Discussion On Strategic Management - Philippine Christian University

STRATEGIC MANAGEMENT
Prepared by Prof. Alejandro Bautista, MBA, PhD DAPM

“The relevant question is not simply what shall we do
tomorrow, but rather what shall we do today in order to
get ready for tomorrow?”
Peter Drucker
TOPICS
➢ Introduction of Strategic Management
➢ Process of Strategic Management
➢ Strategy Formulation
➢ SWOT/SMART/TOWS / BGC / IEM / EEM
Strategic Management
What is Strategic Management?
▸ Strategic management is the ongoing planning, monitoring, analysis, and
assessment of all necessities an organization needs to meet its goals and
objectives.
▸ The strategic management process helps organizations take stock of their
present situation, chalk out strategies, deploy them and analyze the
effectiveness of the implemented management strategies.
▸ Strategic management is the process of determining how this direction can
be achieved.
▸ Strategic planning is the process of formulating a direction for an
organization
Features of a Successful Strategic Management
▸ Has the support of the organization’s executive officer.
▸ Is user-friendly.
▸ Is participatory, not left to planners.
▸ Is flexible.
▸ Leads to resource decisions.
▸ Engages and motivates all staff.
▸ Is fresh and continuous, not static and stale.
▸ Is Proactive
▸ Not a Quick Fix
▸ Part of Quality Management
Features of a Successful Strategic Management
▸ Heightened cross-team learning.
▸ Less time spent reinventing the wheel.
▸ Fewer repeat mistakes.
▸ More rapid education of new team members.
▸ Higher quality output.
▸ Increased efficiency.
▸ The possibility/choice of at least one better practice in a
similar situation.
Process of Strategic Management
Strategic Management Model
▸ Scanning ▸ Strategy Implementation
○ Where are we now? ○ How do we get there?
▸ Strategy Formulation ▸ Measurement/Performance

○ Where do we want to be? ○ How do we measure our progress?
Process Of Strategic Management
#1 – Identifying Direction
The first step requires the organization to have a clear vision and
direction. Before developing plans, a business should determine its
short- and long-term objectives. The company will not have any clarity
on processes and procedures unless it sets its goals beforehand.
#2 – Analyzing Resources
An organization must first arrange its resources to carry out specific

tasks to reap the strategic management benefits. For example,
someone who excels at marketing may struggle to manage the
organization’s public relations. Hence, the management should assess
its resources and select the best one for respective processes.
#3 – Framing Strategies
After selecting the best resource for every process, the organization
frames its action plan for accomplishing the goal. This strategic
planning consists of elements needed to achieve the set objectives
effectively. The analysis, assessment, and supervision of processes at
every stage help the business resolve issues, whether internal or
external.
#4 – Implementing Strategies
Following the strategy development based on the organization’s
objectives, the next stage is to execute them. Every business must train
its human resources, from entry-level employees to managers, to
ensure they fully understand the process. It will bring core
competencies into action within the organization for the best possible
output.
#5 – Evaluating Effectiveness
The review of strategies is the final step in the process. Looking into
each aspect of the business during the strategy formulation and
implementation helps the management identify the efforts of every
individual. The organization can recognize these efforts through
performance appraisal schemes, which are essential aspects of the
business.
Strategy Formulation
Where do we want to be?
Vision
Mission
Values
Goals
Objectives
Vision
• Vision without Action is a Daydream
• Action without Vision is a Nightmare
• Not Optional
• Stretch –30+ Years
• 8-10 Words in length
STRATEGY FORMULATION
SWOT Analysis
SMART Model
• Specific
• Measurable
• Attainable
• Results-Oriented
• Timebound
Tows matrix/analysis
▸ TOWS matrix can be defined as a framework to create, compare, decide and access
business strategies
▸ SWOT and TOWS from a practical standpoint come down to the fact that SWOT
emphasizes the internal environment (strengths and weaknesses) while a TOWS
matrix analysis focuses on the external environment (opportunities and threats).
▸ The external environment has factors such as the nature of a market, competition,
government policies, changing preferences and fluctuating rates.
▸ The internal environment consists of processes, HR policies, goals and objectives,
core values and other factors.
1. Strength and opportunity SO
▸ SO or maxi-maxi strategy utilizes internal strengths to
maximize or optimally use external opportunities available to
an organization.
2. Strengths and threats ST

▸ ST or maxi-mini strategy maximizes the strengths of a business
and minimizes the threats using those strengths.
3. Weakness and opportunity WO
▸ WO or mini-maxi strategy’s aim is to minimize weaknesses of an organization
and maximize opportunities. This strategy revamps internal weaknesses by
using external opportunities.
4. Weakness and threats WT

▸ The WT strategy, also known as the mini-mini strategy, aims to minimize threats
and weaknesses. A TOWS matrix example will show that it’s a defensive spot in
the matrix that is utilized by businesses in adverse situations.
▸ These strategies are laid down in a 2×2 matrix by listing all elements of
strengths, weaknesses, threats and opportunities to develop a tows matrix in
strategic management.
Rules of tows matrix
▸ It is quite mandatory to be very specific in the overall approach and process
eliminating all the grey areas so that the strategies arrived is feasible, realistic,
and functional in nature.
▸ It is necessary that the strategy should include the internal growth and
development of the company by the way of mergers, acquisitions, new
product development, capturing new markets and target audience, and joint
ventures.
BCG Matrix – Boston Matrix Model
▸ The BCG matrix is a matrix designed by the Boston Consulting

Group back in 1970’s.
▸ It is a matrix which helps in decision making and investments. It
divides a market on the basis of its relative growth rate and market
share and comes up with 4 quadrants – cash cow, stars, question
marks and dogs.
• X-AXIS – RELATIVE MARKET SHARE – the market share of the
business / SBU / product in the market as compared to its
competitors and overall product/category.
• Y-AXIS – MARKET GROWTH RATE – the growth rate of the industry
as a whole is taken into consideration from which the growth rate
of the product is extrapolated. This growth rate is then pitched on
the graph.
Cash Cows – High market share but low growth rate (most profitable).
Stars – High market share and high growth rate (high competition).
Question marks – Low market share and high growth rate (uncertainty).
Dogs – Low market share and low growth rate (less profitable or may even be
negative profitability)
Internal Factor Evaluation (IFE) Matrix
▸ Is a strategy tool used to evaluate a firm’s internal environment
and to reveal its strengths as well as weaknesses
Internal Factors
➢ Internal factors are the outcome of detailed internal audit of a firm obviously, every company have
some weak and strong points, therefor the internal factors are divided into two categories namely
strengths and weakness.
STRENGTHS
▸ Strengths are the strong areas or attribute of the company, which are used to overcome weakness and
capitalize to take advantage of the external opportunities available in the industry. The strengths could
be tangible or intangible; such as brand image, financial position, income, human resource.
Weaknesses
▸ Weaknesses are the risky areas which needs to be addressed on priority to minimize its impact. The
competitors always searching for the loop holes in your company and put their best effort to capitalize
on the identified weaknesses.
▸ IFE matrix. Strengths and weaknesses are used as the key
internal factors in the evaluation.
▸ When looking for the strengths, ask what do you do better
or have more valuable than your competitors have?
▸ In case of the weaknesses, ask which areas of your
company you could improve and at least catch up with
your competitors?
▸ IFE matrix. The ratings in internal matrix refer to how
strong or weak each factor is in a firm. The numbers range
from 4 to 1,
✓ 4 means a major strength
✓ 3 – minor strength
✓ 2 – minor weakness
✓ 1 – major weakness.
▸ Strengths can only receive ratings 3 & 4, weaknesses – 2 &
1. The process of assigning ratings in IFE matrix can be
done easier using benchmarking tool.
▸ Weighted scores & total weighted score
▸ The score is the result of weight multiplied by rating.
▸ Each key factor must receive a score.
▸ Total weighted score is simply the sum of all individual weighted
scores.
▸ The firm can receive the same total score from 1 to 4 in both
matrices.
▸ The total score of 2.5 is an average score.
▸ In internal evaluation a low score indicates that the company is
weak against its competitors.
External Factor Evaluation (IFE) Matrix
▸ Is a strategy tool used to examine a company’s external
environment and to identify the available opportunities and
threats.
▸ EFE matrix. When using the EFE matrix we identify the key
external opportunities and threats that are affecting or
might affect a company.
▸ Where do we get these factors from?
○ Simply by analysing the external environment with the tools like
PEST analysis, porter’s five forces or competitive profile matrix.
▸ EFE matrix. The ratings in external matrix refer to how effectively company’s
current strategy responds to the opportunities and threats. The numbers
range from 4 to 1,
✓ 4 – means a superior response
✓ 3 – above average response
✓ 2 – average response
✓ 1 – poor response.
▸ Ratings, as well as weights, are assigned subjectively to each factor. In our
example, we can see that the company’s response to the opportunities is
rather poor, because only one opportunity has received a rating of 3, while the
rest have received the rating of 1. The company is better prepared to meet the
threats, especially the first threat.
▸ Weighted scores & total weighted score
▸ The score is the result of weight multiplied by rating.
▸ Each key factor must receive a score.
▸ Total weighted score is simply the sum of all individual weighted scores.
▸ The firm can receive the same total score from 1 to 4 in both matrices.
▸ The total score of 2.5 is an average score.
▸ In external evaluation a low total score indicates that company’s
strategies aren’t well designed to meet the opportunities and defend
against threats.
Hambrick & Fredrickson
Strategy Diamond
▸ A strategy diamond is a collection of the five elements forming a

coherent business strategy.
▸ These five elements of strategy include Arenas, Differentiators,
Vehicles, Staging, and Economic Logic.
▸ This model was developed by strategy researchers, Donald
Hambrick and James Fredrickson.
The 5 Elements of Strategy Diamond
Arenas: where will we be active?
Be as specific as you can when you define the Arenas. The insight should be at the level of what kind of
product categories, market segments, geographies, technologies and other value-added stages we
intend to take.
Vehicles: how will we get there?
This is basically the means to attain the arenas you define in the first step. In case of product
expansion, how will we go, is it going to be organic or inorganic?
Differentiators: how will we win in the marketplace?
This doesn’t mean we have to be at extreme ends to create differentiation among competitors.
Instead, the best combination of different differentiators can create a market advantage.
Staging: What will be our speed and sequence of moves?
Above three were the decisions on what the managers plan to do. This is the
steps to increase the likelihood of success. This doesn’t mean among the things
defined in the previous stages are more important than others but instead, we
want to process our work in a way that every part work in right symphony.
Economic logic: how will we obtain our returns?
A central economic logic should be created which drives profit generation. People
try to focus on certain things like more revenue than cost, etc. but it’s the clarity
of defining our economic logic which is of importance.
▸ The Strategy Diamond doesn’t only apply to the very top of an
organization. It can apply at all levels of an organization. The executive
board completes a Strategy Diamond for the whole organization.
▸ A business unit could then take this strategy, and use it to create their
own strategy. This strategy would appropriate for them but reference
the original strategy.
▸ The company can repeat this at every level of the organization. In this
way the strategy cascades throughout the organization, forming an
integrated strategy at all levels of the organization. In fact, the beauty of
the Strategy Diamond is that it can apply whether you work for a
company with 100,000 employees or 1 solo employee.

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STRATEGIC MANAGEMENT

Prepared by Prof. Alejandro Bautista, MBA, PhD DAPM

▸ Strategy Formulation ▸ Measurement/Performance

An organization must first arrange its resources to carry out specific

2. Strengths and threats ST

4. Weakness and threats WT

▸ The BCG matrix is a matrix designed by the Boston Consulting

▸ A strategy diamond is a collection of the five elements forming a

Vehicles: how will we get there?

Differentiators: how will we win in the marketplace?

Economic logic: how will we obtain our returns?

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