DATA CENTER COLLEGE OF THE PHILIPPINES OF LAOAG CITY, INC.

BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT

LEARNING MODULE

STRATEGIC MANAGEMENT

MODULE 2
STRATEGIC FORMULATION

Prepared by:

MARK RONNEL A. ESPEDILLON

Instructor

markronnelespedillon@gmail.com

09275219101
 DATA CENTER COLLEGE OF THE PHILIPPINES OF LAOAG CITY INC.
BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT

STRATEGY FORMULATION
BUSINESS STRATEGIES

LEARNING OUTCOMES:
Particularly at the end of this unit, you should be able to:
1. Discuss the components of supply chain management;
2. Define and explain the importance of inventory management;
3. Contrast manufacturing from assembly;
4. Examine the interrelationship of the sequential processes of the
logistics circle;
5. Assess the different popular competitive strategies;
6. Distinguish the role of innovation as a competitive strategy; and
7. Explain why companies opt to implement stability or retrenchment
strategies.

Supply Chain Management (SCM)

- Supply Chain Management – is the management of the flow of goods and services and includes all
processes that transform raw materials into final products.
- Defined as the management of flow of products and services, which begins from the origin of products
and ends at the product’s consumption.
- Supply Chain Management is a broad continuum of specific activities employed by a company. It consists
of the following:

Figure 1. Supply Chain Management

1. SUPPLY MANAGEMENT
o Formerly termed as procurement
o It is a key business function that is responsible for:
a. Identifying material and service needs
b. Locating and selecting suppliers
c. Negotiating and closing contracts
d. Acquiring the needed materials, services, and equipment
e. Monitoring inventory stock keeping units
f. Tracking supplier performance
o Sourcing and Ordering
 Value is generated when supplier relationships are created and managed in delivering
quality products, delivering on time, delivering at competitive prices, providing good
service back-up when needed, and keeping promises.
o Inventory Management
 The role of inventory is to buffer uncertainty. It includes all purchased materials and goods,
partially completed materials and component parts, and finished goods.
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 DATA CENTER COLLEGE OF THE PHILIPPINES OF LAOAG CITY INC.
BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT

 There are four broad categories of inventories:

i. All unprocessed input or raw materials for manufacturing
ii. Work-in-process (WIP)
iii. Finished goods
iv. Maintenance, repair, and operating supplies (MRO)

2. PRODUCTIONS AND OPERATIONS

o Production and operations are processes that transform operational input into output to satisfy
consumer needs and requirements. This transformational process consists of manufacturing and
assembly.

Figure 2. Productions and Operations Model

o Manufacturing is the process of producing goods using people or machine resources. It is

commonly referring to industrial production where raw materials are converted into finished
goods.
o Assembly is the process of putting together raw materials into a desired output.

3. LOGISTICS CIRCLE
o Logistic - is the complete distribution control of inventory, from its procurement to its point of
consumption.

Figure 3. Logistics Circle

o There are sequential processes involve in logistics:

i. Warehousing is the function of physically packing finished goods or merchandises in a
building, room, or any space for temporary storage.
ii. Scheduling is the act of organizing these inventory units and booking them for delivery.
iii. Dispatching products are for transfer
iv. Transportation - scheduling and other logistics are necessary to make dispatching cost
efficient.
v. Delivery to the specified site is undertaken. It closes the entire logistic circle.

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 DATA CENTER COLLEGE OF THE PHILIPPINES OF LAOAG CITY INC.
BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT

4. Marketing and Sales

o The company can study the unique purchasing patterns of buyers and determine what will
translate their desire for the products into actual purchase. Aside from coping up with good and
distinct products, businesses can offer competitive pricing like special offers, quantity discounts,
and volume sales, among others. They can aggressively promote their products through
advertisements in newspapers, magazines, radio, television, and other forms of promotional
mediums.

BUSINESS AND CORPORATE STRATEGIES

1. Growth Strategy
o A mode adopted by an organization to achieve its main objective.
o This can be internal or integrative.

a. Internal Growth Strategy

 Ansoff's Matrix is a marketing planning model that helps a business determine its product
and market growth strategy. The Ansoff Matrix was developed by H. Igor Ansoff and first
published in the Harvard Business Review in 1957, in an article titled "Strategies for
Diversification." It has given generations of marketers and business leaders a quick and
simple way to think about the risks of growth.

Current Products New Products

Current Markets Market Penetration Product Development
New Markets Market Development Diversification
Table 1. Ansoff’s Matrix

b. Competitive Strategies
 A long term action plans prepared with the end goal of directing how an organization will
survive and compete.

Competitive
Cost-Leadership Differentiation Market Niche
Strategies
Focused/Market-
Low-Cost Best-Cost Provider
Cost-Leadership Niche Lower Cost
Leadership Strategy Strategy
Strategy
Focused/Market-
Best-Cost Provider Broad Differentiation
Differentiation Niche Differentiation
Strategy Strategy
Strategy
Table 2. Competitive Strategies (Porter 2008)

 Other Competitive Strategies:

a. Innovation Strategy
b. Operational Efficiency Strategy
c. Economies of Scale
d. Technology Strategy

c. Product/Service Life-Cycle Strategy

 Refers to the lifespan that a commodity/service undergoes from its introduction stage to
its growth, maturity, and decline stages.

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DATA CENTER COLLEGE OF THE PHILIPPINES OF LAOAG CITY INC.
BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT

Figure 4. Product Life-Cycle Source: Ausmed

 The Introduction Stage is the period of launching the product/service for acceptance. In this
phase, the product/service is new; hence, there is a need to create awareness.
 The Growth Stage is the phase where the product/service gains acceptance by the
consumers. In this phase, sales and profit slowly increase and emphasis is now on continuous
market development and improvement.
 The Maturity Stage is the period where the product has reached its penultimate level.
 The Decline Stage is the period where the product/service begins to reach or is reaching its
lowest point.

d. Stability Strategy
 For organizations that are doing fine or are doing better in their existing businesses, they
may choose not to implement any growth strategy.

e. Retrenchment Strategy
 The Retrenchment Strategy is adopted when an organization aims at reducing its one
or more business operations with the view to cut expenses and reach to a more stable
financial position.
 There are different modes of dealing with serious situation of the business, they are the
following:
a. Liquidation – is the most radical action a company takes when the company is losing
money and thus, is further compounded by a disinterest on the part of the stockholders
to do anything more to save it. In such cases, the business may be terminated and its
assets sold.
b. Divestment – is implemented when a company consistently fails to reach the set
objectives or when the company does not fit well in the organization. Thus, the
stockholders would preferably sell it or set it as a separate corporation.
c. Turnaround Strategy – is adopted when the organization has reached a significant
level of non-performance, non-productivity, demoralization, and unprofitability, and
therefore has to implement restorative strategies.

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 DATA CENTER COLLEGE OF THE PHILIPPINES OF LAOAG CITY INC.
BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT

CORPORATE STRATEGIES
LEARNING OUTCOMES:
Particularly at the end of this chapter, you should be able to:
1. Define and explain the significance of integrative growth strategies;
2. Differentiate horizontal integration and vertical integration;
3. Differentiate backward integration from forward integration;
4. Assess the utility of the Boston Consulting group;
5. Understand global strategy and the resources needed.

2. Integrative Growth Strategy

o Involve investing the resources of the organization in another company or business to achieve
growth goals. This is essentially acquisition strategies. Types of integrative strategies are:
1. Horizontal Integration is a strategy where the organization acquires another
competing business. There are varied reasons for undertaking horizontal integration.
i. To eliminate real or potential competitors because some competitors
can present themselves as deadly threats to an organization.
ii. The desire of the organization to simply expand its reach, expand its
market demographically, and maintain its market status as a market
leader, market challenger, or a market follower.
iii. To help increase revenue
2. Vertical Integration is the process of consolidating into an organization other
companies involved in all aspects of a product’s or a service’s process from raw
materials to distribution. This is use to gain control over its suppliers and distributors,
increase the company’s market share, minimize transaction and inventory costs, and
ensure adequate stocks in the retail stores. This can either be backward or forward.
i. Backward integration – the organization buys one of its suppliers.
ii. Forward integration – the organization buys distribution companies that
are part of its distribution chain.

a. The Boston Consulting Group

 This was developed by Bruce Henderson of the Boston Consultant Group. This model
classifies the products or business units of an organization in terms of two parameters,
namely, market share and market growth.

Figure 5. The Boston Consulting Group Matrix

 Market Share is the relative sales percentage of a company in relation to the total sales
percentage of the market in consideration.
 Market Growth refers to an increase in demand over time. It may be high or low.
• A high market share in a high market growth defines STARS
• A high market share in a low market growth defines CASH COWS
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 DATA CENTER COLLEGE OF THE PHILIPPINES OF LAOAG CITY INC.
BACHELOR OF SCIENCE IN HOSPITALITY MANAGEMENT

• A low market share in a high market growth defines QUESTION MARKS

• A low market share in a low market growth defines DOGS

b. Global Strategies
 Organizations pursue global strategies for external business expansion. This strategy
cover three main areas: international, multinational, and global.
 In building a global strategy, certain resources are necessary to establish a level of
competitiveness. They are:
i. Substantial capitalization
ii. Managerial and strategic leadership
iii. Expertise and capabilities
iv. Quality and differentiated products and services

REFERENCES:
Young, F. (2015). Strategic Management Made Simple. Rex Book Store Inc. Sampaloc Manila.
https://www.tutorialspoint.com/supply_chain_management/supply_chain_management_introduction.ht
m, July 25, 2021
https://logistics.mitchellsny.com/the-importance-of-business-logistics/, July 25, 2021
https://www.tutor2u.net/business/reference/ansoffs-matrix, July 25, 2021
https://www.mindtools.com/, July 25, 2021
https://businessjargons.com/retrenchment-strategy.html, July 25, 2021
https://www.business-to-you.com/bcg-matrix/, July 25, 2021

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