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PAGE 2 ORGANIZATIONAL VISION ORGANIZATIONAL CLIMATE

• an inspirational statement of what the organization hopes to • the regular and repetitive patterns of attitudes and behavior
achieve at some point in the future the image of what an exhibited by employees of an organization
organization desires to achieve short and succinct but carries an
• a measure of the health of an organization
extraordinary force that will stir, motivate, and inspire
employees to work and refocus toward its desired optimal future Strategic Analysis in Decision-Making CHALLENGES IN THE
stat. EXTERNAL & INTERNAL ENVIRONMENT

ORGANIZATIONAL GOALS AND OBJECTIVES EXTERNAL ENVIRONMENT


Organizational goals are pursued on their respective purpose Student Learning Outcomes
and direction. Goals are macro, encompassing in perspective and 1. Perform environmental scanning
prospective in nature.
2. Employ SWOT Analysis using a company
• Objectives are different from goals in that they are micro and
specific in perspective. 3. Analyze and evaluate the social, political, economic,
Strategic Objectives technological, and environmental forces affecting the country
• Strategic objectives are, in general, externally focused. 4. Identify external forces that may prove beneficial or
According to Peter Drucker (2008), objectives fall into eight detrimental to an organization
major classifications: SCANNING THE ENVIRONMENT
1. Market standing like desired share of the current and new
• Environmental scanning is the study and interpretation of the
markets.
2. Innovation like development of new goods, services, and of forces existing in the external and internal environments.
skills and methods required to supply them. • It is carefully monitoring the surroundings with the
3. Human resources like selection and development of end goal of ascertaining early indications of prospects and
employees. challenges that may influence the organization's present and
4. Financial resources like identification of sources of capital and future plans.
their uses. The external environment includes social, economic, political,
5. Physical resources like equipment and facilities and their uses.
technological, environmental forces that may influence an
6. Productivity like efficient use of the resources relative to
output. organization, an industry, or an entity.
7. Social responsibility like awareness and respon siveness to the The competitive environment covers competitors, suppliers,
effects on the community of the stakeholders. customers, stakeholders, culture, and the government.
Modes of Environmental Scanning
• Scanning processes:
1. looking at or simply viewing information the environment
involves two

According to Aguilar (1967), there are 4 ways of environmental


scanning:
Undirected Viewing
• The individual is exposed to information with no specific
informational need in mind. The sources of information are
wide-ranging and large chunks of information are quickly
dropped from the individual's attention.
Conditioned Viewing
• The individual directs viewing of information to specified facts
and data to be able to assess their general impact on the
organization. It is not an active search but a mere viewing of
ORGANIZATIONAL CULTURE information.
• a system of knowledge and common values which Informal Search
can be exhibited and evaluated similarly by people • This essentially involves a relatively unstructured effort where
even with different backgrounds and at different the objective is to gather information to expound on the issue
Formal Search
levels within the organization
• The effort exerted by the individual is deliberate and planned.
• more solid, stable, and long-term because it
The search is both focused and structured and the research
presents the organization's culture from its inception methodology is clearly enumerated and followed.
to where it is; showing how the culture of an The SWOT Matrix Analysis
organization evolved through the years • The SWOT Matrix is a structured assessment tool used to
• unique and largely and generally influenced by the evaluate an organization, industry, a place, or even a person in
terms of set parameters like strengths, weaknesses,
leadership of the top management
opportunities, and threats.
PAGE 3• It classifies strengths and weaknesses as internal • These areas are government, culture, the stakeholders,
dynamics characterizing an organization and threats and competitors, suppliers, customers, and the community.
opportunities as external influences to the organization Government: BUSINESS CARETAKER
• Strengths are features that organizations possess, thus,
The government is the sole legitimate institution tasked with
giving it significant advantage over others.
• Weaknesses are characteristics that place organizations at a overseeing organizational operations in the country. In
disadvantage relative to others. These may just be limitations or implementing these administrative functions and
vulnerabilities of organizations. responsibilities, the government undertakes the following:
• Opportunities are possibilities in the external environment that 1. Provides the needed infrastructure
organizations can exploit to their advantage. physically in the form of roads, bridges, electricity, and water
• Threats are challenges in the external environment that services; technologically through information technology
can cause problems to organizations.
infrastructure and communication facilities;
THE EXTERNAL ENVIRONMENT
• The external environment presents varying forces that • economically by providing availability of loans, banking
influence organizational direction and strategic decision-making. services, low interest rates, and tax incentives; socially through
• These forces are social, political, technological, housing, welfare, waste management policies, community
economic, environmental, and legal in perspective. services, and societal responsibilities; and
• The confluence of these forces can present themselves as 2. Creates an atmosphere of fair and robust competition among
threats and challenges to organizations. On the other hand, they industry and company players, monitors and regulates
could provide valuable opportunities. The analysis of the external
monopolies and oligopoles, and eliminates unfair and legitimate
environment is referred to as PEST Analysis
FORCES IN THE EXTERNAL ENVIRONMENT practices politically in terms of peace, security, stability, and
Political Forces governance.
• Political Independence 3. Formulates business policies, implements business operating
• Changing Governments guidelines, regulates the conduct of business activities such as
• Terrorism payment of taxes, health and safety practices in food,
• Suicide Bombings
manufacturing, construction, and other service industries,
• Global Alliances
• Chemical and Nuclear Threats. ensures quality of products and services, and mandates
Economic Forces minimum wages of employees, and their fair and just treatment.
• Globalization A COMMUNIAL CONVERGENCE
• Competitors and Suppliers • Culture is the communal aggregation and convergence of the
• Fall of Financially Stable Organizations country's philosophy, beliefs, traditions, values, attitudes,
• Increasing Oil Prices aspirations, and practices that have historically evolved since a
• Economic Trade Agreements
nation's inception.
• Emerging Markets
• Rise of China • The Philippines has its own culture-a culture greatly.
Social Forces influenced by diverse cultures: Chinese, Japanese, Spanish, and
• Changing Social Structures American.
• Aging Population • Through many years of national growth and
• Demand for Health Services development, this culture has been shaped by environmental
• Sophisticated Lifestyles of People variables happening within and outside the country, and until
• Cross-cultural Diversity
today, continues to change, mature, and transform.
Technological Forces
• Communication Technology • Such evolution has nurtured in the Filipino certain distinct
• Computer-integrated Business beliefs, traditions, and practices, which are either a pride to the
• E-banking country or otherwise.
• E-learning CULTURE:
• Digital Medicine A COMMUNIAL CONVERGENCE
• E-security
FILIPINO CULTURE
Environmental responsibility is the urgent call of the global
neighborhood. Ecological damage is happening everywhere. • Trait of hospitality
Environmental Forces • Practice of bayanihan
• Climate Change • Taking care of parents, old relatives, and siblings
• Use of Biodegradable Materials • Concern or pakikisama and utang na loob
• Environmental Waste Management • Habits of ningas kugon, mañana, and 'Filipino time
• Preservation of Rainforests and Marine Life • Attitudes of crab mentality and bahala na
INTERNAL ENVIRONMENT
• Virtue of resiliency
Student Learning Outcomes
1. Assess the internal environment • Idea of kanya-kanya
2. Identify the role of the government as the business caretaker • Consciousness of 'being politically involved'
3. Appreciate the role of culture as a venue of communal STAKEHOLDERS:
convergence THE BUSINESS INVESTORS
4. Classify the types of competitors and compare them with each Organizations exist because there are individuals who are willing
other to take risks, invest their capital, and engage in business
5. Relate consumer behavior to specific consumer outcomes
activities in exchange for a retum called profit.
6. Appreciate the importance of suppliers in any business
transaction
7. Explain Porter's Five Forces Model Stakeholders are an asset to the country. They provide
THE INTERNAL ENVIRONMENT opportunities for exchange of products and services. They
• In the internal environment, there are existing unique and initiate business operations and compete among themselves.
interrelated variables that directly affect any
organization/business.
• Understanding these variables is essential to conduct the
PAGE 4• Stakeholders are business investors. Some are actively SUPPLIER: THE BUSINESS PARTNERS
involved in the conduct of their business while others prefer to  These refer to individuals and companies engaged in the
be silent investors. delivery of raw materials, machinery, technology, labor,
• They boost and energize economic activity, provide
expertise, skills, and other forms of services.
employment to the community, and help government by paying
business taxes. of businesses are the direct While owners of  They are essentially business partners. Without them,
businesses stakeholders, others are indirect certain products cannot be produced and some services
stakeholders. These are individuals or entities that stand to cannot be rendered.
benefit from the investments of the owners. They are the COMMUNITY: THE BUSINESS CONCERN
employees, the government, and the community.
COMPETITORS:
BUSINESS THREATS
• Competition is an economic scenario where nations,
communities, organizations, companies and individuals offer and
sell her products and services.
• Competitors continuously stive to outplay and outsmart each
other, hoping to get a larger share of the target market.
1. Same Products – companies who sell exactly the same
products or offer the same services.
2. Similar Products – companies who sell similar products PORTER’S 5 FORCES MODEL
3. Substitute Products are products that are similar enough that
one an be used in place of other products.
4. Different Products
CUSTOMER: THE BUSINESS CHALLENGES

COURSE PACKET 2: STRATEGY FORMULATION


CUSTOMER: THE BUSINESS CHALLENGES
BUSINESS STRATEGIES
VALUE CHAIN ANALYSIS
• Value chain is a general term that refers to a sequence of
interlinked undertakings that an organization operating in a
specific industry engages in.
• It looks at every phase of the business from the time of
procurement of raw materials to the time its products reach its
eventual end users or consumers.
Changes in Consumer Behavior
• The value chain concept is concretized in supply chain
management. Here, value creation is greatly emphasized.
SUPPLY CHAIN MANAGEMENT
• Supply chain management is a broad continuum of
specific activities employed by a company. It consists of the
following:
• — Purchasing or supply management which includes the
sourcing, ordering, and inventory storing of raw materials, parts,
CUSTOMER: THE BUSINESS CHALLENGES and services;
• Production and operations, also kwon as manufacturing and
assembly;
• Logistics which is the efficient warehousing, inventory
tracking, order entry, management, distribution and delivery to
customers; and
• Marketing and sales which include promoting and selling to
customers.
Sourcing and Ordering
Steps in sourcing and ordering:

1. Specify the need clearly by writing down the details.


2. Identify and analyze possible sources of supply.
3. Ask potential suppliers for their respective quotations,
proposals, and bids.
4. Compare and evaluate submitted documents, then select the
suppliers. Both buyers and suppliers agree and determine the
terms of the contract. Correspondingly, the negotiated order
placements follow.
PAGE 5 • Manufacturing is the process of producing goods using people
Supply Management Objectives or machine resources. It commonly refers to industrial
• Improving the organization's competitive position production where raw materials are converted into finished
•Providing uninterrupted flow of materials, supplies, and services goods.
• Keeping inventory and loss at a minimum
• Assembly is the process of putting together raw
• Maintaining and improving quality
• Finding best-in-class suppliers materials into a desired output. Quality raw materials and parts,
• Purchasing at lowest total costs efficient production layouts and processes, and employees with
• Achieving harmonious relations with suppliers skills and motivation are essential to effective transformational
process.
Sourcing and Ordering
Steps in sourcing and ordering:
1. Specify the need clearly by writing down the details.
2. Identify and analyze possible sources of supply.
3. Ask potential suppliers for their respective quotations,
proposals, and bids.
4. Compare and evaluate submitted documents, then
select the suppliers. Both buyers and suppliers agree and
determine the terms of the contract. Correspondingly, the
negotiated order placements follow.
5. Prepare, place, follow up, and expedite the PO (purchase order
1. Warehousing is the function of physically packing finished
a written requisition placement to purchase supplies).
6. Confirm that the order placed has actually arrived in good goods or merchandiser in a building, room, or any space for
condition and at the quantity. Forward the shipment to its temporary storage. While these
destination, properly document and register the receipt, and items are stocked in store rooms, they are timetabled for release
forward it to the accepting to customers or buyers.
party/parties. 2. Scheduling is the act of organizing these inventory units and
7. Lastly, invoice clearing and payment follows.
booking them for delivery.
Inventory Management
3. Dispatching products are for transfer- This may include
The role of inventory is to buffer uncertainty. It includes all
purchased materials and goods, partially completed materials posting, mailing, shipping out, transmitting, forwarding, or
and component parts, and finished goods. There are four broad releasing commodities-
categories of inventories: 4. Transportation scheduling and other logistics are necessary to
1. All unprocessed purchased input or raw materials for make dispatching cost-efficient. The goal is to minimize
manufacturing transportation costs. Therefore,
2. Work-in-process (VVIP)
considerations have to be prioritized in terms of location site,
3. Finished goods including all completed products for Shipment.
4. Maintenance, including the producing the repair, and ease, or gravity of traffic, safety, and
operating supplies (MRO) materials and supplies used when labor requirements.
products but are not parts Of the products . 5. Delivery to the specified site is undertaken. It closes the entire
Inventory Model logistics circle.
• Inventory management is ordering the right quantity of SKUs GROWTH STRATEGIES
at minimum inventory costs. a mode adopted by an organization to achieve its main
• Inventory cost is the sum total of ordering costs and carrying
objectives of increasing in volume and turnover can be internal
costs.
-Ordering costs (set-up costs) are variable costs associated with or integrative
placing an order with the supplier like managerial and Growth strategies are carefully studied and deliberately carried
clerical costs in preparing the purchase. out by organizations for the following reasons:
— Carrying costs (holding costs) are costs incurred for holding • They want to survive the hypercompetitive environment and
inventory in storage like handling charges, warehousing not perish.
expenses, insurance, pilferage, shrinkage, taxes, and costs of
• They want to increase their earnings or income.
capital.
• They want to create their advantage among competitors.
• The inventory model answers two questions: • They may want to increase their market leadership in a given
"How much to order?" and "When to order?" industry.
• The question, how much to order, is answered by determining COMPETITIVE STRATEGIES
the Economic Order Quantity (EOQ). • designed to deal with the so-called reality of hyper
The EOQ seeks to determine an optimal order quantity where competition
the sum of the annual order costs and annual carrying costs is
• essentially long-term action plans prepared with the end goal
minimized.
• The question, when to order, is answered by computing the of directing how an organization will survive and compete
Reorder Point (RP). • formulated to help organizations gain competitive
advantage after evaluating and comparing their strengths and
weaknesses to their competitors.
PAGE 6 STABILITY STRATEGIES
Low-cost Leadership Strategy • For organizations that are doing fine or are doing better in their
• Its objective is to offer products and services at the lowest cost existing businesses, they may choose not to implement any
possible in the industry. growth strategy.
Broad Differentiation Strategy • They may not want to apply any competitive strategy
• The objective of the broad differentiation competitive strategy and hence, decide to keep the status quo. Not adopting any
is to provide a variety of products, services, or product/service growth or competitive strategy is a choice that organizations
features that competitors do not offer or are not able to offer to make.
consumers. • Stable with their current businesses, some organizations are
Best-cost Provider Strategy comfortable with their current market niche and any loud
It is a combination of low-cost leadership and broad strategy may attract the attention of competitors.
differentiation strategies. RETRENCHMENT STRATEGIES
• It is implemented when the organization gives its customers 1. Liquidation is the most radical action a company takes when
more value for money by emphasizing both low-cost products the company is losing money and thus, is further compounded by
and services with unique features. a disinterest on the part of the stockholders to do anything more
Focused/market-niche Lower Cost Strategy to save it. In such cases, the business may be terminated and sell
• This strategy is implemented when the organization its assets.
concentrates on a limited market segment and creates a market 2. Divestment is implemented when a company consistently fails
niche based on lower costs. to reach the set objectives or when the company does not fit well
Focused/market-niche Differentiation Strategy in the organization. Thus, the stockholders would preferably sell
• This strategy is implemented when the organization it or set is as a separate corporation.
concentrates on a limited market segment and creates a market 3. A turnaround strategy is adopted when the organization has
niche based on differentiated features like design, utility, and reached a significant level of non performance, non- productivity,
practicality. demoralization, and unprofitability, and therefore, has to
Other Competitive Strategies implement restorative strategies.
Innovation Strategy. This strategy is difficult to implement. CORPORATE STRATEGIES
The goal of a competitive innovation strategy is to radically INTEGRATIVE GROWTH STRATEGIES
catapult or leapfrog the organization by introducing completely • essentially external growth strategies
new and highly differentiated products and services that give an • involve investing the resources of the organization in another
organization competitive posturing. company or business to achieve growth goals
Operational Effectiveness Strategy. The objective of an • essentially acquisition strategies
operational effectiveness strategy is to make an organization Types of Integrative Growth Strategies
perform better by making the structure lean, streamlining Horizontal integration is a strategy where the organization
wasteful and inefficient processes, harnessing better facility and acquires another competing business. Organizations may employ
equipment maintenance, and increasing workforce productivity. horizontal integration to eliminate real or potential competitors
Economies of Scale. When applied as a competitive strategy, it because some competitors can present themselves as deadly
lowers costs because of volume. In other words, the more a threats to an organization.
product/service is produced, the lower the costs are for Vertical integration is the process of consolidating into an
producing the product and rendering the service. organization other companies involved in all aspects of a
Technology Strategy. Technology can be applied system-wise product's or service's process from raw materials to distribution.
through digital integration. As organizations realize the benefits It is adopted by an organization to gain control over its suppliers
of going digital, they aggressively pursue this thrust. Functional and distributors, to increase the company's market share, to
activities like accounting, marketing, purchasing, human resource minimize transaction and inventory costs, and to insure adequate
management, production, and operations are interconnected stocks in the retail stores.
using enterprise resource planning. • Vertical integration can either be backward or forward:
Backward integration is when the organization buys one of its
suppliers. An organization may carry out backward integration to
better control its supply chain and ensure a more reliable or
cost-effective supply of input; eliminate inefficiencies; secure
quality outputs or according to set conformance standards; help
increase the profitability of an organization; and thus, create
competitive advantage.
Forward integration is when the organization buys distribution
companies that are part of its distribution chain. In effect, the
The life cycle of any product/service refers to the lifespan that a organization is able to remove the intermediary, thus,
commodity/service undergoes from its introduction stage to its eliminating distribution costs. It allows an organization to
growth, maturity, and decline stages. reinvent its marketing outlook and redesign its marketing
strategies.
1.The introduction stage is the period of launching the The Boston Consulting Group
product/service for acceptance. In this phase, the The Boston Consulting Group Growth/Share Paradigm started to
product/service is new; hence, there is a need to create make its impact on corporate strategy in the early 1970's.
awareness. Bruce Henderson of the Boston Consultant Group developed this
2. The growth stage is the phase where the product/service gains model, called the BCG model.
acceptance by the consumers. In this phase, sales and profit The BCG model classifies the products or business units of an
slowly increase and emphasis is now on continuous market organization in terms of two parameters, namely, market share
development and improvement. and market growth in relation to the marketing leader.
3. The maturity stage is the period where the product has
reached its penultimate level. Here, the established product  Market share is the relative sales percentage of a
tends to remain steady and the number of competitors increases. company in relation to the total sales percentage of the
4. The decline stage is the period where the product/service market in consideration.
begins to reach or is reaching its lowest point. Here, sales and  Market growth refers to an increase in demand over
profits decline and price competition is intense. time. It may be high or low.
PAGE 7 Benefits of Global Strategies
In pursuing global strategies:

 companies can enjoy larger sales and earnings;


 they can benefit from the global branding of their
products and services, not to mention, the earnings from
economies of scale;
 higher production volume with efficiency increases
savings and creates greater advantage for companies;
and
The BCG Model illustrates four broad categories in relation to  sourcing of labor can be studied to optimize labor costs.
market share (low, high) and market growth (low, high).
• A high market share in a high market growth defines stars.
They are the market leaders and if the market continues to grow,
they are likely to become cash cows.
• A high market share in a low market growth defines cash cows.
Since they are the market leaders in a mature market growth,
establishing a competitive advantage can generate a lot of cash
flow and bring about high profit margins.
• A low market share in a high market growth defines question
marks. These essentially new products need promotional
strategies.
• A low market share in a low market growth defines dogs. They
should essentially be minimized, if not avoided. They can be
expensive to the company.

 McKinsey conceptualized the General Electric (GE)


Model for the company.
 This model is an improvement of the BCG Model, in that
it is used to assess the strength of a strategic business
unit (SBU) of an organization.
 It takes into consideration two parameters to determine
the overall strength of an SBU: market attractiveness and
business strength.

GLOBAL STRATEGIES

Organizations pursue global strategies for external business


expansion. Global strategies cover three main areas:
international, multinational, and global.

- Companies who might want to sell their excess products


outside their home markets pursue international strategies.

- A company can engage in multinational strategies when


it is involved in a number of markets outside the home country.

The challenge in undertaking multinational strategies is to sell


competitive and distinct products and services that are suited to
the customer demands of different countries.

- In global strategies, the company treats or considers the world


as a whole, one market and one source of supply with slight local
variations.
PAGE 1 Strategic Management Model • If strategic decision-making is correctly effected, organizations
Student Learning Outcomes can acquire the capability of thinking strategically. Strategic
1. Perform environmental scanning thinking is the cognitive process of competently and analytically
2. Employ SWOT Analysis using a company weighing factors and arriving at critical decisions in the context
3. Analyze and evaluate the social, political, economic,
of the current milieu of which an organization is part.
technological, and environmental forces affecting the country
4. Identify external forces that may prove beneficial or • If strategic formulation is uniquely designed and effectively
detrimental to an organization communicated, organizations have greater possibilities of
 The 21st century epitomizes the reality of dynamism. In attaining organizational competitiveness. Organizational
fact, today's milieu is in a state of fluidity. competitiveness pertains to the ability of any business or
 The certainty of change is universal. company to utilize its resources optimally and Sustainably for
 The current landscape of competition is highly maximum performance and productivity.
threatening and daunting. • If strategic implementation is efficiently employed,
 As the global economy expands, blurring boundaries,
organizations can achieve comparative advantage. Comparative
any business needs to create its own impact in any part
of the world. Thus, it is urgent for organizations and advantage refers to the ability of an organization to produce a
businesses to strategize. particular good or service at lower marginal and opportunity
HYPERCOMPETITION costs than its competitors.
 a fundamental feature of the new economy occurs •If strategic control is productively monitored, organizations can
when product/service offerings and technologies are so realize strategic performance. Strategic performance is the
new that standards become unstable and competitive accomplishment of a high level of productivity that is
advantage is not sustainable
characterized by efficiency in the context of lean and
 Hypercompetition is a condition whereby strategic
maneuverings have escalated to bigger business quantifiable management.
exposure, more sophisticated marketing positioning,
aggressive selling, and innovative products and services.
 It is a situation where both globalization and technology
collaborate to create a heightened cutthroat situation.
STRATEGIC MANAGEMENT DEFINED
 Strategic management is a continuous process of
strategy creation. It involves strategic processes like
strategic analysis and decision-making, strategy
formulation and implementation, and strategic control,
with the primary objectives of achieving and
maintaining better alignment of corporate policies,
priorities, and success STRATEGIC PLANNING
 Strategic analysis consists of a systematic evaluation of a continuous, repetitive, and competitive process of setting the
variables currently existing in the external and internal goals and objectives that an organization aims to attain, defining
environments. the means to achieve them, and assessing the best way to
 Strategic decision-making is deliberately bringing realize them in the context of the prevailing environment while
 together the right resources for the right markets at the
measuring performance through set standards and periodically
right time.
 Strategy formulation is designing strategies on the but continuously conducting reassessments
business and corporate levels. Strategic Plans
 Strategy implementation is employing these crafted There are two principal types of plans:
strategies to achieve organizational set goals and 1. Medium/long-range plan - prepared in the context of the
objectives. coming three to five, ten, or more years; describes the major
 Strategic control is the application of appropriate factors or forces that affect the organization's long-term
monitoring and feedback system. objectives, strategies, and resources required.
2. Annual/yearly plan short-term; succinctly - describes the
organization's present situation, its goals and objectives,
strategies, monitoring mechanisms, and the budget for the year
ahead.
Steps Involved in Strategic Planning
1. Make a situation audit to ascertain where the organization is
today.
2. State the respective goals and objectives of the organization,
the values and value systems it espouses, its business definition,
and its corresponding strategy statements to determine where it
wants to go.
• If strategic analysis is accurately conducted,
3. Delineate appropriate strategies to be carried out in order to
organizations can develop strategic intelligence. help direct the organization to where it wants to be.
Strategic intelligence is is the capability of an 4. Identify and then choose the soundest strategy to determine
the best way for the organization to be where it wants to be and
to achieve its goals.
5. Monitor the implementation of strategies to measure
performances.
6. Conduct periodic and continuous reassessments in order to
implement improvements and suggested changes

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