formulate and implement strategies

that enable it to become more

profitable. - Hill
Legend: - main objective: earn income; profit
- Point out the internal environment of
Lesson Title
Category the company since controlled mo itong
Heading 1 opportunity
Heading 2 - Without this yung income mo mas
Heading 3 mababa
Additional Questions
- Part ng management ang monitoring
Comments, lecture
Book provisions ng progress. Kasi if mababa ang
revenue, need mo mag-iba ng strategy
and maximize your strengths

Threat
EXTERNAL ANALYSIS
- “Elements in the external environment
Jan 25, 2024 that could endanger the integrity and
profitability of the company’s
we are trying to find out the area that business.” - Hill
businesses want to focus on - other side of opportunity na
need din tignan
Strength - makikita na ang main threat is
- Always try to find out areas where you competitors. baka kasi kunin nila
can improve product mo or i-improve
- if hindi ka nag-innovate, makakain ka - kahit na anong business, you
ng business. Maraming strategy na cannot expect na wala kang
pwede gamitin. competitor especially if marami
- Ex: gadgets super bilis mag bago na kayong seller so madidivide
- Ang business if you want to survive: yung profits
● Find out ano yung area na pwede
mo pang i-improve Industry
- you always find an - “A group of companies offering
account ‘r&D’ very products or services that are close
material (malaki) yung substitutes for each other.” - Hill
amount kasi vital siya sa - Stiff competition is expected.
business. - Ex: laptop, marami na sellers
- be aware of competitors and
EXTERNAL ANALYSIS - IDENTIFICATION OF anong mga goods ang pwede
OPPORTUNITIES AND THREATS i-substitute sa products mo
- Ex. SB, Tim Hortons, Bo’s Cafe;
Opportunity all them targets busy people who
- “Elements and conditions in a wants to study/focus in their
company’s environment that allow it to
 cafe [more of vibe ang - If nasa business ka, wag
competition] ka magpakamatay sa
- If you do not innovate, isang product. Check out
mawawala ka other areas to improve.
- Ex: telegram (yung sulat) per Dati, Coca Cola only
word yung bayad ngayon online produces Coke. Pero
na lahat bumababa sales nila dahil
- find out the ff: anong industry sa competition. Therefore,
mo, sino competitors mo gumawa din Coca Cola ng
- May mga times na hindi na juice, water, or sports
na-a-achieve ang hurdle rate drink.
- Ang business risk talaga yon,
always. PORTER’S COMPETITIVE FORCES MODEL

Industry Boundaries 1. The risk of entry by potential competitors;

- “The basic customer needs that are - Assess who is your competitor
served by a market define an industry’s - Kahit maliit risk, you have to find out
boundaries.” - Hill how to control it
- kani-kaniyang products - If di mo macontrol buy it!
- may theoretical boundaries yon - Ex. Inasal - madami pumila dahil sa
- ex: Coca Cola chicken at unli rice. Natakot MCDO and
- Originally considers itself jollibee kasi manok din yung business.
as part of the soda Since di makontrol, Jollibee bought
industry (offering inasal.
carbonated drinks). - Hindi lahat ng acquisition papatok.
- Actually, it is part of the Meron paring mga acquired na hindi
soft-drink industry (this pumapatok
includes noncarbonated - Ex: pho hoa malapit na magsara
drinks). sa ibang areas
- The growing demand for - Baka hindi na na-achieve yung
bottled water and fruit hurdle rate (residual income)
drinks affected the - Walang business na 100% free from
Coca-Cola company. risk. That is why you need to identify
- meron parin hanggang the risks and adjust.
ngayon. madaming
reasons naman bakit 2. The intensity of rivalry among established
andito pa siya, pero noong companies within an industry.
80s,90s, pagpasok mo sa - kaya bang pantayan yung product mo.
restaurant,ang ino-offer - If not, pwede ka parin magfocus sa R&D
is either pepsi or coca para ma-improve product
cola. pero unti unti
nagkaron ng ibang
products, juice, water,
3. The bargaining power of buyers. - Ex: sa current cars in the market,
- lilitaw yung problem nato if super dami ang potential competitor nila is
niyong nagbebenta ng product na to yung tesla na bagong pasok lang
- Sabihin ng buyer “ayaw mo bigay sakin pero electric na kasi so yung
sa ganitong price, lipat ako sa kabila’ pagshift to electric car may
potential competition.
4. The bargaining power of suppliers.
- Mayroon ka tinignan sa suppliers lalo ● Economies of scale refer to the
na sa materials reduction of product cost due to large
- If the raw materials acquisition is high, output.
maapektuhan revenue mo - We only focused on fixed cost
- If tataas acquisition cost mo at - Kahit how much units mo,
therefore expense, tatas din price mo, babayaran mo pa rin fixed
- If not, bawasan mo quality or quantity cost
- But this may result na magalit - Ex. Rent
customers - If di mo nafactor fixed
- Ex: tinapay super liit na cost mo, it will lead to loss
- Ex: sa gasolina if sabi nila of revenue
mag-increase sila walang laban yung - Pag madami production
customers unit, masmababa
- Magiging sunod sunuran ka sa production cost
suppliers mo
5. The closeness of substitutes to an industry ● Brand loyalty exists when consumers
product. have a preference for the products of
- learn from coca cola established companies.
- kahit na small players lang yan pero - Mahirap i-establish
marami sila, ma-aaffect parin ang - “Mayroon ba kayo na brand ng
market share mo. ganito?”
○ continuous advertisement
- Kahit radyo, tv, kahit wala
The risk of entry of potential competitors nakikinig
- Kahit paulit ulit,
● “Potential competitors are companies nakatatak na
that are currently not competing in the subconsciously
industry but have the potential to do ○ emphasis on a high-quality
so.” - Hill product
- mahirap i-anticipate but always - It might help brand
assume na magkaka competitor loyalty
ka kapag may business ka. baka - Mahal pero di ka lugi
inoobserve ka lang nung iba ○ exceptional after-sales service
- ang pangotra is yung business - warranty
secret mo Ex: secret ingredient
 ● Absolute Cost Advantages – ● Industry competitive structure –
competitors cannot expect to match the number and size distribution.
established company’s lower cost
structure. ● A fragmented industry consists of a
○ Superior production operation large number of small or medium-
due to accumulated experience, sized companies.
patents, or trade secrets. - meron sariling definition ang
○ Control of resources needed in law ng small, medium,
producing the products. companies.
○ Easy access to funds compared SRCRULE68-Revisedversion2011
to that of new entrants. (lower .doc (sec.gov.ph)
risk than the new entrants) Republic Act No. 9501 | Official
Gazette of the Republic of the
● “Customer switching costs – costs Philippines
that consumers must bear to switch
from the products offered by one SEC. 3. Section 3 of the same Act,
established company to the products as amended, is hereby further
offered by a new entrant”. [Hill] amended to read as follows:
- Customer will change brand
- May mga product na pwde mo “SEC. 3. Micro, Small and
lang magamit sa isang product Medium Enterprises (MSMEs)
- Ex: may apps na hindi pwede sa as Beneficiaries. — MSMEs shall
apple dati so hindi sila accessible be defined as any business
sa iphone users. But now, ang activity or enterprise engaged in
ginawa nila is pwede na industry, agribusiness and/or
- If hindi pwede magamit yung services, whether single
product mo with others, proprietorship, cooperative,
mababawasan market share mo partnership or corporation
sa competitors whose total assets, inclusive of
- Other ex: S&R nung dumating those arising from loans but
dito, need ng membership fee exclusive of the land on which
bago ka makagrocery dun so the particular business entity’s
yung mga nagswitch from office, plant and equipment are
regular groceries may additional situated, must have value falling
cost. under the following categories:

The intensity of rivalry among established

companies within an industry.

- The competitive struggle between - Rate na pag finance na

companies within an industry to gain babayaran is lower
market share.
 - Not in a position to determine ● The Cost condition.
the industry prices. - Recovering high fixed costs
- drawback: hindi requires high sales volume.
papansinin yung mga - The need to increase the sales
small companies volume can ignite intense
- Pagdating sa pricing, rivalry.
hindi mabahala mga big - ang pangontra sa fixed cost is
companies high revenue or else malulugi ka,
- Example: agriculture, real estate kaya ang ginagawa is maa
brokerage, health clubs production. but the problem
- wala pang big players arises kung mabebenta niyo.

● A consolidated industry is dominated ● The exit barriers are the economic,

by small number of large companies strategic, and emotional factors that
(Oligopoly) or in an extreme case, by prevent companies from leaving an
just one company (Monopoly). industry. [Hill]
- Usually in a position to - If exit barriers are high,
determine the industry prices. companies become locked into
- Example: Soft drinks, Wireless an industry where overall
service demand is static or declining.
- nag -g-group together [Hill]
- ang tatamaan dito mostly is - Exit barriers results :
consumers kasi sila (businesses) ➢ Excess productive
nagcocommand ng price wala capacity
kang magagawa. - marami
- Pine-prevent ng government iproproduce para
ang monopoly. Pero ang mapababa ang
oligopoly existent yan. production cost.
- Ex: ilan lang naman talaga - para maiwasan
nagpoprovide ng wireless fixed cost
service. Dalawa lang talaga so - kaso if nag mass
far, smart and globe produce ka,
- If nag-merge pa tong mababa presyo mo
dalawang to, yari ang ➢ Price competition
consumers (lowering of the selling
- Yung price ng product price)
tataas if mangyari to

● The level of industry demand.

- Declining demand causes stiff
competition to maintain market
share.
 mo. Hindi ka magkakaroon ng
leadership as to price kung
RESOURCE AND COMPETITIVE
pantay lang or mas mataas sa
ADVANTAGE
competitors.
- Kadalasan, sinasacrifice ang
quality since mahirap
DISTINCTIVE COMPETENCIES
talaga-balance ng quality and
- “Firm-specific strengths that allow a
price.
company to differentiate its products
- Pwede i-increase mo ang price
and/or achieve substantially lower
pero ang target mo mas mababa
costs to achieve a competitive
sa competitor so there is a
advantage.”- Hill
tendency talaga na sacrifice mo
- Ano strength mo? Quality ng
quality.
product mo ba or pricing?
- Manufacturing Concern
Focus Strategy (Target Market)
- the organization focuses on a specific
Generic Strategy
regional market, product line, or group
of buyers.
Differentiation Strategy (Quality)
- You’ll try to find out your target
- the organization seeks to distinguish
market and doon ka lang
itself from its competitors through the
mag-concentrate ng product
quality of its products or services
- Ex:Soleus Running
- Strategy is to focus on quality
- Watch na pang takbo. Before,
- kapag naka position ka na, kilala
wala talagang ganon. Oras lang
na yung brand mo, i-maximize
talaga makikita mo. Unlike yung
mo.
mga digital watch ngayon na
- Ex: Rolex
madami feature pati email
- Website palang makikita mo ng
makikita mo
mahal pero may bumibili parin
- Yung market mo, unlike yung
- Customers are willing to pay more for
general na relo, kaunti lang.
the perceived extra value

THE BUILDING BLOCKS OF COMPETITIVE

Overall-cost Leadership Strategy (Price)
ADVANTAGE
- the organization attempts to gain a
● Superior efficiency
competitive advantage by reducing its
- efficiency and effectiveness
cost below the cost of competing firms.
should always be together
- pricing yung target mo
- ang tinitignan is yung process ng
- Many possible ways to introduce
pag produce ng product
product
- malaki ang impact ng production
- Ex. Production - raw
cost sa pag earn ng income
materials
- If mataas production cost,
- Target mo mas mababa yung
mataas ang price.
price mo kaysa sa competitors
 - Sa Pilipinas hindi quality EFFICIENCY:Capital productivity
tinitignan mostly. They usually - The sales produced by a peso of capital
check the price before buying. invested in the business.
- lowering production cost: - Involves ROI & ROE
➔ Labor intensive - relies - Avoid unproductive assets or activities.
on manpower - If you have this asset, make sure
■ Problems to take advantage of it
- Pag walang - If real property yan, gawan mo
supervisor, ng paraan para magamit mo
maapektuha - Ex. If may idle na real property,
n yung use it as a collateral to get a loan
productivity and expand your business
since - Importance of just-in-time inventory
magkekwent system.
uhan yan. - If you are in a manufacturing
- Napapagod, industry, you need a steady
nagkakasaki supply of raw materials. You
t. want to avoid na may
➔ Capital intensive - Mas demand/order pero wala ka na
mahal but can recover in supply.
the long run. - If may iimbak na raw materials,
● Superior quality madami ka din iisipin - ex.
● Superior customer responsiveness Warehouse - dahil may bayad
● Superior innovation din yun, security - baka maubos
yun
EFFICIENCY - another problem is spoilage -
- The more efficient a company is, the basa o napasukan ng daga
fewer inputs it requires to produce a
particular output and the lower its ● JUST IN TIME INVENTORY SYSTEM
costs. - “System of economizing on
- Measures of efficiency: inventory holding costs by
- Employee productivity scheduling components to arrive
- Capital productivity just in time to enter the
- Kung nag-eearn ba talaga production process or only as
yan stock is depleted.”
- inventory will only come
EFFICIENCY: Employee productivity in when it is needed to
- The output produced per employee. avoid ipon sa warehouse.
- It helps a company attain a competitive - ex: Iligan Cement
advantage through a lower cost (business) nasa may port
structure. na siya so if need ng
limestone, ipapadala
nalang niya agad by boat
 di na niya need ng - once a customer is not satisfied,
warehouse magiging sampu yan [noon na
- Location is good saying pa yan; ngayon more than
pa because of social media]

Quality as reliability:
- “A product can be said to be reliable
when it consistently performs the
function it was designed for, performs
it, and rarely if ever, breaks down.” -
Hill
- You can find this one in pricey
products
QUALITY - Nasisisra sila pero
- “A product is said to have superior matagal
quality when customers perceive that - Ex. cars - may iba na
its attributes provide them with higher matagal masira;
utility than the attributes of products masmahaba lifespan
sold by rivals.” - Sa mga mura, 2 or 3 years pa
- Depende sa need ng customer. lang madami na sira
ex: need ng customer na pang
tawag lang talaga yung phone, TWO TYPES OF INNOVATION
bibilhin niya yun even if walang - If you do not innovate, mawawala ka sa
camera market
Quality as excellence: ● Product innovation
● Product design and styling ● Process innovation
- maganda ba? - Pwde process improve para
- ex: dati hindi nafofold yung gumanda din product
cellphone ngayon pwede na - Ex. food
● Features and functions
- Pagandahan na ng function ng PRODUCT INNOVATION
gadget - “Development of products that are new
● Level of service to the world or have superior attributes
- aftersales to existing products.” -Hill
- ex: warranty-period - ex: Kodak lost to fujifilm
where the company - This does not require na bago ang
shoulders the expenses product. Pwede namang i-improve
for repairs. may iba pati product mo.
parts covered - Eg. Phone - tawag lang pero
- once na pumalya service mo, sira compared before ang dami ng
agad image mo pagbabago.
PROCESS INNOVATION
- “Development of a new process for
FUNCTIONAL LEVEL STRATEGIES
producing and delivering products to
customers.” -Hill
- reason why you allot budget for R&D
Recall:
Functional Level Managers
- Responsible for the specific business
Customer Responsiveness
function, such as:
● Satisfying customers’ need
● Human resource
- Malaki impact sa customer if
● Purchasing
service after the sales hindi
- Sometimes wala
maganda
● Product development
- Ineexpect ng mga customer if
- If you want to innovate, you
may issue doon sa product,
need to assign.
maayos agad. Makaapekto sa
- For large companies lang since
collection kasi hindi
for medium companies wala sila
magbabayad.
inassign
- Mabilis na response time, mas
● Production
maganda
- Nagmamanage ka talaga
- Honda Mission, Vision & Values |
● Customer service
Comparably
- Since you want to address
- Mission Statement | Global
immediately the complaints of
Suzuki
the customers.
- Apple Mission Statement 2023 |
- Kaya ang nagiging norm is
Apple Mission & Vision Analysis
instead of hiring someone,
(mission-statement.com)
mayroon kang hotline na hindi
● Customer response time:
talaga empleyado ng company.
- “The time it takes for a good to
Yung naka assign na call center,
be delivered or a service to be
tinetrain regarding possible
performed.” [Hill]
solutions sa problems ng
customers since yung
complaints need i-address
talaga ASAP
- Usually nag poprovide na sila ng
number para pag may complaint
ka, pwede mo agad itawag

Efficiency and Economies of Scale

● Economies of scale are unit cost
reductions associated with large-scale
output.
- directed towards reduction of
production costs
 - In management accounting, the Efficiency and Learning Effects
effect of cost reduction to Learning effects are cost savings that result
production cost from “learning by doing”.
- One of the factors in
production cost is fixed - if labor intensive ka, kailangan
cost (cost na same parin marunong na yung workers mo sa
kahit gaano karami trabaho kasi kapag may question sila
maproduce mo) need pa hanapin supervisor so matagal
- Associated sa pagrereduce ng yung process.
fixed cost by way of mass but if matagal na sa trabaho,
production ma-ma-master na niya yung work
● Fixed cost – costs that must be
incurred to produce a product - Ang problema sa experience is that
regardless of the level of output. baka umalis na sila. So the question is
- #1 na cinoconsider production how are you going to motivate them
cost ay ang FIXED COST. and make them stay.
- Ex. Fixed cost (rent ng factory) -
500K. Kahit isa lang i-produce “Labor productivity increases over time, and
mo na product, the same bayad unit costs decrease as individuals learn the
ka ng 500K. Dalawa man yan, most efficient way to perform a particular
ganun pa rin. task” [Hill]
- Cost per product
➢ Variable cost - depende sa “Experience curve refers to the systematic
dami ng ipoproduce. lowering of cost structure and consequent
➢ Fixed cost - pag konti unit cost reduction that have been observed to
lang prinoduce mo, occur over the life of the product.”
malaki.
- Mahirap if labor-intensive since Learning effect and experience curve, kambal.
hindi ka basta basta makapag
mass produce since limited ang Cost structure pertains to the expenses
capacity ng tao. (fixed cost and variable cost) that will
- Paano i-adjust yung fixed cost, be incurred in producing the product.
Kung may pera ka at maganda
takbo ng pera mo, invest in Flexible Production Technology
robotics since hanggat di nag - “A range of technologies designed to
ooverheat yan, may power, reduce setup times for complex
magtatrabaho talaga yan at hindi equipment, increase the use of
yan magrereklamo. Mabilis pa, machinery, through better scheduling,
accurate pa. and improve quality control at all
stages of manufacturing process.” -
● Diseconomies of scale – Unit cost Hill
increases associated with a large-scale - Can be customized
output. - Cost-intensive
 - Dati di pa uso robotics. Pag may - Churn Rate: Lumilipat yung customers
need ka na material, pupunta ka mo
sa fabricator - manual pa talaga. - maraming rason: ex: hindi nagustuhan
Pero ngayon, mayroon ng raytu aftersales
layser (high power laser cutting - Key: Satisfy customers, kung ano gusto
machine) - mas pulido. Yun nga nila gawin mo na agad.
lang initial acquisition cost
(since capital intensive) kung Supply Chain Management
kakayanin mo. Sa ngayon, may - “Managing the flow of inputs and
bumibili pa rin ng itak. components from suppliers into the
- Pwde mo i-apply ang economies company’s production processes to
of scale - mass production minimize inventory holding and
maximize inventory turn-over.” [Hill]
Marketing strategy - Ang tinitignan is may expenses
“Marketing strategy – The position that a ka na gusto i-avoid sa
company takes with regard to pricing, pagproduce ng product
promotion, advertising, product design, and - Pag nag over raw materials mo,
distribution.” [Hill] may babayaran ka na warehouse,
- kanya kanya ng paraan sa marketing materials, etc.
depending on the company - Gagawaan mo ng paraan para
- usual na nakikita is advertising maga mo yung just in time
- ex: youtube, magststop pinanonood mo inventory system
kasi may ads - This requires coordination
- Ex. Cigarette - Inform consumers about - RECALL: Inventory turnover measures
the effects of your products. Pero how efficiently a company uses its
minsan ang ginagawa, mabilis nalang inventory by dividing the cost of goods
magsalita para hindi maintindihan. sold by the average inventory value
- Ex. In carinderia, may mga fridge kung during the period.
saan nandoon mga pepsi at coca-cola.
Free advertisement na rin yun. RESEARCH AND DEVELOPMENT &
- Pricing and Promotion: pagbago palang EFFICIENCY
product mo, hindi pwedeng mahal - R&D can boost efficiency by designing
agad. Kailangan mababa lang muna. products that are easy to manufacture.
Over time, attract mo customers mo.
Lugi ka dyan pero pag nagustuahn
product mo, bibili yan.
- Ex. Youtube Premium

Customer Defection (Churn Rate)

- “The percentage of a company’s
customers who defect every year to
competitors.” [Hill]
- Customer Satisfaction
 - Kadalasan ito gingamit
- From strategizing, lumipat sila
BUSINESS LEVEL STRATEGIES
sa segmentation

Third: Target only a limited number of

BUSINESS -LEVEL STRATEGY
market, or just one, and become the very best
- “At its most basic, business-level
in serving that particular segment.
strategy is about whom a company
- “Focus strategy – when a company
decides to serve (its customer
decides to serve a limited number of
segments), what the company is trying
segments, or just one segment.” [Hill]
to satisfy, and the company is trying
- Example: Porsche HOME - Porsche USA
to satisfy those needs and
- Natarget mo na yung specific
desires.”-Hill
segmentation ng market and
napag-aralan mo na yung wants and
MARKET SEGMENTATION
needs nila
- “The way a company decides to group
- Pinaganda mo product mo
customers, based on important
- Drawback: limited ang market
differences in their needs, in order to
-
gain a competitive advantage.”

TWO (2) WAYS OF GAINING COMPETITIVE

3 APPROACHES TO MARKET
ADVANTAGE
SEGMENTATION

● Lowering cost
First: Produce and sell a standardized
- Pababain product cost
product.
- Pag mababa production cost,
- “Standardization strategy – When a
mas mapapababa mo yung
company decides to ignore different
selling price ng product mo.
segments and produces a standardized
- Ang customer usually sa
products to average consumers.” [Hill]
pilipinas unang kinoconsider
- [Example: Coke before the introduction
ang price.
of diet coke and other products]
● Differentiation

Second: Recognize differences between

Lowering cost
segments and create different product
- Assume that all enterprises in the
offerings for each segment.
industry offer the same product (as to
- “Segmentation strategy – when a
quality). The competitive advantage
company decides to serve many
goes to the company that has the
segments, or even the entire market,
lowest cost.
producing different offerings for
- Kapag lower production cost mo
different segments.” [Hill]
compared to competitors, that is
- Example: Brands & Products | The
your advantage
Coca-Cola Company
- One technique is to utilize
- Nag venture na rin sila to sport
robotics para bumaba yung
drinks
 production cost mo kasi kaya - Pataas nang pataas
nila mag mass produce since income mo and you
fixed cost ang robotics. But the cannot achieve that
assumption is effective talaga without after sales
product mo and binibili talaga. - Ex. Mga warranty card
- and suggestion kung ano
- Producing products at a low cost will gagawin mo at saan ka
enable a company to still gain profit at pupunta na service center
price points where competitors are - If you compare it to cheap
losing money. products, wala silang
location kung saan service
DIFFERENTIATION center nila.
- “Differentiation involves
distinguishing your company from its - Usually raises the cost structure of the
rivals by offering something that they firm.
find hard to match.” - But if differentiation is successful,
- Ex: yung apple, hindi match ang economies of scale will set in.
security ng apple pero ang - Company mo superior sa quality
drawback, super hirap - Ex. Laptop - Apple. Hindi mo match
mag-install sa apple. product dahil di matatablahan ng virus.
However, mahirap maginstall sa Apple.
- A product can be differentiated by: - Magkakaroon ka ng additional
(Differentiation can be done through) expenses dahil pinapaganda mo.
● Superior reliability - Official Expenses for Research and
Rolex Website - Swiss Luxury Development.
Watches
● Better design VALUE INNOVATION
- Kung mas maganda
design mo like - “When innovation push out the
Cellphones. Ex. natutupi efficiency frontier in an industry,
yung cellphone. allowing for a greater through superior
● Superior function and features differentiation than was value to be
- Ex. Apple - no virus offered at a lower cost previously
● Better after-sales service thought possible.”
- If you are in business, try - IKEA: Vision | Mission | Core Values
to find out ano pwde (2019) (bstrategyhub.com)
maganda para bumalik
customers mo.
- Break even point: If kahit
may customer ka pero di
mo abot break even, wala
rin.
 capabilities on competing successfully in one
area;
CORPORATE-LEVEL STRATEGY
- you can focus your resources and
aligned ka sa research and development
2. It stays focused on what it knows and does
CORPORATE LEVEL STRATEGY
best. -Hill
Strategic managers must:
1. Decide in which businesses it should
Disadvantages:
compete;
1. Strategic managers may fail to see the
- market segmentation
changing nature of the industry;
- find our the needs and desires of the
2. Strategic managers may fail to take
market
advantage of the opportunities and/or
recognize the threats. -Hill
2. Select which value creation activities it
- kalaban mo mga big firms kasi mas
should perform in those businesses;
marami sila pwede maproduce
- concept of after-sales - every product
needs to have value creation. Kahit
HORIZONTAL INTEGRATION
pricing target mo, kailangan may
quality parin na consideration.
- “The process of acquiring or merging
with industry competitors to achieve
3. Determine how it should enter,
the competitive advantages that arise
consolidate, or exit businesses to maximize
from a large size and scope of
long-term profitability.
operations.”-Hill
- after the determination of the market
- merger ng big firms
segment, yung targe mo, you will now
- ex: BPI and robinsons
plan how to join (if may nauna sa
- the idea is kapag nagconsolidate ka,
industry)
ang perceived result is dadami ang
- take into consideration yung capital
transactions in one entity. so yung
customer ng isa, mapupunta din sa isa.
Sometimes, top level management would
- aside from that, ma-streamlined ang
decide to stop a segment kasi baka may ibang
employees, so magbabawas sila ang
product na sila gustong i-produce.
ireretain lang nila yung need nila na
tao. bawas sa cost.
- Especially today with AI
SINGLE INDUSTRY CORPORATE STRATEGY
- other possible advantages is wider
- nakafocus ka sa isang industry
range of networks. going back to
- ex: case of coca-cola, hindi uubra
customer example, yung isang client ng
kapag single product lang ibebenta mo
kabila, mapupunta sa kabila kasi sanib
kasi hindi m-ma-maintainn yung
pwersa na sila.
market share
- even sa accounting, instead of two, iisa
nalang ipag-pre-prepare-an.
Advantages:
- advantages of volume acquisition.
1. Allows a company to focus all its
kapag marami ka na client, mas
managerial, financial, and technological
 makamura ka yung raw goods mo mas - there are situations where you have
mura kasi may discount for bulk order. repeat customers (loyal) so hindi ka
mahihirapan mag introduce ng new
Benefits: product kasi satisfied na siya ngayon. if
1. Lowers the cost structure (economies of unsatisfied sila, hindi na babalik yan.
scale); - Lesson: take care of your repeat
- economies of scale: pinapababa yung customers
production cost. one of the advantages
if you consider merger. mas kaya mong ACQUISITION
mag mass produce
2. Reduces the rivalry within the industry; - “A company uses its capital resources
- the bigger the company, the bigger the to purchase another company.”-Hill
network, mas marami rin customer so - List: Brands operated by Jollibee Foods
advantage siya. Corp. | Philstar.com
- Mababawasan rivalry - Acquire the company
3. Increases the bargaining power over - Labanan ng mga voting rights.
suppliers (volume discounts) and buyers (the - Ex. Mang inasal
effect of fewer suppliers on price);
MERGER
4. Increases product differentiation (more
products to sell). -Hill - “An agreement between two companies
to pool their resources and operations
Increased product differentiation and join together to better compete in a
● Product bundling: “Offering to business or industry.”-Hill
customers the opportunity to purchase - Landbank-DBP merger to strengthen
a range of products at a single, resilience of PH financial sector
combined price.” -Hill - sanib pwersa
- Ex. usually during sale sa
department store, bibili ka ng PROBLEMS WITH HORIZONTAL
isang product na may kasama ng INTEGRATION
ibang product
- Hindi siya buy 1 take 1; 1. Difficulty of merging very different
mag-kaiba yung products company cultures;
- Ex. TV and Electric Fan bundle - hindi pareho ang nakaranasan nila per
- Ex. Grocery - may isang pack na company
may iba ibang product sa loob - Ex. mafefeel mo talaga culture ng
japanese firm, which is hindi mo
● Cross selling:“A company takes makikita sa ibang firm. Talagang
advantage of its established trabaho sila at strict sa oras.
relationship with customers by way of Pag-minerge mo sila sa company na
acquiring additional product line that it relax lang, sasabog sila.
can sell to them.” -Hill - Lalo na mga senior
-
2. High management turnover in the acquired HOLDUP
company. -Hill - “A company is taken advantage of by
- Hindi namna ppwde na itong mga another company it does business with
management na ito iabsorb lahat with after it has made an investment in
the same position. Hindi pwde na same expensive specialized assets to better
sila position, may mawawala talaga. meet the needs of another company.”
- Ex. area manager. Hindi pwde dalawa [hill]
na area manager sa isang area. Kaya,
may matatanggal talaga. Hindi TAPERED INTEGRATION
maiiwasan.
- “Purchasing part or most of its needs
Note well: Philippine Competition Act for a given input from suppliers.”-Hill
“Prevent economic concentration which will - Ex. Cement - most of the
control the production, distribution, trade, or companies may problem sa
industry that will unduly stifle competition, input.
lessen, manipulate or constrict the discipline - forward
of free markets.” [Sec. 2 (c) of R.A. 10667]
VERTICAL DISINTEGRATION
“Penalize all forms of anti-competitive - “A company decides to exit industries,
agreements, abuse of dominant position and either forward or backward in the
anti-competitive mergers and acquisitions, industry value chain, to its core
with the objective of protecting consumer industry to increase profitability.” -Hill
welfare and advancing domestic and - Backward: pabalik ka doon sa
international trade and economic mga nagususupply
development.” [Sec. 2 (b) of R.A. 10667] - Ex. nakita mo supplier mo
paubos na supply - steady ka pa
VERTICAL INTEGRATION rin? Hindi, dapat humanap ka
alternate.
Forward vertical integration: “A company
expands its operations forward into an - Hindi purket disintegration,
industry that uses, distributes, or sells the hindi ka na makakawala.
company’s products.”-Hill
- It is possible na you will have to
[SLING article]
consider
- May steady na firm/pwesto na Corporate level strategy is part of a
pagpapasahan mo ng finished product multi-tiered process that owners and
- Ex. Kawasaki/ Panasonic. managers use to:
Backward vertical integration: “A company
● Define a plan of action
expands its operations backward into an
● Hit a specific target
industry that produces inputs for the ● Achieve business goals
company’s product. ” -Hill
- You will have to negotiate with your
supplier 3 LEVELS:
 1. Corporate Level Strategy (both business level and
- top of the planning pyramid. It functional level).
is the main purpose of your 5. Dynamic
business. Think of corporate - Corporate level strategies
level strategy as the shouldn’t be set in stone. You
destination toward which your want your business to adapt
business is moving. That and cope with consumer
destination affects all the demands and market and
strategies and decisions in industry changes.
every other part of your - dynamic corporate level
business. strategy makes your business
more flexible in the face of
2. Business Level Strategy strong market and industry
- translates that direction (from storms and prevents it from
corporate strategy) into more being blown over and crashing
actionable goals to the ground.
- the broad strokes for how 6. Far Reaching
you’re going to achieve the 7. Formulated from the top down
goal set at the corporate level. - Corporate level strategies are
Those broad strokes then always created at the highest
influence what you do at the levels of your business.
next level. Owners, board members, and
chief officers (e.g., CEO, CFO,
3. Functional Level Strategy COO) should be the ones to
- Functional level strategies are formulate the strategies and
the actions and goals assigned then put them into practice in
to departments and individuals the other levels of the business
that support your business
level strategy. These are the 9 Examples Of Corporate Level Strategy
smallest components of the Subdivided into 3 types
planning pyramid but are the 1. Growth
foundation on which the ● Concentration
success of your strategy lies. - focus resources in order
to increase the vertical
or horizontal
Key characteristics of Corporate Level participation in your
Strategy respective market.
1. Long Term ● Diversification
- Implementation and - spread into new
completion takes much longer markets
2. Uncertain - Related market
- extremely broad and often (concentric
incorporate a great many diversification)
moving parts - Unrelated to current
3. Geared towards Overarching Goals niche (conglomerate
4. Complex diversification
- Incorporate many moving ● Forward or Backward
parts and may be made up of a Integration
long list of sub-strategies ○ Forward integration -
 you take steps to has failed to make the
assume the role business profitable, you
previously provided by may choose to cease
one of your distributors production, sell all your
(forward in the supply assets, and close the
chain). business completely.
○ Background integration
- take steps to assume Benefits of Corporate Strategy
the role previously 1. Allows your business to be proactive
provided by one of your 2. Increases Efficiency
suppliers (backward in 3. Increases Market Share
the supply chain). 4. Increases profitability
2. Stability 5. Makes business more durable
● No change 6.
- Continue doing what
you’re doing, but plan
for a time when you
want to grow or
retrench.
● Profit
● Investigation
- Testing the waters
before a specific
strategy
3. Retrenchment
● Turnaround
- efficiency in an attempt
to eliminate the
weaknesses that are
holding your company
back
● Divestment
- involves selling off
poorly performing
assets (or even
high-performing
periphery assets) to
raise capital for the core
product or service. With
a properly planned
divestment strategy,
you can get your
business back on track
and in the black once
again.
● Liquidation
- Last-resort corporate
strategy
- When everything else
 by information technology that
functions as one large company
STRATEGY AND TECHNONLOGY
- They establish networks of linked
merchandising outlets that are so
interconnected by advanced IT that
Fragmented Industry
they function as one large business
- A fragmented industry is one composed
entity.
of a large number of small and
- ex: starbucks
medium- sized companies
- possible challenge:
- A fragmented industry is one composed
- It is costly kasi iisa lang may-ari
of a large number of small and
Franchising
medium- sized companies—for
- “A strategy in which the franchisor
example, the dry cleaning, restaurant,
grants to its franchisees the right to use
health club, and legal services
the franchisor’s name, reputation, and
industries.
business model in return for a franchise
- There is no major player
fee and, often a percentage of the
profits. ” [Hill]
Fragmented industry: reasons
- method of distributing products or
● Mass production is impractical
services involving a franchisor, who
- Ex. custom-made jewelry
establishes the brand's trademark or
- Kaya Mas akma sa products or
trade name and a business system, and
manufactured goods ang
a franchisee, who pays a royalty and
fragmented industry kasi quality
often an initial fee for the right to do
ang mostly pinaguusapan here.
business under the franchisor's name
● Brand loyalty in the industry may
and system.
primarily be local
- Ex: Mcdonald’s
- Ex. the massage services
- ex: Master Siomai
industry is primarily driven by
- advantage:
differences in the skill set of
● established business already so
therapist
there’s a guarantee that it would
● Low Entry barriers
succeed
- Ex. The massage services
● compared to chaining, the risk is
- if here, konti lang ang kalaban
scattered. sa chaining kasi, salo
mo. wala masyadong big firms.
mo lahat ng risk. so sometimes if
challenge: pano i-po-promote product nila to
one fails, sunod sunod na.
compete with existing businesses
- Ex: sa starbuck’s issue
- One difficulty is yung capital
baka madamay yung iba
- Medyo nagging saturated kasi minsan
Chaining
sa isang kanto meron na sa kabila
- A strategy designed to obtain the
meron pa.
advantages of cost leadership by
establishing a network of linked
merchandising outlets interconnected
Strategy in Mature Industries (deterring new Technology Upgrading
entrants) - “Incumbent companies deterring entry
Mature Industry by investing in costly technology
- A mature industry is commonly upgrades that potential entrants have
dominated by a small number of large trouble matching.” [Hill]
companies.” - Hill
A way of entering a mature industry Strategies to Manage Rivalry
Steps: Price signaling
1st: Determine a segment that is poorly served - “The process whereby companies
2nd: Fill the needs of a poorly served segment increase or decrease product prices to
3rd: Gain experience and create a brand convey their intentions to other
4th: Progressively move upmarket (expensive companies and influence the price of an
and good quality products.). industry’s products.” [Hill]
- an indicator that the supply and
Product proliferation strategy demand for a good or service in an
- “The strategy of filling the niches or industry need to change because of an
catering to the needs of customers in all increase or decrease in the price of the
market segments to deter the entry of good or service.
competitors.” [Hill]
- most companies move to increase their Price leadership
market share by producing a wide - “One company assumes responsibility
range of products targeted at different for determining the pricing strategy
market segments that maximizes industry profitability.”
- the strategy whereby a firm extends its [Hill]
product offer in a market or submarket - occurs when one firm in a market (the
so as to saturate the product space and leader) sets its price level or price
minimize unmet demand change, and the other firms in the
- Ex: san miguel dami na products market (the followers) adopt the same
or similar price level or price change.
Limit price strategy - If you have this strategy,
- Charging a price that is lower than that madidiscourage yung potential
required to maximize profits in the competitor mo
short run to signal to a potential
entrant that the incumbent has a Non-price Competition
low-cost structure that the entrant - “The use of product differentiation
likely cannot match.” [Hill] strategies to deter potential entrants
- price, or pricing strategy, where and manage rivalry within an
products are sold by a supplier at a industry.” [Hill]
price low enough to make it - May mga industry na hindi basta basta
unprofitable for other players to enter napapasok
the market. It is used by monopolists to - Ex: energy industry
discourage entry into a market, and is
illegal in many countries
Strategy and Technology customers to adopt the new format
Importance of Technology thereby killing demand for competing
- Due to technological advances, many formats.” [Hill]
low- technology industries are - Ex: streaming platforms killed yung
becoming high-tech. videocity and cable
- Examples:
- Impact of genetic engineering on RAZOR AND BLADE STRATEGY
farming. - “Pricing the product low (razor) in
- Retailing to online retailing. order to stimulate demand and increase
- Amazon.com. Spend less. Smile the installed base, and then trying to
more. make high profits on the sale of
compliments (razor blades).”
Technical Standard and Format Wars - Ex: yung printer mura pero yung ink
Technical standards cartridge super mahal
- a set of technical specifications that
producers adhere to when making a COOPERATE WITH COMPETITORS
product or component - Stronger together: the partnership
- Ownership of technical standards is a between Philips & Sony - Brabant is
significant competitive advantage Bright [Philips and Sony]
- Product Differentiation maybe based - If hindi kaya mag-compete, baka
on technical standards pwedeng mag collaborate
- Ex. Microsoft - the current
domain operating system for PCs License the Format
- “Licensing the format to other
Format Wars enterprises so that they too can
- “Battles to set and control technical produce products based on that
standards in a market.” [Hill] format.” [Hill]
- Battles to control the source of - Pag gumamit sila, bayad sila sayo
differentiation.
- Differentiated products often command Costs in High-tech industries
higher prices - Fixed cost is very high
- Comparative cost economics.
Strategies for Winning Format Wars [Conventional producer v. High Tech
Ensure a supply of Complements producer]
- Diversify into the productions of - Increase in profit [high tech producer]
complements.
- Make it easy for other companies to
make compliments.

Leverage Killer Applications

- Applications or uses of a new
technology or product that are so
compelling that they persuade
 enterprises in the photographic industry
such as Kodak and Fuji film have generated
CAPTURING FIRST- MOVER ADVANTAGES
most of their revenues from selling and
processing film using traditional silver
halide technology. The rise of digital
photography is a huge threat to their
First Mover business models.
- “A firm that pioneers a particular Paradigm shifts appear to be more likely to
product category or feature by being occur in an industry when one or both of the
first to offer it to the market.” [Hill] following conditions are in place:
- The History Of Intel CPUs: Tom's the established technology in the industry is
mature and approaching or at its “natural
Hardware (tomshardware.com) (Intel
limit,” and
microprocessor) limit, research attention turns to possible
- improvement siya sa nauna. alternative technologies, and sooner or later
- ex: angkas, improved siya one of those alternatives might be
nung habal habal system commercialized and replace the established
- Does not by itself guarantee success technology.
a new “disruptive technology” has entered
- may limitations parin.
the marketplace and is taking root in niches
- may risk parin sa business. hindi
that are poorly served by incumbent
naman guarantee na may companies using the established
income technology.
disruptive technology
to refer to a new technology that gets its
Technological Paradigm Shifts start away from the mainstream of a market
and then, as its functionality improves over
- “Shifts in new technologies that
time, invades the main market. Such
revolutionize the structure of the technologies are disruptive because they
industry, dramatically alter the nature revolutionize industry structure and
of competition, and require companies competition, often causing the decline of
to adopt new technologies in order to established companies.
survive” Summary:
- Ex: dati film camera
Technological paradigm shifts occur when
- Ex: taxi very impacted ng grab and
new technologies come along that
angkas revolutionize the structure of the industry,
dramatically alter the nature of
competition, and require companies to
Technological Paradigm Shifts
adopt new strategies to survive.
occur when new technologies come along
that revolutionize the structure of the
Technological paradigm shifts are more
industry, dramatically alter the nature of
likely to occur when progress in improving
competition, and require companies to
the established technology is slowing
adopt new strategies to survive.
because it is giving diminishing returns and
Ex: shift from chemical to digital
a new disruptive technology is taking root in
photography (another example of
market niche.
digitalization).
For over half a century, the large incumbent
 ● Realize cost savings from economies of
scale
Strategy in Global Environment [Feb 29,
- Increase sales volume through
2024]
international expansion.
- Economies of Scale: 3 Industries
That Benefit the Most
Globalization of Markets
(usnews.com)
- Declining barriers to cross-border
● realize location economies
trade.
- “Location economies – the
- Enhancing Trade Facilitation through
economic benefits that arise
ICT: Progress and Roadblocks for the
from performing a value
Philippines | JIA SIPA (columbia.edu)
creation activity in an optimal
- Brought upon by communication
location. ” [Hill]
- nawawala yung barriers sa transactions
- Some locations are more suited
- meron na kahit nung wala pang
than others for producing
internet. but now mas easier na.
certain goods and services
- ex: before walang internet, yung FS
- Ex: clearvision
finafax. with the internet, ang bilis na
magtransmit yung soft copy nalang.
Choosing A Global Strategy
Global Strategies
Multinational Company
Global Standardization strategy
- A company that does business in two or
- “A business model based on pursuing
more national markets
low-cost strategy on a global scale.”
- Hindi pwede stagnant business mo.
● Economies of scale
need mo mag branch out
- Minimizing production costs
● Location economies
Benefits of Expanding Globally
Localization strategy
● Increase the company’s growth rate
- “A strategy focused on increasing
- Locally developed products are
profitability by customizing a
sold internationally.
company’s goods or services so that
- Philippines top 10 exports 2021
they provide a favorable match to tastes
(worldstopexports.com)
and preferences in different national
- 7 Philippine Products Exported
markets” [Hill]
Abroad | Philippine Prime
Transnational Strategy
- kapag na-saturate mo na yung
- A business model that simultaneously
isang area, it’s time na lilipat ka
achieves low costs, differentiates their
sa iba
product offering across geographic
- idea id if you have a business and
markets, and fosters a flow of skills
you have a quota, you have to
between different subsidiaries in the
consider expanding
company’s global network of
operations.” [Hill]
Finals a diamond-shaped framework that explains
why specific industries in a nation become
[Read articles posted in canvas] internationally competitive while those in
other nations do not. [FourWeekMBA]

It identifies factors that contribute to a

Porter’s Diamond Model - ARTICLE
nation’s or region’s competitiveness on a
CONTENTS [April 11, 2024]
global scale.[FourWeekMBA]

*Note, I only got the relevant parts and

Key Elements
bridged the content in the three articles to
Porter argues that any company’s ability to
create this summary.
compete in the international arena is based
mainly on an interrelated set of location
Porter’s Diamond Model
advantages that certain industries in different
model published by Michael Porter
nations posses [B2U]
● Factor Conditions
- Refers to a nation’s or region’s
endowments in terms of labor,
natural resources, capital,
infrastructure, and technological
capabilities. [FourWeekMBA]
- Ex: Reason why Saudi Arabia is
one of the largest exporters of oil
worldwide. [B2U]

● Demand Conditions
- Describes the nature and size of
the domestic or local market,
including customer preferences,
needs, and the level of
sophistication. [FourWeekMBA]
- Striving to satisfy a demanding
domestic market propels
companies to scale new heights
and possibly gain early insights
into the future needs of
customers across borders.
Nations thus gain competitive
advantage in industries where
the local customers give
also known as the Diamond Theory of companies a clearer or earlier
National Advantage [FourWeekMBA] picture of emerging buyer needs,
and where demanding
 customers pressure companies example, Italy, known for its
to innovate faster and achieve fashionable clothing, will
more sustainable competitive definitely have a different
advantages than their foreign approach than Greece, which
rivals. [B2U] emphasizes tourism and related
● Related and Supporting Industries facilities. [WallStreetMojo]
- Focuses on the presence and
strength of supporting Diamond Model emphasizes that these four
industries, suppliers, and a interconnected elements influence one another
competitive supply chain. and collectively impact a nation’s or region’s
[FourWeekMBA] competitiveness in specific industries. Changes or
- suppliers are crucial to improvements in one element can lead to ripple
enhancing innovation through effects throughout the model, ultimately
more efficient and enhancing or diminishing competitiveness.
higher-quality inputs, timely [FourWeekMBA]
feedback and short lines of
communication. [B2U] Government
- example see this in Silicon - role of the government in Porter’s
Valley, where all kinds of Diamond Model is described as both ‘a
tech-giants and catalyst and challenger‘. Porter doesn’t
tech-start-ups are believe in a free market where the
clustered in order to share government leaves everything in the
ideas and stimulate economy up to ‘the invisible hand’.
innovation. [B2U] However, Porter doesn’t see the
government as an essential helper and
● Firm Strategy, Structure, and Rivalry supporter of industries either.
- Addresses the competitive Governments cannot create
dynamics within the nation or competitive industries; only companies
region, including the level of can do that. Rather, governments
competition, management should encourage and push companies
practices, and the overall to raise their aspirations and move to
business environment. even higher levels of competitiveness.
[FourWeekMBA] [B2U]
- This aspect of the theory focuses - government also plays a vital role in
on the competition in the native developing and retaining the
markets that businesses have to competitive advantage by offering a
excel against. The region in conducive environment for businesses
which the firms operate to flourish. [WallStreetMojo]
determines the structure and
strategies to be framed to Chance
compete in the home market. As - the role of chance is often included in
a result, the strategies differ the Diamond Model as the likelihood
from nation to nation. For that external events such as war and
 natural disasters can negatively affect ● Businesses use regional advantages to
or benefit a country or industry. capture international markets.
However, it also includes random ● They value suppliers as they understand
events such as where and when the importance of their support.
fundamental scientific breakthroughs ● Firms of national importance get to know
occur. [B2U] the power of buyers in enhancing business
growth.
● The model teaches market players to
innovate, remain updated, and put in
their best efforts to fight the fear of being
substituted.

Drawbacks:
● Complexity
- Analyzing and managing all four
factors can be intricate and may
require extensive data and
Other discussions by [FourWeekMBA] resources.
● External Factors
Applications - The model doesn’t account for
● Economic Policy external factors like global
- Used by governments to economic shifts or political
formulate policies that promote changes.
industry competitiveness ● Limited Scope and Generalization
● Investment Decisions ○ Focus on Developed Economies:
- Helps businesses make informed - Porter’s Diamond Model
decisions about where to invest is often criticized for
and expand. being more applicable to
Benefits: advanced industrial
● Strategic Insight economies and less
- Offers insights into factors relevant to developing
affecting competitiveness in countries.
specific industries. ○ Generalization Issues:
● Policy Guidance - The model may
- Assists policymakers in shaping oversimplify or generalize
strategies to support national or complex economic
regional industries. realities, potentially
Additional Benefits according to leading to incorrect or
[WallStreetMojo] overly broad conclusions
● It helps businesses understand the about a nation’s
structure and techniques of their rival competitive advantage.
companies, allowing them to frame their
strategies accordingly.
 - So pag pricing, hindi pwde mura
masyado kasi malulugi ka.
Governance Mechanism [May 2, 2024]
- Suppliers
- Their objective is to supply and
profit
We do benchmarking because we want to
- You need to take in to
improve
consideration of them. Hindi
Ex: giving incentive through shares of stock
pwede bili nang bili kung mahal
That practice, if it is being done by
kung pwede ka naman
competitors, you can do it also.
maghanap ng iba
The objective is to improve performance
- There are situations yung mga
supplier will personally contact
CORPORATE GOVERNANCE
someone from the procurement
Set of rules, practices, and procedures.
department of the company so
● Objective: balancing the interests of
they can have their edge
various stakeholders.
- There are possibilities na hindi
● Significance: The principals
gagawa ng tama yung managers
(shareholders) cannot easily predict
mo
what the managers might act
- Kahit nakalatag na lahat ng rules
opportunistically.
and procedures, you will
encounter employees na
opportunistic - nangingibabaw
greed nila.

- Wala kwenta ang manual if hindi

AGENCY COST
naman sinusunod
The sum of incentive costs, monitoring costs,
- Internal Auditor - check if the rules and
enforcement costs, and individual financial
practices of the company are being
losses incurred by principals because
followed
governance mechanisms cannot guarantee
- Rules are there to be followed. For
total compliance by the agent. [Hitt]
whom? For the shareholders.
- Hindi lahat ng company nagbibigay ng
- The main intention of
incentive, pero iba generous pag
shareholders is to profit
nakakakita sila ng effort
- Paano sila kikita if kanya kanya
- This is a cost because you will shed off
sila trabaho
assets to give to those good performing
- Agency - we are referring to the Agency
2 types of stakeholders
Theory
- Customers
- agency : workers
- A company wants to profit pero
- Principal: yung may ari o yung
hindi pwede na magdecide lang
shareholders or stockholders
sila na taasan ang presyo kasi
hindi bibili customers
 - Yung stockholders, maaffect sila control large block shareholder positions.
sa management ng company so [Hitt]
may incentives yan
- If top level management ka, It has the potential to be a powerful
hihingi ka ng report from governance mechanism. [Hitt]
accounting. Another cost yun
kapag ginawa nila kasi baka BOARD OF DIRECTORS
magovertime Primary responsibility is to act in the owners’
- The main objective why best interest by formally monitoring and
shareholders buy stocks is to controlling the firms’ top level managers.
earn dividends… [Hitt]

Can you recall the reason why the Sarbanes

Oxley Act was enacted? Who will elect the Board of Directors?
- Ang pinaka na-apektuhan here is yung - Yung shareholders.
publicly traded companies. - Technically shareholders yung
- Since naga financial crisis, america principal tapos agents yung BOD
enacted this to protect the shareholders
CLASSIFICATION OF BOD
NOTE: The Sarbanes-Oxley Act (SOX) authorised Insiders – The firms’ CEO and other top-level
strict reforms to improve financial disclosures managers. They are the source of information
from corporations and prevent accounting fraud about the firms’ day to day operation. [Hitt]

OWNERSHIP CONCENTRATION Related outsiders – Have some relationship

Ownership concentration is defined by the with the firm, contractual or otherwise, but
number of large-block shareholders and the they are not involved with firm’s day-to-day
total percentage of the firm’s shares they own. operation. [Hitt]
[Hitt]
Outsiders – Individuals who are independent
Ownership concentration as a governance in terms of day to day operation of the firm.
mechanism has received considerable interest They provide independent counsel to the firm.
because large block shareholders are [Hitt]
increasingly active in their demands that
firms adopt an effective governance
mechanism to control managerial decisions so EXECUTIVE COMPENSATION
that they will best represent the owner’s It is a governance mechanism that seeks to
interest. [Hitt] align the interest of managers and owners
through salaries, bonuses, and long term
incentives. [Hitt]
INSTITUTIONAL OWNERS
Institutional owners are financial institutions,
such as mutual funds and pension fund , that
MARKET FOR CORPORATION CONTROL
It is an external governance mechanism that
is active when the internal governance
mechanisms fail. [Hitt]

It is composed of individuals and firms that

buy ownership positions in undervalued
corporation.

Being considered ineffective, the top level are

usually replaced. [Hitt]