HANDOUT 1: STRAT including owners, employees, customers, suppliers, the

community at large, and so on.

BASIC CONCEPTS OF STRATEGIC MANAGEMENT
(PART 1) Example: If the overwhelming emphasis is on generating
profits for the owners, employees may become isolated,
Definition of Strategic Management customer service may suffer, and the suppliers may
resent demands for pricing concessions.
The phrase "Strategic Management" is sometimes used
as a synonym for "Strategy," but the two terms are not 3. Needs to incorporate short-term and long-term
the same. perspectives. Managers must maintain both a vision for
the future of the organization and a focus on its present
A strategy refers to a unique plan designed to achieve a
operating needs.
competitive position in the market. It is also an
interpretative plan that guides the organization to reach Example: If a company has a three-to-five-year plan,
its goals and objectives. Whereas Strategic Management this long-term plan should have sequences of short-term
consists of analyses, decisions, and actions, an plans. Once the long-term goal is defined, management
organization undertakes to create, implement, and sustain must define the short-term steps necessary to achieve
competitive advantages. In short, Strategic management it.
is the process that defines the organization's strategy.
4. Recognizes trade-offs between efficiency and
This definition of Strategic Management entails three effectiveness. It is the difference between doing the
(3) ongoing processes: right thing (effectiveness) and doing things right
(efficiency).
1. Analyses - Strategic Management is concerned with
the analysis of strategic goals (mission, vision, and Example: Managers must make many trade-offs. In doing
strategic objectives) along with the internal and external so, managers must allocate and use resources wisely
environments of the organization. (efficiency) but still direct their efforts toward
attaining overall organizational objectives
2. Decisions Strategic decisions address two (2) basic
(effectiveness).
questions: What industries should we compete in? And
how should we compete in those industries? The Study of Strategic Management Process

3. Actions Strategic actions require leaders to allocate The study of Strategic Management leads to the
necessary resources and to bring the intended strategies development of a strategic position that helps determine
to reality. the organization's future sustainability and profitability,
simultaneous with the integration of managerial
Key Attributes of Strategic Management
capabilities, responsibilities, motivation, and reward
The four (4) key attributes of Strategic Management: system.

1. Directs the organization toward overall goals and Originally called business policy, strategic management
objectives. This perspective refers to how efforts must has advanced substantially with the concentrated efforts
be directed at what is best for the total organization, of researchers and practitioners. Today, we recognize
not just a single functional area. That is, what might look both a science and art in applying strategic management
"rational" or ideal for one functional area, such as techniques.
operations, may not be in the best interest of the overall
firm.

Example: Operations may decide to schedule long

production runs of similar products to lower unit costs.
However, the standardized output may counter what the
marketing department needs to appeal to a demanding
target market.

2. Includes multiple stakeholders in decision-making.

Stake holders are those individuals, groups, and
organizations interested in the organization's success,
 groups of managers and key employees from various
departments and workgroups. They develop

and integrate plans emphasizing the company's true

competitive advantages. Strategic plans at

this point detail the implementation, evaluation, and

control issues. Rather than attempting to

forecast the future perfectly, the plans emphasize

probable scenarios and contingency strategies.

Planning is typically interactive across levels and is no

longer strictly top-down. People at all levels

are now involved in overall strategic thinking,

comprehensive planning process, and supportive

The following phases describe the evolution of value system.

strategic management:
Types of Strategies
Phase 1: Basic financial planning. During this phase,
Strategic alternatives are developed to set direction in
organizations emphasize preparing and meeting annual
which human and material resources of business will be
budgets. Financial targets are established, revenues are
applied for a greater chance of achieving selected goals.
measured, and costs are carefully monitored. Also, the
It is also involved with the identification of the ways
organization's primary focus is short-term (1 year) and
that an organization can undertake to achieve targets,
mostly on the functional aspects.
weaken the competitors, gain competitive advantage, and
Phase 2: Forecast-based planning. During this phase, ensure sustainability,
organizations usually extend time frames covered by the
The following are the different types of strategies:
budgeting process (3-5 years). Organizations tend to
seek more accurate forecasts by considering past and  Corporate-level strategy. This strategy defines
present records and the short-term and long-term the markets and business in which a company will
effects of its external environment. Therefore, this operate. It also entails a clearly defined, long-term
phase has more effective resource allocation and timely vision that organizations set to create corporate
decisions value and motivate the workforce to implement
proper actions to achieve customer satisfaction. It
relating to organization's long-term competitive position
is a continuous process that requires constant
in the market.
effort to engage investors in trusting the company
Phase 3: Externally oriented planning. During this phase, with their money, thereby increasing its equity.
organizations attempt to understand Organizations that manage to deliver customer value
consistently are those that revisit their corporate
basic marketplace phenomena. Organizations begin to strategy regularly to improve areas that may not
search for new ways to define, meet, and deliver the aimed results.
 Business level strategy. This strategy emphasizes
satisfy customer's needs and wants. The managers are
strengthening the company's competitive position of
tasked with generating several alternative
products or services. Business strategies are
strategies for top management. Lastly, the top composed of competitive and cooperative strategies.
management begins to evaluate the proposed It covers all the activities and tactics for competing
in contrast to the competitors and the management
alternative strategies in a formalized manner for planning behaviors requiring strategic alignment and
and actions. coordination. Business strategies focus on product
development, innovation, integration, market
Phase 4: Strategic management. During this phase, the
development, and diversification, among others.
top management organizes planning
 Functional level strategy. This strategy is
formulated to achieve some objectives of a business
 unit by maximizing resource productivity. Functional  Target market. It pertains to a selected group of
strategy is concerned with developing a distinctive customers within a business' available market at
competence to provide a business unit with a which a business aims its marketing efforts and
competitive advantage. Each business unit or resources. Companies must be aware of their target
company has its own set of departments, and every market to innovate their products and services
department has its functional strategy. based on the particular needs of their customers.
 Functional strategies are adapted to support the
Example: Newspapers' target market is drifted
competitive strategy. For instance, a company
towards older people who are not comfortable or
following a low-cost competitive strategy needs a
capable of getting their news online.
production strategy that emphasizes on reduction
cost operation and a human resource strategy that  Competition. It pertains to the rivalry between
emphasizes retaining the lowest possible number of companies that sell similar goods and services. Aside
highly qualified employees for the organization. from the companies that sell similar products, a
 Operating level strategy. This strategy is usually business must also identify its indirect competitors
created at the field level to achieve immediate in the market.
objectives. An operating strategy is formulated in
the operational units of an organization. In some Example: Newspaper companies thought their
companies, managers develop an operating strategy competition was with other newspaper companies
for each set of annual objectives in the departments until they realized it was the advent of
or divisions. modernization because of the Internet.
 Part of Strategizing is planning on how to navigate
 Cost advantage. This pertains to the strategy of a
unchartered territories. Take for example, the
company that involves producing a product or
global health crisis brought by Covid-19. Nobody
providing a service at a lower cost than its
predicted Covid-19 and how bad it will get.
competitors. Companies with this advantage produce
Companies must consider how the world is changing
products in higher quantities and provide customer
and move towards strategic thinking. It is about
benefits. This is mainly influenced by multiple
making quality decisions, learning from history, and
factors such as access to low-cost raw materials,
using foresight on what will be needed by the
efficient processes and technologies, low
company to gain a competitive advantage.
distribution and sales costs, and efficiently managed
Competitive Advantage operations.

Competitive advantage means superior performance Example: A global company that employs cost
relative to competitors in the same industry or superior advantage is Unilever, which is influenced by its
performance relative to the industry average. It can also large operation and massive presence in the market.
be defined as the factor that makes a business's goods
 Differentiation strategy. This pertains to a
or services superior to the available options in the
company's strategy that involves marketing the
market.
qualities of a product that sets it apart from other
The following are the determinants of competitive similar products and uses that difference to drive
advantage: consumer choice. Product differentiation makes
consumers' attention focused on one or more key
 Benefit. It pertains to the value offered by a benefits of a brand that make it better than others.
product or service to the market. Aside from the
product features, companies must also identify the Example: A global company that employs a
unspoken benefits of their product or service. This differentiation strategy is Apple, which creates its
means constantly being aware of new trends that operating system (IOS) that distinguishes its
affect a product's or service's value. product as superior apart from its competitors.

Example: Newspapers slowly adapt to the current

technological trends because most news and
information are already available via the Internet.
Other newspaper companies may perceive that some
people are still willing to pay for news delivered daily
on a piece of paper.