteen F’s of Effective Strategies

1. Be Fundamentally Sound and Correct. This means it must be anchored on the

realities of the environment or the situation the organization is in. It must
recognize major trends and directions in the environment. It must take into the
account what the organization can do and cannot do, what it has and does not
have.

2. Have Foresight. It must be able to determine the most likely future scenario in
order to properly position the organization.

3. Take a Favoured Course of Action. The implementors of the strategies must

empathize with what they are doing. Otherwise, there motivational level would
be low. They must actually identify with their strategy based vision, values and
preferences.

4. Focus Efforts on a Few but Critical Activities. Effective strategies are rifle shots
a chosen target, not shotgun blasts that scatter resources of the organization.
They choose the few things that would make a big difference.

5. Have Force Behind the Chosen Few Things. Organization must put full force
and major resources behind the strategies taken. They must “put their money
where their mouth is”.

6. Follow Through. A golfer or tennis player knows that hitting the ball is not
enough. There must be a complete swing that directs the ball towards its chosen
destination. The whole organization must move to support its major thrusts all
the way to final acceptance by and satisfaction of its client.

7. Have a Fit Among the Objectives, Tasks, People, and Structure of the
Organization. There must be consistency between the type of people operating
within certain organizational structures and systems and the defined objectives,
chosen strategies and tasks of the organization.

8. Have a Finite Time Frame. Unreachable stars have less motivating power than
realizable objectives within finite time frame of five, 10 to 20 years.

9. Be Feasible. This means that strategies must be do-able by the organization. It

must work out to the field and produce a good benefit-cost relationship.

10. Take a Full and Holistic Approach. Compartmentalized approaches leads to

partial solutions that often lead to greater problems. Organizations must look at
 the full implications of relationships among variable in order to reinforce rather
than cancel each other out.

11. Get Feedback Through Good Monitoring and Evaluation System. Every action
produces a reaction and this reaction must be monitored closely and assessed as
to whether it is moving towards the desired objectives.

12. Be Felt with Sufficient Impact by the Intended Targets. Development

organizations tend to forget the very purpose of their strategy which is to
positively affect the lives if the people they are serving. Strategies must be
therefore translate into impact that is felt.

13. Be Flexible Depending on Environmental Changes. The assumptions governing

strategies chosen may change over time. Hence, there is a need to modify, alter or
overhaul strategies in the face of environmental changes.

14. Be Final Results Oriented. At the end of the day, the organization must be
responsible for its intended results and be accountable to its customers or
beneficiaries for such results. They should not concentrate on inputs or tasks
only but should make sure that these inputs or tasks lead to the desired outputs
and outcomes.
Strategic Planning Process

Strategic Planning is the process of finding the best means of attaining

organizational goals. It defines what the organization is all about and what it wants to
achieve in clear and certain terms.
It defines the chosen market, customers, clientele, or beneficiaries the organization
wants to serve. It specifies the results or outcomes the organization hopes to
produce and how it will produce those results.
Strategic Planning is about making major moves that will determine the long term
direction of the organization. It is a set of principles and philosophies which would,
hopefully, guide all the operational activities of the organization.
Therefore, Strategic Planning seeks to obtain good cost-benefit, investment-return,
and input-outcome ratios given the resources the organization can marshal and the
environmental conditions it operates.

The Process
Strategic planning can be a vital tool for a business as it provides companies with
measurable objectives that aid in daily decision-making. This planning process helps
prevent companies from aimlessly performing business tasks without set priorities or
a real purpose. Without a clear vision in mind for the future, employers may make
wrong decisions for their business and employees may be confused about their
position in the company. A strategic planning process is designed to drive businesses
in the right direction and promote the exchange of useful ideas between people with
similar goals.
The strategic planning process is essentially a list of steps that managers should
follow to complete and implement a strategy within a company. There are several
key components that make up the strategic planning process, including common
phases like strategic analysis and strategy formulation, along with implementation and
monitoring. Although the strategic planning process requires great patience and can
be a challenging undertaking, most businesses can agree that the process can yield
highly rewarding results.
Here is a closer look at the individual stages of the strategic planning process and
how they affect your business.
1. Select the corporate mission and major corporate goals.

2. Analyze the organization’s external competitive environment to

identify opportunities and threats.

3. Analyze the organization’s internal operating environment to identify

the organization’s strength and weaknesses.

4. Select strategies that build on the organization’s strengths and correct

its weaknesses in order to take advantage of external opportunities and counter
external threats. These strategies should be consistent with the mission and major
goals of the organization. They should be congruent and constitute a viable
business model.

5. Implement the strategies.

LESSON III
During your first year in the university, on your first few weeks. You might
had a headache on having the Vision, Mission, Quality Policy and your course
objectives be memorized? Don’t worry I have been a student of the university and
also undergone the same of activity to have those be memorized and recite in class.
Do you still remember those things? ● I hope so. Anyways, in this lesson you will
learn about the Strategic planning process and encounter the words vision, mission
etc.

What are the Steps in Strategic Planning and Management?

There are many different frameworks and methodologies for strategic planning and
management. While there are no absolute rules regarding the right framework, must
follow a similar pattern and have common attributes. Many frameworks cycle
through some variation and some very basic phases:
1. Analysis or assessment, where an understanding of the current internal and
external environment is developed
2. Strategy formulation, where high level strategy is developed and a basic
organization level strategic plan is documented
3. Strategy execution, where the high-level plan is translated into more
operational planning and action items
4. Evaluation or sustainment/ management phase, where ongoing refinement
and evaluation of performance, culture communications, data reporting and other
strategic management issues occurs.
However in strategic planning has strengths and limitations. According to
Young (2015) as the strategic planning process defines an vision, mission and
objectives of the organization it aids in lessening the chances that there would be a
mistakes. This would increase the efficiency of the organization. It also helps in the
efficient allocation of the resources, better networks of communications and
relationships between the employees of the organization. Furthermore, if the strategic
plan is exercise with caution, has clarity and undertaken with proactive attitude this
would provide leverage and competitive advantage for the organization.
Meanwhile the limitations of the strategic planning process has also
limitations. Most concerns is that the plans are only good in paper. There are some
instances that organization fail to follow the strategic plan. Another thing is that
some of the organizations follow the strategic plan faithfully but encounters difficulty
in making adjustments and realignments because to the circumstances especially
during challenges. Moreover, having a strategic planning process is costly for the
organizations.
There are two considered as principal type of plans:
1. Medium/long range plan- this plan is usually prepared for the next three to
five, ten or more years. This encompass the factors that may affect the long
term objectives, strategies and resources.
2. Annual/ yearly plan- this plan is considered to be short term. This plan
delineates the current situation, the goals and objectives, strategies,
mechanisms for monitoring and the fund for the next year.
Vision
The vision of an organization is considered to be motivational statement of
what the organization wants to become and what they want to achieve at a specific
point in the future. It also reflects the image that the organization wants to project. It
is concise and carries a unique factor that would encourage to inspire the
organizational members to work and refocus to work towards the desired state. This
binds the organization and with a good vision the organization can achieve the image
it wants to achieve in the future.
Can you recite the vision of the university? Can you write it down? Did the
vision energizes you? Do you feel bonded by the vision as a student of Bicol
University? Well, I leave it you for reflection ●

Mission
Are you familiar with the mission of the university? Do you know where it is
from? Well it comes from RA 5521, this is the act that establish Bicol University in
1969. I expect an Owwww reaction but probably you know it already in your first
year. ●
The mission statement is different from the vision. The mission is defined as
the current purpose of the organization. The mission answers of what the
organization do, how and for whom does the organization do their stuff. The mission
statement provides a better perspective on how the members of the organization
enable to contribute to attain their goal. Most of the time, the vision is presented in
more passionate way however the mission delineates the realities which the
organization may encounter.
Goals and Objectives

Goals
To realize the vision and mission you need to have the goals and objectives.
Organizations have set goals. These are pursued to make the strategies succeed. The
goals differs from the vary and dependent on their direction and purpose. The basic
organizational is for them to use their resources efficiently and effectively enable to
continue the operation of the organization. They also considered as macro which is
encompassing and forward looking. In short, the goals reflects the vision of the
organization which has the following properties.
1. Goals provide organizations focus and direction. They cover the purpose
of the firm and streamlines those unimportant and duplicated matters.
2. Goals move organizations to action. The goals needed to be attained, the
organization is driven to do perform and achieve their vision.
3. Goals develop in organizations the trait of persistence. The organization is
given the spirit to continue to achieve their aimed success.
Objectives
To support the attainment of the goals, there is a need for the organizational
objectives. They differ from goals because they are more specific in nature. They
possess the following characteristics (Young, 2015. p.10):
1. Objectives need to be clearly defined and formulated, carefully chosen,
specific and definite.
2. Objectives may be immediate or short term
3. They need to be prioritized into hierarchy of objectives
4. Objectives need to be realistic and attainable. They need to be flexible,
consistent and strategic
5. sObjectives need to be measurable over time.
Enable to achieve the goals specific strategies are enumerated. The objectives
are mostly based on the department’s or unit’s role in the organization. These
objectives should be consisted directed towards the achievement of the given goal.
 The strategic objectives are primarily considered as externally focused.
Drucker, 2008 cited by Young (2015) classify them to the following:
1. Market standing
2. Innovation
3. Human resource
4. Financial resource
5. Physical resource
6. Productivity
7. Social responsibility
8. Profit requirements

Application

Let us do the activity again. Hope you git everything correct now
FACT or BLUFF.
If the statement is correct write the word Fact but if the statement is incorrect
write the word Bluff in the space provided.
Strategic management is equivalent with strategic leadership
Strategic Planning is costly.
Vision is the state of the organization that it wants to achieve in the
future.
Objectives supports directly the vision
Mission is much broader than the vision
Strategic decisions making is the process of setting of goals and
identifying the best way to achieve it.
Delegation of authority is important in strategic leadership.
Rational strategizing requires people to be creative in the organization.
SWOT stands for Strengths, Weakness, Threats and Obstacles.
Long term plans usually cover a year.
Questions:

1. How will you describe strategic management?

2. What makes strategic management different from strategic leadership?
3. How will you explain the relationship between vision, mission, goals and
objectives?

This will be the end of the application part of Module 1. I hope you had fun and be
able to gain something from the inputs ●

Synthesis

Strategic Management is an
essential part of any business
organization. It will provide the
business with the needed plans
enable to sustain, enhance or level
up their operations.
 MODULE II
Environmental Assessment

Environmental Assessment

Overview of the Module

The first module deals with the basic concepts of Strategic Management and
Planning. You have also encountered some terms which are basic for making
strategies. These terms might be familiar or not familiar with you. Anyways, the
second module will now discuss the topics about environment scanning internal and
external.
 In this module you will learn about the following topic:
 Environmental Scanning
 The Components of a Business Environment
 SWOT Analysis; Competitor Analysis
 and Porter’s Five Forces Model of Competition
By the end of the topics in the module you are expected to:
 Understand the concept and familiarize the conduct of Environmental
Scanning
 Familiarize with components of business environment
 Describe the SWOT Analysis, Competitor Analysis and Porter’s Five Forces
Model of Competition
 Understand the concepts of competitive advantage

Ready or not, Let’s get started! ●

Activity
Let us have an activity before we get started with the discussion.

CHOOSE ME. Choose among the following words which the statement
below describes. Write your answer in the space provided.

WEAKNESSES
DRUCKER PORTER
COMPETITIVE
COMPETITION
RIVALRY
SUBSTITUTE
COMPARATIVE

1. These are qualities that enable us to accomplish the

organization’s mission.
2. He has assumed that the competitive environment within
an industry depends on five forces
3. It refers to the competitive struggle for market share
between firms in an industry.
4. This refer to the products having ability of satisfying
customers’ needs effectively.
5. It is advantage that accrues to a firm when it does
something that the rivals cannot do or owns something that the rival firms
desire
Discussion
Don’t be confused you are still in a business course. Environmental scanning is not
referring to the environment literally. In the business world or in any organizations
there is an environment that you consider in making strategies.

LESSON I
Environmental Scanning
The Environmental Scanning – Internal and External Analysis of Environment
Organizational environment consists of both external and internal factors.
Environment must be scanned so as to determine development and forecasts of
factors that will influence organizational success. In order for the organization to be
successful, it is important that it scans its environment regularly to assess its
developments and understand factors that can contribute to its success.

Environmental Scanning refers to possession and utilization of information

about occasions, patterns, trends, and relationships within an organization’s internal
and external environment. It helps the managers to decide the future path of the
organization. Scanning must identify the threats and opportunities existing in the
environment. While strategy formulation, an organization must take advantage of the
opportunities and minimize the threats. A threat for one organization may be an
opportunity for another.

The purpose of the scan is the identification of opportunities and threats

affecting the business for making strategic business decisions. As a part of the
environmental scanning process, the organization collects information regarding its
environment and analyzes it to forecast the impact of changes in the environment.
This eventually helps the management team to make informed decisions.

Internal analysis of the environment is the first step of environment scanning.

Organizations should observe the internal organizational environment. This includes
employee interaction with other employees, employee interaction with management,
manager interaction with other managers, and management interaction with
shareholders, access to natural resources, brand awareness, organizational structure,
main staff, operational potential, etc. Also, discussions, interviews, and surveys can
be used to assess the internal environment. Analysis of internal environment helps in
identifying strengths and weaknesses of an organization.

As business becomes more competitive, and there are rapid changes in the
external environment, information from external environment adds crucial elements
to the effectiveness of long-term plans. As environment is dynamic, it becomes
essential to identify competitors’ moves and actions. Organizations have also to
update the core competencies and internal environment as per external environment.
Environmental factors are infinite, hence, organization should be agile to accept and
adjust to the environmental changes. For instance - Monitoring might indicate that
an original forecast of the prices of the raw materials that are involved in the product
are no more credible, which could imply the requirement for more focused scanning,
forecasting and analysis to create a more trustworthy prediction about the input costs.
In a similar manner, there can be changes in factors such as competitor’s activities,
technology, market tastes and preferences.

While in external analysis, three correlated environment should be studied and

analyzed as follows:
 Immediate / industry environment
 National environment
 Broader socio-economic environment / macro-environment

Examining the industry environment needs an appraisal of the competitive

structure of the organization’s industry, including the competitive position of a
particular organization and its main rivals. Also, an assessment of the nature, stage,
dynamics and history of the industry is essential. It also implies evaluating the effect
of globalization on competition within the industry. Analyzing the national
environment needs an appraisal of whether the national framework helps in achieving
competitive advantage in the globalized environment. Analysis of macro-
environment includes exploring macro-economic, social, government, legal,
technological and international factors that may influence the environment. The
analysis of organization’s external environment reveals opportunities and threats for
an organization.

Strategic managers must not only recognize the present state of the
environment and their industry but also be able to predict its future positions.
 LESSON II

The Components of a Business Environment

We already know that every organization has an internal and external

environment. Now, let’s take a view of the Components of a Business Environment
as shown in the figure.

Components of Business Environment

As you can see above, the internal environment of an organization consists of

various elements like the value system, mission/objectives of the organization,
structure, culture, quality of employees, labor unions, technological capabilities, etc.
These elements lie within the organization and any changes to them can affect the
overall success of the business. On the other hand, an organization cannot operate in
a vacuum. Also, there are many factors outside the walls of an organization which
affects the functions of the
 LESSON III

SWOT Analysis; Competitor Analysis and Porter’s Five Forces Model ofCompetition

The SWOT Analysis

SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats.

By definition, Strengths (S) and Weaknesses (W) are considered to be internal factors
over which you have some measure of control. Also, by definition, Opportunities (O)
and Threats (T) are considered to be external factors over which you have essentially
no control.

SWOT Analysis is the most renowned tool for audit and analysis of the
overall strategic position of the business and its environment. Its key purpose is to
identify the strategies that will create a firm specific business model that will best
align an organization’s resources and capabilities to the requirements of the
environment in which the firm operates.

In other words, it is the foundation for evaluating the internal potential and
limitations and the probable/likely opportunities and threats from the external
environment. It views all positive and negative factors inside and outside the firm
that affect the success. A consistent study of the environment in which the firm
operates helps in forecasting/predicting the changing trends and also helps in
including them in the decision-making process of the organization.

An overview of the four factors (Strengths, Weaknesses, Opportunities and

Threats) is given below:

1. Strengths - Strengths are the qualities that enable us to accomplish the

organization’s mission. These are the basis on which continued success can
be made and continued/sustained.
Strengths can be either tangible or intangible. These are what you are well-
versed in or what you have expertise in, the traits and qualities your employees
possess (individually and as a team) and the distinct features that give your
organization its consistency.
 Strengths are the beneficial aspects of the organization or the capabilities of an
organization, which includes human competencies, process capabilities,
financial resources, products and services, customer goodwill and brand
loyalty. Examples of organizational strengths are huge financial resources,
broad product line, no debt, committed employees, etc.

2. Weaknesses - Weaknesses are the qualities that prevent us from

accomplishing our mission and achieving our full potential. These weaknesses
deteriorate influences on the organizational success and growth. Weaknesses
are the factors which do not meet the standards we feel they should meet.
Weaknesses in an organization may be depreciating machinery, insufficient
research and development facilities, narrow product range, poor decision-
making, etc. Weaknesses are controllable. They must be minimized and
eliminated. For instance - to overcome obsolete machinery, new machinery
can be purchased. Other examples of organizational weaknesses are huge
debts, high employee turnover, complex decision making process, narrow
product range, large wastage of raw materials, etc.

3. Opportunities - Opportunities are presented by the environment within

which our organization operates. These arise when an organization can take
benefit of conditions in its environment to plan and execute strategies that
enable it to become more profitable. Organizations can gain competitive
advantage by making use of opportunities.
Organization should be careful and recognize the opportunities and grasp
them whenever they arise. Selecting the targets that will best serve the clients
while getting desired results is a difficult task. Opportunities may arise from
market, competition, industry/government and technology. Increasing
demand for telecommunications accompanied by deregulation is a great
opportunity for new firms to enter telecom sector and compete with existing
firms for revenue.

4. Threats - Threats arise when conditions in external environment jeopardize

the reliability and profitability of the organization’s business. They compound
the vulnerability when they relate to the weaknesses. Threats are
uncontrollable. When a threat comes, the stability and survival can be at stake.
Examples of threats are - unrest among employees; ever changing technology;
increasing competition leading to excess capacity, price wars and reducing
industry profits; etc.
 Advantages of SWOT Analysis

SWOT Analysis is instrumental in strategy formulation and selection. It is a

strong tool, but it involves a great subjective element. It is best when used as a guide,
and not as a prescription. Successful businesses build on their strengths, correct their
weakness and protect against internal weaknesses and external threats. They also
keep a watch on their overall business environment and recognize and exploit new
opportunities faster than its competitors.

SWOT Analysis helps in strategic planning in following manner:

1. It is a source of information for strategic planning.
2. Builds organization’s strengths.
3. Reverse its weaknesses.
4. Maximize its response to opportunities.
5. Overcome organization’s threats.
6. It helps in identifying core competencies of the firm.
7. It helps in setting of objectives for strategic planning.
8. It helps in knowing past, present and future so that by using past and
current data, future plans can be chalked out.

SWOT Analysis provide information that helps in synchronizing the firm’s

resources and capabilities with the competitive environment in which the firm
operates.

The SWOT Analysis Framework

 The Limitations of SWOT Analysis

SWOT Analysis is not free from its limitations. It may cause organizations to
view circumstances as very simple because of which the organizations might overlook
certain key strategic contact which may occur. Moreover, categorizing aspects as
strengths, weaknesses, opportunities and threats might be very subjective as there is
great degree of uncertainty in market. SWOT Analysis does stress upon the
significance of these four aspects, but it does not tell how an organization can identify
these aspects for itself.

There are certain limitations of SWOT Analysis which are not in control of
management. These include-
1. Price increase;
2. Inputs/raw materials;
3. Government legislation;
4. Economic environment; and
5. Searching a new market for the product which is not having overseas
market due to import restrictions; etc.

Internal limitations may include-

1. Insufficient research and development facilities;
2. Faulty products due to poor quality control;
3. Poor industrial relations; and
4. Lack of skilled and efficient labour; etc.

SWOT Analysis of Starbucks

 Starbucks is a globally recognized coffee and beverages brand that has rapidly
made strides into all major markets of the world. The company has a lead over its
nearest competitors including Barista and other emerging competitors. Indeed,
Starbucks is so well known throughout the western hemisphere that it has become a
household name for coffee.

Strengths
 The main strength of Starbucks is its strong financial performance which has
resulted in the company occupying the number one spot among coffee and
beverage retailers in the world
 The company is valued at more than $4 Billion which is a key strength when
compared to its competitors
 The intangible strengths of Starbucks include its top of the mind recall among
consumers and by virtue of its brand, which symbolizes excellence, and quality
at an affordable rate, the company enjoys a dominant position in the
worldwide market for coffee and beverages.
 The company is the largest coffeehouse in the world and because of its size
and high volumes; it can afford to price its products in the premium as well as
the middle tier range to attract more consumers.
 The company is known for its pioneering people management in an industry
where people skills and soft skills make the difference between success and
failure. In other words, Starbucks has actualized a positive and welcoming
workplace for its employees, which translates into happier associates serving
customers in a superior way leading to all round benefits for the company.

Weaknesses
 The company is heavily dependent on its main and key input, which is the
coffee beans and hence, is acutely dependent on the price of coffee beans as a
determinant of its profitability. This means that Starbucks is overly price
sensitive to the fluctuations in the price of coffee beans and hence, must
diversify its product range to reduce the risk associated with such dependence.
 The company has come under fire in recent times for its procurement
practices with many social and environmental activists pointing to the
unethical procurement practices of coffee beans from impoverished third
world farmers. Further, the company has also been accused of violating the
“Fair Coffee Trade” principles that were put in place a few years ago to tackle
this precise problem.
 The company prices its products in the premium to the middle tiers of the
market segment which places its products outside the budgets of many
working consumers who prefer to frequent McDonald’s and other outlets for
their coffee instead of Starbucks.
 The company must immediately diversify its product range if it has to
compete with full spectrum competitors like McDonald’s and Burger King in
the breakfast segment which is rapidly growing as a consequence of
compressed schedules of consumers who would like to grab a bite and drink
something instead of making it at home.

Opportunities
 The company has an opportunity to expand its supplier network and expand
the range of suppliers from whom it sources in order to diversify its sources of
inputs and not be at the mercy of whimsical suppliers. Further, this would also
help the company in becoming less sensitive to the prices of coffee beans and
make it resilient against supply chain risks.
 The company has a huge opportunity waiting for it as far as its expansion into
the emerging markets is concerned. With a billion consumers likely to join the
pool of those who want instant coffee and breakfast in China and India, the
company can expand into these countries and other emerging markets, which
represents a lucrative opportunity for the taking.
 Starbucks also has the opportunity to expand its product offerings to take on
the full spectrum food and beverage retailers like McDonald’s and Burger
King as the consumer segment which these retailers target is expanding
leading to more business opportunities for Starbucks to take advantage of.
 The company can significantly expand its network of retail stores in the
United States as part of its push towards greater market share and more
consumer segments. This opportunity ties in with the other opportunities
described above related to the expansion into newer markets, diversifying into
newer consumer segments, and increasing its footprint across the US and
globally.

Threats
 The company faces threats from the rising prices of coffee beans and is
subject to supply chain risks related to fluctuations in the prices of this key
input. Further, the increase in the prices of dairy products impacts the
company adversely leading to another threat to its profitability.
  The company is beset with trademark and copyright infringements from
lesser-known rivals who wish to piggyback on its success. As with other
multinational retailers in the emerging markets, Starbucks has fought litigation
against those misusing its brand and famous logo.
 The company faces intense competition from local coffeehouses and specialty
stores that give the company a run for its money as far as niche consumer
segments are concerned. In other words, the company faces a tough challenge
from local stores that are patronized by a loyal clientele, which is not
enamored of big brands.
 Starbucks has to expand into emerging markets as a necessity as the developed
markets that it has traditionally relied on are saturated and given the fact that
the ongoing recession has made the going tough for many retailers, it faces
significant threats from this aspect.
 Finally, as mentioned earlier, Starbucks faces significant challenges because of
its global supply chain and is subject to disruptions in the supply chain
because of any reason related to either global or local conditions.

The Competitor Analysis - Meaning, Objectives and Significance

Organizations must operate within a competitive industry environment. They

do not exist in vacuum. Analyzing organization’s competitors helps an organization
to discover its weaknesses, to identify opportunities for and threats to the
organization from the industrial environment. While formulating an organization’s
strategy, managers must consider the strategies of organization’s competitors.
Competitor analysis is a driver of an organization’s strategy and effects on how firms
act or react in their sectors. The organization does a competitor analysis to
measure/assess its standing amongst the competitors.

Competitor analysis begins with identifying present as well as potential

competitors. It portrays an essential appendage to conduct an industry analysis. An
industry analysis gives information regarding probable sources of competition
(including all the possible strategic actions and reactions and effects on profitability
for all the organizations competing in the industry). However, a well-thought
competitor analysis permits an organization to concentrate on those organizations
with which it will be in direct competition, and it is especially important when an
organization faces a few potential competitors.
 Michael Porter in Porter’s Five Forces Model has assumed that the
competitive environment within an industry depends on five forces - Threat of new
potential entrants, Threat of substitute product/services, bargaining power of
suppliers, bargaining power of buyers, Rivalry among current competitors. These five
forces should be used as a conceptual background for identifying an organization’s
competitive strengths and weaknesses and threats to and opportunities for the
organization from its competitive environment.

The main objectives of doing competitor analysis can be summarized

asfollows:
 To study the market;
 To predict and forecast organization’s demand and supply;
 To formulate strategy;
 To increase the market share;
 To study the market trend and pattern;
 To develop strategy for organizational growth;
 When the organization is planning for the diversification and expansion plan;
 To study forthcoming trends in the industry;
 Understanding the current strategy strengths and weaknesses of a competitor
can suggest opportunities and threats that will merit a response;
 Insight into future competitor strategies may help in predicting upcoming
threats and opportunities.

Competitors should be analyzed along various dimensions such as their size,

growth and profitability, reputation, objectives, culture, cost structure, strengths and
weaknesses, business strategies, exit barriers, etc.

The Porter’s Five Forces Model of Competition

Michael Porter (Harvard Business School Management Researcher) designed

various vital frameworks for developing an organization’s strategy. One of the most
renowned among managers making strategic decisions is the five competitive forces
model that determines industry structure. According to Porter, the nature of
competition in any industry is personified in the following five forces:
1. Threat of new potential entrants
2. Threat of substitute product/services
3. Bargaining power of suppliers
 4. Bargaining power of buyers
5. Rivalry among current competitors

Porter’s Five Forces model

The five forces mentioned above are very significant from point of view of
strategy formulation. The potential of these forces differs from industry to industry.
These forces jointly determine the profitability of industry because they shape the
prices which can be charged, the costs which can be borne, and the investment
required to compete in the industry. Before making strategic decisions, the managers
should use the five forces framework to determine the competitive structure of
industry.

Let’s discuss the five factors of Porter’s model in detail:

1. Risk of entry by potential competitors: Potential competitors refer to the
firms which are not currently competing in the industry but have the potential
to do so if given a choice. Entry of new players increases the industry
capacity, begins a competition for market share and lowers the current costs.
The threat of entry by potential competitors is partially a function of extent of
barriers to entry. The various barriers to entry are:
 Economies of scale
 Brand loyalty
 Government Regulation
 Customer Switching Costs
 Absolute Cost Advantage
 Ease in distribution
  Strong Capital base

2. Rivalry among current competitors: Rivalry refers to the competitive

struggle for market share between firms in an industry. Extreme rivalry
among established firms poses a strong threat to profitability. The strength of
rivalry among established firms within an industry is a function of following
factors:
 Extent of exit barriers
 Amount of fixed cost
 Competitive structure of industry
 Presence of global customers
 Absence of switching costs
 Growth Rate of industry
 Demand conditions

3. Bargaining Power of Buyers: Buyers refer to the customers who finally

consume the product or the firms who distribute the industry’s product to the
final consumers. Bargaining power of buyers refer to the potential of buyers
to bargain down the prices charged by the firms in the industry or to increase
the firms cost in the industry by demanding better quality and service of
product. Strong buyers can extract profits out of an industry by lowering the
prices and increasing the costs. They purchase in large quantities. They have
full information about the product and the market. They emphasize upon
quality products. They pose credible threat of backward integration. In this
way, they are regarded as a threat.

4. Bargaining Power of Suppliers: Suppliers refer to the firms that provide

inputs to the industry. Bargaining power of the suppliers refer to the potential
of the suppliers to increase the prices of inputs( labour, raw materials, services,
etc.) or the costs of industry in other ways. Strong suppliers can extract
profits out of an industry by increasing costs of firms in the industry.
Suppliers’ products have a few substitutes. Strong suppliers’ products are
unique. They have high switching cost. Their product is an important input
to buyer’s product. They pose credible threat of forward integration. Buyers
are not significant to strong suppliers. In this way, they are regarded as a
threat.
 5. Threat of Substitute Products: Substitute products refer to the products
having ability of satisfying customers’ needs effectively. Substitutes pose a
ceiling (upper limit) on the potential returns of an industry by putting a setting
a limit on the price that firms can charge for their product in an industry.
Lesser the number of close substitutes a product has, greater is the
opportunity for the firms in industry to raise their product prices and earn
greater profits (other things being equal).

The power of Porter’s five forces varies from industry to industry. Whatever
be the industry, these five forces influence the profitability as they affect the prices,
the costs, and the capital investment essential for survival and competition in
industry. This five forces model also help in making strategic decisions as it is used by
the managers to determine industry’s competitive structure.

Porter ignored, however, a sixth significant factor- complementaries. This

term refers to the reliance that develops between the companies whose products
work is in combination with each other. Strong complementors might have a strong
positive effect on the industry. Also, the five forces model overlooks the role of
innovation as well as the significance of individual firm differences. It presents a
stagnant view of competition.

LESSON IV
Competitive Advantage in the Field of Strategic Management

It is a truism that strategic management is all about gaining and maintaining

competitive advantage. The term can be defined to mean “anything that a firm does
especially well when compared with rival firms”. Note the emphasis on comparison
with rival firms as competitive advantage is all about how best to best the rivals and
stay competitive in the market.

Competitive advantage accrues to a firm when it does something that the

rivals cannot do or owns something that the rival firms desire. For instance, for
some firms, competitive advantage in these recessionary times can mean a hoard of
cash where it can buy out struggling firms and increase its strategic position. In other
cases, competitive advantage can mean that a firm has lesser-fixed assets when
compared to rival firms, which is again a plus in an economic downturn.
What is Sustained Competitive Advantage?

We have defined what competitive advantage is as it relates to strategic

management and the sources of competitive advantage differing from firm to firm.
However, a firm can have a source of competitive advantage for only a certain period
because the rival firms imitate and copy the successful firms’ strategies leading to the
original firm losing its source of competitive advantage over the longer term.
Hence, it is imperative for firms to develop and nurture sustained competitive
advantage.

This can be done by:

1. Continually adapting to the changing external business landscape and
matching internal strengths and capabilities by channelling resources and
competencies in a fluid manner.
2. By formulating, implementing, and evaluating strategies in an effective manner
which make use of the factors described above.
 Application

Lets do the assessment again in the pre-discussion part ●

CHOOSE ME. Choose among the following words which the statement
below describes. Write your answer in the space provided.

WEAKNESSES
DRUCKER PORTER
COMPETITIVE
COMPETITION
RIVALRY
SUBSTITUTE
COMPARATIVE

1. These are qualities that enable us to accomplish the organization’s

mission.
2. He has assumed that the competitive environment within an
industry depends on five forces
3. It refers to the competitive struggle for market share between
firms in an industry.
4. This refer to the products having ability of satisfying customers’
needs effectively.

5. It is advantage that accrues to a firm when it does something thatthe rivals cannot Questions:
1. How will you describe the environmental scanning process?
2. What is the importance of being familiar with the components of business
environment?
3. What is the difference between the models for strategic management (SWOT,
Porter’s and Competitor Model?
4. Why is it important for organizations to develop their competitive advantage?
Synthesis

As a strategist one must be familiar

with business environment the
organization belongs. Using the
different models, a good strategic
plan can be formulated from the
analysis made.
 MODULE III
Strategy Formulation,
Implementation
and Evaluation
Strategy Formulation, Implementation and Evaluation

Overview of the Module

Congratulations! You are now on the third module of the course. How are you
doing so far? Hope you are not feeling exhausted. Because things will get more exciting
as you will be developing your Strategic Plan in the coming weeks.
In this module you will learn about the following topic:
• Strategy Formulation
• Strategy Implementation
• Strategy Evaluation
By the end of the module for each of the topic you are expected to:
• Describe the process of strategy formulation on specific business
organizations
• Describe the process of strategy evaluation
• Explain the strategy implementation and resource mobilization

Ready or not here we go! ●

Activity

Let us have an activity before we get started

with the discussion.

Application
GUESS ME. Identify the word/s which the statement below describes. Write
your answer in the space provided.
1. It is the last stage of strategic management
2. It is an ongoing process to develop and revise
future-oriented strategies that allow an organization to achieve its objectives,
considering its capabilities, constraints, and the environment in which it
operates.
3. It is the standard which actual performance is being
compared to.
4. It is concerned with the overall purpose and scope
of the business to meet stakeholder expectations. Corporate level strategy is
often stated explicitly in a "mission statement".
5. The first phase of strategy formulation process.
6. It is the translation of choses strategy into action
enable to achieve the goals and objectives set.
7. It is the difference between the actual performance
and the standard measure of performance.
8. The action that is being implemented for the issue
identified by the strategist.
9. It is the first step in the evaluation process starts.
10. It is a strategy where groups of specialists actually
create value for the organization.
Discussion
After an organization undergone environmental scanning—external and internal, the
next step is to formulate a strategy. However, as we have discussed in the previous
modules it must be carefully done. The process which the organization should take
should be aligned with the identified gaps and basic parts. Since the strategic plan is
the final output of the module, I hope that you are settled now with the organization
you are going to be your case study.

LESSON I
Strategy Formulation

The first step in forming a strategy is to review the information gleaned from
completing the analysis. Determine what resources the business currently has that can
help reach the defined goals and objectives. Identify any areas of which the business
must seek external resources. The issues facing the company should be prioritized by
their importance to your success. Once prioritized, begin formulating the strategy.
Because business and economic situations are fluid, it is critical in this stage to develop
alternative approaches that target each step of the plan.
It is useful to consider strategy formulation as part of a strategic management
process that comprises three phases: diagnosis, formulation, and implementation.
Strategic management is an ongoing process to develop and revise future-oriented
strategies that allow an organization to achieve its objectives, considering its
capabilities, constraints, and the environment in which it operates.
Formulation includes the production of a clear set of recommendations, with
supporting justification, that revise as necessary the mission and objectives of the
organization and supply the strategies for accomplishing them. In formulation, we are
trying to modify the current objectives and strategies in ways to make theorganization
more successful. This includes trying to create "sustainable" competitive advantages
-- although most competitive advantages are eroded steadily by the efforts of
competitors.
Primary Steps in Strategy Formulation
I. Reviewing the current key objectives and strategies of the
organization, which usually would have been identified and evaluated as part
of the diagnosis.
II. Identifying a rich range of strategic alternatives to address the
three levels of strategy formulation outlined below, including but not limited
to dealing with the critical issues.
III. Doing a balanced evaluation of advantages and disadvantages of
the alternatives relative to their feasibility plus expected effects on the issues
and contributions to the success of the organization.
IV. Deciding on the alternatives that should be implemented or
recommended.

Levels of Strategy Formulation

I. Corporate Level Strategy. Corporate level strategy is concerned
with the overall purpose and scope of the business to meet stakeholder
expectations. Corporate level strategy is often stated explicitly in a "mission
statement". This is the "big picture" view of the organization and includes
deciding in which product or service markets to compete and in which
geographic regions to operate.
II. Competitive Strategy or Business Level Strategy. Competitive
Strategy, often called Business Level Strategy, involves deciding how the
company will compete within each line of business (LOB) or strategic business
unit (SBU). Business level strategy is the level at which business unit managers
set the direction for their products and markets to exploit value- creating
opportunities.
III. Functional Level Strategy. Functional Level Strategy is where
groups of specialists actually create value for the organization. Functional- level
strategies are concerned with coordinating the functional areas of the
organization (marketing, finance, human resources, production, research and
 development, etc.) so that each functional area upholds and contributes to
individual business-level strategies and the overall corporate-level strategy.This
involves coordinating the various functions and operations needed to design,
manufacturer, deliver, and support the product or service of each business
within the corporate portfolio.
LESSON II
Strategy Implementation
Successful strategy implementation is critical to the success of the business
venture. This is the action stage of the strategic management process. If the overall
strategy does not work with the business' current structure, a new structure should be
installed at the beginning of this stage. Everyone within the organization must be made
clear of their responsibilities and duties, and how that fits in with the overall goal.
Additionally, any resources or funding for the venture must be secured at this point.
Once the funding is in place and the employees are ready, execute the plan.

In short, strategy implementation is the translation of choses strategy into action

enable to achieve the goals and objectives set. It can also be defined as the manner
when organization restructures the systems based from the strategies. The organization
further allocates funds to support the realization of the set goals and objectives and be
able to support the enhancement of the employees.

Steps in Implementing a Strategy

Following are the main steps in implementing a strategy, this is based from
Management Study Guide. com:

Developing an organization having potential of carrying out strategy

successfully.
Disbursement of abundant resources to strategy-essential activities.
Creating strategy-encouraging policies.
Employing best policies and programs for constant improvement.
Linking reward structure to accomplishment of results.
Making use of strategic leadership.

Strategies that are formulated with great effort will not be effective if it will not be
implemented properly. There is also a need to have the and stable organization along
with its dimensions will provide greater chances to have successful implementation.

However, it can also provide challenges and even threats to the people involve in the
organization. The new created system in the organization will provide powers and thus
will change the dimensions in the organization (norms, values, culture etc.)
 Strategy Formulation vs Strategy Implementation

What differs implementation from formulation? Let us look at the differences

between the two. ●

Strategy Formulation Strategy Implementation

Strategy Formulation includes planning Strategy Implementation involves all
and decision-making involved in those means related to executing the
developing organization’s strategic goals strategic plans.
and plans.
In short, Strategy Formulation is placing In short, Strategy Implementation is
the Forces before the action. managing forces during the action.
Strategy Formulation is an Strategic Implementation is mainly an
Entrepreneurial Activity based on Administrative Task based on strategic
strategic decision-making. and operational decisions.
Strategy Formulation emphasizes on Strategy Implementation emphasizes on
effectiveness. efficiency.
Strategy Formulation is a rational Strategy Implementation is basically an
process. operational process.
Strategy Formulation requires co- Strategy Implementation requires co-
ordination among few individuals. ordination among many individuals.
Strategy Formulation requires a great deal Strategy Implementation requires specific
of initiative and logical skills. motivational and leadership traits.
Strategic Formulation precedes Strategy Strategy Implementation follows Strategy
Implementation. Formulation.

Source: Management Study Guide (2020)

LESSON III
Strategy Evaluation
Strategy evaluation and control actions include performance measurements,
consistent review of internal and external issues and making corrective actions when
necessary. Any successful evaluation of the strategy begins with defining the
parameters to be measured. These parameters should mirror the goals set in Stage 1.
Determine your progress by measuring the actual results versus the plan. Monitoring
internal and external issues will also enable you to react to any substantial change in
your business environment. If you determine that the strategy is not moving the
company toward its goal, take corrective actions. If those actions are not successful,
then repeat the strategic management process. Because internal and external issues
are constantly evolving, any data gained in this stage should be retained to help with
any future strategies.

Strategy Evaluation Process and its Significance

It is important that the strategies that has been formulated and implemented
will be evaluated. This will show if the strategy has given light on whether has been
efficient or not. It is the final stage of strategic management. It is considered as a state
in which the organization will know if they are set to achieve their goals. Furthermore,
the strategy evaluation looks into the coordination between the functional units in the
organization. It also focuses on how the inputs of the organization being organized
have the strategic plan be implemented properly. This will also provide important
feedback for the improving the incentives and other concerns for the organization.

The process of Strategy Evaluation consists of following steps:

Fixing benchmark of performance – the organization should have the
performance indicator enable to identify and express the needed requirements for the
tasks to be done. The criteria can be qualitative or quantitative for the evaluation. This
would also give a comprehensive assessment of the performance. The
Quantitative data can be in terms of profit, return on investment, costs etc. The
qualitative factors can cover the factors of competencies, potentials, and the like.
Measurement of performance – when the benchmark is already set the actual
performance will now be compared. The system of reporting and communication will
aid in measuring the performance. If the performance indicators are set properly the
evaluation will be easy. However, there are instances that thereare some indicators are
not easy to understand or measure. There may also be a conflict between the
departmental versus individual performance indicators. Thus,the organization should
carefully craft the indicators so they will lessen confusion in the evaluation process and
the evaluation will serve its process. Documents especiallyfinancial statements can be
use as bases for analysis.
Analyzing Variance – After the actual performance and the standard
performance are compared, variances will be analyzed. The person in charge for
strategizing will evaluate the level of tolerance between the variance between the actual
and standard performance. They will also determine on the level that can be accepted.
The positive deviation will indicates that the variance is unusual while negative
deviation will indicate there is an issue that needs to be addressed by the organization.
Thus, the organization shall now dig deeper to determine and make corrective action
to address the concerns.
Taking Corrective Action – after the deviation has been identified, the
needed corrective action. The detailed analysis will be done along with the different
factors needed to be analyzed. If for an instances an indicator does not match with
the performance the standards must be revised. The other thing the strategist can do
is to reformulate the strategy. Thus, this will also require a drastic measure to have
everything aligned along with the resources.
Application

Let’s answer again the pre-discussion activity.

GUESS ME. Identify the word/s which the statement below describes. Write your
answer in the space provided.
1. It is the last stage of strategic management
2. It is an ongoing process to develop and revise future-
oriented strategies that allow an organization to achieve its objectives, considering
its capabilities, constraints, and the environment in which it operates.
3. It is the standard which actual performance is being
compared to.
4. It is concerned with the overall purpose and scope of the
business to meet stakeholder expectations. Corporate level strategy is often stated
explicitly in a "mission statement".
5. The first phase of strategy formulation process.
6. It is the translation of choses strategy into action enable
to achieve the goals and objectives set.
7. It is the difference between the actual performance and
the standard measure of performance.
8. The action that is being implemented for the issue
identified by the strategist.
9. It is the first step in the evaluation process starts.
10. It is a strategy where groups of specialists actually create
value for the organization.
Questions:
5. Describe the strategy formulation process.
6. How will the strategy implementation helps the organization.
7. Describe the essential steps of strategy evaluation in strategic planning and
management.

Synthesis

The three stages in

strategic
management is
formulation,
implementation, and
evaluation.