BME 2

STRATEGIC MANAGEMENT IN TOURISM AND

HOSPITALITY INDUSTRY

CARMELITA PAGUYO - SERRANO

ENTREPRENEURIAL FORMATION
AND EVALUATION
Development of Strategic Entrepreneurship

Strategic Entrepreneurship has been increasingly recognized and emphasized as an important

priority for organizations, particularly for established businesses that strive to develop a more
entrepreneurial orientation in their quest for sustained competitive advantage. Both as a
discipline and business practice, strategic entrepreneurship has attracted much attention and
acceptance since its introduction about 10 years ago (2001). As a field of study, strategic
entrepreneurship involves the integration of strategy (strategic management) and
entrepreneurship.
Strategy entrepreneurship is the use and/or stimulation of entrepreneurial activity to achieve
strategic goals. Strategic entrepreneurship describing an input-process output model that entails:
organizational resources, individual knowledge, and skills, and environmental factors as inputs.

1. There are three perspectives on the formation of strategic and entrepreneurship.

strategic management is “dominants” over entrepreneurship (Baker and Pollock,2007
cited in Rensburg, 2013)
2. strategic management is itself a “subset” of entrepreneurship (Browne & Harms,2003
cited in Rensburg, 2013)
3. Strategic management “intersection” with entrepreneurship (Rensburg, 2013)
INNOVATION FOR ENTREPRENEURIAL FORMATION

STRATEGIC ENTREPRENEURIAL PROCESS

I. Strategic Planning Process.

1. Entrepreneurial Visioning. It is the art and science of formal process of looking
ahead on the course of actions that the firm goes from where it started in term
of its strength and capabilities as he looks for opportunities and threats in the
business environment. It is the function of the top level management to look
into the present business condition and anticipating the future scenario
through careful analysis of the prevailing data.
2. Setting Goals and Objectives. Strategic planning is the process of analyzing
the present environmental conditions through the different data available to
the entrepreneur. It requires foresight and the development of business
directional map towards the destined business future.
3. Defining the Firm Strategies. It is the setting priority programs and policies to
bring into the reality of the set plans according to the desired objectives. It seeks to
put in place the needs and wants of the customers and develops the necessary
strategies on what to do about them. It is defining the business strategies to match
the firm values of and directions in attaining customer satisfaction which is the
essence of procedural activities for competitive advantage.
4. Setting Strategic Procedures. Programs and activities need defined procedure
and developed strategic action plans that set the firms in motion with certainty and
proper direction. Strategic procedures are carefully planned strategies defining the
steps to be followed in tracking the activities towards the attainment of policies laid
down in the planning process.
5. Setting the Timeliness. Strategic actions need the setting of timelines as
each strategy must be done at the right time and at the right place. When
procedures are properly identified the timing of activities must be put in place.
Timing must be based on the internal and external analysis of the environment
of business in order to take advantage of the prevailing market opportunities
and also anticipate the threats. Timelines are important aspects in action
planning.
6. Setting and Allocating Capital Resources. Entrepreneurial strategies
need budgets in term of capital resources in order for it to operate effectively.
Budgets are sets of financial programs that will be necessary to implement
targeted strategies. Resource allocation for definite activities must be set so
that programming of fund allocations are provided as they become necessary in
the implementation of the strategy.
II. Strategic Formulation Process.
1. Determining the Human Capital. Strategic actions and programs need people
who have the skills necessary to carry out strategies. The human capital resources are
the vital and important component of the organization that will be task to carry the
planned strategies. It is the process of taking inventory of the skills, capabilities and
individual competencies and the assignment of the task or strategies for
implementation. Training and re-orientation of the new program strategies may be
necessary to fit the human capital into the new and innovative program task at hand.
2. Setting the Compensational Strategies. The human power will not perform
according to set strategies without the necessary compensation that is based on their
skills and capabilities. Strategies and programs are carried out by the people who are
properly compensated. Competitive advantage could only be developed with people
who are competitively paid in the industry. The development of salary structure based
on education, duties and responsibilities, technical and managerial skills and other
factors would enable the firm to get people with proper capabilities to perform the
needed strategies.
3. Setting Performance Targets. Strategies and program implementation
must be evaluated in terms of accomplishments and the extent by which
these strategies are implemented. Performance standards in term of quality
output, quantity of work done and accomplished and the timeliness by
which the strategies were accomplished. The development of work values
and attitude towards work are important indicators for effective
performance.
4. Defining the Target Strategy
a. Know your Product or Service. First you must know the product or
service that your will offer to your customer. If it is the new product or
concept, you must be able to convince that you have a unique product that
would satisfy customer needs and wants. Customers want to try new
products, but it must be better than those existing in the market.
b. Analyze the Market Potential. The customer base will determine the success of
your business venture. The wider the market potential, the more chances of growth and
success. The entrepreneur must know the needs and wants of the customer through
market research and analysis and figure out how to satisfy them. This requires the
analysis of their buying habits, customer potentials, their income base and social status.
c. Determine the Mart Strategy. A product or service needs effective marketing and
distribution strategy to get the customer into the basket of demand potential.
Continuous supply determines product growth. Customers must have access to the
product when they need it.
d. Know the Competitors. Competitors in the markets are threat when they are not
properly identified, and their strategies are unknown. The competition in the market
determines the success and failure of the firm, and new and better strategies must be
develop overtime to remain competitive. Develop new competencies and strategies
that will bring in the desired return and do not set on our present laurels.
Environmental Scanning
The environment of business is vast with the opportunities as well as
threats. The entrepreneur must look at the business potential as well as the
prevailing condition in the place of operation. The investment in capital
necessities generation of the desired profit. To generate for product or
services the entrepreneur must be able to scan the feasibility of the location
in terms of the different factors related to its operation.
a) Business Location for Retail Establishments. A retail outlet would need
a site that is convenient for prospective customers in terms of parking space
or availability of transportation.
Factors to consider in choosing business location
1. Rent and space
2. Terms of lease agreement
3. The type of goods or merchandise
4. The income level of prospective customer in the area
5. Prospective sales in volume
6. Government regulations, taxation and ordinances
7. Location of the area in terms of traffic and weather or rain flood.
b) Business Location for Industrial Plant or Manufacturing Operation.
Environmental factors in locating industrial plant or manufacturing
facilities need environmental scanning as it is a great factor in long term
investment in building facilities and other equipment. The environment
must be suitable to the kind of operations in terms of its proximity to
related industries in the locality. It must be comply with government
zoning and environmental regulations related to pollution and other
environmental laws.
The factors must be considered:
 Land are of the site
 Facilities for expansion
 The availability of power and other utilities
 Building and equipment
 Plant site accessibility to transportation
 Traffic condition
Analysis of the Business Condition

It is not enough that the entrepreneur has the money and capital to go into business. It is
important that before going into the field of business, the entrepreneur must know the business
condition prevailing in the environment. One important tools to analyze the business
environment is the SWOT analysis methods. Before barking in business, the entrepreneur must
be able to identify the internal STRENGTHS and WEAKNESSES and develop foresight in the
external factors, which are OPPORTUNITIES and THREATS.
Strengths may be in terms of capital base and product attributes or the
capabilities of its core manpower base. The entrepreneur must look at
how to combat the weaknesses, as they need strong determination to
succeed with caution and need long hours of planning and strategic
implementation. Planning and environmental analysis is needed to be
keep the opportunities moving to profitable operations. Threats are
external factors that must be addressed with strategies consistent with
the firm’s direction plans.
Product and Market Level Analysis

a. Product Strength
Available technology in processing. Technology is an important factor in
producing the product as the economies of scale determine the price index.
Customer wants product with standard quality, and technology is an important
factor in mass production and the development of quality products.
The source of raw materials. The consistency of product is dependent on the
supply of raw materials. The price must be affordable, and its quality must be
consistent with the product requirements.
Product attributes and market acceptance. The product must have the attributes
that the customer needs and wants. Consumer products represent daily needs
while some products represent the social wants of some customers. The product
must satisfy the needs of the customer and must be consistently innovated and
improve as customers’ preferences change overtime.
b. Sustainable Product Opportunities

Product demand. Product demand is the greatest opportunity of the

entrepreneur. Demand must be sustained before competitors appear in the
market. The absence of other products or similar product will expand production
and distribution, and therefore generate the desired profit objective.
Product quality. Quality and standards products is the market wanted for their
money. The presence of substandard product in the market is an opportunity for
the entrepreneur to introduce new and innovative products and enter into
competition.
Government support for local products. The government support for local
entrepreneur is an opportunity for product development and expansion in the
market.
c. Threats to product profitability and market expansion.

Entrance of competitors. Competition will reduce profitability as price war will be the
strategy for competitive advantage.
Supply of raw materials. The supply of raw materials will be generally higher as firms
will be competing for the same supplier. As demand for raw materials becomes
competitive in price, production input inputs go higher, affecting product pricing.
Increase in production cost means changes in the price level in the market.
Poor quality and high price. Poor quality products will likely fail to advance in the
market. Entrepreneur must be able to produce the desired quality of products in
order to get sustained patronage.
Product design and appeal. Product design must appeal to customer demand.
Technical expertise is necessary in product design as customer are particularly
attracted to well-designed products. It refers to product color and features that
appeal to customer taste and preference.
Production cost. Production cost is price determinants. Entrepreneur cannot make
maximum profitability on products whose production cost cannot survive market
competition.
Supply and demand. Intermittent product supply to the market will make customer
shift to other products. The supply chain management must be put in place and make
the products available to all valued customers.
Weak marketing and distribution. The competitive landscape needs marketing and
distribution strategy that will sustain it product market share and above average
return.
I. Strategic Implementation Process.

1. Managerial Leadership and Strategies. Business organization compete through

strategic operations that influence the environment. The success of these
strategies requires management process and leadership that will sustain the firm’s
competitive advantage.
a. The Top Management. Top management have the cash value in the
management of the organization which stands for:
 Competencies. It is the ability to manage the firm towards its vision and
mission and to direct the organization to the attainment of its projected
above average return.
 Attitude. It is a personal commitment for excellence in handling the
operational system of the firm. It is putting aside personal interest for the
higher interest of firm.
 Skills. Management must have the conceptual, human, and technical skills
in order to be effective in visioning and planning strategies. Human skills
refer to managerial leadership strategies in handling people while
technical skills refer to the operational strategies.
 Habits. It refers to personal discipline that is developed in the individual
manager in handling himself with the various public in the organization.
b. The Functional Role of Top Management.
 Determine strategic direction of the firm.
 Exploit and maintain the firm core competencies
 Develop human resources for effective performance
 Develop control mechanism and sustain balance operational strategy.
 Develop organizational culture and values of ethical standards.
c. Characteristics of Strategic Leaders. A good leader is develop through time.
Effective leaders are born with intellectual capacity to think and to conceptualize, they
are mare by the opportunity and the willingness to lead other. Strategic leadership is
the art of making people follow without telling them directly what a leaders want
them to do.
2. Functional and Operational Strategies
a. Production Process. Production innovation strategy is a leadership in
product quality. Product design and specification must follow standard
requirements and it must be physically attractive and with features that will
attract customer demand.
b. Inventory and Storage Management. Inventory management can be a
source of competitive advantage when managed properly. The just-in-time
management system must be put in operation to maximize resources and
develop economic order quantity.
c. Marketing and Distribution. The new paradigm shift in marketing is
creating demand, managing profitable operation through attracting new
customers, retaining current market and establishing new market base.
d. Financial Management Strategies. The success of the firm’s strategic
action is generally dependent on how the top management allocated their
financial resources in their operation. Financial planning is the process of
allocating and controlling the flow of money towards its present and long-
term goals.
e. Information and Data Base Management. Information and data base
management is the process of combining the hardware technology and
computer literate people in gathering and storing data that supports
managerial functions of planning, organizing, directing and controlling.
3. Strategic Human Resources Management. Strategic management process
would flourish with people whoa are proactive to change. The human resources are
the pillars who will implement the strategic actions and carry out the plans and
programs of the firms towards its target goals and objectives.

Human Resources Staffing Strategies

a. The right people with necessary education and training.
b. Good social and psychological framework of mind for strategic change.
c. With right attitude and ethical values of work.
d. Proactive to change and forward thinking
e. Technologically oriented in the use of new system and procedure
f. Potential for growth and advancement in the organizational structure.
IV. Strategic Evaluation Process. It refers to the final review of the
implementation of the strategies that were made during the planning and
formulation stage where the program and stage as the environment keep on
changing as the firm implements the strategies.

The Measurable Criteria is SMART

1. Systematic. The measuring instruments that will be applied are in
consonance with the existing strategies against the tends and individual
performance of the team players. It must be able to measure the extent of
strategic evaluation of the external environment that affects the performance of
the internal factors within the organization.
2. Measurability. It refers to the extent of performance made in terms of
product output, quality of product and market acceptability.
3. Acceptability. The strategies applied must be acceptable to the team players as
they are achievable and provide criterion for the maintenance of the firm competitive
advantage. The criteria for evaluations should center on the following:
 Skills of people who are instruments in the implementation of strategies.
 Resources available for disposal in the implementation of the strategies.
 The current firms’ position within the industry
4. Result oriented. Strategies must be measured in terms of result in carrying out the
competitive advantage in terms of the following:
 Managerial and supervisory effectiveness in policy decision making;
 Product efficiency;
 Market penetration and greater market share;
 Effective use of information in strategic implementation; and
 Financial Control systems
5. Time bound. Effective strategic implementation needs to be monitored in
timely manner, accurate and relevantly measured. Timely and relevant
measurements when effectively done could be an instrument in changing strategy
directions when the strategies have to be realigned to the changing business
condition. The following factors need to be monitored timely and accurately:
a. Provide feedback on employee’s performance related to strategy
implementation. This is to minimize poor performance and maximize good
performance
b. Compliment and encourage employee’s creativity and adaptability to strategy
implementation and devise reward system to motivate employees for work
excellence and the development of ethical values of work.
c. Use of information feedback sparingly. Information and feedback mechanism
should be selective of those that are necessary on the day-to-day operation.
 CORPORATE
SOCIAL
RESPONSIBILITY (CSR)
CORPORATE SOCIAL RESPONSIBILITY (CSR)

What Is Corporate Social Responsibility (CSR)?

Corporate social responsibility (CSR) - is a self-regulating business model that helps

a company be socially accountable—to itself, its stakeholders, and the public. By
practicing corporate social responsibility, also called corporate citizenship,
companies can be conscious of the kind of impact they are having on all aspects of
society, including economic, social, and environmental.

Corporate social responsibility (CSR) - is a type of international private business

self-regulation that aims to contribute to societal goals of a philanthropic, activist, or
charitable nature by engaging in or supporting volunteering or ethically-oriented
practices.
THE DEVELOPMENT OF CORPORATE SOCIAL RESPONSIBILITY IN THE PHILIPPINES

1. 1960’s – Donation. CSR awareness among Philippine businesses began in the 1960s, with
them giving donations in cash directly to foundations and other charitable organizations

2. 1970’s – Organization. A decade later, in the 1970s, the country suffered from a socio-
economic turmoil and the business environment was on a survival mode. It was during
this time that Philippine Business for Social Progress (PBSP) was founded. CSR was used
as a form of organization which is concerned in the economic development to help the
poor in the communities.

3. 1980’s – Involvement. CSR strategy during the 1980s was community relations or
COMREL as companies needed to secure a license to operate in the community.
4. 1990’s – Institutionalization. “In the 1990s, companies were driven more by
the need to enhance competitive advantage and reputation capital. Towards the
end of the decade, businesses began to engage in more strategic social
investment and mainstream corporate social responsibility in their business
practices.

5. 2000’s – Continuous Improvement. To continue the CSR, social

organization was organized toward continuity of acceptable programs to allow
the poor to have access to basic education, health services, credit and skills
development for nation building. PBSP has become the vehicle of the business
sector in delivering organized, professional and sustainable assistance to
underprivileged sectors, namely: the landless farmers, fisherfolk, rural workers,
urban poor, and indigenous cultural communities. It is the leading advocate on
the practice of CSR and corporate citizenship in the country.
Drivers of CSR

1. External Drivers.
a) Regulations. Compliance with the government laws and policies of
concerned cities and municipalities in form of environmental compliance,
community development, permits and others.
b) Market Forces. All business operations deal with various market
forces like:
 Competition
 Natural forces
 Demographic factor
c) Societal Forces. The norms and beliefs of the people in the
community.
2. Internal Drivers
a) Individual Behavior- The monitoring of company behavior
b) Operation - The CSR Business Performance in terms of:
 Principles
 Policies Communicated
 Policies Implemented
 Best Practices
c) Strategies
 Performance Data
 Impact Data
CORPORATE SOCIAL RESPONSIBILITIES APPROACHES AND PROGRAMS

The rapid development of CSR among corporations through the Philippines, have manifested
various approaches and programs laying their list of initiative and its beneficiaries with annual
evaluation of how the initiatives, plans and programs benefited the communities.

Some of the approaches gathered are:

1. CSR as value of Creation/Innovation

a) Business Mission/Vision
b) Promote competitive edge among competitors
c) Integrate Business and community
d) Skills Development/Human Capital Development
2. CSR a Risk Management
a) Promote Policy and Legal Compliance and Reporting
b) Promote Acceptable Strategic Operations Impact.
3. CSR as Corporate Philanthropy
a) Support and access to basic needs like education
EXAMPLE OF TYPICAL PROGRAM OF CSR IN THE PHILIPPINES

Fujifilm Group (PHILS) established its approached to CSR in 2006 revised it

in 2014 in step with social changes to promote awareness in and
implementation by every employee. The group developed the Six Policy
Statement.

1. Green Policy/Environmental Policy. Environmental policy is the

commitment of an organization or government to the laws, regulations, and
other policy mechanisms concerning environmental issues.

The Fujifilm Group companies around the world aim to stay at the forefront of
efforts to attain these goals in terms of environmental, economics, and social
terms. They strive for customer satisfaction as well as contributions “to
sustainable development” by achieving high environmental quality in products,
services and corporate activities.
2. Social Contribution Policy. Social policy is a plan or action of government or
institutional agencies which aim to improve or reform society.

Fujifilm Group will work together with local communities as a good corporate
citizen and contribute to society by responding sincerely to needs and expectations
of those communities.

3. Guidelines for Biodiversity. Biodiversity is a term used to describe the

enormous variety of life on Earth. It can be used more specifically to refer to all of
the species in one region or ecosystem. Biodiversity refers to every living thing,
including plants, bacteria, animals, and humans.

The Group conduct a range of environmental activities to conserve biodiversity.

4. Procurement Policy. A procurement policy lists the people in a company who
have authority to purchase supplies for the business.

The group seeks to contribute to the development of society and enhancement to the
quality of life of people throughout the world by providing top-quality products and
services.

5. Quality Policy. To provide the market with products that had both high quality and
environmental performance.

6. Occupational Health and Safety Policy. Ensure employee protection by placing

top priority on safety and implementing exhaustive compliance with laws and
regulations related to occupational health and safety.
PRINCIPLES OF CORPORATE SOCIAL RESPONSIBILITY

1. Sustainability. The most important aspect in dealing with CSR and its program is
SUSTAINABILITY. Sustainability is a development action that requires the stakeholders to
check internally their operational activities if it affects the communities in terms of social,
environment or economics development.
2. Accountability. To achieve the sustainability in CSR program, Accountability is
prerequisite, by being responsible for all undertaking and programs of the CSR.
3. Transparency. Transparency is the act of opening communication with stakeholders
characterized by a reliable level of information disclosure, clarity, and accuracy.
TYPES OF CORPORATE SOCIAL RESPONSIBILITY

1. Basics. CSR is the commitment a company has to the community outside of its
shareholders and employees.
2. Traditional Conflict Model. Social values and benefits are seen in conflict with
shareholder’s profit. Under this model, corporation opting to practice forms of social
responsibility are likely to see added cost for doing so.
3. Added Value Model. It sees social and environmental commitments as a means to
increase profit. This model tends to focus on issues like the value of CSR in attracting
socially conscious employees and managing the risk of negative press.
4. Multiple Goals Model. Under this model, corporations have goals beyond shareholder’s
value, including the enhancement of their community without respect to monetary gain.
ADVANTAGES AND DISADVANTAGES OF CSR

ADVANTAGES:
1. Improved Financial Performance
2. Enhanced Brand Image and Reputation
3. Increased Sales and Customer Loyalty (Customer satisfaction can generate customer loyalty)
4. Increased Ability to Attract and Retain Employees
5. Reduced Regulatory Oversight
6. Easier Access to Capital

DISADVANTAGES:
1. Less Profit
2. Competitive Disadvantage
3. Loss of Focus
4. Lasting Impact
5. Costs