STRATEGIC MANAGEMENT STEPS AND PROCESS OF STRATEGY CREATION

LM 4A – CSU ANDREWS The process of making a strategy is crucial

because it provides a structured approach for an
STRATEGIC MANAGEMENT organization toward achieving long-term success.
This process ensures that resources are
 Talks about the strategic actions or plans
effectively allocated, priorities are established,
to achieve main goals and objectives by
and risks are identified, ultimately helping the
the use of effort.
organization stay adaptable, focused, and aligned
 It is also about making decisions on
with its mission and vision in a dynamic
allocating resources in order to pursue
environment.
strategies.
 EXTERNAL FOCUS: customers, Basic steps include formulation (where to apply),
competitors, economy implementation (whether it is the right one) and
 INTERNAL FOCUS: employees, machines, evaluation & control (how it’s taking effect).
capitals

KEY COMPONENTS
PROCESS:
1. Mission - It focuses on the present and
outlines how the organization aims to 1) Establishment of mission and vision.
serve its customers. 2) Setting of objectives (wherein the
2. Vision - the organization's ultimate long- objectives should be aligned to the
term aspiration. It’s a future-oriented mission-vision statement and have a
statement that represents the ideal state prescriptive period as to short-term or
the organization aims to achieve. long-term)
3. Values - the principles and beliefs that 3) Environmental Scanning
guide the organization’s behavior, culture, 4) Formulate strategy
and decision-making. They represent what 5) Implementation
the organization stands for and the ethical 6) Evaluate and control
standards it upholds.
CHALLENGES OF STRATEGIC MANAGEMENT
ENVIRONMENTAL SCANNING

Environmental Scanning is the analyzing of 1) Rapid technological change

internal and external environments to 2) Globalization
understand factors that affect the organization. 3) Sustainability
4) Uncertainties and risks
Internal or when dealing inside the organization,
use SWOT ANALYSIS. Strength and Weakness,
gathered from internal factors. While,
Opportunities and Threats are gathered from
external factors.

External or when you study the external

environment of the organization. Use PESTEL
analysis. It stands for Political, Environmental,
Social/Society, Technology, Economy, Law/Legal.
LEVELS OF STRATEGIC MANAGEMENT PORTER’S 5 FORCES OF COMPETITION
ANALYSIS
1. Corporate – decisions for overall of the
entire organization e.g. diversification, 1) Competitive Rivalry or Presence of
merging and acquisition or entering a new competitors /rivals - The intensity of
market. competition; high rivalry can reduce
2. Business – competing to other markets or profitability, especially if companies
how your business is compared to others compete heavily on price, quality, or
e.g. pricing, product differentiation, innovation.
innovation and market segmentation. 2) Threat for New Entrance – increased
3. Functional – different functions and areas competition and new market penetration.
of the organization such as campaigns, High barriers to entry, like strong brand
promotions and advertising, proper identity, economies of scale, and capital
allocation of funds. requirements, lower this threat and
4. Operational – it transpires on a daily basis protect existing firms.
including the inventory and supervision. 3) Bargaining Powers of Suppliers -
influence the cost and quality of inputs. If
few suppliers exist or if they offer unique
GROWTH AND DIVERSIFICATION resources, their bargaining power is high,
Intangible resources like brand reputation, which can squeeze industry profits.
intellectual property, and skilled employees drive 4) Bargaining Powers of Buyers - influence
a company's growth and diversification. It also customers on pricing and quality. When
deals with the information about customers and buyers have many choices or buy in large
the market. volumes, they can demand better terms,
pressuring companies to reduce prices or
GROWTH is evident when company improved improve quality. Price sensitivity.
and increased in market share, it expanded 5) Threats of Substitute/Alternative - the
operations and profitability is increased. likelihood of customers switching to
alternative products or services. When
substitutes are readily available and
Types of growth: affordable, they pose a threat to
profitability by limiting pricing power
I. ORGANIC GROWTH - expansion of a
within the industry.
business through internal efforts. e.g.
franchising. It’s typically gradual and relies
on the company’s existing resources and DIVERSIFICATION
capabilities to drive growth from within.
Diversification is a growth strategy where a
company expands its product lines, services, or
II. INORGANIC GROWTH - involves external
markets to reduce risk and increase profitability
strategies like mergers, acquisitions, or
by entering new areas beyond its core business.
partnerships. This approach allows faster
By diversifying, companies can reduce their
expansion by acquiring new markets,
dependency on a single product or market and
technology, or resources from outside
improve resilience against market fluctuations.
Types: 3. ORGANIZATIONAL – reengineering
of positions or change in the
I. Related (Concentric) – different product,
organization’s hierarchy, human
same market. Entering new markets or
resources and responsibilities.
product lines that are related to the
Relocations and terminations.
existing business in terms of technology,
(Twin notice rule must be done to
market, or function.
avoid illegal dismissal)
II. Unrelated (Conglomerate) – completely
different. Expanding into completely new
and unrelated industries, often to spread DIVESTITURE
risk and tap into new markets.
Divestiture refers to the process by which a
RESTRUCTURING AND DIVESTITURE company sells off or liquidates a subsidiary,
business unit, or asset. This can occur for various
Restructuring is the altering frameworks of the
reasons, including regulatory compliance,
company and organizational structure.
financial restructuring, business unit redundancy,
 Purpose: or strategic realignment. The goal of divestiture is
- Enhancement/Improvement often to enhance a company’s focus on its core
- Efficiency operations, improve financial health, or respond
- Flexibility to market conditions.
- Reduce cost
Purpose:
dispose asset → cut cost → repay debts → focus
 Areas
on core business → enhance shareholder value
1. OPERATIONAL - focuses on
TYPES OF DIVESTITURE
improving day-to-day operations
to enhance efficiency and reduce 1. Asset Sale – unloading non-performing
costs. Making things easier and the asset that makes the company unstable.
transformation of inputs to Specific assets or business operations are
outputs into better ones. It Include sold off, which may include physical
optimizing production processes, assets, intellectual property, or customer
cutting redundant functions, or contracts.
redesigning workflows. 2. Spin-offs – sells a specific division that
Operational restructuring is often then forms a new independent company;
undertaken to improve stand alone. Separating subsidiary
productivity and competitive company to the parent.
positioning. 3. Curve out - A parent company sells a
2. FINANCIAL - aims to improve a minority stake in a subsidiary through an
company's financial stability. It initial public offering (IPO), retaining
involves reorganizing the control of the subsidiary.
company’s debt and equity 4. Management by Objectives (MBO) –
structure, possibly through ownership is offered to existing
refinancing, debt consolidation, employees.
asset sales, or changes in
ownership. Stabilizing funds by
selling tools and assets.