Chapter 1

Strategic Management The Challenge of the New Century

STRATEGIC MANAGEMENT PROCESS

Strategic management is the dynamic process that is full of commitment to decisions

and actions to deliver strategic competencies to achieve the desires results in terms of
corporate profitability and growth. The strategic competitiveness is the result of the internal and
external analyses of the corporate environment for the formulation of the strategy and action
plans that are directed to set goals and targets. Effective strategic actions are prerequisites to
achieving the desired corporate profit goals and above-average return on investments.

The strategic process is used to match the ever-changing market environment and the
competitive structure of the business involving material and production resources. The changing
technology and resource capabilities of companies are competing with the local and global
market for greater market share. The desired outcome is the product of carefully conceived plan
of actions and concerted strategy formulation in the context of its corporate objective.

The world of business in the new century is full of uncertainties, and some companies
achieve competitive success while others fail to achieve the desired return on investments. The
corporate achievements of successful firms are the result of strategic competitiveness of the
managers, employees and their organization towards continuous improvement and commitment
to corporate goals and targets.

The corporate competitiveness in the new century is created primarily by the emergence
of the global economy and the rapid technological changes in the production of goods and
services. New and innovative products are tactical strategies in the globalization of trade and
business where countries are geared towards the exchanges of more goods and services with
less barriers. This prevailing business landscape provides the context of opportunities and
threats within, which corporate organizations must strive to meet the global challenge of
competitiveness.

The competitive advantage could be divided into two different strategies;

1. Industry-Based Model

It refers to the analyses of the prevailing industry where the firm has its competitive
advantages over the firms in the environment. The corporate strategy must be focused on
industry search and scanning of the most profitable business activities that would give the best
returns on investments. The external environment is full of unexplored opportunities for
corporate investments. These opportunities are open not only to big corporations but also to
small enterprises that must develop strategic competencies on the vast areas of the business
landscape.

2. Resource-Based Model

It refers to the analyses of the prevailing resources available to the firm that are present
in the internal environment which could then be utilized in the development of competitive
advantage. This may refer to the capabilities of the human resources that could be linked to the
needs of the present technological development as highly trained manpower could develop new
products. This may also refer to the available material resources that are present in the
environment which could be developed into new products that could be the sources to exports
to the global market.

STRATEGIC MANAGEMENT CHALLENGES

Earning above the average return on investments and achieving the desired
competencies are challenges that the business must be able to contain in the world of
competition. The challenges are substantial in the economic global arena not only the big
corporations operating in multi-national environment but also for small firms that need to
innovate in order to survive the challenges of competition. The business war-games could be
won with the participation of executive generals equipped with the knowledge of strategic
management.

Strategy is an integrated management challenge as the top executive formulates policies

and programs that will bring the company to its desired direction. It is the integrated and
coordinated set of actions designed to exploit core competencies that were developed overtime
and revised with new strategic actions fitting in to the new and changing environment. Strategic
adaptation is scanning the present business scenario and is making amendments to operational
programs. Forecasting and planning strategies must be put in place with pertinent date analyses
of the present business conditions.

Research and development of new products that will satisfy customer needs and wants
are strategic action plans that must be pursued if the company wants to survive the new
business environment. Companies should not rely on their present successes, as other
companies would like to take over the laurels that they once had. Visioning and foresight,
together is not the monopoly of one organization. Many executives are studying the move of its
competitors and their weaknesses become their strength.
 The corporate profitability hinges on the development of customer satisfaction and a well
thought of strategy. It must be directed to the development of new or innovative products that
will satisfy the ever-changing needs of the customers. MAximizing customer satisfaction and
loyalty develop business leadership. Quality products and services are the major concern of the
management organization to earn the desired profit. It must be consistent with the view that no
matter how goood a product or service is, firm must select the right strategy and then implement
it effectively. No company can set on its laurels all the time. Other firms are on their tails to get it.
Companies need to introduce new and innovative strategy consistent with the prevailing market
condition.

STRATEGIC VISION AND INTENT

Strategic vision is an advantage of the firm’s resources and core competencies to

accomplish its goals in the competitive environment. Strategic Vision and intent exist when all
employees and its executives are committed to the pursuit of a specific performance criterion.
Strategic vision provides the manpower resource with the commitment to remain the best in the
industrial world and unseat the best in their ranks of competitors. It is the power of effectively
and fervently believe that they produce and market quality products as they focus their firm’s
ability to outperform their industry competitors.

It is concerned with identifying the resource capabilities and core competencies on which
the firm can base its strategic action. It reflects what the firm is capable of doing and the unique
ways to utilize its competitive advantage. It is not enough for the company to know its strategic
intent. Performing well demands that the firm also identifies the competitor’s intent as their
strategies may counterbalance their own intent and operational strategies. The firm’s success
may be also be grounded in the keen and deep understanding, not only of the competitors but
also of the customers, suppliers, stockholders and the different corporate stakeholders.

STRATEGIC MISSION

Strategic mission flows from strategic vision and intent. It is the statement of the firm’s
direction in the pursuit of its operation in the production and marketing of its products and
services. Strategic mission provides general description of the products and services that the
firm offers to its various stakeholders based on its own core competencies. An effective mission
establishes the frim’s individuality, and it is inspiring and relevant to the making of great
stakeholders for greater patronage that will form the required insights and strategic actions.

An effective mission is formed by the company with the strong sense of what it wants to
do with all ethical standards guiding the behavior of its corporate resources in the pursuit of its
goal and profitability. An effective vision and mission when properly implemented with the
strategic actions develop positive effect on performance that can be measured in terms of
increased sales and market growth.
THE LANDSCAPE OF BUSINESS IN THE NEW CENTURY

The competitiveness of the world’s market is in the continuous process of change whose
pace is relentless and increasing over time. The industrial boundaries have become challenges
as corporate directions change. New opportunities are taken over by big companies as they
spread their resources into new ventures that would generate greater return on investments.
We consider, for example, San Miguel Corporation has ventured now on infrastructure
development and construction as the opportunity in this area has a greater promise of increased
revenue. The billions of government expenditure for the development of the skyways and other
infrastructures are opportunities for new industrial ventures.
A new mindset is necessary to cope with the ever-increasing competition as the old
economies of scale and intensive advertising are not as effective as it was before. Managers
and corporate leaders need new orientation in terms of flexibility and foresight. Managers must
be able to think the foregoing development in their are of operations. They must see the future
with clear vision of what is going to happen in 5 to 10 years ahead. Forward planning must be
put in the drawing board ahead of time and make amendments as the new landscape develops
in the new business horizon.
The business landscape in the new century is a combatant giant corporations. the
changing conditions and competitiveness needs new values of flexibility, speed, innovation and
integration. The changing conditions evolved from the challenges of the new market needs and
wants. This is brought about by the advancing economies of the world markets. The
development of new technology and the advancing changes in customer preferences are
opportunities for innovative companies and a threat to the traditional players in the industry.
The new century business is the field of hyper competition that results from the
dynamics of strategic maneuvering of global and innovative combatants. The rapid competition
is in terms of innovative products and price- quality positioning. Product Specifications and
information could be revised and modified and create new product design that is superior to the
once in the market without violating existing patent laws. new product positioning and
marketing strategy will be developed to invade established product and geographic markets.
in the hyper competitive market, companies are aggressively challenging their
competitors in the hope of improving their competitive advantage and product positioning,
thereby ultimately improving their performance. this rapid hyper competitive environment is the
result of the rapid change in technology that is usually the monopoly of the big industries and
innovative young corporations with new visions and foresight.

THE GLOBAL ECONOMIC SCENARIO

The new global economic scenario is the result of the new borderless flow of goods
services people skills and ideas that are relatively unfettered by artificial constraints. the global
economy significantly expands across borders and complicates the corporate competitiveness
as opportunities and challenges become new playing fields for those with foresight and vision
for expansion.
the united states and japan that used to be the hub of economic development with its
billions in foreign investments and market leadership have slowdown significantly with the
development of the european market and some countries in the asian region. The economic
crunch in the last decade affected the advanced countries while the asian region suffered less
devastation.
singapore malaysia indonesia vietnam and the philippines continued to grow
economically. china with its new policy of changing from total communist philosophy to capitalist
socialist economy with less government control for new investments became the new economic
hub of the asian region. the groupings of economic regions continue to device new cooperative
undertakings for the exchange of goods and resources among member countries with lesser
control in the flow goods and services.
the achievement in economic regional development could be the result of cooperative
undertakings and competitiveness in terms of the country's effort in putting its resources and
manpower into the production of more goods and services. the infrastructures for development
such as roads, bridges, air, and land are in competitive advancement of the country's economy
THE NEW HORIZON FOR THE PHILIPPINES STRATEGIC COMPETITIVENESS
the philippines is in the center in the asian region which could serve as the transient
point in the flow of goods and resources for its neighboring countries. that infrastructures and
the liberalization of trade and commerce will create new investments for its vast natural and
human resources. it is only through the development of our natural resources and the
development of new work values and skills of our manpower that we could achieve the creation
of new investments that will create new job opportunities.
New investments create new businesses that will generate employment sustaining the
economic well-being of the filipino people. changing the philippine scenario for business
development is the creation of more honest governance and the development of more attractive
investment policy without sacrificing the opportunity of its people for growth and economic
development. the country's economic development and global competitiveness are not the
making of its people alone but of the more sincere and honest commitment to the achievement
of good governance and transparency in the conduct of business.

THE DEVELOPMENT OF STRATEGIC COMPETITIVENESS

The borderless flow of goods, services. knowledge and ideas, and the financial capital
for investments plus the economic interdependence of the world's countries if the effect of the
marching orders for globalization. globalization has the view that the flow of capital may by the
natural resources of one country to be develop into new finish products and exported to another
country. the flow of capital maybe put in infrastructure development, and the use of new
machinery and technology in another Country as a new center of development. it is that
globalization will increase the range of business opportunities of companies competing in the
global market.
global competition has increased the standards in product quality, cost of production,
productivity levels and the operational efficiency. continuous improvement is not static as firms
and companies sick operational innovations and new marketing strategies. films in economy
need improve the skill of the workers and increase managerial innovativeness in order to
survive the increased competitiveness. exceeding capabilities in the global standards is the
rallying point to stay in business.
 the development of transitional and emerging economies in the asian region is an
opportunity for the philippines to actively participate competitively by increasing the opportunity
for new investments. local and foreign investments in capital must be attractive to develop
economically and generate the needed employment for our people. the development of its
capital base of human resources through skills training For competitive world standards is in
the right direction. the technical education and skills development authority, more commonly
known as tesda, should actively pursue more training programs to invite foreign capital
investment a new technology. While skills development is the foundation of good workers, the
attitude of work values must conform to world ethics of good performance.
the country's rich natural resources must be top for investments in the field of mining,
forest development and the vast resources of mindanao for agricultural development.
sustainable development could be the result of putting infrastructure in place for the
development of efficient and low-cost power generation by utilizing the natural energy of
hydropower which could in turn develop the agricultural sector for irrigation. the government
must institute reforms in bureaucracy to deliver more efficient service to the industrial sector and
the business community attracting more business opportunities for new entrepreneurs.
The global market is not dominated by the big players alone. small entrepreneurs could
be given the opportunity to enter the world market if given if given the right support and
incentive by the government. entrepreneurship in the rural areas must be developed and
explored at the economic base of the country is more in rural areas. The spread of infrastructure
development should cascade down the rural sector as we develop the foundation of
development in the metropolitan community. small players could be the next giant in the global
market if given the right boost and incentives.

THE TRENDS AND CONDITION THAT ALTER COMPETITION

1. the increase rate of technological change

the present rate of technology change has gone too fast during the last
decade. This diffusion in technology has created a new challenge for companies
to innovate or perish in the world of business. perpetual innovation is the by
word of advancing companies for supremacy especially in the electronic Industry
and the invention of new machinery that will produce more products or services.
the shorter product life cycle resulting from the rapid innovation and the
diffusion of new technology plays a competitive premium on being able to quickly
introduce new goods and services into the marketplace. the speed of the market
with new product satisfying the human needs and wants is one of the great
competitive advantage for a company that innovates consistently with the need of
the time.
innovations, even covered by patent, could be copied within a 3 month
period after its introduction into the market. this innovative diffusion becomes
not a monopoly of one company. marketing and new strategy could be another
factor in the competitive advantage. The internet age also plays a great role in
the marketing of products and services.
1. the advancement in information linkages
The advancing technology in the exchange of information in recent years
is brought about by the presence of new computers and the wireless transformation of
messages across countries. Personal computers, cellular Phones, artificial intelligence,
virtual reality, and massive databases are used by competitive persons and companies
to communicate effectively with their markets and business partners. with the efficient
and effective use of this technology, the resultant factor is the progressing of competitive
advantage by most industries.
for companies and industries to advance ahead of others in their line of
business, they need to build electronic linkages with their markets, suppliers, vendors
and even to their employees and managers. the speed of technological linkages and
interconnections reduces the cost of message transformation, hence making business
connection more efficient and effective.
the declining cost of information technologies and the increasing accessibility in
the present decade of competitive advantage as producers and sellers of goods could
be linked in a matter of seconds. the global proliferation of relatively inexpensive
computing power and its linkage on the global scale via computer networks combined
increase the speed and diffusion of information technologies.

2. knowledge base intensity

the computer age has increased the competitive knowledge base of the company
as they invest in information intelligence, technology and its application. in the new
century, knowledge base on new technology and its application is the organizational
corporate resource that develops greater competitive advantages. the investment in
individual talents is transformed into corporate assets By combining the knowledge base
into productive Development of new products that would satisfy the changing customer
demands.
corporate organizations that employ people with intangible assets for
inventiveness of products increase its market share and increase the stockholders equity
in terms of investments. the probable probability of achieving strategic competitiveness
is enhance in the new century as they realize that the corporate survival in the
information landscape depends on their ability to capture new intelligence, transform it
in new usable knowledge, and diffuse throughout the company. firms accepting this
challenge shift their focus from merely obtaining information to its exploitation gain
competitive advantage over rival firms in the corporate arena.
The corporate objective of greater return on investment should adapt quickly to
change their competitive advantage by developing strategic flexibility. strategic flexibility
is the ability to respond to various demands and opportunities existing in the dynamic
and uncertain competitive environment. the accompanying risk in the uncertain
environment could be overcome with a strategic foresight and plans that work effectively.
Strategic competitiveness is the development of flexibility in all areas of
operation, for product planning, sourcing of materials as inputs in production, product
ideation, to development and production. Firms must be able to take advantage of slack
resources that allow flexibility to respond To the ever-changing environment. when
embarking on major changes, the must conduct reorientation of its corporate strategy to
avoid major setbacks that would diffuse their corporate earnings.
the capacity to learn is another strategy to develop competitive advantage.
continuous learning provides the company with new and up-to-date sets of knowledge
and skills that would be necessary to the ever-changing environmental condition. failure
to update the firm's capability would mean being left out in the advancing changes in
technology and innovations that will be the competitive advantage of the competitors in
the industry.
continuous learning is the product of innovativeness. innovativeness is the
injection of new ideas and knowledge in products or marketing strategies that will
develop new competitive advantage. Learning while being flexible is difficult but they is
necessary for the continuous growth and survival in the competitive landscape of
business in the new century.

THE EXTERNAL INFLUENCE IN ABOVE RETURN ON INVESTMENTS

the success of the firm's objective in the increase return on investments is

primarily the determinants of strategic competency. the dominant influence of the
external environment of business is the focal point on the firm's strategic action that will
bring in the desired return on invested capital. the competition within the industry that it
Chooses to compete exert greater pressure on the firm's managers and executives to
perform with greater performance and accept the challenges of competitiveness.
the firm's performance is believed to be determined primarily by the range and
availability of the resources of the firm in terms of the following;

1. the availability of fixed assets

the firm that has a well asset management could compete with other
firms within the industry as they have the capital base to mobilize these
resources to take advantage of the prevailing opportunities within the business
environment. The competitiveness of the camella province in the real estate
business is brought about by many real properties that were in their inventory for
development when the housing boom became the new landscape in the
philippine business.
San miguel corporation has diversified in other areas of business and
accumulated assets that they use as investment in other profitable ventures that
generated substantial returns on investments. the corporation is in food and
beverages, meat and processed products, wine and beer, energy and power
generation, construction and development both in vertical and horizontal in
integration of activities.

1. the economies of scale

 the firm that produces more products not only for local market but for the
global supply has the greater advantage of the economies of scales. the more
products that the firm produces, the lesser are the cost of production as the fixed
cost is maximized and the marketing strategy is spread to the greater market
niche. the material input for production is put into greater use, and the more
volume ordered the more discounts are availed by the using firm.
competitive strategic alliance could be developed with the supplier of
inputs that would generate the greater number of products produced. this could
be true to consumer products like those produced by nestle that they penetrate
not only that local market but also the other countries that depended on quality
affordable products. while nestlé philippines import some of its inputs, there
Economies of skills put them in great advantage. they also capitalize on the
stable labor market conditions after the turbulent bottles with the activist labor
unions.

2. barriers to market entry

the competitive advantage is developed by the firm with vast resources
to deter other firms from entering the market that they dominate. the fast food
industry is dominated by jollibee corporations by buying all the other possible
major competitors as mang inasal, chowking, greenwich and other smaller fast
food outlets and putting in one basket the supply chain under one roof, thereby
maximizing the economies of scales.
While other smaller businesses in the fast food industry are trying to
capture the other market, their market shares could not overcome the dominated
clientele of jollibee as they expand not only in the local market but also in the
foreign market. the capital base became to huge that the entry to this market
becomes barriers to other entrance as they also accept franchising of their
operations in the urban provinces and cities throughout the country and other
parts of the world.
Smart and globe communications dominate the telecommunication
industry with the introduction of new marketing strategy of electronic loading
system with their prepaid clients. the introduction of the cellular phone as a
means of communications develops a new landscape of business for the
enterprising is small intrapreneurs by availing of the promotional strategies of the
two giant service providers. smart communication both the giant pldt to dominate
the telecommunication network, making other entrants difficult to penetrate the
other market share.

3. Corporate vertical and horizontal Diversification

the strategy for growth and expansion is the major role of competitive
major corporations to increase the return on investments. once they have
saturated the market with their products and brands, the next step is to expand
horizontally or vertically and integrate the resource base of operation. san mig
 makes its own battles for its beers and soft drinks at the time when they dominate
the bottling industry through backward integration.
when the feed industry for poultry and meat products became the new
business venture, they went into poultry growing to meet their supply needs for
their magnolia chicken that became the by word name in chicken products. san
miguel corporations is in meat processing through its monterey farms and
purefoods canned products and vertically expand in other new meat products.
the strategic competitive advantage of vertical and horizontal integration was the
result of the making of giant corporations.
it is not only in this venture that makes san miguel corporation of what it
is now today as they are also in energy development, power generation,
constructions, airlines, real estate development and infrastructure, and
corporate ventures that increase their stockholders equity and investments. They
expand into global market through joint ventures and investments in new product
development.

Degree of market concentration

Companies that acquire And develop skills needed to implement

strategies required to succeed in their chosen field of operation, develop
competitive advantage by concentrating on their field of expertise. again, the
example of jollibee foods corporation develops new taste buds for fried chicken
that appears both children and adults makes the company the leader in the fast
food industry.
Concentrating on this market niche and developing a new competencies
through the introduction of other new product lines increase the market foothold
and increases the return on investment. marketing strategies of making
children's parties and birthday occasion make a new twist for more product
patronage and making the place as center for family occasion. jollibee characters
become an added attraction with the twist marketing strategy.
the spread in corporate strategy must be studied very carefully as
competitive advantages done by not putting the eggs in many basket at a time.
let the eggs hatch in the incubator and make moorhens that laid the golden eggs
before venturing on other business activities for the corporate expertise lies in the
pipeline.
expertise and market concentration are two important ingredients that will
generate increase in return on investment and gradually expand to other markets
and products through diversification and integration. the corporate strategic
growth should concentrate on related products and services where the company
has developed their line of expertise.

THE INFLUENCE OF INTERNAL ABOVE RETURN ON INVESTMENTS

 The corporate achievements in greater return on investments are the making
such people and executives with an eye for competitive strategic competencies.
dc the future scenario and make steps towards the direction of success while
they foresee and avoid failures as they step forward with risk and cautions. the
following strategies are common to people with higher achievement for greater
return on investment;

1. study the business environment

2. locate the industry with high potential for above average returns
3. identify the strategy needed by the industry that will generate greater
returns
4. develop and acquire the needed assets and skills to implement the
strategy
5. use the corporate skills that were developed and implement the strategy

ENVIRONMENTAL SCANNING OF INDUSTRY

The internal environment is managed by executives and managers with an eye for the
profitability and growth of their firm. their focus of attention is not only the internal operation of
the business but also the prevailing environment where the firm's operate within the industrial
landscape. environmental scanning is the process of seeing the whole scenario of business
operation in terms of the general business activities within the industry and the competitors
strategies that may affect the present market share of the firm.
Success in business operation is seeing the future with an ai that could penetrate miles
ahead and foresee the business condition with the advancing technological changes and the
product shorter life cycles. the internal capabilities of manpower skills and knowledge base
must be updated and respond to changes in product development that becomes obsolete over
time. product innovation in the new century is the competitive advantage of the firm that makes
him or innovative products as customer satisfaction is the foundation for greater return on
investments.

horizontal and vertical expansion

while corporate organizations may succeed in one line of operation, corporate growth
and expansion need to integrate related industry and products that may supplement business
investments and generate the greater return on investments. this refers to seeing the firm's
expansion on related business within the environment that is either making the product in puts
related to their operation or new attractive industries where the corporate capabilities have
earned the competitive advantage.
horizontal expansion is either the backward integration or forward expansion. backward
integration is the processing of the material inputs that are source outside the firms operation.
when the economies of scale become evident due to manufacturing expansion in marketing
strategies that generate greater sales the integration of material inputs could earn savings that
will add to increase return on investments.
 on the other hand, forward expansion is taking over the marketing of the products that were
produced and used to be channeled to distributors and dealers. it could also be the acquisition
of related industries or firms that used to be competitors in the same business. san miguel pure
foods that used to be owned by robina foods corporation and Integrate its operation with
monterey farms that is also in the processing industry. on the other hand, robina foods
corporation use the added capital in expanding their operation on more profitable investments in
consumer snacks food products that are related to their integral flour processing operation.