Most of today's CEOs make subjective decisions based on objective information.

In formulating
strategies, strategists consider several factors such as, but not limited to,behavioral aspects including
politics, culture, ethics, and social responsibility. Decision-making is not an easy task. As such, arriving at
a decision is also critical in the strategy formulation. Decision makers may not only use the logical and
analytical side but also the intuition and experience to make decisions. Stettinius et. al. (2005) said. "A
cornerstone of strategy formulation is determining what customers really want and need not just what
you think they want and need." In addition, knowing the sources of firm's strengths covering but not
limited to materials, manpower, methods, machine, management style, moncy, and others - create a
competitive advantage and thus, can be the basis of crafting strategy

Elements of the Formulation Stage

medium-term period. It

1. Developing a strategic vision and mission. This is about defining the business Stephen Covey states,
"Begin with the end in mind." It is a good start to think strategically about the firm's future makeup and
to form a vision of the organization in the next three to five years. A corporate vision concretely
describes how a company sees itself in the future; therefore, it must be realistic and attainable. Due to
the fast paced change in the business environment, a corporate vision is adjusted to a more basically
answer the question, "What do we want to become?" It is also good to reflect on Proverbs 4:23. " Be
careful how you think; your life is shaped by your thought.

The first step in strategic planning to visualize what the organization wants to be Setting a corporate
vision creates dreams; it actually paints a picture of the preferred future we seek to create. It visualizes
an image of how we see our purpose unfolding. Next, it inspires people. People are motivated to work
and improve towards the realization of the vision. Lastly, it provides focus because it paints one's future
direction such that all resources can be utilized efficiently and effectively.

What are the tasks that would help accomplish the realization of the vision: First, inject a sense of
purpose into the firm's activities. Second, provide a long-term direction. Third, give the firm a strong
identity. And fourth, decide "Who we are, what we do, and where we are headed to?" A firm's progress
is not going to happen until managers know where they want to go. As Helen Keller said, "The most
pathetic person in the world is someone who has sight, but has no vision."
Strategic vision normally emanates from the top management, as they give directions describe what is
going on with the firm and where the firm is headed. Thus, they are are in the best position to cven
competition based on their overview of the firm's situation. Hence, they charged to evaluate the current
position by identifying the opportunities trends, and even competition.

A good strategic vision statement should be specific, time-bound, and distinct to the organization. A
vision is a dream but it will always remain as a dream without time frame. If the stated time frame is no
longer realizable then there is a need to replace it with that which is more realistic. A strategic vision is
better stated in present tense to connote that every action performed today is a step towards realizing
the vision,Hence, the words to be" or "will be should be deleted and changed to "is" or "are".The vision
must contain simple but powerful words that should inspire and challenge every member of the
organization. Instead of saying "To be known as a world-class organization it would be better to state
We are a world class organization This invokes conviction to which every employee can and will Identify
with.

Collins and Parras (1994), in the book Built to last Successful Habits of Visionary Companies, makes
mention that truly great companies understand the difference between what should never change and
what should be open for change betweens genuindly sacred and what is not

Meanwhile, how often do we revise the vision? When is the right time to revisit the vision? Practitioners
of strategic management are usually confronted with this issue. Several factors have to be considered
when there is the intention to revise the corporate vision: time, cost, the company's current
performance, and the competencies of the members of the organization at present.

A. Time. From the planning stage up to the evaluation stage, time is of the essence. Strategies should be
timely, therefore, a significant gap between stages could drastically affect the formulation of strategies
and the outcome of strategic planning. Note the use of the term significant rather than stating a specific
measure of time.The significance of the amount of time depends on the business of the organization. A
split second decision can have a drastic effect on the operations of service related organizations versus
real-estate companies which may have to make sure of every move since mistakes will have lasting
repercussions.

B. Cost. Cost is often the cause of setbacks. The question. "Is it still worth it?" usually points back to
whether the strategy to be implemented can still be implemented, and if there are still funds to make it
happen. Most strategies, if not all, need money and will affect the revenue of the company. The
intention in life changing reviews and re-strategizing is to improve on the output of the organization; the
measure of which is almost always revenue or profit.

C. Company's Performance. Often times, the words "If it ain't broke, don't fix it," would be an excuse not
to touch anything. After all, everything is working as it should be. However, considering the factors of
time and cost, an organization which continuously produces the same revenue over time will lead
people to think that the organization has stagnated - no growth, no future, and nothing new. Therefore,
to look at the performance of the organization would mean to see the growth of the company from its
formation to present. Given the innovation in the different functional areas of the organization as it
progresses, it is important to find out if there is a significant increase in revenue/profit. If it is the desire
of the decision-makers of the organization to make the organization grow, then there is a need to revisit
the vision,

D. Workforce Competencies. Still on the subject of growth, this time, the focus is on the anticipated
increase in competency of workers and the development of their different expertise. The vision of the
company would also determine the possibility of going up the corporate ladder.

On the other hand, the mission statement provides more details about organizational goals and
describes the scope of the mission. The mission statement answers the questions, "What is our
business?" and, "Why do we exist?" The mission gives an identity or the reason of existence. Therefore,
mission statements are "enduring statements of purpose that distinguish one business from other
similar firms." The statement of purpose or strategic intent defines the business as to who is being
served or satisfied (customer), as to what is being satisfied (customer needs), and as to how these
customers needs are being satisfied (distinctive competencies). "Why would customers choose your
product or services over other competing products or services?

It is the commitment of the organization to achieve the set objectives. According to Collins and Porras
(1994), the mission statement should last at least 100 years, whereas goals and strategies can be
changed many times within 100 years. The benefits of writing down the strategic intent are as follows:

1. It compels management and employees to have a sense of direction and purpose

2. It drives strategic decision making and resource and allocations

reality. In this book, the terms goals and objectives

3. It obliges the seeking of significant performance improvements to attain objectives.

An organization's mission reflects the management's vision of what the firm seeks to do and become.
The mission is the reason for the organization's existence, and it gives a clear picture of what the firm is
trying to accomplish for its customers and other stakeholders. It also indicates its intent to stake out a
particular business position. It basically answers the query, "What business are we in?"

Effective visioning is when decision makers start by creatively stating the desired outcome, which will be
dictated by the distribution of resources and supported by organizational and managerial capabilities
accordingly. On the other hand, efficient visioning starts with utilizing the available resources and
capabilities offered by each function/ division within the organization to achieve predictable results.
Effective visioning arises out of the need for a business to operate in a more global and market-oriented
environment. Through this, the CEO and his senior officers are accountable for strategy deliverables vis-
a-vis resources provided

2. Setting measurable objectives. An objective is what one hopes to accomplish. It is a clear statement
of the exact means of measuring whether the goal has been achieved.For an objective to have
relevance, it must be SMART (Specific, Measurable, Attainable, Realistic, and Time- bound) and COW
(Communicated, Owned, and Written). Objectives should also be communicated so that these will draw
ownership. It is never safe to assume what anyone knows. Setting measurable objectives is the
cornerstone of turning what came out of the strategic planning into reality. In this book the terms goals
and objectives are used interchangeably.

Long-term objectives refer to the goals set by the organization and are intended to be achieved over a
period of three years or more. Business goals that are normally considered long term include a new
product, growing annual revenue, and developing a comprehensive marketing and public relations
strategy. Furthermore, these objectives can be chosen based on the following identified strategie
categories vis-à-vis closer to the company's mission and vision: market position, new market,
product/service mix,technology, human resources, Image, growth/diversification, and profitability.

The best ways to establish sensible objectives and to meet them are to compare or benchmark with the
performance of competitors.

3. Determining strategic posture refers to the development of a long-term vision of a firm's strategic
purpose. A strategy sets the direction of the company towards the end vision. It is important not to lose
sight of the strengths of the organization when making changes required by a new strategic direction.
Below are the guide questions in forming strategic visions:

a.What business are we in now?

b. What business do we want to be in?

C. What will our customers want in the future?

D. What are the expectations of our stakeholders?

E. Who will be our future competitors? Suppliers? Partners?

f. What should our competitive scope be?

G. How will technology impact our industry?

h. What environmental scenarios are possible?

4. Establishing policies. A policy is a written general guide that provides clear, concise and straight to the
point directions for people within the organization. It also provides guide on how resources should be
properly allocated and the tasks innate in order to accomplish the objectives. The policies are means to
achieve the objectives and how procedures are formed. Updated policies and quality standards ensure
that processes, procedures and deliverables must consistently meet the needs of the business. The
deviation in the policy metes a sanction. It is imperative that realistic policies should be clearly
communicated to employees at all levels so they can perform according to the expected standards of
quality. Accordingly, non performing employees will find no excuses or reasons for below par
performance. One must bear in mind though that policies should not be too constraining and confusing
that they limit creativity in decision-making. While policies are well entrenched into the system of the
organization, changes are expected and necessary. When should a policy be reviewed, amended, or
revised? Policies should be amended or revised as necessary or as circumstances warrant. One good
example would be when the current policy may no longer be attuned to the times as evidenced by
dwindling organizational performance. This can be manifested in the decreasing stakeholders' wealth
and income.

and bottom-up approach, the Strategic Position and Action

5. Implementing rules and procedures. Once policies have been established, rules and procedures
should be introduced. Rules describe how a specific action is to be performed to ensure that
management and employees fulfill their roles toward meeting company expectations. Procedures, on
the other hand, define a precise series of steps to be used in achieving a specific task. The rules and
procedures should not in any way contradict with the policy. In the event of conflict, policy should
prevail over the former

6. Matching resources and capabilities.Strategies are formulated through matching a firm's resources
and capabilities with the opportunities and risks that arise in the external environment. It is through this
process of matching that determines the attractiveness of the industry and the firm's competitive
advantage. Porter's five forces suggest that industry attractiveness derives ultimately from the
ownership of resources. A firm's competitive advantage is based on the development of resources
available to the firm. Resources are tangible assets (land, equipment, cash, building, and others),
intangible assets (brand name,. patents, copyrights, goodwill), and capabilities (research and
development processes, managerial competencies, and fast and accurate logistics processes).
Benchmarking a strategy thar objectively assesses the firm's capabilities vis-a-vis its competitors. In the
benchmarking process, first, identify areas to benchmark and the metrics; second, determine and
contact industry partners; third, gather data; and fourth, analyze. This strategy would only be feasible if
company has established good relations with industry partners prior to the conduct of benchmarking. It
covers manpower, materials, equipment, and money,

Tools in Formulation

Strategies are formulated to establish an advantageous competitive position based on compelling

objectives and expectations of the business owners. The strategy framework can be done by way of
matching the organizations internal resources and skills and competencies from the opportunities and
risks brought by its external factors. Various literature provide that the matching phase of strategy
formulation framework comprise of five tools: the SWOT Matrix, the top-down and bottoms up
approach, the Strategic position and action. Evaluation (SPACE) Matrix, the Boston Consulting Group
(BCG) Matrix, and the CPM. There are many strategy formulation tools but these mentioned ones are
suffice. What is indeed important is the proper matching of external and internal environmental factors
is the key to effectively generating feasible alternative strategies.

The commonly used tool is the SWOT analysis. However, the full business potential can be best analyzed
and appreciated by holistically covering the various facets of business and its environment. Hence, the
other strategy formulating tools can substantially supplement the result of the SWOT analysis. Several
factors can be considered in employing these tools: sufficiency of time (or timing), availability of data or
information ability of the managers, and adequacy of money (budget allocation).

However, is it wise to do the strategy-formulation analysis for the competitors. The answer to this query
is in the affirmative. From the standpoint of your major competitors, you can also use the strategy-
formulation tools. In the course of the analysis, you may discover the different areas which happen to be
the company's waterloo; this exercise is a reality check though. A good test is asking yourself these: How
can the company match or over come the competitors' strengths? Which among the competitors'
weaknesses can be matched or overcome the firms' strengths? What will be the possible strategic
moves of the competitors? Could the company and its competition co-exist and win their battles without
'competing with each other? Which among the competitors' weaknesses can be matched by the firm's
strengths? What will be the possible strategic moves of the competitors? Would there be a chance that
the company and competitors can exist together and win their battles without competing with each
other?

The Threats-Opportunities-Weaknesses-Strengths (TOWS) Matrix

By using this matrix, one can look intelligently on external and internal factors that will have an impact
on the core and auxiliary businesses of the company. The TOWS Matrix is a relatively simple tool for
generating strategic options. These strategic options shall be assessed in relation to the organization's
objectives, KRAs, and performance indicators in correlation with the organization's vision-mission. After
which these strategic options should be in cognizance with programs, activities, tasks, and resources.

By using the TOWS matrix, managers can develop four types of strategies: SO (strengths- opportunities)
Strategies, WO (weaknesses-opportunities) Strategies, ST (strengths-threats) Strategies, and WT
(weaknesses-threats) Strategies. Weihrich and Koontz (1994) describe in detail how strategies can be
arrived at using the data gathered from the SWOT analysis.

SO Strategies use a firm's internal strengths to take advantage of external opportunities. All managers
would like their organizations to be in a position in which internal strengths can be used to exploit the
external trends and events. Organizations will generally pursue WO, ST, or WT strategies to get into a
situation in which they can apply SO Strategies. When a firm has major weaknesses, it will strive to
overcome them and make them strengths. When an organization faces major threats, it will scek to
avoid them to concentrate on opportunities.
WO strategies aim at improving internal weakness by taking advantage of external opportunities
Sometimes, key external opportunities exist, but a firm has internal weaknesses that prevent it from
exploiting those opportunities. For example, there may be a high demand for electronic devices to
control the amount and timing of fuel injection in automobile engines (opportunity), but a certain auto
parts manufacturer may lack the technology required for producing these devices(weakness). One
possible WO STRATEGY would be to acquire this technology by forming a joint venture with a team

WT Strategies are defensive tactics directed at reducing internal weakness and avoiding external threat.
An organization faced with numerous external threats and internal weaknesses may indeed be in a
precarious position. In fact, such a firm may have to fight for its survival and merge, retrench, declare
bankruptcy, or choose liquidation.

A schematic representation of the TOWS Matrix follows. Note that a TOWS Matrix is composed of eight
cells. As shown in the following diagram, there are four key factor cells and four strategy cells. The four
strategy cells, labeled T. SO, WO, ST, and WT, are developed after completing four key factor cells,
labeled S, W. O, and T. There are eight steps involved in constructing a TOWS Matrix:

1. List the firm's key external opportunities.

2. List the firm's key external threats.

3. List the firm's key internal strengths.

4. List the firm's key internal weaknesses

5. Match internal strengths with external opportunities and record the resultant SO Strategies in the
appropriate cell

6. Match internal weaknesses with external opportunities,appropriate cell and record the resultant WO
Strategies.

7. Match internal strengths with external threats, and record the resultant ST Strategies.

8.Match internal weaknesses with external threats, and acquire WO Strategies aim at improving internal
weaknesses by record the resultant WT Strategies

Boston Consulting Group (BCG),

Another tool for formulation is the Boston Consulting Group (BCG), David (2005) discussed the BCG as a
management-consulting firm founded by Harvard Business School alumnus Bruce Henderson in 1963.
The BCG Matrix examines closely the portfolio of a company and where it should pour resources and
support to create more stars and cash cows at the end of the day. It also allows a company to make use
synergy across its product lines.

The growth-share matrix is a chart created by the group in 1970 to help corporation analyze

their business units or product lines, and decide where to allocate cash. It was popular for two

decades, and it is still used as an analytical tool. To use the chart, corporate analysts would plor

a scatter graph of their business units, ranking their relative market shares and the growth rates

of their respective industries.This led to the categorization of different types of businesses

A. Cash cows are units with high market share in a slow-growing industry. These units typically generate
cash in excess of the amount of cash needed to maintain the business. They are regarded as staid,
boring, and as a mature market, and every corporation would be thrilled to own as many as possible
cash cows. They are to be milked continuously with as little investment as possible since such
investment would be wasted in a industry with low growth.

B. Dogs or more charitably called pets have units with low market share in a mature and slow-growing
industry. These units typically break even, generating barely enough cash to maintain the business's
market share. Though owning a break-even other business units, from accounting point of view, such a
unit is worthless at the end of the day. It also allows a company to make use of synergy across its
product lines. unit provides the social benefit of providing jobs and possible synergies that assist
company's return on assets ratio. Dogs must be considerado cold off

These

would be wasted in an industry with low growth.

generating barely

since it does not generate cash for the company. Dogs

or pets depress a profitable

C. Question marks are units with low market share in a fast-growing industry. Such business units
require large amounts of cash to grow their market share. The corporate goal must be to grow the
business to become a star. Otherwise, when the industry matures and when the growth slows, the unit
will fall down into the dog's category.

D. Stars are units with a high market share in a fast- growing industry. The hope is that stars become the
next cash cows. Sustaining the business unit's market leadership may require extra cash, but this is
worthwhile if this is what it takes for the unit to remain a leader. When growth slows, stars become cash
cows if they have been able to maintain their category leadership.

The Strategic Position and Action Evaluation (SPACE) Matrix

The Strategic Position and Action Evaluation (SPACE) Matrix is another important marching tool in the
strategy formulation stage. It explains what is the strategic posture and the possible actions that can be
taken. It is a graphical representation of the company's position, which is divided into internal and
external dimensions. Under internal dimensions are financial strength and competitive advantage, while
under external dimensions are environment stability and industry strength.

Following a counter-clockwise direction, as shown in Figure 9, the framework determines an appropriate

set of strategies for each quadrant. The first quadrant is aggressive. The second is conservative. Third is
defensive. While the fourth is competitive. These four factors are the most important determinants of
an organization's overall strategic position.

Procedures to develop the SPACE Matrix

1. Identify a set of variables to comprise financial strength (FS), competitive advantage (CA),
environmental stability (ES), and industry strength.

2. Assign a numerical value ranging from +1 (worst) to +6 (best) to each of the variables that comprises
the FS and IS dimensions. Assign a numerical value ranging from-1 (best) to 6 (worst) to each of the
variables that comprises the ES and CA dimensions.

3. Compute an average score for FS, CA, IS, and ES by summing the values given to the variables of each
dimension and dividing by the number of variables included
4. Plot the average scores for FS, IS, ES, and CA on the appropriate axis in the SPACE MATRIX

5. Add the two scores on the x-axis and plot the resultant point on X. Add the two scores on the y-axis
and plot the resultant point on Y. Plot the intersection of the new xy point.

6. Draw a directional vector from the origin of the SPACE Matrix through the new intersection point. This
vector reveals the type of strategies recommended for the organization: aggressive, competitive,
defensive, or conservative.

Competitive Profile Matrix (CPM)

Competitive Profile Matrix is a matching tool in the strategy formulation stage which determines
competitiveness of a firm by way of gathering points or rating as assessed by respondents such as
customers, employees, competitors and the general public.

Selection of respondents can be done purposively considering the constraint of time and money. Direct
competitors are those firms that offer the same kind of products or services to a similar target market.
In the case of coffee shops, Figaro, Coffee Bean and Tea Leaf, Gloria Jean's, Café de Lipa, and Seattle's
Best

Coffee are among the direct competitors of Starbucks Coffee. On the other hand, indirect competitors
are those firms that offer with relative the same products or services to similar target market. For
example, Buko ni Juan, Fruitas Fruit Shake and Fruit Magic are indirect competitors of Starbucks coffee
shop.Knowing the firm's competitors is a good start of coming up of a benchmarked strategy. Then, who
are they? What are their

CHAPTER

Competitiveness in a company determines its future success or failure. Strategic competitiveness is

about effectively meeting the business and industry requirements as compared to others that offer
similar goods and services. In other words, business and industry environment greatly influence a firm's
strategic actions in order to be competitive. Therefore, all approaches and activities at the corporate
and business levels should be on the same wavelength. In the words of Sun Tzu, "Strategy without
tactics is the slowest route to victory: tactics without strategy is the noise before defeat."

Elements of the Implementation Stage

Three Hierarchical Levels of Strategy

There are three levels of strategy that serve as a guide for decision-making. These vary in the degree,
urgency, and required resources needed and link formulation to implementation (Figure 11):

1. Corporate or Directional Level Strategy Strategies are laid down to determine the direction of the
business on a broad or corporate level. It is the basis of the Strategic Business Units (SBU) to develop
their strategies. Under this level, the owners and shareholders are very much concerned with the yield
or spread of their investments. The question, "What business are we in?" is answered in this level. An
example of corporate level is the case of Unilever Philippines when it performs as the umbrella and the
overall stance of its various businesses.

Wheelen and Hunger (2010) makes mention of three directions of corporate level strategies: growth,
stability, and retrenchment. Strategies growth are designed to achieve growth in sales, assets, profits, or
other combinations. These are further categorized as mergers, acquisitions, and strategic alliances.
Stability strategies are, at times, lacking in strategies. In this direction, a firm may simply opt to stay put
or maintain the current array of businesses. Examples of thisstrategy are paused/proceed with caution,
no change, and profit strategy. The retrenchment strategy is applied when the company has a weak
competitive position in some or all of its product lines resulting in poor performance (i.e. sales are down
and profits are becoming less). This strategy imposes a great deal of pressure improve the firm's
performance to go back to growth and profitability. Examples of this strategy are turnaround
(contracting and consolidation), sell-out/ divestment. bankruptcy, and liquidation.

Orcullo (2007) presented Thompson's and Cats-Barril's Four genetic ways that a Corporate strategy can
evolve

1. Exit- the form of making some sacrifice by dropping some product lines and services. or business units
deemed uncompetitive or unprofitable or less profitable to operate

b. Enhanced - adding functionalities or improving a product or service that is currently being offered

c. Extend- adopting in new business model of entering new business

d. Expand-- adding products and services within an existing business

2. Business on Portfolio Level Strategy refers to a hierarchical level of strategy where tactics are mapped
out to beat competition through its products and strategic business units (SBU) such as competitive,
cooperative, and integration among others. The SBU is a business unit within the overall corporate
identity especially for large companies that are comprised of a number of businesses. Strategic issues
are less about the coordination of operating units and more about developing and sustaining a
competitive advantage for the goods and services that are produced. In this level the question, "How to
compete?" is answered. Examples of SBUs of Unilever Philippines Inc. are Surf, Pond's, Creamsilk.
Eskinol, Selecta, Ladies Choice, Lipton, Dove, Knorr, Close up, Rexona, Axe, and Cleat.
3. Functional or Parenting Level Strategy: Operational methods and processes are properly coordinated
and involve transferring of resources and cultivating capabilities.

Corporate Governance

Nowadays, corporate stakeholders do not look only on profitability performance but also on whether
the company is exhibiting Good Corporate Governance (GCG). GCG refers to balancing the interests of
and relationships among stakeholders (shareholders, management, customers, suppliers, investors,
government, and the community) that is used to determine and control the strategic direction and
performance of organizations. It is concerned with the rules, practices, and processes as well as ways to
ensure that strategic directions are made effectively to institute a system of checks and balance among
the company owners and its top-level managers. The guiding principles of GCG systems are anchored in
Fairness, Accountability and Transparency (also known as FAT). To ensure FAT in the firm, the separation
of powers should be respected i.e. ownership belongs to sharcholders, governance is the responsibility
of the board of directors; and management is delegated to the CEO and his team of officers.

Since corporate governance also provides the framework for attaining a company's objectives, it
encompasses practically every area of management - from action plans and internal controls to
performance measurement and corporate disclosure

The Role of the Board of Directors

The Board of Directors (BOD) is the highest governing authority in an organization. A director according
to webster Dictionary, is one of a group of persons entrusted with the overall direction of a corporate
enterprise The BOD is the highest policy-making body. The shareholders elect the members of the board
to serve during a certain period. Ideally, the BOD should be comprised of the following individuals:
Insiders, Related Outsiders, and Outsiders, The Insiders are directly involved in running the firm like
President. CEO, General Manager, and other senior officers. Related Outsiders are individuals that do
not have involvement with day-to-day operations, but who have a relationship with the company (i.e.
audit committee). Outsiders are individuals who are not involved with the firm's day-to-day operations
and who do not have a relationship with the company. The 1999 ADB Survey showed that the most
importan roles of the board are: to make strategic decisions for the company to protect the
sharcholders interest, and to appoint senior management. The protection of the shareholders interest
clearly refers to the majority of the (rather than the minority) shareholders (Estanislao and Saldana, and
Fider).

The main concern and responsibility of the BOD is to protect the shareholders investments and to
ensure they receive a decent yield. A thought of concern is that in the event of a very low bottom line,
who must be the priority in rewarding the BOD. for their honoraria plus dividends and other
privileges,or their employess. Understandably, the BOD would be after their investment, bur choosing
the latter is a way of taking care of the invaluable employees' welfare.

As reported in the news about the bankruptcy of Enron, shareholders sued the BOD for mismanaging
their investments. To avoid a similar incident, several literature suggest the following best practices to
have GCG:

1. Separate ownership with management control. This is to encourage autonomy and independence in
living up to the mandate of maximizing shareholders' wealth, guiding and shaping corporate strategy,
and overseeing the firm's operations. Thus, there should be no more than two directors that are current
or former company executives. Also, a director must not do business with the company or accept
consulting or legal fees from the firm. Furthermore, there must be no interlocking directorships where a
director of CEO sits on another director's board. Finally, the acquisition of business opportunity belongs
to the Corporation, otherwise a director is liable to account for and refund the corporation with any
profits he gained from the business opportunity

2. Increase the diversity of board members. This is to diffuse ownership concentration. In so doing, the
audit, compensation, and nominating committees are made up of outside directors.

3. Establish formal processes for evaluation of the BOD performance. As such, the shareholders have
considerable power and information to choose and replace directors

4. Promote democracy on the boardroom. Creating an atmosphere of openness encourages the board
to participate and contribute to the discussions especially in crafting strategies. Likewise, a democratic
atmosphere promotes shared responsibility for the decisions made. Each director must attend at least
75% of all meetings

5. Receive compensation (per diems) in accordance to the capacity of the firm. Sec.30 of the Corporation
Code of the Philippines specifically provides:

In the absence of any provision in the by-laws fixing their compensation, the directors shall not receive
any compensation, as such directors, except for reasonable per diems. Provided, however, that any such
compensation other than per diems may be granted to directors by the vote of the stockholders
representing at lease a majority of the outstanding capital stock at a regular or special stockholders'
meeting. In no case shall the total yearly compensation of directors as such director exceed ten (10%)
percent of the net income before income tax of the corporation during the preceding year.

Unite et al. (2008) conduded that there is a positive relation between pay and firm performance in the
Philippines. Furthermore, this pay-performance relation does not appear to hold for those firms that are
affiliated with a family corporate group"

Politics of Strategy Choice

Is politics bad or good for any organization. All organizations, be they as profit or non- profit, are
political. Decisions are usually based on political affiliations or motives. Strategies are often influenced
by political factors the hidden agenda are secretly programmed to advance one's own desires). Thus,
ideas and innovations coming from an unpopular director- endorser will naturally die due to political
biases and personal preferences.

On the contrary, a concept or proposal would be readily embraced if they gain the support of key
people. The same people will also monitor the progress of the proposal, from its inception, to resources
allocation, to implementation stage.

Directors and managers must carefully employ approaches for managing political relationship which are
critical in strategic management. Building enthusiasm and esprit de corps are essential ingredients of
promoting harmonious relationships between and among key people.

"The Role of Top Management

Top management is comprised of the key officers who are responsible for formulating and implementing
the organization's strategies. Top-level officers are also called strategic managers because their insights
play such a critical role toward achieving the firm's strategies.

It is imperative that their Competency, Attitude, Skills, and Habits (CASH) match with the firm's
strategics. Being at the top, they should have a long-term vision to set the overall direction of the
company although they are not involved in day to day tasks. "The cadre of management is composed of
the Chief Executive Officer (CEO). President, Vice President, Chairman, and Board of Directors. It is the
BOD that makes policy decisions while the CEO/COOs are involved in day-to-day operations.

Top managers must handle human and other capital for the effective and efficient execution of various
policies and objectives. The management of an enterprise is divided into various levels. Top
management is responsible for running the business as a whole and has specific executive powers. They
decide and implement the vision of the company. They are less involved in the day-to-day running of the
business

The CEO can have autonomous power because of virtual supervision by the BOD especially when the
CEO is also serving as Chairman of the BOD. Hence, CEO's long tenure of office can also exercise
considerable power. Kenneth R. Andrews (1971) describe chief executive's role of the Chief Executive as
an Architect of Purpose.
George Steiner (1997) summarizes the role of the CEO in strategic management as follows:

1. Must understand that strategic management is his responsibility; parts of this task, but certainly not
all of it, can be delegated

2. Responsible for establishing a climate in the organization that is congenial to strategic management

3. Responsible for ensuring that the design of the process is appropriate to the unique characteristics of
the company.

4. Responsible for determining whether there should be a corporate planner. If so, the CEO generally
should appoint the planner (or planners) and see that the office is located as close to that of the CEO as
practical

5. Must get involved in doing planning

6.Should have face-to-face meetings with executives for making plans and should ensure that there is a
proper evaluation of the plans and feedback to those making them.

7. Responsible for reporting the results of the strategic management process to the board of directors

"The CEO makes the final decisions: his decisions are the culmination of ideas, information, and analyses
of others.

Top management consists of individuals who hold various positions and titles. The CEO, the Chief
Financial Officer (CFO), the chairman of the board, the vice president, and the president of the company
are all part of the executivedecision making management team. An effective strategic leadership cover
determining strategic direction, exploiting and maintaining core competencies, developing human
capital, sustaining an effective organizational culture, emphasizing ethical practices, and establishing
balanced organizational controls.

The top level sets the broad objectives and policies of the business as a whole and appoints middle
management to see to its implementation. Further, they decide on thelong-term goals that the business
will accomplish for the business while coming up with effective strategies that can implemented for the
achievement of the identified objectives.

A McKinsey Global Survey (2011) shows that only half of the executives say their timespent at work
aligns with their organizations" strategic priorities. Moreover, there are four executives who use their
time badly

1. Online junkies-suck to the office and spend less time managing and motivating their employees, 38%
of their time is spent using asynchronous messaging. Communication is mostly done through e-mails
and over the phone. The gain point is the personal contact.
2. "Schmoozers spend much time of their time outside the office and can be elusive for direct reports,
29% of their time is spent on the phone. They are the CEOs and sales directors. The communication
channels are face-to-face and meetings with clients. Main points are strategy and thinking time.

3. Cheerleader The good with employees but spend little time with outsiders (including customers). 55%
of the time spent is face-to-face. They are the C-suite executives. The communication channels are face-
to-face and internal meetings Pain points are external orientation.

4. Fireghter are invariably dealing with emergencies, micro-managing, and operationally Focused. 39%
of their time is spent alone. They are the general managers. Communication channel is through email,
Main points are direction setting and meeting people.

In all of these cases, the survey cites that too much focus on a particular aspect of the job means that
other things get left behind. All these add up to a large cost in productivity and effectiveness. In the
report, he suggested four tips on how companies can ensure that executive time is used effectively:

1. Create a budget for leader's time think about how much attention cash project will require figure out
which ones are the priority, and delegate accordingly,

2. Strip out redundancy and extra layers in the decision-making process.

3. Encourage executives to measure how they use their time, so they can align it with their company's
priorities.

4. Use a calendar not only as a scheduling tool but also as a tool to find and strip out time wasting
meeting

Similar to McKinsey's survey results, many employees share that their bosses allow too many purely
routine and repetitive tasks to creep into their schedules - tasks that are essentially non-executive. They
also fall into the trap of just talking too much. The progress of any business, however, is not measured in
terms of routine and repetitive tasks, for these are simply indicators of mediocrity, and mediocrity has
no place in modern business. It is therefore, imperative for executives to have a much broader
perspective than ordinary routine.

Strategic Leadership

As an old adage goes, "Good leaders are made not born." if you have the desire and willpower, you can
become an effective leader. Good leaders develop through a never-ending process of self-study,
education, training, and experience (Jago, 1982).

As such, good leaders are continually working and studying to impact their leadership skille: they are
NOT resting on their Laureis
A genuine leader is a good steward of the organization and its resources. It is about protecting the
interest of the master or owner. Moreover, he should possess the character of personal sacrifice to
achieve the common purpose or goal. As Lao Tsu pointed out; "A leader is best when people hardly
know he exists. Less good when they praise him and obey him. Worse when they fear and despise him.
But with a good leader, when his aim is met and his dreams fulfilled, they will say: We did this ourselves.

A strategy serves as a guide to achieve the desired goal set. It actually helps the managers organize the
resources including, but not limited to human resources. No greater strategy can be formulated without
able and visionary leaders. The effectiveness of the strategy relies on the degree or level of influence
applied br corporate leaders. Simply said. leadership is influence.

Strategic leadership involves the ability to anticipate, maintains a flexibility, and empower others to
create strategic change. It also involves working through and with others via multi-functional work. An
effective strategic leadership shapes the formulation of strategic intent and corporate mission, which
influences the strategic actions heading to achieve competitiveness, and above average returns.

Decision-making is seemingly the most important task of a manager and one of the easiest to

get "wrong.". It is imperative in making a decision that is rational or a reasoned choice among the
alternatives. Hence, decision-making is a process of selecting among the alternative courses of action for
the purpose of achieving the stated obiective of goal that will create value for stakeholders.

The role of leader in the organization cannot be gainsaid. The success and failure of every organization is
fundamentally attributed to leadership. To be an effective one, a leader possesess characteristics such as
tolerance for ambiguity.

commitment to the firm, good interpersonal skills, high level of aspiration and self-confidence. However,
the factors affecting a managerial discretion are external environment vis- a vis organizational
characteristics. This external environment refers to industry structure, rate of market growth, number
and type of competitors, political/legal constraints, and product differentiation. On the other hand,
organizational characteristics pertain to size and age culture ,resources, availability , and employee
interaction. Furthermore, these factors may lead to a failure in decision-making because of the presence
of these conditions,

1. Certainty- A situation in which a manager can make an accurate decision because the outcome of
every choice is known. In other words, all the information is readily and sufficiently available.

2. Risk- A situation in which the manager is able to estimate the likelihood of outcomes that result from
the choice of particular alternative. Hence, it is subject to chance.

3. Uncertainty- Limited information prevents estimation of outcome probabilities for alternatives

associated with the problem and may force managers to rely on intuition; hunches or gut feels following
the experience. feelings and accumulated judgment. In short, the information about alternatives and
future events is incomplete. .

4. Ambiguity- A situation wherein the objective to be achieved or the problem to be solved is unclear,
such that, alternatives are difficult to define because information about the anticipated outcomes is
unavailable.

Functional Strategy Fitness and Alignment

Business organizations compete through strategic action that influences the business environment.
Functional or operational strategies should be aligned with or supportive of the corporate strategies.
Operational strategies can be articulated effectively given that functional resources, capabilities and
competencies are sufficiently on hand. To support the implementation of strategy, management
including those at the functional level, should have conscious effort to align the structure, systems, and
culture.

A better way to communicate the strategic initiatives is through coordination and collaboration with
functional managent. A culture of excellence in the workplace, coupled with discipline and dedication,
should be fostered at the operational level because they are essential components to attain sound
performance. The following are the most common type of functional management areas:

Management Operations

This secular function ensures that general management is organized, especially in the delivery of goods
and services.Product innovation leadership can be open to more than one firm in an industry. Success
at this strategy requires a world-class development process and adequate investment. To succeed like
Starbucks, SM. Canon, Apple, and 3M innovation is essential within the organization and not just an
afterthought. This is a difficult and risky strategy, but it offers a fairly long beneficial payback period to
the company.

Operations influences the implementation of strategies in various ways: product and service design,
cost, location, quality, quick response, flexibility, inventory management, supply chain management and
service management

Product and service design should reflect the efforts of the many functions of the organization to
achieve a match between financial resources, operations capabilities, supply chain capabilities, and
consumer needs, wants, and demands.

Cost is a key variable that affects pricing decisions and profits. Productivity is an important determinant
of cost. Organizations with higher productivity rates than their competitors have a competitive cost
advantage. Outsourcing may help achieve lower costs. higher productivity, or better quality,
Location can be important with regard to cost and convenience for customers. Locations near inputs
result in lower inpur costs, Locations near markets can result in lower transporation cost and quick
delivery times.

Quality refers to materials, workmanship, design, and service. Consumers judge the quality of a product
or service based on its intended purpose.

Quick response can be a source of competitive edge by quickly bringing new on improved products or
services to the market or delivering existing products or services to the customer after they are ordered.

Flexibility is the ability to respond to changesChanges might relate to alteration in design features of a
produce or a service or to the volume demanded by customers or themix of products or services offered
by an organization

Inventory management can be a competitive advantage if supplies of goods are efectively matched with
the demand

Supply chain management involves coordinating internal and external operations (buyers and suppliers)
to achieve timely and cost effective delivery of goods throughoutthe system

Service might involve after-sales activities that customers may perceive as value added

such us delivery, set-up, warranty and technical support.

Marketing and Sales

Marketing is about creating demand and managing profitable customer relationships,i.e attracting new
customers, retaining current customers, and establishing new customer base. It influences competition
in many ways such as identifying consumer wants, needs, and demands: pricing location, process,
people, and promotion. Customer satisfaction and delight are the objectives and have preeminent
position

The challenges in marketing cause marketplace changes including but not limited to technological
advances, rapid globalization, and continuing social and economic shirts, The modern approach to
marketing is connecting - with buyers, suppliers, competitors, and other market players.

Customer Relationship Management (CRM) is the overall process of building and maintaining profitable
customer relationships by delivering superior customer value and satisfaction. With CRM, marketers
must be concerned with the lifetime value of the customer.

Finance/Accounting

The significance of finance in the strategic planning cannot be gainsaid. The sucess of strategic planning
is largely dependent on the sucess of financial planning. Without access to money, plans cannot be put
into action. Strategic planning is about allocating and controlling resources toward long-range goals.
Regardless of the set objective, it is important to plan for financial contingencies and be able to adapt to
situation where uncertainties and risks may occur.

Based on the analysis of the revenue and cost problems may arise that management must implement
measures to lower its burn rate or negative cash flow given the following situation

a. Total revenue and total cos tare significantly less. This means that the existing assets are not totally
producing the desired or expected outputs. For instance, lesses for the office-condo-units moved to
another business areas and these office condo units remain untenanted for a longer period. Hence, they
become non-performing assets (NPA). To address the very wide disproportion, determine which of the
current composition of assets are not productive at all to generate income, and then reduce drastically
by way of disposing them to have additional income to the firm. This measure is called asset reduction
strategy

b. "Total revenue is lower than the total cost (wide disproportion). This means that the existing assets
are less producing income. The maximum potentials of these assets are not fully being tapped while
others are simply non performing. For instance, a computer school which conducts classes from 8:00 am
to 5:00 pm can accommodate 25 students at any given time. Given the infrastructure and connectivity,
an option to be considered to increase the revenue portion of the assets is to convert the same office
into a data-encoding hub (medical or legal transcription BPO units) to earn more income hence,
maximizing the usage of the firm's asset. This measure is called asset maximization revenue booting
strategy

Total revenue is slightly lower than the total cost (smalll disproportion). This means that the existing
assets are producing income but not enough to cover the cost incurred. To address the small
disproportion, combination of the abovementioned strategies can be done. This measure is called asset
reduction cum maximization revenue boosting strategy.

Total revenue is the same as the total cost (break-even). This means that the existing assets are
producing income enough to cover the cost incurred. To further increase the yield there must be
additional income generating activities to maximize the usage of the assets while removing the
unnecessary expenses. This measure is called asset maximization-revenue boosting cum cots-cutting
strategy. It is recommended to continue with this strategy until the firm arrives at the normal operating
corridor and reaches the maximum level of capacity utilization

Rearch and Developwear (Re-D/Engineering)

Research and Development is about investing for the future given today's knowledge- based world
economy. It is expected that this functional area will bring about innovation by way of offering new
value proposition, as it is a key to developing competitive advantage and providing leadership in the
global marketplace. And since the world has become one global business village, competition is a good
motivation to tendering new and distinct offerings. New product and distinct offering open the door of
opportunities to penetrate or create a new market. To do this strategy, in-depth market research should
be carried out first to meet an unmet need.

Today's R&D plays a vital cog to keep pace with modern trends and customer demands so that in the
long run the business will sustain its operations. Accordingly, investment on this area valued the
importance of intangibles for innovation and competitiveness in each firm R&D is critical in advancing
science and entering and creating intellectual Innovation. In the case of technology, it is an industry that
is changing so fast that firms must continually improve their designs and array of products.

While R&Ds important is acknowledged universally, maintaining R&D program is costly and risky for the
firm. Besides, it does not give an assurance of increasing profit and market share. Firms that have not
institutionalized R&D would opt to form strategic alliances, acquire business ventures, or establish
networks/linkages in order to exploit the innovations of others while sustain competitiveness. Another
option is to tap the expertise and facilities of the university community and some companies given their
well-trained researchers and fully equipped research facilities in pursuit of delivering the cutting-edge
knowledge

Looking macro level, the National Statistics Coordination Board in its press release. was posted on June
2012 states that The Global Competitiveness Report 2011-2012 of the World Economic Forum showed
that among the member countries of the Association of Southeast Asian Nations (ASEAN), the
Philippines ranked third In terms of availability of latest technologies and firm-level which technology
absorption. However, the country did not fare well in six of seven innovation indicators. Notably, it
ranked last among the ASEAN countries (excluding Lao People's Democratic Republic and Myanmar) in
government procurement of advanced technology products; it ranked second from the last in university
industry collaboration in R&D and third from the last in the availability of scientists and engineers."
(Underscoring supplied)

A Management Information System (MIS) is an organized combination of people, hardware,

communication networks, and data sources that collect, transform, and distribute information to
support managerial functions such as planning, organizing, directing, and controlling. An MIS helps
decision-making by providing timely, relevant, and accurate information to managers. Thus, it is
concerned with processing data into information which is then communicated to the various
departments in an organization for appropriate decision-making. An MIS is distinct from regular
information systems in that information systems are used to analyze other information systems applied
in operational activities in the organization.

Management Information is an important input for the efficient performance of various managerial
functions at different organization levels. Information systems facilitares decision making. Management
functions include planning, controlling and decision-making.Decision-making is the core of management
and aims at selecting the best alternative to achieve an objective. The decisions may be strategic,
tactical or technical Strategic decisions are characterized by uncertainty. They are future-oriented, and
they relate directly to planning activity: Tactical decisions cover both planning and controlling. Technical
decisions pertain to the implementation of specific masks through appropriate technology Sales region
analysis, cost analysis, annual budgeting, and relocation analysis are examples of decision-support

systems and management information systems,

The information required to make a decision must be such that it highlights the trouble spots and shows
the interconnections with the other functions. It must summarize all information relating to the span of
control of the manager. The information required to make these decisions can be strategic tactical, or
operational information

Human Resources

Aligning Human Resources to the formulated strategy is very important to achieve the organizational
goals. The right people with the right skills and competencies are valuable employees who will spell a big
difference in achieving successful strategies. Therefore, the wrong people must be weeded out of the
team. In finding the right people, the base qualification would include: knowledge, actitude and
potential. Stettinius,etal wrote. "The key is to hire people with the right values, attitudes and social skills
that lead to success in almost all jobs, Employees can operate technology, but it is difficult to teach
people to be pleasant. A good rule to follow in recruitment - When in doubt, do not hire.

It is also imperative that the HR strategies and integrated policies should link with the strategic needs of
the business to gain a competitive advantage. As such, there should be strategic integration of the HR
policies and activities starting with HR philosophy, guidelines, programs, change management, practices
and processes. Doing so will promote high level of commitment and quality work outputs.

Implementing strategic human resource management entails a huge investment; but in the long run, it
will certainly redound to the benefit and interest of the organization

Consequently, the risks and uncertainties, in the course of attaining the formulated strategic goals, will
be addressed with greater flexibility.

Overcoming Barriers to Change

Management's greatest challenge when implementing change is getting 100% comittment from
stakeholders - the officers , employees, and customers. Managers must be ready in case people would
resist change. Lisa Alther said, "That's the risk you take if you change, that people you've been involved
with,won't like the new you. But other people who do will come along."

Management is constantly tested because of strategies developed in the light of environmental change
it is essential to developed an organizational climate conducive in change.

Take note that it is through good leadership that change is implemented and accepted. Expectedly there
would be resisters to change and that resistance can surface at any level of the implementation process.
This is primarily because any change is synonymous to inconvenience, uncertainty and a break in normal
social patterns arising from anxiety over the unknown future challenges to ones self esteem, financial
and employment security. If these anxieties are not addresseel, resistance occurs in the form of
production processes and machine sabotage, absenteeism, and unwillingness of employees to
cooperate resulting to failure of the strategy implementation

On the contrary, management should understand that resistance at the onset exists because
stákeholders are not aware of what will happen. Most often, the national or objective of Implementing
change is not dear. This creates an atmosphere of misunderstanding, confusion, and distrust. Take note
that dear communication is a key to rolling outside anal charge.

thereby gaining extraordinary commitment from the stakeholders. The implications to the organization
and the individuals that may be affected have to be explained cearly and thoroughly face-to-face.
Communication must begin from top or senior executives. Sustained involvement will foster cooperation
commitment, and enthusiasm.

Based on various readings and observations, in order to systematically roll out strategy and manage
change, it is better to identify the common mistakes and the corresponding solutions:

1. No performance focus. First, align the skills, culture, structure, etc. with specific business results.
Second, ensure that key performance indicators such as market share, productivity, and innovation are
specific as possible.

2. Lack of a winning strategy). Ensure that resources and leadership are in place to give a

reasonable chance in creating a winning strategy.

3. Failute to engage in-champions. Co-champions will always have a compelling value

proposition. First, identify the co-champions or change agents, who are instrumental

to implementing change, and their value proposition for the change. Second, develop

ways on how to improve their participation

4 Over reliance on structure and systems. The structural and systems changes are easy to track but
would not guarantee behavioral support or skills development and resource allocation. Determine and
develop what else is needed to get the organization performing in a new and different track, including
the proper allocation of resources.

5. Leades resistance to change. Any attempt to change the course of an organization will fail if top
management will not adopt the changes themselves. The resistance of subordinates may be lessened if
members of top management will ensure that they themselves are Co-champions orchange and willing
to model the values and behaviour they demand of others. As the saying goes, "Walk the talk."
Tools in the Implementation Stage

Experienced leaders find success whatever the situation of the organization may be. Strategy, therefore,
is an integrated and coordinated course of actions to exploit core competencies and gain a competitive
advantage. They can be long, intermediate, or short- term. Strategies must be designed to support the
organization's mission and organizational goals.

1. Synergistic Strategy

It is a directional strategy where two independent firms agree to combine their resources to establish a
greater than the value of the two firms prior to acquisition due to economies of scale. When we say
synergy, it can be best represented by the equation 1 +1=3. This denotes that the firm sucks a better
market position greater than the sum of its parts, which can be attributed to the multiplier effect of the
firm combined resources

Horizontal integration is a synergistic strategic action to strengthen the company's position in the
industry by way of acquisition, merger, or takeover of a competitor in the same industry value chain. To
have a better understanding of this definition we will use examples Disney taking over Pixar (movie
production): Kraft foods merged with Cadbury, Pfizer with Wyeth; and Porsche with Volleswagen. As to
the Philippine setting, Jollibee acquired many companies such as Mang Inasal, Chowking, and Red
Ribbon among others.While for mobile phone there is Smart Sun Cellular. In the banking industry, Banco
De Oro bought Equitable PCI Bank, while Philippine National Bank acquired Allied Bank.

Several companies are motivated to engage in horizontal integration due to the following:

1. Lower costs - Because of synergistic effects, the production increases and the costs decrease, which
leads to greater economies of scale and higher efficiency,

2. Increased level of differentiation. As a result of combined resources, the firm can offer a distinct
product or service features.

3. Increased bargaining power - With combined resources, the company becomes larger and bigger,
gaining more power over suppliers and distributors customers. Also, there is a perceived notion that due
to merging, weak companies stay out of the picture and only those who are strong stay, thereby
promoting economic stability,

4. Reduced competition. As a result of consolidation of companies, the number of market players

operating in the industry decreases resulting to a less intense competition

5. Increased Diversification -A company that produces the same goods but operates in: a different region
or serves a different market segment can exploit this opportunity to access new markets and
distribution channels,

On the other hand, companies would not engage into integration due to the following:
1. Damaged value - The expected benefits and value from the integration did not materialize.
Oftentimes, the partnership fails and destroy the value primarily due to difference in organizational
culture

2. Legal repercussion - government discourages a monopolistic market structure due to lack of

competition. Hence, the government plays a vital role in the facilitation of the approval process of such
merger

3. Reduced Flexibility - Large organizations are harder to manage and less flexible in introducing
innovations

This strategy may only be effective based on the following conditions: First, the Organization competes
in a growing industry. Second, competitors have deficiency in some capabilities, competencies, or
resources. Third, cconomies of scale would have a significant impact on the production and operation.
Fourth integration would lead to a monopoly permitted by the government.

Vertical Integration

Vertical integration is a synergistic strategic action where a firm usually expand to strengthen the
company's position in the industry by way of acquisition, merger or takeover of another company along
the industry value chain Accordingly, there are two kinds of vertical integration: forward and backward
integration. To have a clear picture of this strategy, let us illustrate this using the Lamoiyan Company
who was the major supplier of aluminum collapsible toothpaste tubes to Colgate-Palmolive Co. (CPC)
sometime in 1970

In forward d integration, the manufacturing company acquires the wholesaler or retailer for the purpose
of achieving higher economies of scale and larger market share. In backward integration, the
manufacturer acquires the supplier company.co streamline the supply chain process. To have an
effective forward integration strategy, the following are the considerations: first, few quality distributors
or retailers are available in the industry and have high profit margins. Second distributors are very
expensive. unreliable, or unable to meet firm's distribution needs. Third, the industry is expected to
grow significantly where there are benefits of stable production and distribution. Fourth, the acquiring
company has enough resources and capabilities to manage the new business. For our discussion, let us
assume that Lamoiyan Company acquired CPC for the toothpaste products and performs the task of a
distributor/wholesaler. This approach is considered forward integration

In backward integration, the manufacturing company acquires its suppliers for the improving efficiency
and cost savings. For example, assuming CPC takes over the Lamoiyan Company for the toothpaste tube,
in order to cut transportation costs, better economies of scale, improve profit margins and make the CC
more competitive.

2. Intensive Strategies
"This can be classified as corporate or business strategies that offer courses of action by way of
providing intensive efforts to improve a firm's competitive position with existing products,

Market Penetration

Market Penetration is a strategy that seeks to increate market share for existing products or services in
existing market through intensified marketing effors such as promotion and advertising. This strategy
includes increasing the number of salespeople. increasing advertising expenditures, offering extensive
sales promotion items, or increasing publicity efforts. This is effective to pursue following the four
conditions

a.Current markets are not saturated

b. Usage rate of present customers can be increased significantly

c.Market shares of competitors are declining while total industry sales are increasing

d. Increased economies of scale provide major competitive advantages:

Market Development

Market development is a strategy that seeks to increase market share by introducing existing products
or services into new marker(s) or geographical arca(s). This strategy is effective to pursue following the
six conditions:

a. New channels of distribution that are reliable, inexpensive, and good quality

b. Firm is very successful at what is does

c. Untapped or unsaturated markets

d. Capital and human resources necessary to manage expanded operations

e.Excess production capacity

f. Basic industry rapidly becoming global

Product Development

Product development is a porifolio strategy that seeks to increase market share and sales by innovating
or improving existing products or services to be sold in existing markets. Take note, quality is a moving
target that companies continuously aim for. As the evolving demographics and psychographics of the
market strongly influence the shaping of the concept of quality, companies innovate their products and
services to address this quality issue. This can also be done by developing new products or services,
which entails large research and development expenditures. This strategy is effective to pursue
following the five conditions:
a. Products are in maturity stage of life cycle

B. Competes in industry characted by rapid technological developments

C Major competitors offer better-quality products at comparable prices

d. Compete in high-growth industry

e. Strong research and development capabilities

3. Diversified Strategy

It is a corporate strategic action applied for a firm to expand business operation that offers new
products to new markets whether related or not related in products or services. A good guide in crafting
this strategy would be answering the question "What motivates firms to diversify?" Among the many
reasons are to grow, to fully utilize existing resources and capabilities, to spread the risks, and to make
use of surplus cash flows. There are two important points to consider prior to diversification: first, "Is
the industry to be entered more attractive than the firm's existing business." second. "Can the firm
establish a competitive advantage within the industry to be entered?". This strategy can be done in two
ways:

Horizontal or Related Diversification

Horizontal or related diversification is a strategy of offering new products to related products or

services. These new products/services add to the existing core business, either through acquisition of
competitors or through internal development of new products/services. An example of this is the
Jollibee Group which has been expanding its food and restaurant brands for three decades through
acquisition of its domestic competitors and expansion to overseas markets. It has acquired Chowking,
Greenwich,,Red Ribbon and Mang Inasal

Unrelated Diversification

It is about offering new products not related to existing products or services. An example is the Aboitiz
Group that has the following businesses: 1) Power generation and distribution (Davao Light and Power),
2) Banking and insurance (Union Bank and City Savings Bank). 3) Food manufacturing (Pilmico Foods), 4)
Real estate (AboitizLand, Cebu Industrial Park Developers), 5) Construction and shipbuilding (Aboitiz
Construction Group).

4. Defensive Strategies

An adage, "The best defense is a good offense, has been used in several occasions. This strategy is
designed to achieve two purposes, first to hold onto market leader position or to strengthen the firm's
current competitive position (ie, competing against rivals who attempt to take away established market
share). Second, to hedge or reduce the risk of loss or uncertainty especially when the market is
shrinking,

Joint Venture

This action occurs when two or more companies form a strategic alliance or partnership for the purpose
of capitalizing on some opportunity. Due to combined resources, joint venture minimizes risks and
allows companies to improve communication and networking due to economies of scale. The life of
partnership is only up to the consummation of the agreed project. An example of this is when San
Miguel, the Philippine food and beverage company, and its joint-venture partnet. Coca-cola, agreed to
pay 14 billion pesos for the second-largest soft drink company Cosmos. The purchase will give the joint
venture a 90% share of the Philippines' $1 billion-a-year soft drink marker (Wayne Arnold. The New York
Times, October 26, 2001),

Retrenchment

This action happens when an organization regroups through cost and asset reduction to reverse
declining sales and profits. Retrenchment is also referred to as downsizing (politically correct word is
right sizing) aimed at preventing serious business losses and collapse. Turnaround strategy such as
contracting and consolidation is also a good example of retrenchment Contracting refers to a corporate
action for the purpose of protecting the company from incurring possible losses. This approach is helpful
in addressing the constraint of limited internal resource availability which prompts management to see
the opportunities of acquiring lower cost of external providers or suppliers, Consolidation, on the other
hand, happens when two independent firms combine together to form a new company. Neither of the
previous companies survives and the aim is to improve the new company's financial performance and
provide economics of scale.

An example of retrenchment-contracting strategy is when the Secretary of the Department of Labor and
Employment Rosalinda Baldoz decided to allow PAL TO outsource its jobs for "non-core positions, rather
than directly hiring full-time employees.The purpose is to cut needed overhead cost as a means to save
cost" (Philippine labor News and Analysis, November 2010. Vol. 1. No.1).

In some case, bankruptcy can be an effective type of retrenchment strategy. Under this scheme, it is
mutually beneficial to both owners-debtors and creditors. For the owners debtors, it is a business move
to clean the balance sheet and to improve financial health. Consequently, the firm will have a new and
fresh start. For the creditors, this scheme will provide a chance to collect the outstanding obligations
based on remaining assets.

Divestiture

It is a strategy which sells a business unit or a division of a company for the purpose of recovering from
financial woes or raising capital for further strategic acquisitions or investment Corporate spin-off is a
type of divestiture where an independent company is created through the sale or distribution of now
shares of an existing business or division of a parent company. An example of corporare spin off is when
San Miguel Corporation, through the issuance of shares, took a minority stake in PAL Holdings of Lucio
Tan Group (Doris Dumlao, Philippine Daily Inquirer, April 4, 2012). In the report, the spin-off plan was a
measure intended to stabilize PALs finances due to the lingering effects of the global recession

Receivership and liquidation

Instead of putting the firm in bankruptcy, a firm can opt for the appointment of a receiver (can also be
known as conservator) to safeguard the company's assets and properties for the best interest of its
creditors. During the receivership period (usually within 90 days), interested white knight or strategic
third party investor shall seek endorsement from previous owners because the latter has the right of
first refusal. Once the two parties agree, they will submit a viable rehabilitation plan to be approved by
the receiver-company. In most cases, the government or a third party is included in the process of
selecting the receiver-company. The receiver-company should have established good reputation in
terms of integrity and should be unbiased and knowledgeable.

In case the negotiation bogs down, the receiver-company will proceed to the liquidation of its remaining
assets. Liquidation occurs knowing that it is better to cease the operation than to continue losing a large
sum of money. Under the liquidation scheme, the proceeds out of disposing the assets shall be
distributed to the creditors in accordance to the concurrence of creditors and order of priority as
provided in the Civil Code:

An example of this is the case of Prudential Plans Inc. (PPI). As reported in the news, the Insurance
Commission (IC) ordered the appointed liquidator. Sandiego. Ycasiano, Macias, Estorco, Castaneda,
Sanchez law office (Symocs), to submit the final plan within two months or until September 2013. The
PPI was placed under receivership leading to liquidation under directives issued by the IC on Sept. 19
and Oct. 19 2012 with some 300,000 or so affected planholders. Furthermore, the sources of assets are
the trust funds and the corporate assets and that the entire liquidation process must be settled two
years.

5. Generic Competitive Strategies

Michael Porter (1998) presents three general types of strategies that businesses use to achieve and
maintain competitive advantage. Moreover, he advised that it is not prudent to follow more than one
generic strategy or "hedge your bets" because each strategy may appeal in a different way to every
manager. An important consideration in choosing the type of competitive strategy is to take into
account the firm's competencies and strengths,

Cost Leadership

It is a business level action designed to produce or deliver goods or services with features acceptable to
many customers at the lowest cost relative to that of the competitors. So, in what way can cost
leadership be obtained? There should be constant effort to reduce costs through the
following.Determine and control the cost drivers such as production overhead, cost of sales, research
and development, and service. Controlling can be done by building efficient scale facilities including
scare of the art manufacturing facilities. Maximize the use of the assets to increase productivity,

Re-engineer the value chain as effective as necessary though simplification of production process,
change of manual to automation, and establishment of new and efficient advertising media as well as
distribution channels and logistics including order processing

Differentiation

It is a business level action that distinguishes a product or offering from competitors to make it more
attractive to a target market. This strategy should not only create value for a product or offering but also
makes it difficult for competitors to copy Product differentiation, as originally conceived by Edward
Clumbelain in his book Theory of Monopolistic Competition (1933), is the process of distinguishing a
product or service from others to make it more attractive to a particular target market. To
differentiation can be a source of competitive advantage and a potent weapon in an overcrawled
battlefield In fact, very aggressive and radical differentiation can be a company's potential passport ro
the proverbial blue ocean . Blue Ocean Scategy refers to the creation of new demand in an uncontested
market rather than competing head on with other players or supplies in an existing industry.

A firm who has established a new market ahead of others has the advantage of being pioneer and
different thus, capturing a big market share and with less promotional expense. A good example of this
is the C2 a healthy beverage product of Gokongwei Company. The management realized that it could be
difficult to compete under a red ocean" or traditional market of cola products. Red Ocean is a type of
market where it is occupied by sharks or many players. Consequently, the ocean is swamped by blood
because organizations outmaneuver each other to gain or control the market. This Blue ocean strategy
was introduced by W. Chun Kim and Renee vinc in 2005.

Differentiation can also be done by developing new systems and processes, creating image through
advertising, focusing on quality, enhancing capability in research and development, and maximizing
human resources contributions through low turnover and high motivation. In order to create
differentiated value, firms should establish an image of rarity or uniqueness, thereby creating buyers'
switching costs. In most cases, buyers will not mind the price increase as long as the products are well
differentiated.

The following make a company distinct over its rivals:

A. Unique product features and performance. Example: H2O Hotel is the only city hotel with giant
aquariums in all its guestrooms.

B.Extra-ordinary service. Banco De Oro's longer banking hours extending to weekends sets the firm
apart from the rest of the other banks.
C.New technologies and state of the art facilities. An example of a new technology is when Toyota
pioneered cars with global positioning system (GPS). Another is Philips LED bulbs that are energy savers
for household or office use.

D.Quality of Input. The Zuellig Building located at the corner of Makati Avenue and Paseo de Roxas
boasts of being the most advanced building in terms of being eco-friendly, with 90% of its office space
supplied with natural light and saving up to 70% in water costs.

E.Excellent skill or experience. Microsoft provides numerous ways to assist clients experiencing technical
problems regarding purchased products call center e-mail.surveys, etc.).

Focused Leadership

It is a business level action to produce or deliver goods or services that serve the needs of a particular
segment or niche at the exclusion of others. This strategy can be done through the following:

A.Particular buyer group-yuppies (young professional) or senior citizens

B.Different segment of product line-products for professional painters or DIY (Do

It Yourself)

C.Different geographic market - provincial or metro city

Foccused Differentiafion

It is a business level action designed to create distinct products or services in pursuit of above average
returns. Examples of areas to be covered are reputation design skills, manufacturing expertise, R&D
capability, and empowered and talented workforce.

Integrated Cost Leadership/Differentiation

It is a business level action to bring about the ability of the firm to integrate the means of competition
necessary to implement the cost leadership and differentiation critical to developing competitive
advantage of the apply this strategy, firms should do the following:( a) Adapt quickly to enironmental
changes,( b) Learn new skills and technologies more quickly: c) Effectively leverage its core
competencies while competing against rivals.