STRATEGIC MARKETING the authority to commit the resources

CHAPTER 1: Nature of Strategic Management necessary for implementations.

Strategic Management can be defined as the art Strategy implementation

and science of formulating, implementing and • Requires a firm to establish annual
evaluating cross functional decisions that enable an objectives, devise policies, motivates
organization to achieve its objectives. employees, and allocate resources so that
The term Strategic Management is used to refer to formulated strategies can be executed.
strategy formulation, implementation and • Strategy implementation includes
evaluation, with strategic planning referring only to developing a strategy-supportive culture,
strategy formulation. creating an effective organizational
structure, redirecting marketing efforts,
The strategic management process consist of preparing budgets, developing and utilizing
three stages: information systems, linking employee
ü Strategy formulation compensation to organizations
ü Strategy implementation performance.
ü Strategy evaluation. • Strategy implementation often is called the
“Action Stage” of strategic management.
Strategy formulation Implementing strategy means mobilizing
• Includes developing a vision and mission, employees and managers to put formulated
identifying an organizations external strategies into action.
opportunities and threats, determining • Often considered to be the most difficult
internal strengths and weaknesses, stage in strategic management, strategy
establishing long term objectives, implementation requires personal
generating alternative strategies, and discipline, commitment and sacrifice.
choosing strategies to pursue. Successful strategy implementation hinges
• Strategy-formulation issues include deciding upon managers ability to motivate
what new business to enter, what business employees, which is more an art than a
to abandon, how to allocate resources, science.
whether to expand operations or diversify, • Interpersonal skills are especially critical for
whether to enter international markets, successful strategy implementation.
whether to merge or form a joint venture, Strategy implementation activities affect all
and how to avoid hostile takeover. employees and managers in an
• Because no organization has unlimited organization.
resources, strategists must decide which • Every division and department must decide
alternative strategies will benefit the firm on answers to question such as “ What
most. must we do to implement our part of the
• Strategy formulation decisions commit an organization’s strategy?” and how can we
organization to specific products, markets, get the job done?” the challenge of
resources and technologies over an implementation is to stimulate managers
extended period. and employees throughout the organization
• Strategies determine long-term to work with pride and enthusiasm toward
competitive advantages. For better or achieving stated objectives.
worse, strategic decisions have major multi-
functional consequences and enduring Strategy evaluation
effects on an organization. • The final stage in strategic management.
• Top managers have the best perspective to Managers desperately need to know when
understand fully the ramifications of strategies are not working well; strategy
strategy-formulation decision; they have evaluation is the primary means for
 obtaining this information. All strategies are corporate and divisional performance, Spot
subject future modification because internal emerging market opportunities, identify business
and external factors are continuously threats and develop creative action plans.
changing. • Vision and Mission Statements
Many organizations today develop a Vision
Three Fundamental strategy-evaluation activities Statement that answers the question “what do we
are: want to become?” developing a vision statement is
often considered the first step in strategic planning,
• Reviewing the external and internal factors preceding even development of a mission
that are bases for current strategies. statement.
• Measuring performance • Mission statements are enduring of purpose
• Taking corrective actions that distinguished one business from other
similar firms.
Strategy evaluation is needed because success • A mission statement identifies the scope of
today is no guarantee of success tomorrow! a firm’s operations in product and market
Success creates new and different problem; terms”. It addresses the basic question that
complacent organizations experience demise. faces all strategists: “What is our business?”
a clear mission statement describes the
• Peter Drucker says the prime task of values and priorities of an organization.
strategic management is thinking through • Developing a mission statement compels
the overall mission of the business: strategists to think about the nature and
• “That is of asking the question, “What is our scope of present operations and to assess
business?” this leads to the setting of the potential attractiveness of future
objectives, the development of strategies, markets and activities.
and making today’s decision for tomorrows • A mission statement broadly charts the
results. future direction of an organization. A
• This clearly must be done by a part of the mission statement is a constant reminder to
organization that can see the entire its employees of why the organization exists
business; that can balance objectives and and what the founders envisioned when
the needs of today against the needs of they put their fame and fortune at risk to
tomorrow; and that can allocate resources breathe life into their dreams.
and money to key results.
External opportunities and threats
Key terms in Strategic Management • External opportunities and threats refer to
• Competitive Advantage Political, Economic, Socio-cultural,
Strategic management is all about gaining and Technological, Environmental, Legal, and
maintaining competitive advantage. This term can Competitive trends and events that could
be defined as “anything that a firm does especially significantly benefit or harm an organization
well compared to rival firms.” When a firm can do in the future. Opportunities and threats are
something that rival firms cannot do, or owns largely beyond the control of a single
something that rival firms desire, that can organization –thus the word external. A few
represent a major competitive advantage. opportunities and threats that face many
• Strategists firms are listed below:
Strategists are the individual who are most
responsible for the success or failure of an Examples of External Opportunities and Threats
organization. Strategist help an organization • Availability of capital can no longer be taken
gather, analyze and organize information, They for granted
track industry and competitive trends, Develop • Consumers expect green operations and
forecasting models and scenario analyses, evaluate products
 • Marketing moving rapidly to the internet comparing to past periods and industry
• Commodity food prices are increasing averages. Various types of surveys also can
• Political unrest in the middle east is raising be developed and administered to examine
oil prices internal factors such as employee morale,
• Computer hacker problems are increasing Production efficiency, advertising
• Intense price competition is plaguing most effectiveness, and customer loyalty.
firms
• Unemployment and underemployment What are Policies?
rates remain high • Policies are the means by which annual
• Interest rates are rising objectives will be achieved. Policies, include
• Product life cycles are becoming shorter guidelines, rules, and procedures
• States and local governments are financially established to support efforts to achieve
weak stated objectives. Policies are guideline to
• Winters are colder and summers hotter decision making and address repetitive or
than usual. recurring situations.
• Home prices remain exceptionally low. • Policies can be established at the corporate
• Global Markets offer the highest growth in level and apply to an entire organization at
revenue. the divisional level and apply to a single
division, or they can be established at the
Internal Strength and Weaknesses functional level and apply to particular
Internal Strength and Weaknesses are an operational activities or departments
organization’s controllable activities that are Policies, like annual objectives, are
performed especially well or poorly. They arise in especially important in strategy
the management, marketing, finance/accounting, implementation because they outline an
production/operations, R&D, MI activities of a organizations expectations of its employees
business. Identifying and evaluating organizational and managers. Policies allow consistency
strengths and weaknesses in the functional areas of and coordination within and between
a business is an essential strategic-management organizational departments.
activity. Organizations strive to pursue activities
that capitalize on internal strength and eliminate What are Annual Objectives?
internal weaknesses. • Annual objectives are short-term milestone
that organizations must achieve to reach
• Strengths and weaknesses are determined long-term objectives. Like long-term
relative to competitors. Relative deficiency objectives, annual objectives should be
or superiority is important information. Also measurable, quantitative, challenging,
strengths and weaknesses can be realistic, consistent, and prioritized. They
determined by elements of being rather should be established at the corporate,
than performance. Divisional and functional levels in a large
• For example, a strength may involve organization. Annual objectives should be
ownership of natural resources or a historic stated in terms of management, marketing,
reputation for quality. Strengths and finance/accounting, research and
weaknesses maybe determine relative to a development, and management
firm’s own objectives. For example, high information system accomplishments. A set
levels of inventory turnover may not be a of annual objectives is needed for each
strength to a firm that seeks never to stock- long-term objective. Annual objectives are
out. especially important in strategy
• Internal factors can be determined in a implementation, whereas long-term
number of ways, including computing objectives are particularly important in
ratios, measuring performance, and strategy formulation.
Chapter 2: The Business Vision and Mission What is our business?
§ Drucker says that asking the question
What do we want to become? “What is our business”, the mission
• A Vision statement should answer the statement is a declaration of an
question “What do we want to become?” a organization’s “reasons for being”. A clear
clear vision provides the foundation for mission statement is essential for effectively
developing a comprehensive mission establishing objectives and formulating
statement. strategies.
• Many organizations have both vision and § Sometimes called creed statement, a
mission statement, but the vision statement statement of purpose, a statement of
should be establish first and foremost. philosophy, a statement of beliefs, a
• The vision statement should be short, statement of principles, or a statement
preferably one sentence, and as many “defining our business,” a mission
managers as possible should have input into statement reveals what an organizations
developing the statement. want to be and whom it wants to serve.
§ All have reason for being, even If strategists
Vision Statement Examples with Analysis have not consciously transformed this
• Tyson Foods’ vision is to be the world’s first reason into writing.
choice for protein solutions while
maximizing shareholder value. (Author Mission Statement Example with Analysis
comment: Good statement, unless Tyson • At L’Oreal, we believe that lasting business
provides nonprotein products) success is built upon ethical (6) standards
• General Motors’ vision is to be the world which guide growth and on a genuine sense
leader in transportation products and of responsibility to our employees (9), our
related services. (Author comment: Good consumers, our environment and to the
statement) communities in which we operate (8).
• PepsiCo’s responsibility is to continually (Author comment: Statement lacks six
improve all aspects of the world in which components: Customers, Products/Services,
we operate—environment, social, economic Markets, Technology, Concern for
—creating a better tomorrow than today. Survival/Growth/Profits, Concern for Public
(Author comment: Statement is too vague; Image)
it should reveal beverage and food • Dell’s mission is to be the most successful
business) computer company (2) in the world (3) at
• Dell’s vision is to create a company culture delivering the best customer experience in
where environmental excellence is second markets we serve (1). In doing so, Dell will
nature. (Author comment: Statement is too meet customer expectations of highest
vague; it should reveal computer business in quality; leading technology (4); competitive
some manner; the word environmental is pricing; individual and company
generally used to refer to natural accountability (6); best-in-class service and
environment so is unclear in its use here) support (7); flexible customization
• The vision of First Reliance Bank is to be capability (7); superior corporate citizenship
recognized as the largest and most (8); financial stability (5). (Author comment:
profitable bank in South Carolina. (Author Statement lacks only one component:
comment: This is a very small new bank Concern for Employees)
headquartered in Florence, South Carolina,
so this goal is not achievable in five years; Vision versus Mission
the statement is too futuristic) § Many organization develop both a mission
statement and a vision statement. It can be
argued that profit, not vision or mission, is
 the primary corporate motivator. But profit Characteristic of a Mission statement
alone is not enough to motivate people. • A mission statement is more than a
Profit is perceived negatively by some statement of specific details. It usually is
employees in companies. Employees may broad in scope for at least two major
see profit as something that they earn and reasons.
management then uses and even gives § First, a good mission statement allows
away to shareholders. Although this for the generation and consideration of
perception is undesired and disturbing to a range of feasible alternative objectives
management, it clearly indicates that both and strategies without unduly stifling
profit and vision are needed to motivate management creativity.
workforce effectively. § Second, a mission statement needs to
§ When employees and managers together be broad to reconcile differences
shape or fashion the mission and vision effectively among, and appeal to, an
statements for a firm, the resultant organizations diverse stakeholders.
document can reflect the personal visions
that managers and employees have in their Conclusion
hearts and minds about their own futures. • Every organization has a unique purpose
Shared vision creates a commonality of and reason for being. This uniqueness
interest that can lift workers out of the should be reflected in vision and mission
monotony of daily work and put them into a statements. The nature of a business vision
new world of opportunity and challenge. and mission can represent either a
competitive advantage or disadvantage for
Components of a Mission Statement the firm.
Mission statements can and do vary in length, • Well-designed vision and mission
content, format, and specificity. Most practitioners statements are essential for formulating,
and academicians of strategic management feel implementing, and evaluating strategy.
that an effective statement should include nine Developing and communicating a clear
components. business vision and mission are the most
1. Customers- Who are firm’s customers? overlooked tasks in strategic management.
2. Products or Services- what are the firms
major products or services? Chapter 3:The External Assessment
3. Markets- Geographically where does the
firm compete? The Nature of an External Audit
4. Technology- is the firm technologically • The purpose of an external audit is to
current? develop a finite list of opportunities that
5. Concern for survival, growth and could benefit a firm and threats that should
profitability- Is the firm committed to be avoided. As the term finite suggests, the
growth and financial soundness? external audit is not aimed at developing an
6. Philosophy – what are the basic beliefs, exhaustive list of every possible factor that
values, aspirations and ethical priorities of could influence the business; rather, it is
the firm? aimed at identifying key variables that offer
7. Self-concept- What is the firm’s distinctive actionable responses.
competence or major competitive • Firms should be able to respond either
advantage? offensively or defensively to the factors by
8. Concern for public image- is the firm formulating strategies that take advantage
responsive to social community, and of external opportunities or that minimize
environmental concerns? the impact of potential threats.
9. Concern for employees- are employees a
valuable asset of the firm?
Key External Forces Economic Forces
External forces can be divided into five broad Increasing numbers of two-income households is
categories: an economic trend in the United States. Individuals
• economic forces; place a premium on time. Improved customer
• social, cultural, demographic, and natural service, immediate availability, trouble-free
environment forces; operation of products, and dependable
• political, governmental, and legal forces; maintenance and repair services are becoming
• technological forces; and more important.
• competitive forces.
Social, Cultural, Demographic, and Natural
Environment Forces
• Small, large, for-profit, and nonprofit
organizations in all industries are being
staggered and challenged by the opportunities
and threats arising from changes in social,
cultural, demographic, and environmental
variables.
The Process of Performing and External Audit • New trends are creating a different type of
• The process of performing an external audit consumer and, consequently, a need for
must involve as many managers and different products, different services, and
employees as possible. different strategies.
• To perform an external audit, a company Political, Governmental, and Legal Forces
first must gather competitive intelligence • Political, governmental, and legal factors,
and information about economic, social, therefore, can represent key opportunities or
cultural, demographic, environmental, threats for both small and large organizations.
political, governmental, legal, and • For industries and firms that depend heavily
technological trends. on government contracts or subsidies,
• Individuals can be asked to monitor various political forecasts can be the most important
sources of information, such as key part of an external audit. Changes in patent
magazines, trade journals, and newspapers. laws, antitrust legislation, tax rates, and
These persons can submit periodic scanning lobbying activities can affect firms
reports to a committee of managers significantly.
charged with performing the external audit. • The increasing global interdependence among
economies, markets, governments, and
The Industrial Organization (I/O) View organizations makes it imperative that firms
• The Industrial Organization (I/O) approach consider the possible impact of political
to competitive advantage advocates that variables on the formulation and
external (industry) factors are more implementation of competitive strategies.
important than internal factors in a firm Technological Forces
achieving competitive advantage. • Revolutionary technological changes and
• Competitive advantage is determined discoveries are having a dramatic impact on
largely by competitive positioning within an organizations.
industry, according to I/O advocates. • The Internet has changed the very nature of
Managing strategically from the I/O opportunities and threats by altering the life
perspective entails firms striving to cycles of products, increasing the speed of
compete in attractive industries, avoiding distribution, creating new products and
weak or faltering industries, and gaining a services, erasing limitations of traditional
full understanding of key external factor geographic markets, and changing the
relationships within that attractive industry.
 historical trade-off between production
standardization and flexibility.
• Technological advancements can dramatically
affect organizations’ products, services,
markets, suppliers, distributors, competitors,
customers, manufacturing processes,
marketing practices, and competitive position.
Competitive Forces
• Collecting and evaluating information on
competitors is essential for successful
strategy formulation. Identifying major Industry Analysis: The External Factor Evaluation
competitors is not always easy because (EFE) Matrix
many firms have divisions that compete in An External Factor Evaluation (EFE) Matrix allows
different industries. strategists to summarize and evaluate economic,
• Competitive intelligence (CI), as formally social, cultural, demographic, environmental,
defined by the Society of Competitive political, governmental, legal, technological, and
Intelligence Professionals (SCIP), is a competitive information.
systematic and ethical process for gathering
and analyzing information about the Five steps in developing an EFE Matrix:
competition’s activities and general 1. List key external factors as identified in the
business trends to further a business’s own external-audit process. Include a total of 15 to
goals 20 factors, including both opportunities and
threats, that affect the firm and its industry.
Competitive Analysis: Porters Five Forces 2. Assign to each factor a weight that ranges from
• The intensity of competition among firms 0.0 (not important) to 1.0 (very important). The
varies widely across industries. The weight indicates the relative importance of that
collective impact of competitive forces is so factor to being successful in the firm’s industry.
brutal in some industries that the market is 3. Assign a rating between 1 and 4 to each key
clearly “unattractive” from a profit-making external factor to indicate how effectively the
standpoint. Rivalry among existing firms is firm’s current strategies respond to the factor,
severe, new can enter the industry with where 4 = the response is superior, 3 = the
relative ease, and both suppliers and response is above average, 2 = the response is
customers can exercise considerable average, and 1 = the response is poor.
bargaining leverage. 4. Multiply each factor’s weight by its rating to
• According to Porter, the nature of determine a weighted score.
competitiveness in each industry can be 5. Sum the weighted scores for each variable to
view as a composite of five forces: determine the total weighted score for the
1. Rivalry among competing firms organization.
2. Potential entry of new competitors Example of EFE Matrix for a Local Ten-Theatre
3. Potential development of substitute Cinema Complex
products
4. Bargaining power of suppliers
5. Bargaining power of consumers
The Competitive Profile Matrix (CPM) • The Marketing Department
The Competitive Profile Matrix (CPM) identifies a • The Research & Development
firm’s major competitors and its strengths and Department
weaknesses in relation to a sample firm’s strategic • The Operations Department
position. The weights and total weighted scores in
both a CPM and an EFE have the same meaning. The Human Resource Department
However, critical success factors in a CPM include One of the functional department of an
both internal and external issues; therefore, the organization that deals with the human assets of
ratings refer to strengths and weaknesses, where 4 the company. Considering that the manpower of
= major strength, 3 = minor strength, 2 = minor the company is the one that keeps the company
weakness, and 1 = major weakness. afloat is a contributing factor in the flow of work in
each functional department of the company. Hence
a department dedicated to the management,
organizing, and monitoring of this specific asset of
the company is needed. Some of the functions of
the HRD is as follow:
• Recruiting & selection
• Training & development
• Compensation & benefit

Chapter 4: Internal Assessment The Accounting Department

• The department responsible in recording,
The Internal Audit summarizing, and analyzing the business
 For a company to stay competitive in the transaction conducted by the company. Data is
market, certain factors affects them on the one of the valuable asset that a company will
external which the company needs to adapt need in the decision-making process especially
towards to. Knowing this external factors will in terms of understanding what has transpired
contribute to the company's strategies and in the near history of a company. The
tactics in adapting to the said factors. accounting department ensures that data
 In the internal assessment/audit, there is a pertaining to any movement in assets of the
need to determine what are the capabilities business is clearly recorded and summarized in
and capacity of the firm in terms of their a way that every stakeholder of a company will
internal operations and processes. Knowing be able to comprehend.
how the firms operates from within • The final output of the accounting department
determines how the company can create a in the company is the production of financial
boost on their functionality and differentiate statements and relevant information that
themselves from their competitors. pertains to the business transaction that has
transpired.
Key internal forces The Finance Department
• In the internal analysis there is a need to • Keeping apart from the function of the
determine the strengths and weaknesses of accounting department. The functionality of
a company, these factors are represented this specific department goes about in the
by the different functionalities of an allocation and maximization of the limited
organization which are known as the resources of the company which is the financial
different departments. Some of these resources.
department are considered below: • One of the rationale of the finance department
• The Human Resource Department is that they have the specific responsibility of
• The Accounting Department budgeting and allocation of the financial
• The Finance Department resources for maximum use by each
 department of the company. Furthermore, different industry such as the service industry,
locating where additional financial resources looking at an accounting consultancy we see a
can be obtained such as investment (stocks), paradigm shift of the OD wherein they now
IPO, business loans, etc. is an imperative coexist with the accounting department in the
function of the finance department. creation of value and profit for the company.
The Marketing Department
 The department responsible for the Cross Functional Decision-Making
information dissemination of the company's • Considering the different departments or key
offering and ensuring that through this internal forces within the company there is a
information value is created in the form of need to understand that each decision,
sales. Although the marketing department has movement, and changes made in each
been stereotyped for always conducting department affects the condition of the other
promotions and advertisements, they also have department. This because each department
the function of market research that have interdependence with one another, the
contributes to the decision-making process of bottom line to understand is which among the
whether current and new offering has a department are the main or value creating
competitive niche in the market using tool such process and who are the support process.
as the Marketing Knowledge Information Training &
Development

System (MKIS). HRD Recruitment &

Selection
Compensation &
The Research and Development Department Benefit
Recording business
transaction
• Each company has the need to innovate both AD
Analyzing recordings of
business transactions

through their business processes and Summarizing and

translating business
transaction
product/service offerings. This specific Allocating financial

department has the sole function of making FD

resources
Maximizing financial
resources
sure that the company does not experience any Locating financial
resources

organizational lag. Market research

• Innovation is the key word used in the R&D MD Promotion and

advertisement
Database management
department as their responsibility is to keep up
with trends and upgrades within the market Exploration of new

R&D product and processes

and their competitors. Aside from keeping up Exploitation of current

products and processes

with the times, they also have the main Supply chain
management
responsibility that the product/services keeps OD
Inventory management
Value chain

its value to the customers by either explorative management

Varies according to
nature
or exploitative means.
The Operations Department The IFE Matrix (Internal Factor Evaluation)
• The department of the company that creates • In an analysis, data and information are the
value and profit for the company wherein it most important tool in the decision making
houses the existence of the companies process, without data and information we
product/service creation. would entirely rely on hearsay and gut feeling
• In each industry the operations department which is not a contributing factor in the
differs from the nature of the company, internal assessment process.
meaning that for each company their • Using the IFE matrix, there is a need to gather
operations department will have different data and filter the most relevant to the
functionalities. current analysis that is being conducted. After
• In a manufacturing company, the OD is widely the filtration process we are able to identify
visible as they are the ones who are in charge in information coming from within the company
the processing of raw materials to the creation that will be considered as strengths and
of the final output which is often situated in the weaknesses of the aforementioned.
manufacturing plant of the business. While in a
Example of the IFE Matrix for a Company
Same as with the EFE matrix, each factor is given a
weight from 0.00 (low importance )to 1.00 (high
importance), the number signifies how important
the factor is if a company wants to succeed. The
sum of all weights should equal 1.00. In the rating
section, the numbers range from 4 to 1, where 4
means a major strength, 3 – minor strength, 2 –
minor weakness and 1 – major weakness. Strengths
can only receive ratings 3 & 4, weaknesses – 2 & 1. 

Key Internal Factor Weight Rating

Strengths
1. Strong organizational culture and 0.05 3
loyal employees (HR)
2. Cross functional MIS across the 0.05 4
organization (R&D)
3. Strong social media presences (MD) 0.10 3
4. Increase in inventory turnover from 0.10 4
1.00 to 3.00 (AD, FD)
5. Decrease in defective raw materials 0.20 4
from supplier due to QC increase
Weaknesses
1. Lacking a thorough written policy on 0.05 1
workplace decorum (HR)
2. Lack of diversified product offering 0.15 1
(R&D, OD)
3. Lack of customer profile 0.05 2
demographics (MD)
4. Increase in accounts receivable 0.10 2
turnover of 54.5 to 107.89 (AD, FD)
5. Product output decrease due to 0.15 2
aging equipment
1.00