A STRATEGIC MANAGEMENT MobEL Learning Outcomes Particularly at the end of this chapter, the students should be able to: 1. define strategic management; 2. _ identify each of the components of the strategic management process and its corresponding outcome; identify the strategic management model; differentiate strategic analysis from strategic decision-making, and strategic intelligence from strategic thinking; explain the meaning of strategic planning; formulate a sample company vision, mission statement, and company goals and objectives; and ‘compare organization climate and organizational culture, The Reality of Dynamism ‘TheRGRHER epitomizes thexealityofdynamishf In fact, today’s milieu is ina state of fi ity. Itis not static. Rather, changes and fluctuations are constantly happening in the surroundings. These actualities are characterized by the occurrence of phenomenal situations, continuous challenges, and triggering forces that provoke corresponding reactions. Theeertaintyofichangeisuniversat afd this foregone conclusion is largely experienced by all nations and peoples—whether developed or undeveloped, large or small, powerful or weak. As a result, the current landscape of competition is highly threatening and daunting. With an environment that is characterized by drive, energy, and pursuit and transformation, volatility is a ruthless reality. Impermanence and unpredictability are certainties. Nothing is stable; neither is regularity a logical expectation. Competition has gone beyond nations, peoples, cultures, geographic frontiers, and industries. As the global economy expands, blurring boundaries, any business needs to create its own impact in any part of the world. Thus, its urgent for organizations and businesses to strategize. competition 1s a fundamental feature of the new economy. As the word implies, it Carries a note of overexcitement and agitation. Hypercompetition occurs when product/service offerings and technologies are so new that standards become unstable and competitive advantage is not sustainable. It is a condition where strategic maneuverings have escalated to bigger business ‘exposure, more sophisticated marketing positioning, aggressive selling, and innovative products 2Chagler 1 ~ A STRATEGIC MANAGEMENT MODEL | 3 and services, Doing business has become intense and more deliberate. It seems like a big waste not to discern and take advantage of every opportunity. The business atmosphere is characterized by activities such as outdoing each other, surpassing sales, taking competitors by surprise, capturing a bigger market share, winning the business battle, and seizing the number one slot. In a strict sense, hypercompetition is a situation where both Globalization and techn collaborate to create a heightened cut-throat situation. It means that businesses compete with each “other whether they have same products, similar products, substitute products, and different products. ‘Competitors continuously strive to outplay and outsmart each other. They need to devise ways and means to survive and deal with this super competitive and turbulent reality. New value creation, competitive pricing, innovation in supply chain management, and rs of quality are logical responses of companies. In short, the name of the game today is tougher and smarter competition, ‘quantitative and qualitative organizational changes, and sustainable competitive advantage. In this hypercompetitive environment, only the most adaptive and nimble organizations will survive. Thus, there isthe need to strategize. This is what this book is all about: the reality of dynamism and hypercompetition, strategic management, and strategy all summed up 1. Howwill you describe in your own words the reality of dynamism? Cite examples to prove why the environment is considered dynamic. 2. _ Define hypercompetition. Give two important catalysts of competition and expound on their respective roles in setting off hypercompetition in the global environment. Strategic Management Defined free [seoege ‘management's a continuous proce3s of strategy creation. It ‘tes strategic processes like strategic analysis and decision-making, strategy formulation and implementation, and strategy control with the primary objectives of achievi corporate policies, priorities, and success. Strategic analysis| consists of aCsystematic evaluat 5 current external and internal environments while strategic decision-making js deliberately’ ¢ | (the rightiresources for the right markets at the right time. Strategy formulation is. designing satesies 1 an the business and corporate levels. Strategy implementation isémploying these crafted strategtes ~ ”- 1 ¥0 achiewe-organizational set goals and objectives while strategic control is the application of an ~~~" appropriate monitor \ and feedback syster - Defined as-thé”science of treating, executing, and evaluating cross-functional decisions to enable an organization to achieve its goals and objectives, the components of the strategic management process have to be effective. As shown in Figure 1.1, output may materialize when each of the components of the strategic management process is appropriately executed.4) STRATEGIC MANAGEMENT MADE SIMPLE ‘Strategic Analysis. mae ‘Strategic Intelligence: Seats | | mmm | Statesic Tinkng Strategy ‘Organizational O : Foruiaton | EERE | Competitiveness Strategy ‘Comparative PB, ed implementation | MB | “Advantage | ( I I \ Srategecontel | mmm | peromance ) Figure 1.1 The Strategic Management Process. N + If strategic analysis is accurately red, organizations can develop strategic intelligence. Like an antenna, strategic intelligence is the capability of an organization to possess relevant and related knowledge, abilities, foresight, and systems thinking, such that it is able to assess its own strengths and vu ies, the pressing challenges confronting the organization, as well as the trends a ies existing in the environment. ~L; . + Ifstrategic decision-making is correctly effected, organizations can acquire the capability of thinking strategically. Strategic thinking is the cognitive process of competently and analytically weighing factors and arriving at critical decisions in the context of the current milieu of which an organization is part. ‘+ Ifstrategy formulation is uniquely designed and effectively communicated, organizations have greater possibilities of atfaining-organizational competitiveness. Organizational is efficiently employed, organizations can achieve comparative advantage. Comparative ad refers to the ability of an organization to produce a particular: af lower: Land opportunity costs than its competitors. * If strategic control is productively monitored, organizations can realize strategic performance. Strategic performance js the accomplishment of high fevet of productivity that is characterized by efficiency in the context of lean and quantifiable management.chapter) A STRATIGIC MANAGEMENT MODEL [5 050 Thus, the strategic management model is itlustrated as follows: Wels Organizational Success Strategic Intelligence Stratogie Thinking Organizational ‘Competitiveness Comparative ‘Advantago Strategic Performance Strategic Management Process + Strategic Analysis Strategic Decision-making Strategy Formulation Strategy Implementation Strategic Control Equipment) Infrastructures Processes | . Figure 1.2 Strategle Management Model The strategic management model (Figure 1.2) shows the relationships between and among the input, process, and output. The input in this model includes organizational variables like management and employees, financial resaurces, facilities and equipment, infrastructures, and processes. The strategic management process consists strategic analysis, strategic decision-making, strategy formulation, strategy implementation, and strategic control. When these specific processes are executed and managed creatively, distinctly, and strategically, the organization can ultimately achieve organizational success. In particular, the ‘output are exhibited in the strategic intelligence acquired, strategic thinking mode developed, ‘organizational competitiveness, comparative advantage, and strategic performance attained by the organization. How will you define strategic management? What roles do organizational input play in the attainment of the success of an organization? Identify each of these input. Differentiate strategic analysis from strategic decision-making, Give an example. Differentiate strategic intelligence from strategic thinking, Show this difference using ‘companies that have demonstrated the application of both processes. When does an organization enjoy competitiveness? Explain by giving an example. ‘What is comparative advantage? Cite examples. What role does strategic control play in the strategic management of an organization? Give examples. Strategic Planning Oftentimes, the word strategic planningis more popular than strategic management. Essentially, be two words are the In terms"of purpose, both strategic management and strategic ining have the same goals and objectives, that is, to devise a strategic mode of preparing,6 | STRATEGIC MANAGEMENT MADE SIMPLE . addressing, and steering organizations to where they want todo, Particularly, both undertakings ‘endeavor to understand the strategic position of organizations—their set goals, preferred choices, snd deliberate and calculated strategies. Furthermore, both strategic management and strategic planning use the same processes toattain thelr goals. 12.) fi (On the other hand, strategic_manager i ‘om. Srategic planning, in that the ‘ckled in the context of an academic environmen} where itis approached and treated Abeoreticall) while the latter is the buzzwordin the business world. Practitioners and organizations conduct strategic planning yearly or as often as they feel the need to do so. Secondly, strategic management generally presents all the possible strategic approaches and techniques that organizations can avail of. It is conducted withra-view of the individuality and distinctiveness of the organization, its current condition, specific needs-and desired outcomes. In this way, we can rategic management is the springboard of strategic planning: Strategic management is, ttegic planning is a distinct and focused approach that is unique to the specific organization. _) ; Strategic planning is defined as 2ontinuoy), Gee dams a ning. sans to achieve them, the goals and objectives that an organization aims to and assessing the best way to realize [Link] the context of the prevailing environment while ‘measuring performance through. set standards, and periodically but continuously conducting teassessments: Strategic planning exhibits the following properties: " 1. Itgenerates the blu of what the organization inte 2. The strategic plan presents the Gand sche ofthe organization and outlines all the set activities, ranging from the organizational to the departmental level. It formalizes all plans with respect to type and extent. It is the process of developing a strategic fit between the organizat capabilities in the context of changing opportunities, 4, Itisa process that involves carefully delineated steps. As stated in the definition, strategic planning is structured, in that it begins with reviewing the environment, setting goals, adopting and monitoring strategies, and continuously redesigning them as the needs arise. 5, 1G proacte, in that itis written in the context of anticipated future realities, Strategic planning does not make future decisions. Instead, plans are made in anticipation of future changes and developments. a philosophy because it evolves a dynamic way of conducting and managing an organization. Strategic planning involves a unique a way of thinking and doing things. It is an intellectual exercise that embraces a belief that convinces organizations of their worth and importance. In other words, values are integrated within the philosophy of an evolving organizational culture. 7. It links the organizational plan with functional and operational~plaps. Strategic planning speaks obeworgs of planning: (a) the organizational grand plan: and (b) the departmentaf tactical plan: —_- = 8. It Is intricately interwoven within the defined managerial functions of organizing, directing, staffing, and controlling. Although strategic planning is a strictly formal and separate function of management, itis subtly intertwined in all the other functions and responsibilities of a manager. In other words, no manager can fully accomplish his/her responsibilities effectively if strategic planning is disregarded or overlooked. fon yccomplish. Ys goals andChapter} A STRATEGIC MANAGEMENT MODEL 7. 9. It necessitates the leadership and support of top management and, at the same time, employee participation and commitment. Successful Implementation of strategic planning Is largely dependent on responsibility, support, and sustained leadership coupled with acceptance and involvement of employees. There should be synergistic Interrelationships between departments and intra-relationships within departments, ‘Types of Strategic Plans There are two principal types of plans: 1, Medium/tong-range plan - prepared in the context of the coming three to five, ten or more years. It describes the major factors or forces that affect the organization's long- term objectives, strategies, and resources requited. 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. ‘Whether the plan is long-range or annual, it can be strategic when the organization formulates Its action plans and takes advantage of opportunities in the constantly changing environment while maintaining a tactical alignment between the organization's goals, capabilities, and opportunities. The steps involved in strategic planning are iterative, cyclic, and integrative. They include: 1. making.a situation audit to ascertain where the organization is today; 2. stating 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: 3. delineating appropriate strategies tobe carried outin order to help direct the organization to where it wants to be; ‘4, _ identifying and then choosing the soundest strategy to determine the best way for the ‘organization to be where it wants to be and to achieve its goals; 5, _ monitoring the implementation of strategies to measure performances; and 6. conducting periodic and continuous reassessments in order to implement improvements and suggested changes. The steps in strategic planning will be tackled in detail in the next chapters. Initially, an organization conducts an environmental scanning to determine where itis today. Then, with respect to the organization's vision, mission, goals, and objective, as well as its value system, apt strategies are identified to help direct the organization to where it wants to go. There can be more than one strategy of choice. Once the studied strategies are enumerated, the best strategy that will significantly bring about the achievement of desired outcomes is specified for implementation. Concomitant to the process of implementing the strategy/strategies, the monitoring system has to be set in place. Periodic assessments then follow to determine whether the chosen strategies were worthwhile and effective. Need for Strategic Planning Whi is there aneed for strategic planning? As earlier stated, the reality of dynamism, complexity, ‘and hypercompetition characterizes today’s environment. To survive, ‘organizations need to plan ‘Garefully their strategic approaches. Therefore, strategic plans have to be prepared purposefully for effective and efficient implementation, thus, leading to the attainment of their set objectives. The benefits of designing and putting into effect a strategic plan cannot be overemphasized.8 | STRATEGIC MANAGEMENT MADE SIMPLE VW i we Strategic Planning | mations of Sra n)and fet objectives. It provig "5 viston) mission, he oe nd hee frategies to-achieve their goyt focused tmakes things happen, Furermert sto imitting mistakes, thus, increas! jizane planing ets rece tm oa re efcient allocation of organizational OUces bey . serorsven se cross-departmental employees and functional units, and communicatig, Seen manag arers/supervsors of all levels. Lastly, when cautious, clearly, and proactive eesertaken, strategic planning provides leverage and competitive advantage to the organization while strategic planning has its advantages, it als has its limitations. Although Conductey yearly or even more often, the strategic plans prepared in some rastaces are good ony i bape Some organizations fail to follow faithfully their prepared strategic plans. iy weet rategic plans ae fallowed religiously, some organizations may not be flexible enough fo Et adjustments ‘and realignments due to inevitable or forthcoming external or int om challenges \Simiary, conducting strategic planning sessions may entail costs that can be expensive ‘organizations. . Strengths and Lim strategic planning defines an orga 3S anizations the opportunity to asses: Stateaic planning helps organizations tostay’ Discuss in what ways strategic management and strategic planning are similar. In ‘what ways are the two different? Give reasons why organizations undertake strategic planning. Do you agree with these reasons? Explain your answers. What are the disadvantages of conducting strategic planning? Will you still advise ‘organizations to conduct strategic planning? Why? Define strategic planning and discuss its salient features. Discuss and differentiate the two types of strategic planning. Enumerate the steps in strategic planning. % Organizational Vision . Gols To help organizations. achieve strategic direction,they need to articulate and have # ‘commonality in vision, mission, and goals. The interrelationships between and among these thre? variables are essential in the organizations’ thrust of achieving competitiveness. The organizational vision {san insptational. statement of what the Organization hopes to? achieve at some point in the fi itis the image a of what an organization desires to achiev f what and succinct, but it carries “an extraordinary force that will sti, motivate, and inspire employees to work and refocus toward its desired optimal future ps state. Having a strong sense of vision can move the organization to be what it wants to be, Like an unseen force, the organizational vision binds the company and its employees together. Figure 1.3 Relationship of the Vision Misslon-Goats ofan OrgaCchaplor 1 A STRATIGIC MANAGEMENT MODLL J 9 ‘An example of a vision statement is: “An educational institution ablaze with the Spirit of Excellence” This is the vision statement of the educational institution, College of the Holy Spirit Manila. The statement energizes the administrators, faculty, students, and staff. It brings singleness in their desire and coherence in their efforts. Although difficult and in fact, not measurable, the ‘organizational vision is an effective mode of binding everyone to a Company's ultimate goat: Mission Statement ion statement differs from the organizational vision. The mission statement defines ‘pose of an organization; it answers what the organization does, for whom itis done, and how it does what it does - The mission statement of the College of the Holy Spirit Manila is as follows: “We build, through Christian and holistic formation, new generations of responsible citizens who are agents of transformation” Here, what the organization does is “to build’; it does this “for new generations of responsible citizens”; and how it does what it does is “through Christian and holistic formation” Mission statements are likewise short and easy to remember. It gives employees a better perspective on how their tasks contribute to the attainment of organizational goals. Oftentimes, vision statements are more enduring compared to mission statements. Mission statements are expected to change in the context of shifting economic realities or unexpected circumstances like challenges, threats, and even opportunities, ae a Vision-Mission of the College of the Holy Spirit Manila Vision: An educational institution ablaze with the Spirit of Excellence Mission: We build, through Christian and holistic formation, new generations of responsible citizens who are agents of transformation Strategic Goals In living out the ideals of St. Arnold Janssen, CHSM aims at the total formation of authentically Christian Filipinos who are: + humane and committed to the care of creation; + professionally competent and dedicated to service; + socially and critically conscious of the realities of life; + motivated to proactively respond to the call of the times; and + just and other-centered leaders. ©2011 College of the Holy Spirit Manila Organizational Goals and Objectives ‘To operationalize the mission statement, organizational goals and objectives are defined. Al organizations have set gopla-TMeze are referred to as organizational goals. Organizational goals are pursued to make the Specified strategies succeed. They vary and are essentially dependent on their respective purpose and direction. One of the implied basic goals of any organization is to use ‘economic resources efficiently and effectively such that survival, if not profit, is at least secured, thus, ensuring the continuity of the organization. Goals are macro, encompassing in perspective,rr 10 | StraTes (orospectie in nature Infact, goals represent the overall vision ofan organization. 8 they, on ‘goals have the following properties: Goals provide organizations focus and direct ' Ee cng mt ‘thus, streamlining all unnecessary and redund: Goals move organizations toation. Because goals haveto be attained, organizations ay motivated to function and perform toward theicson- 3, Goals develop in organizations the trait of persistence. persevere until they achieve their desired success. Nevertheless, for goals to be attained, they have to be supported by objectives. Objectin, .GIC MANAGEMENT MADE SIMPLE tion. They neatly converge toward the pur " Yedundant considerations. ™* wus, organizations continue jy are different from goals, in that they are micro and specific in perspective. They should possess th, following characteristics: 1. Objectives need to be clearly defined and formulated, carefully chosen, specific, ang definite. 2. Objectives may be immediate or short-term. | 3, Theyneed to be prioritized into a hierarchy of objectives. 4. Objectives need to be realistic and attainable. They need to be flexible, consistent, and strategic. 5. Objectives need to be measurable over time. The relationship between goals and objectives can be concretely illustrated. In Figure 14 ‘organizations have overall goals referred to as the organizational goal. To support and achieve this grand goal, objectives are enumerated. These mentioned objectives are actually the goals of the respective departments or business units that will likewise have their own objectives. Because of these interrelationships, objectives need to be consistently aligned and be within the frameworkof the given goal. Figure 1.4 Relationship between Organizational Goal and Objectives Strategic objectives are, in general, externally focused, i , objectives fal ito eight major clasiationsy nn” NONMNG to Peter Drucker (nr A 1. Market standing (e.g, desired share of the current and new markets); 2 tnovaton (ca. development ‘of new goods, services, and of skills and methods requite@ Human resources (eg. selection and development of employees); Financial resources (e.g, identification of sources of capital and their uses); Physical resources (e.g,, equipment and facilichapter 1 ~ A STRATEGIC MANAGEMENT MODEL | 11 4 6. Productivity (e.g, efficient use of the resources relative to output); 7. Social responsibility (e.g., awareness and responsiveness to the effects on the community of the stakeholders); and 8 Profit requirements (e.g, achievement of measurable financial well-being and growth). Values and Value System janizations até guided by values, which vary from one organization to another. Values are inherent/roots of motivation) with ‘ tion. They ‘are by nature, ingrained-and thus, are more stable and enduring. They are both intellectual and behavioral, serving as bases for the organization's actions and way of thinking. Values are generally exhibited in two different ways, namely, beliefs and attitudes. More particularly, beefs arg cognitive manifestations while attitudes -are|characteristically behavioral. They are fundamental and intricately integrated in the particular organization's value system. Take note that the walues projected by organizations are largely-dependent on any or all of the following: the stockholders) the Board of Directors)and thé top management) + Value System Values Dreams and Aspirations Philosophies Ethical Practices Expectations Figure 1.5 Value System of an Organization Strictly speaking, the values of an organization are not synonymous to its value system. The value system is chi iistically broader in scope; aside from values, it includes other variables such as gm ws ilosophies, as well as leadershi and management st id ethical practices. Moreover, the value system indicates the hierarchy of values ranked by organizations. Because values are distinct, they differ from one organization to another. This explains why one organization may be perceived as socially and community-active, while another is business-oriented. Hence, the importance of these value qualities and value systems for organizations cannot be underestimated.12. | STRATEGIC MANAGEMENT MADE SIMPLE paleo my Balad Organizational Climate andCulture 4) Vl Jated, interdependent, sts of organizational climate and culture are interrel bang seqwent They ae intftelated, in that organizational climate is often defined 26 the regula ny repétitive patterns ‘6 attitudes and behavior exhibited by. ‘employees of an Organization, measure of the health of an organization. It manifests whetherits ‘employeesare happy. hard working ‘whether good interpersonal relationships exist between and am; 1d motivated, or otherwise; h diferent levels of management; and whether the work environment is acceptable and conducivety productivity. Organizational climate is easier to assess and change. It lends to flexibility. It precedes and somehow contributes to the solidification of the culture of an. organization. On the other hand, organizational culture has been variously defined (Hofstede 1980a;Scheiy 1990). Organizational culture denotes a wide range of social phenomena, including ah organization, customary dress, language, behavior, beliefs, values, symbols of status_and_auttrority myths ceremonies and rituals, and modes of deference and subversion; all of which help to define ay organization's character and norms (Scott et al. 2003). Culture, in the sense that itis used here, can be understood as an idealized system (Schein 1999) because a system focuses on types of meanings represented by values, formal rules, knowledge, beliefs, and expressive forms (Pettigrew 1990; Parker 1992; Patrick 2010). The conceptual aspect perceives organizational culture as a system of knowledge and common values which can be exhibited and evaluated similarly by people even with different backgrounds and at different levels within the organization. Thus, organizational culture is more solid, stable, and long-term because it presents the organization's culture from its inception where it is, showing how the culture of an organization evolved through the years. Unique, the organizational cultureis largely and generally influenced by the leadership of the top management In summary, vision projects the image that an organization wants to attain. It is reinforced by the mission statement that specifies how the organization intends to actualize this vision. Thus, goals and obj are clearly enumerated. Furthermore, any organization has its own value system that inevitably becomes part ofits organizational culture. Define organizational vision by using an example, Why is the mission statement important to an organization? Are organizational goals and objectives similar? in what way/s are they different? ‘What values/value system do you want an organization to demonstrate? Explain your answer. Differentiate organizational climate from organizational culture.