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Strategic Management: A Step by Step Guide to the Final Paper

Professor Naomi Martin Masters in Business Administration Ateneo Graduate School of Business

Authored by Professor Naomi Martin Strategic Management: A Step by Step Guide to the Final Paper

This document provides an overview of the expectations from the strategic management paper with guidance on the general story flow, key points in each section which serve to lead into the next section, and reminders on the proper application of each tool . Questions to anticipate in each section are also provided to guide the students in ensuring completeness and relevance of statements included in the paper.

General Tips

Always distinguish between knowledge (facts which can be supported by data) and your belief. The first parts of the paper (Background, External and Internal Analysis) should be based on knowledge and research culled from credible sources (publications, relevant firsthand interviews, books, videos that can be referenced). The authors opinions generally come into play in the sections explaining the IFE and EFE, analysis of the strategic recommendations and action planning.
Formatting Tips

This section should give the readers an overview of the business and the industry it participates in, its biggest present and future challenges from both an external and internal perspective, the key objectives for the company based on the strategic issues identified (financial and strategic objectives) and the recommended strategies and action plans to achieve the objectives. The Executive Summary sets the stage for the readers to focus on key sections of the paper that gives evidence for the conclusions highlighted therein. Make sure this section answers the following questions: 1. What is this companys business and what specific industry does it participate in? Is there anything special about this industry in terms of trends, past performance and future growth prospects? 2. Where is the company going? What are its aspirations? 3. Where is it right now? 4. What are the critical success factors in this industry and how competitive is the company? 5. What external and internal factors are hindering it from getting to its mission/ vision? 6. What financial and strategic issues must be addressed to get it on its course towards the mission and vision?

The syllabus requires that the ES should be a maximum of 2 pages.

Do this portion last, after completing all the required analysis on the entire paper. You know that you have understood your paper very well when you have been able to write an accurate and concise Executive Summary. Have several people read the Executive Summary and validate if their understanding of your key points are similar to yours.

Authored by Professor Naomi Martin Strategic Management: A Step by Step Guide to the Final Paper


This section should give the readers clear picture of the subject company and all the required data in about 2-3 pages. It should, UPFRONT include data on
! ! ! ! ! ! ! ! !

General Tips
This section should contain FACTS culled from research into the companys financial reports, book chapters on the industry and company if any, printed and online reports, firsthand, wellquoted interviews. All facts must be referenced appropriately. Specific numbers should be stated instead of just vague generalizations. Be specific but relevant in the data you choose to include.

the nature of the business its specific product categories and services and an example of any of its famous brands shareholding if relevant major markets served in terms of demography and geography current revenue size and growth rates current profits as a percentage % of sales and growth rates number of employees number of plants/ factories if applicable relevant historical milestones

It should also include a brief background of the industry , its current size and growth rates and any significant trends around the industry

X The company has existed for a long time and is run as a family business " The company was founded in 1982 and has operated as a single proprietorship for 10 years until its incorporation in 1992. It is run by Mr Jun Go with members of his immediate family in 5 of the key management committee positions. X The company participates in a sunset industry. " Company A holds 20% market share in the photocopying industry, which has seen a steady decline in growth rates since 2007. The 2010 growth rate was at (6%), worse than the two previous years rates (-2% for 2008 and -3% for 2009), shrinking the entire industry by 50million pesos in 3 years.

LINKING THE STORY : WHAT IS THIS BACKGROUND SETTING THE STAGE FOR? You are telling your readers about the company to give them idea of its history, its mandate, its current status in terms of finances (revenue and profit) its capability, and its standing within the industry. This sets the stage for your reader to see where you would like to take a company like this, which will be seen in the Mission and Vision analysis.

Make sure this section answers the following questions: 1. Is the companys business clear enough for me to describe why it is capable (from a financial and capability perspective) of aspiring for its vision? 2. Is the description setting the stage for issue identification in later chapters?

Authored by Professor Naomi Martin Strategic Management: A Step by Step Guide to the Final Paper


In this section you must write ALL data and information sources , classified into print, online, other media, interviews (specify the company and position of individuals interviewed) Specify methodologies you employed in coming up with conclusions for items where data was not readily available. For example, if you estimated the market share using different sources of data, through in-store observation, or through other means besides looking for a formal market share table, describe that methodology in this chapter. Spend a maximum of one paragraph explaining why certain critical data have not been obtained, and what databases have been exhausted in pursuit of such data. In the absence of published information, write how you tired to fill in and the basis of your assumptions on critical items such as your industrys growth (past growth and future forecasts), your competitions financial trends, and other competitive information.

General Tips
This is the ONLY part of the paper where you are allowed to put explanations on limited data. Write it all down here and get it over with. After this section, the readers will have an idea of which information or conclusions are based on assumptions and how you made them.


Remember the basic framework for any business; and you must take the mindset throughout the rest of your paper to discuss elements and topics in accordance with basic goals:

Goal is to increase What external factors have or will potentially increase (opportunities) or decrease (threats) What internal factors have or will help increase (strenghts) or decrease (weaknesses)

Goal is to decrease What external factors have or will potentially increase (threats) or decrease (opportunities) What internal factors have or will help increase (weaknesses) or decrease (strenghts)

Goal is to increase What external factors have or will potentially increase (opportunities) or decrease (threats) What internal factors have or will help increase (strenghts) or decrease (weaknesses)

Authored by Professor Naomi Martin Strategic Management: A Step by Step Guide to the Final Paper


The purpose of this section is for you to demonstrate, based on the company background and industry status, where this company CAN be in 35 years, assuming it is able to overcome the critical barriers to success. If the mission and vision is acceptable based on Davids criteria, give your recommendations on how it can be communicated to its stakeholders. Mission statements should be reconciliatory and should address all stakeholders. Make sure that is broad enough to cover the companys present AND potential future businesses (should a strategy of diversification or integration be beneficial). Remember that we are also looking for a reference to ethics and nationbuilding : How does and will your business contribute to building the country ?

General Tips It is not acceptable to simply state present or absent when doing the critique based on Davids framework. A commentary on the impact of the present elements and how the absent elements can be formulated is needed. Dont Forget This! The most often-missed element in the revised vision statement is the year/ period when the vision is anticipated to be accomplished.

LINKING THE STORY : WHAT IS THIS PORTION SETTING THE STAGE FOR? You are setting the stage for the readers to share a vision of the company in the specified timeframe. You will try to make them believe that this state is attainable if the company follows the strategy that you will propose. Be careful thus not to overpromise, nor to underestimate. The vision will be the entire basis for the strategic objectives.

Test it with a friend! Make sure this section answers the following questions:

Is the companys vision and mission clear and inspiring enough for people to want to work there or to partner with the company? Can you imagine the company as you have described it 3-5 years down the road? Can you safely and confidently put this mission and vision in the speeches of the CEO to the stakeholders or on a plaque on the wall of its office for all to see?

Authored by Professor Naomi Martin Strategic Management: A Step by Step Guide to the Final Paper

LINKING THE STORY : WHAT THE NEXT SECTION SHOULD BE ALL ABOUT Now that you have described the company and demonstrated where it can go in 3-5 years, it is time to describe for the readers the factors that will HELP and HINDER this company from achieving that vision. This is the basis for the External and Internal Analysis: factors you identify are either drivers or barriers to success, with success described as the attainment of the vision. BEFORE YOU GO ANY FURTHER, MAKE SURE YOU KNOW WHAT THE BUSINESS IS ABOUT!!!! At every step, ask: What Political Economic Social/ Demographic Technological TRENDS will affect these steps such that a. the companys revenue will either increase or decrease b. the companys costs will either increase or decrease c. the companys profits will either increase of decrease
Figure 1:







Figure 2

Technological Economic Sociologic/ Demographic

Political/ Legal

Company value chain

Competitive Movements

Authored by Professor Naomi Martin Strategic Management: A Step by Step Guide to the Final Paper


This section shows your reader the external PESTC factors that affect your industrys ability to grow, and you companys ability to reach its vision in the next 3-5 years within that industry. This is not merely a laundry list of PESTC factors. You have to prioritize which one is most important and arrange your essay accordingly. Put only the factors that are relevant to your paper, and as emphasized by the syllabus, exert a significant impact on your industry. If you cannot link a factor directly to the ability to influence your attainment of the vision, do not force it! Make sure this section answers the following questions:

General Tips
THIS SECTION IS CALLED EXTERNAL ANALYSIS, NOT EXTERNAL DESCRIPTION. Don't just describe the factor--analyze what the trend in that factor means for your current and future business!

As I pick out a factor to describe, does it impact my value chain (as described in Figure 1 and 2) insofar as increasing revenue, decreasing costs and increasing profits? Does the trend make it harder or easier to secure funding (through debt or equity) and support to grow the business? Did I describe a TREND, not just a one-time status? Did I make an analysis of the past trend and forecasted a future trend for the factor? X The industry had a 14% growth from last year. " The industry has demonstrated a robust double-digit growth of 10-14% for the past 3 years and is expected to continue to grow from 8-9% for the next 3 years. There is a pending bill in Congress that may increase costs of production by 4% and but this is expected to be deprioritized for the next session in 2013.

TRENDS are always better than one-year snapshots. Has the factor been intensifying or diminishing? What is the impact of that development?

WRITING TIPS All descriptions must be referenced! State the actual figures, not just your beliefs on them.

X The economy of the Philippines is booming " Philippine GDP growth has been at 5-6% over the last 3 quarters and is expected to remain robust at 5% for 2013


Does the trend help or hinder the companys market demand, ability to offer current and future products, advantage or disadvantage the competitors, affect the suppliers or distributors, labor force and ability to compete ethically?

LINKING THE STORY: WHAT IS THIS PORTION SETTING THE STAGE FOR? This portion should enable the readers to predict the presence and ranking of the various factors on the EFE table. As you describe the factors, use language to emphasize which is most important and thus needs to be addressed by the company. This is the most critical factor for the company to address to maintain profitability NO SURPRISE FACTORS ON THE EFE! It should be a summary of all relevant factors already discussed, ranked according to impact to the business. Thus spend more time explaining your companys scores


Authored by Professor Naomi Martin Strategic Management: A Step by Step Guide to the Final Paper


This section should reflect the history, status and forecasted future of the entire industry as supported by Porters 5 factors analysis and an in-depth discussion of the characteristics and competitiveness of the major players/competitors in the industry. Make sure this section answers the following questions:
! ! ! !


What is the market size and growth over the last few years? What is the forecasted growth and why? Did I show a market share trend over the past 3 years? Who are my major competitors and what are their revenue sizes, growth rates, key competitive strategies? Did I demonstrate and forecast for the next 3-5 years (based on solid research) the industrys o o o o Customer growth, change in customer profile Production methods Mergers and acquisitions, partnerships Present and future issues/ problems

What is the effect of each force to the companys profits? Does it have to spend more to get the supply? Does it have to spend to defend itself against new entrants and substitutes? Does rivalry cut into revenues and thus profits? The conclusion of Porters is not just attractive or not attractive but it should tell you the most critical elements that impact profit.
X The analysis shows that this industry is not an attractive one. " The analysis shows that profits in this industry may be limited by the ease of entry of new competition, which magnifies the already intense rivalry for a shrinking customer pool. Thus, to be a successful player in this industry, a company must continuously invest in innovation and differentiation.

What does it take to be a successful player in this industry?

LINKING THE STORY: WHAT IS THIS PORTION SETTING THE STAGE FOR? This portion should enable the readers to understand the CRITICAL SUCCESS FACTORS to compete and achieve goals in this industry. If those are the PEST factors to consider, and the Porters showed that those are the forces to contend with, then to be successful a company must have or focus on!.. THIS WILL BE THE BASIS FOR YOUR COMPETITIVE PROFILE MATRIX (CPM). NO SURPRISE FACTORS ON THE CPM! It should be a summary and numerical representation of all critical factors to compete well in the industry, and how each major competitor responds to those factors. The CPM usually reflects the competitive share of the player in the market.

Authored by Professor Naomi Martin Strategic Management: A Step by Step Guide to the Final Paper

LINKING THE STORY : WHAT THE NEXT SECTION SHOULD BE ALL ABOUT Using the EFE, you have described the external factors that help or hinder the industrys growth and your evaluation of how your company has been able to respond to these factors. Using the CPM, you compared the performance of your company on the critical success factors versus its competitors, justifying its market rank and thus its competitiveness in the operating environment. Now it is time to show WHY the company performed as such, with an analysis of its INTERNAL ENVIRONMENT. You thus have to ensure that the next section is built to link to the explanation of the EFE score and the CPM score. INTERNAL ANALYSIS: LOOKING FOR STRENGTHS AND WEAKNESSES
According to the syllabus you must FIRST, review the companys performance
! ! !

Revenue/ sales in the past 3 years; compute for yearly growth Profits in the past 3 years How does the companys growth compare to industry growth? Conclude

The different auditing tools (Davids Functional, McKinsey 7S, Weisbord) serve as a checklist for you to ensure that you are not missing any relevant factor when you audit. This section, however, is not meant to be just a laundry list of factors. The entire section MUST SHOW FROM THE WAY IT IS WRITTEN what the most important factors contributing to the evaluation in the EFE and CPM are. You are at liberty to arrange the functional audit, the 7S or the Weisbord in the order of importance to your industry. The section is capped by a summary which is the IFE matrix. NO SURPRISES IN THE IFE MATRIX! It is but a numerical representation of the factors you already discussed, ranked / weighted according to impact and scored according to how the company is reinforcing its strengths and doing something to correct its weaknesses. Thus spend more time explaining the way you scored the company.

LINKING THE STORY : At the end of this section, your readers would have fully understood why the company has performed the way it has over the years, and how that has affected its ranking in the industry. You should have also set the stage for identifying the course of action to take in order for this company with its strengths and weaknessesto move towards its vision.

Authored by Professor Naomi Martin Strategic Management: A Step by Step Guide to the Final Paper


FIRST, HAVE A HYPOTHESIS ON THE DIRECTION YOU SHOULD TAKE. Given the competitive position and the financial status of the company, should it be aggressive, conservative or defensive? Can it reach its goals alone or does it need to partner? The tools will then help you prove your hypothesis to the reader. SWOT, SPACE, IE, GE/McKinsey , GRAND and QSPM matrices should all align towards general strategy buckets. Your strategy choices should reflect decisions on these major buckets

General Tips


Students often make a mistake on the way they state an Opportunity or Threat. It should be a description of an external trend, not an action the company should take. It should be true of the environment for all competitors. Examples:
NOT a statement of opportunity: The company should tap the female video-gamers/ entry into the female market Statement of opportunity " The female video-gamers have been increasing from 30%-40% of all video-game buyers " Purchases from females have increased by 20% in the past 3 years

Decision Bucket 1

Conservative Defensive

Decision bucket 2 : Specific

Market penetration Product development Integration Diverstification, Retrenchment Divestiture Liquidation

Decision bucket 3


Market development

Organic Joint ventures Merger or acquisition Other partnerships

You should also make that strategy choice in consideration of 1. Your industry are you in an emerging, growing, maturing or declining one 2. Your competition - are there many of you (fragmented), few /monopoly 3. Your rank are you a leader or a follower? LINKING THE STORY: WHAT IS THIS PORTION SETTING THE STAGE FOR? This portion sets the stage for your objectives. The strategy should be reflected in one or more of the key strategic objectives of the company Example Objective 1 : to become the #1 local Mexican taco fastfood company by 2016 with revenues of P50M Objective 2 : to penetrate the Metro Manila area taking 50% of the market by 2016 Objective 3 : to develop the Cebu and Davao markets with 2 branches each generating P5million by 2016 Objective 4 : to strengthen the partnership with Ayala Malls

Strategic Management:

A Step by Step Guide to the Final Paper

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BEFORE YOU PROCEED 1. Look back on the vision statement. This should guide the formulation of the objectives. a. e.g. If the vision is to be #1, the financial objectives should be the revenue equivalent to being #1. b. If the vision is to have a certain market share or rank, the revenue objective must match this rank according to projections of the revenues of the company and its competitors 2. Look back on the mission statement. If you choose a diversification, integration or product development strategy, will this still be aligned with the companys mission scope as stated?


Financial projections are critical. Make an excel sheet reflecting the revenue projections of the company and its competitors, the growths per year, and the resulting market shares. Reflect on the growth needed to achieve the revenue or market share goal required. Is this realistic? How does it compare vs the industry growth? What major move should be done to achieve these required growths?

CONCEPT REVIEW The questions below should be used to guide hierarchy of strategy and to construct the strategy map, which should show how all activities and goals of each function will align towards the achievement of the corporate goals.

What businesses should we be in? How do we grow the whole company organically or through partnerships? How do we address the biggest environmental opportunities and threats?

How do we compete? Do we adopt a low-cost, differentiation or focus strategy for our business units or product segments? How do we ensure we gain market share from competitors?

How can each functional unit contribute to the business goals? How might we organize our company to successfully support the goals?

Strategic Management:

A Step by Step Guide to the Final Paper

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CORPORATE LEVEL 1. Financial (examples) i. To achieve revenues of !! ii. To achieve a net income of!.by! iii. To increase profit margins to!.by! 2. Strategic : should match the strategy choice i. To be in the top 5 players of the industry! ii. To be recognized as the leading provider of! iii. To be the #3 player in the Cebu area! iv. To launch 5 new products in 3 years v. To successfully partner with Company V in a joint venture to penetrate the Indonesian market vi. To divest the smallest subsidiary by! vii. To diversify into the ready-to-wear category viii. To acquire a downstream retailing company ix. To open our own retail stores in Pampanga x. To open a franchise line to develop the Mindanao market

BUSINESS STRATEGIES : Should support the Financial and Strategic Objectives Examples 1. 2. 3. 4. Invest in the Non-Food packaging units and ensure market leadership in this category Launch a new line of clothing exclusively for girls 9-14 years old Develop a product for the growing population of call center agents in North Quezon City Reduce prices on the small household appliances line while maintaining price flexibility on the large household appliances business, with price increases of 5% yearly

ORGANIZATIONAL STRATEGIES 1. What changes in the structure should the company do to support the Business and Corporate objectives? 2. What new skills, capabilities and people should be added? 3. What financial (financing, investing, borrowing) strategies to be done to finance the strategies? 4. What new machines, plants, sites, operational and technological changes/ advancements should be made? 5. What internal leadership and communication styles should be instituted, if any? Authored by Professor Naomi Martin 12

Strategic Management:

A Step by Step Guide to the Final Paper


Strategy flows from the top

Vision and Mission



Organizational or Functional

2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6

REVENUES GROWTH COST OF GOODS % TO SALES GROSS MARGIN % TO SALES OPERATING COSTS ADMINISTRATIVE SALES AND MARKETING OTHERS % TO SALES NET INCOME (BEFORE TAX) % TO SALES Ensure the following: 1. The projections match the financial objectives and vision 2. The operating costs reflect the budgets for the activities suggested to reach the objectives (eg, purchase of a plant, increase in marketing and advertising , hiring more people, adding training, salary increases OR reduction in costs, shutting down facilities, letting go of employees) 3. The trends are well-explained a. Are the growths aligned and realistic? b. Are the ratios improving over the years? c. Are profits increasing in percentage and in absolute value? 4. The profits are plugged into the correct portion in the projected balance and cash flow sheets 5. Assets purchased or divested should be reflected in the balance sheets

Strategic Management:

A Step by Step Guide to the Final Paper

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What will each department do to accomplish the goals? (top 3 action items per Organizational Strategy will do) Plan Objective Timeline Person or Department Responsible Expected Output


CONCEPT REVIEW: THE BALANCED SCORECARD The elements of the balanced scorecard should flow into each other as follows:
Financial: What should we be measuring to get to the objectives and vision? Low cost airline-- revenues per plane

Customer: To get to the financial objectives, how should our customers see us? What should we be measuring to ensure that customers will continue buying? Low cost airline-- best prices, most number of flights to domestic destinations

Internal Processes: For our customers to see us this way, what internal processes should we be good at? Low cost airline --- Ground turnaround time, cost-efficient procurement of materials, availability of staff, % occupancy rate per flight

Learning and Growth : For our processes to be this good, what should our employees learn? How should they be developed? Low cost airline-- Six Sigma training for technical crew; Procurement training; HR connections with flight schools

Strategic Management:

A Step by Step Guide to the Final Paper

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BALANCED SCORECARD Example Objective: To become a 130M company by 2015 with a market share of 10%; To gain share by growing the fruit juice business unit in Visayas and Mindanao to 30M, capitalizing on product differentiation through the launch of 3 new innovative flavors and an aggressive distribution strategy in all malls OBJECTIVE Revenues MEASURE % growth TARGET 15% 10% 8% 8% 100M 110M 119M 128M 15M 25M 30M 4% 7% 8% 10& 12% 15% 20% 2013 50% 75% 100% 100% 2013 80% 50% 100% 2014 2015 2013 TIME 2012 2013 2014 2015 2012 2013 2014 2015 2013 2014 2015 2012 2013 2014 2015 Head of Juices unit Marketing Director, Head of Juice unit LEAD CEO Sales Director


Overall Yearend sales

Sales of juice unit Customer Gain share Overall Market share


Launch 3 new flavors Distribution

Fruit juice share in Visayas and Mindanao Timely launch of 3 flavors % of groceries penetrated and stocked Awareness of new brands in VisMin Trial rate Repeat purchase % of team trained on new products % of groceries mapped and approached by sales team % trained on production and distribution of new flavors

2015 2013 2014 2015 2015

R&D unit Production Distribution Manager Marketing director


Learning and Growth

Sales Training for Vismin Discovery and mapping of groceries Production line training



Head of digital publishing and HR manager



Strategic Management:

A Step by Step Guide to the Final Paper

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1. Use of the BCG matrix The BCG matrix is used to prioritize investments in products or business units within a company to yield the best returns. Companies usually invest in the Star products or services, which have a high share in a fast growing market. Companies usually deprioritize or divest Dogs, which are products not doing well in markets which are expected to decline. Cash cows are products that can continue to be milked without investing much (as they already have a high recall and loyalty among customers). COMMON MISTAKE: Categorizing the entire company as a whole. (Bench is a Star or Meralco is a cash cow) 2. Mistaking slowing of growth for no growth Just because a company grew 8% two years ago and is now growing by 6% does not mean that it is declining. It is still growing, albeit at a slower rate, perhaps in part due to the size of the base. The better way to analyze is to compare this growth with the industry and its competitors. 3. Mistaking substitutes for rivals in the Porters analysis Rivals are companies which make the same products or offer the same services most times with the same business model. Substitutes are products that are NOT similar to the offering but are patronized by the customers in lieu of the product offered by the industry. eg. Medical City, Makati Med and St. Lukes are rivals as hospitals. Their substitutes could be the diagnostic centers and standalone clinics which are not hospitals but may be patronized to get the same kind of service. 4. Not aligning market shares with financial projections As you compute for your financial projections, you should also compute for your competitors and see the resulting market shares of each. You have to determine if if the growth rates of each competitor allow them to catch up with the shares. The projections for the competition should be backed up by rational assumptions

Strategic Management:

A Step by Step Guide to the Final Paper

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