CBMEC 2: STRATEGIC MANAGEMENT

Professor: Josie D. Fuentes, DM

LESSON 1:
INTRODUCTION TO STRATEGIC MANAGEMENT

I. Intended Learning Outcomes

At the end of the lesson, you are expected to:

1. Define strategic management.
2. Describe the strategic management process.
3. Understand the role of managers in different levels of the organization.

II. Lesson Proper:

Defining Strategic Management

Strategic management is associated with the formulation, implementation and evaluation
of cross-functional decisions that enables the realization of an organization’s goals and objectives.
In the application of strategic management the organization focuses on integrating management,
marketing, finance/accounting, production/operations, research and development and MIS to
ensure the success of the organization. Strategic management is akin to strategic
planning. However, strategic planning is more identified with the industry whereas strategic
management is often used in academia. Further, the use of strategic management involves
strategy formulation, implementation and evaluation, with strategic planning referring only to
strategic formulation. Strategic management is undertaken to pursue and create new and
different opportunities.

The Stages of Strategic Management

Strategy Formulation. This stage includes developing a vision and mission, identifying
the external opportunities and threats, determining internal strengths and weaknesses,
establishing objectives, generating alternative strategies and choosing particular strategies to
pursue. The strategy formulation stage would include deciding which new businesses to enter,
what businesses to terminate or cease operation, how to distribute resources, whether to expand
the existing business or diversify, whether to go international in its market coverage, to ally to
merge or form joint venture, and to avoid hostile takeover.
Strategy Implementation. The strategy implementation stage is when the firm
establishes annual or operational objectives, devise policies, motivate employees, and allocate
resources so that formulated strategies can be performed. Strategy implementation includes
developing a culture that supports strategic plans, rationalizing the organizational structure,
reviewing and redirecting the marketing efforts, preparing budgets, developing and utilizing
information systems and linking employee compensation to organizational performance. Strategy
implementation stage is called the “action stage” of strategic management. Implementing
strategy calls for mobilizing the employees and managers to implement these strategies. This
stage of the strategic management process is often considered the most difficult stage since it
requires personal discipline, commitment and sacrifice. The successful implementation of
strategies anchors on the ability of the manager to motivate employees. Strategies that were
formulated but not implemented do not serve the purpose of the organization. For better
implementation, there should be unity of purpose, everybody understands the direction, and all
are able to assume the contribution required from them in implementing the organizational
strategy.
.

Strategy Evaluation is the final stage in strategic management. In this stage the strategies that
failed to address an issue at a particular time within the organizations is identified. With the
constant changes in the environment, the evaluation of strategies provide the basis for
modification. There are three fundamental strategy evaluation activities that can be done: 1)
reviewing external and internal factors that are the bases for current strategies. 2) measuring
performance and 3) taking corrective actions. Strategy evaluation is needed because successful
business operations today may not guarantee tomorrow’s success. Complacency leads to
organizational demise, hence, organizations need to be constantly vigilant.

Adapting to Environmental Changes

Strategic management involves being keen on changes in both the external and internal
environment of the organization. As such adjustments could be made in the company’s strategies
if and when needed. The rate and weight of changes in the business environment that affect
organizations have been dramatically increasing evidenced by the intensity of global economic
recession that caught many firms by surprise. Firms, like organisms, must be proficient at
adapting if they want to survive. Corporate bankruptcies have more than doubled in 2009 from
the economic crisis that hinges from 2008. All industries suffered heavily including those in retail,
chemical, autos and financial institutions.
To survive, all organizations must astutely identify and adapt to change. The strategic
management process is aimed at allowing organizations to adapt effectively to change over the
long run. In the external environment, E-commerce and globalization tranforms the way business
are conducted the same way that society is also affected. With the emergence of globalization
the world has become flat and the boundaries between countries have largely disappeared. This
development made the conduct of business even more challenging. The flow of goods and
services became easier with the aid of more sophisticated facilities. The fast flow of information
because of technology made available to people worldwide the way other people live and
work. The world has become borderless with global citizens who enjoy what other countries offer;
with global competitors, global customers, global suppliers and global distributors.
The supremacy of more industrialized countries are challenged by rival companies in
many industries. In effect, the US who for sometime established itself as a market leader in
several industries, found itself being challenged especially in the automobile industry. Hence, the
need to adapt to change leads organizations to strategic-management of options of determining
“what kind of business they should become”; if they are in the right field(s); whether they should
reshape their business or expand operation; who are their competitors and whether there are new
ones entering the industry; what strategies to pursue; who are the customers and how their
preferences are changing and; whether there are new developments in technology that could put
them out of business.

The Strategic Management Model

 The model depicts how strategic management process flows. This model is widely
accepted, comprehensive model of the strategic management process (David, 1988). The author
claims that the model does not guarantee success but it represents a clear and practical way
formulating, implementing, and evaluating strategies. As shown in Figure 1-1 (adapted from
original illustration) relationships among the major components of the strategic-management
process is illustrated. This will also be followed in the discussion of subsequent topics in this
handout.
In developing a strategic plan, the following important questions are considered: Where
are we now? Where are we headed? How do we get there? The starting point in articulating a
strategic plan is the revisit or identification of the organization’s vision, mission, goals and
objectives, and strategies. The present situation of the organization may be used as the starting
point for strategic management since the firm’s present status may preclude certain strategies
and may determine the needed intervention. The answer to where the organization is going can
be determined mostly by the records of its past.
The strategic management process is done regularly. Change may bring about a review
and can necessitate revision of outlined strategies or components of the system. For instance,
the COVID 19 pandemic has made many companies to review their operations, mostly
streamlining their operations or rationalizing their structure. Annual actions were also revisited
and edited if not totally changed. The strategic management process is not as stiff and as neatly
performed as the strategic management process is presented. Constant review is undertaken
involving the hierarchical level of the organization starting from the base to the top management
level. Some organization conduct review of their vision/mission, external factors, internal factors,
strategies, objectives, policies and performance twice a year. These meetings are conducted
away from the offices and are called retreats. Periodic strategic management meetings are
needed and are done offsite to encourage more creativity and spontaneity.
In larger organizations, application of the strategic management process is typically more
formal. The application of formality in strategic planning is associated with the cost,
comprehensiveness, accuracy and success of planning across all types and sizes of
organizations.

III. Rev Up!

Define the following:
1. Competitive Advantage
2. Strategists
3. Vision and Mission Statements
4. External Opportunities and Threats
5. Internal Strengths and Weaknesses
6. Long-term Objectives
7. Strategies
8. Annual Objectives
9. Policies

IV. Call Up!

Based on your readings, briefly but concisely answer the following questions:
1. Distinguish between strategic planning and lon-range planning.
2. Compare a company’s strategic plan with a basketball team’s game plan.
3. Discuss the three activities that comprise strategy evaluation.
4. Distinguish between a vision and a mission.
5. List down three examples each of opportunities and threats that characterize your school
(HCDC).
6. List down three examples each of the internal strengths and internal weaknesses of your
school (HCDC).
7. List reasons why objectives are essential for organizational success.
8. List four strategies and a hypothetical example of each.
9. Why are policies particularly important in strategy implementation?
 10. Why us strategy implementation often considered the most difficult stage in the strategic
management process?
11. Why do you think some chief executive officers fail to use strategic-management
approach in their decision making?
12. Discuss the importance of feedback in the strategic-management model.

References:
David, Fred R. (2011). Strategic Management: Concepts and Cases, 13 edition. Prentice
th

Hall Pearson, New Jersey