UNIVERSITY OF NORTHEASTERN PHILIPPINES

COLLEGE OF BUSINESS EDUCATION

Iriga City

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 PART I STRATEGIC MANAGEMENT AND DECISION MAKING

CHAPTER I – A STRATEGIC MANAGEMENT MODEL

THE REALITY OF DYNAMISM

Reality of dynamism in fact today, milieu is in the state
of fluidity. It is not static rather changes and fluctuations are
constantly happening in the surrounding. The certainty of
change is universal and this foregone conclusion is largely
experienced by all nations and people. As a result, the current
landscape of competition is highly threatening and daunting.
With an environment that is characterized by drive, energy, and
pursuit and transformation, volatility is a ruthless reality

HYPERCOMPETITION
Hypercompetition is a fundamental feature of the new economy. It carries a note of over
excitement and agitation.
o Occurs when product/service offerings and technologies are so new that standards
become unstable and competitive advantage is not sustainable.
o Is a situation where both globalization and technology collaborate to create a
heightened cut throat situation
o It means that businesses compete with each other whether they have same
products. Competitors continuously strive to outplay and outsmart each other ideas.

STRATEGIC MANAGEMENT DEFINED

Strategic Management is a continuous process of strategy creation. It involves strategic

process like strategic analysis and decision making, strategy formulation and
implementation, and strategy control with primary objectives of achieving and maintaining
better alignment of corporate policies, priorities and success.

Strategic Analysis consists of a systematic evaluation of variables currently existing in the

external and internal environments.

Strategic Decision-making is deliberately bringing together the right resources for the right
markets at the right time.

Strategy Formulation is designing strategies on the business and corporate levels.

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Strategy Implementation is employing these crafted strategies to achieve organizational
set goals and objectives.

Strategic Control is the application of an appropriate monitoring and feedback system.

Strategic Intelligence is the capability of an organization to possess relevant and related

knowledge, abilities, foresight, and system thinking, such that it is able to assess its own
strengths and vulnerabilities, the pressing challenges confronting the organization, as well as
the trends and opportunities existing in the environment.

Strategic Thinking is the cognitive process of competently and analytically weighing factors
and arriving at critical decisions in the context of the current milieu of which an organization
is part.

Organizational Competitiveness pertains to the ability of any business/company to utilize

its resources optimally and sustainably for maximum performance and productivity.

Comparative Advantage refers to the ability of an organization to produce a particular good

or service at lower marginal and opportunity costs than its competitor.

Strategic Performance is the accomplishment of a high level of productivity that is

characterized by efficiency in the context of lean and quantifiable management.

STRATEGIC PLANNING
Strategic Planning. Defined as a continuous, repetitive, and competitive process of setting
the goals and objectives that an organization aims to attain, defining the means to achieve
them, and assessing the best way to realize them in the context of the prevailing environment
while measuring performance through set standards, and periodically but continuously
conducting reassessments.

Strategic planning exhibits the following properties:

1. It generates the blueprint of what the organization intends to accomplish.
2. The strategic plan presents the grand scheme of the organization and outlines all the
set activities, ranging from the organizational to the departmental level.
3. It is the process of developing a strategic fit between the organization’s goals and
capabilities in the context of changing opportunities.
4. It is a process that involves carefully delineated steps.
5. It is proactive, in that is written in the context of anticipated future realities.

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 6. It is a philosophy because it evolves a dynamic way of conducting and managing an
organization.
7. It links the organizational plan with functional and operational plans.
8. It is intricately interwoven within the defined managerial functions of organizing,
directing, staffing, and controlling.
9. It necessitates the leadership and support of top management and, at the same time,
employee participation and commitment.

TYPES OF STRATEGIC PLANS

1. Medium/Long Range Plan
Prepared in the context of the coming three to five, ten more years. It describes the major
factors or forces that affect the organization long term objectives,strategies and resources
required.
2. Annual/Yearly Plan
Short term; succinctly describes the organization’s present situation, its goals and objectives,
strategies, monitoring mechanism and the budget for the year ahead.
The steps involved in strategic management planning are iterative, cyclic and integrative.
They include:
o Making a situation audit to ascertain organization.
o Stating the respective goals and objectives of the organization the values and
value systems it espouses.
o Delineating appropriate strategies to be carried.
o Identifying and then choosing the soundest strategy determine the best way
for the organization to be where it wants.
o Monitoring the implementation of strategies to measure performance.
o Conducting periodic and continuous reassessment.

NEED FOR STRATEGIC PLANNING

Strategic plans have to be prepared purposefully for effective and efficient implementation,
leading to the attainment of their set objectives.

STRENGTHS AND LIMITATION OF STRATEGIC PLANNING

Strategic planning defines organizations missions, vision and set of objectives. It provides
organizations the opportunity to assess the milieu and specify strategies to achieve their
goals. Strategic planning helps reduce the chances of committing mistakes, thus, increasing

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the organization’s efficiency. The strategic plan also has its limitations and said to be
prepared and good only in “papers.” Organizations fail to follow faithfully their prepared
strategic plans.

ORGANIZATIONAL VISION

To help them achieve the goals, they need to articulate and have a commonality vision,
mission and goals. The interrelationship between and among these three variables are
essential in the organization thrust of achieving competitiveness.

Organizational Vision – is an inspirational statement of what the organization hopes to

achieve at some point in the future.

Having a strong sense of vision can move the organization to be what it wants to be. Like an
unseen force, the organizational vision binds the company and its employee together.

MISSION STATEMENT

Mission Statement - Defines the current purpose of an organization; it answers what the
organization does, for whom it is done and how it does what it does.

Mission statement are short and easy to remember; it gives better perspective on how their
tasks contribute to the attainment of the organizational goals.

ORGANIZATIONAL GOALS AND OBJECTIVES

Organizational Goals are pursued to make the specified strategies succeed. They vary and
are essentially dependent on their respective purpose and direction.

Goals represent the overall vision of an organization. By their very nature, goals have the
following properties:
1. Goals provide organizations focus and direction.
2. Goals move organization to action.
3. Goals develop in organizations the trait of persistence.
Objectives often support the goals and are micro and specific in perspective. Objectives
should have the following characteristics:
1. Objectives need to be clearly defined and formulates, carefully chosen, specific, and
definite.
2. Objectives may be immediate or short-term
3. They need to be prioritized into a hierarchy of objectives.

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 4. Objectives need to be realistic and attainable.
5. Objectives need to be measurable over time.

According to Peter
Drucker Market Standing Physical Resources (2008),
objectives Innovation Productivity fall into eight
(8) major Human Resource Social Responsibility
Financial Resources Profit Requirements.

classifications such as the following:

VALUE AND VALUES SYSTEM

Values are inherent roots of motivation within an individual,an organization, community or

nation.They are by nature, ingrained and thus, are more stable and enduring.

They are both intellectual and behavioral serving bases for the organization action and way
of thinking.

Values are generally exhibited in two different ways namely, beliefs(cognitive manifestations)
and attitude (characteristically behavioral).

The value system is characteristically broader in scope, aside from values, it includes other
variables such as organizations dream, aspirations, interest, expectation, philosophies, as
well as leadership and management styles and ethical practices.

ORGANIZATIONAL CLIMATE AND CULTURE

Organizational Climate. Often defined as the regular and repetitive patterns and behaviour
exhibited by employees of an organization. Organizational climate is easier to assess and
change since it lends to flexibility.

Organizational Culture. Denotes a wide range of social phenomena, including an

organization’s customary dress, language, behavior, beliefs, values, symbols of status and
authority, myths, ceremonies and rituals, and modes of deference and subversion; all of
which help to define an organization’s character and norms.

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 CHAPTER II: CHALLENGES IN THE EXTERNAL ENVIRONMENT

SCANNING THE ENVIRONMENT

Operational intelligence refers to the expertise, insight,

and wisdom possessed by an entity. It serves as a valuable
guide to its journey to becoming competitive.

Environmental Scanning is the study and interpretation of

the forces existing in the external (social, economic,
political, technological and environmental forces that may
influence an organization, an industry or any entity) and
internal (competitors, suppliers, customers, stakeholder,
culture and the government) environments.

Environmental Scanning is carefully monitoring the surroundings with the end goal of
ascertaining early indicators of prospect and challenges that may influence the
organizations present future plans.

Environmental scanning can be demanding and is mostly dependent to the following:

• The speed of the organization to conduct scanning

• The presence and availability of complete information
• The physical and financial capability to do so

SOURCES OF STRATEGIC INFORMATION

Strategic information consists of the facts and data used by organizations to assist them in
achieving their vision, mission and goals. Information is either primary (data gathered
through personal experience, observation and experimentation) or secondary (data

collected from reports, internet sources and other published materials).

MODES OF ENVIRONMENTAL SCANNING

Scanning the environment involves two processes. The first one is looking at or simply
viewing information and second one is looking for or searching for information.

According to Aguilar (1967), there are four ways of environmental scanning stated as follows:

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 1. Undirected Viewing. The individual is exposed to information with no specific
information needs in mind. The sources of information ire wide-ranging and large
chunks of information are quickly dropped from the individual’s attention.
2. Conditioned Viewing. The individual directs viewing of information to specific facts
and data to be able to assess their general impact on the organization.
3. Informal Search. The individual actively looks for information to increase knowledge
of a particular issue.
4. Formal Search. The effort exerted by the individual is deliberate and planned. The
search is both focused and structured and the research methodology is clearly
enumerated and followed.

THE SWOT MATRIX ANALYSIS

The SWOT matrix is structured assessment tool used to evaluate an organization, industry a
place or even a person in terms of set parameters like strengths, weaknesses, opportunities
and threats.
● Strengths are feature that organizations possess, thus giving it significant advantage
over others.
● Weaknesses are characteristics that place organizations at a disadvantage relative
to others and may just be limitations or vulnerabilities of organizations.
● Opportunities are possibilities in the external environment that can be cause
problems to organizations.
● Threats are challenges in the external environment that can cause problems to
organizations.

THE EXTERNAL ENVIRONMENT

The external environment is a fundamental paradigm conspicuously characterizes the global

scenario. Nations possess different levels of growth and development. The external
environment presents varying forces (social, political, technological, economic,
environmental and legal perspectives) that influence organizational direction and strategic
decision making.

SOCIAL FORCES

Social Forces refer to important issues that are characteristic of global and local societies.
Society consists of individuals, families, and communities, including their beliefs, aspirations
and traditions and practices.

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Here are some of the critical social concerns that we have today:
● Changing Social Structure. Social structure refers to the network of social
institutions that includes the family and the community.
● Aging Population/Demand for Health Services. There are more maturing and
aging individuals today.
● Sophisticated Lifestyle of People. Once content with simple things, they expect
more from life and living.
● Cross-cultural Diversity. Workplaces are shifting and people in the global
community are either working or migrating to every part of the world.

POLITICAL FORCES

There are crucial concerns confronting nations today. Geopolitical issues have become the
focus of major political powers. Some of these issues are political independence, changing
government, balance of power, terrorism, suicide, bombings, global alliances, and chemical
and nuclear warfare.

Here are some critical problems that are affecting the global political balance:
● Political Independence/Changing Governments. Political sustainability has
become the focus and concentration of developed and power-driven countries.
● Terrorism/Suicide Bombings. The bloody and painful transition toward equality of
basic human rights and the right to a better life have brought about critical security
problems.
● Chemical and Nuclear Threats. Some countries go on developing and producing
weapons with the intention of blackmailing and/or intimidating other countries.
● Global Alliances.Nations are aligning themselves for self-preservation and for global
stability and strength.

ECONOMIC FORCES

Economic realities have concomitantly come to forefront. Economic issues greatly the growth
and development of a nation. Nations are strategizing to maintain a continuum of financial
stability. Most often, trade and investment are transacted to ensure monetary security.

Here are some of the Economic realities nowadays that we are aware of:
● Globalization. This is one major determinant of competition. Globalization can be
viewed from four perspective: product, people, ideas and money.
● Competitors and Suppliers. Aggressive competitors and creative suppliers compete
to get large of the market, both energizing the industry and business environments.

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 Pricing, quality, differentiation and innovation are the usual criteria for business success
with consumers more likely patronizing less expensive but quality products.
● Fall of Financially Stable Organizations. The last few years saw the downfall of a
number of financially successful organizations that were managed by respectable and
competent presidents and chief executive officers.
● Increasing Oil Price. A versatile commodity, oil is a multi-purpose raw ingredient
found in many products. Changes in oil prices are detrimental to the survival and
success of many organizations.
● Economic Trade Agreements. Economic trade agreements among nations have
become a vital bargaining power in a country’s economy.
● Emerging Markets. Closely interrelated to the political, social, and economic growth
and development of a country is the emergence of different markets.
● Rise of China. China is a market for other countries’ products and services.

TECHNOLOGICAL FORCES

Another important catalyst of competition is technology. In the 1980's, information technology

began its journey toward radical communication and technology growth. Significant changes
happening in the world today have been the result of rapid developments in information
technology.

These technological advances are:

● COMMUNICATION TECHNOLOGY. Communication technology saw the proliferation
of mobile phones, popularity of text messaging, convenience of sending fax
messages, usefulness of CCTV cameras for surveillance and simple monitoring, and
benefits of video conferencing, among others.
● COMPUTER INTEGRATED BUSINESS. Processes are computer-aided, computer-
integrated, and computer-manufactures, thereby producing quality, more efficient,
and cost-effective goods and services.
● E – BANKING. Confidentiality of transactions can be largely maintained while
anomalies can easily be tracked as long as procedures for check and balance are in
place.
● E – LEARNING. It is learning from home, the office, while on vacation, or from any
place outside the four walls of a classroom. E-learning has become a convenient way
of pursuing formal education.
● DIGITAL MEDICINE. Computer-guided robots perform surgical procedures. Using
androids, surgical operations are more precise, cheaper and less time-consuming.

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 ● E – SECURITY. The use of information technology is inevitable in manufacturing
missiles and other forms of ammunitions, coding military secrets, safeguarding
fortified installations, monitoring enemies, securing soldiers and planning
counterattacks.

ENVIRONMENTAL FORCES

Environmental responsibility is the urgent call of the global neighbourhood. Environmentally,

no country can claim complete isolation. The safety and survival of one should be the concern
of others.

Here are some of the environmental forces that we experience nowadays:

● Climate Change/Use of Biodegradable Materials. The effects of environmental
degradation, malpractices, neglect and indifference are critical and serious. Global
warming has caused countries to experience extreme weather changes, from heat
strokes on one end to extreme rainstorms on the other end like extreme global climate
changes.
● Environmental Waste Management. In many underdeveloped countries; noise, air
and water pollution levels are high.
● Preservation of Rainforests ang Marine Life. Continuous depletion and denudation
of forests explain why torrential rains are more destructive and intense nowadays.
They result in damage to properties and danger to human lives.

Note: While some of the external environment forces do not directly affect us, they are
significantly vital to an organization. The global landscape cannot allow an organization to
run away from these realities. These social, cross-cultural, geopolitical, economic
determinants will affect the way organizations manage themselves in the near future. In some
instances, these forces may be the reason for their bankruptcy or eventual closure.

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 CHAPTER III: CHALLENGES IN THE INTERNAL ENVIRONMENT

THE INTERNAL ENVIRONMENT

The Internal Environment is the setting in which organization locally exists. As one studies
the local environment, there are existing unique and interrelated variables that directly affect
any organization or business. These areas are government, culture, the stakeholder,
competitors, suppliers, customers and community.

GOVERNMENT: THE BUSINESS CARETAKER

Government is the sole legitimate institution tasked with overseeing organizational
operations in the country. In implementing these administrative functions and responsibilities,
the government undertakes the following:
o Provides the needed infrastructure
a. Physically (roads, bridges, electricity, and water services)
b. Technologically (information technology infrastructure and communication
facilities)
c. Economically (Availability of loans, baking services, low interest rates and
tax incentives)
d. Socially (housing, welfare, waste management policies, community services,
and societal responsibilities)
e. Politically (peace, security, stability and governance)
o Create an atmosphere of fair and robust competition among industry, and
company players, monitors and regulates monopolies and oligopolies and illegitimate
practices.
o Formulates business policies, implements business operating guidelines and
regulates the conduct of business activities.

CULTURE: A COMMUNAL CONVERGENCE

A nation’s culture is the communal aggregation and convergence of the country’s philosophy,
beliefs, traditions, values, attitudes, aspirations, and practices that have historically evolved
since a nation’s inception. Such as evolution has nurtured in the Filipino certain distinct
beliefs, traditions and practices, which are either a pride to the country or otherwise.

Here are some of the traits/practices of Filipinos that are worth mentioning:
1. The trait of hospitality. Filipinos are generally warm people; they are cordial, friendly
and accommodating.

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 2. The practice of bayanihan. This practice creates an atmosphere of unity and concern
among the townspeople.
3. Filipinos generally take care of their parents, old relatives and siblings.
4. Pakikisama and utang naloob. Many Filipinos prioritize friendship to the point of
sometimes sacrificing principles.
5. The habits of ningas kugon, manaña and “Filipino Time.” Filipinos excitedly begin
something without finishing what they have started; sometimes also tend to
procrastinate tasks and responsibilities.
6. The attitude of crab mentality and bahalana. Some Filipinos are not happy with the
good fortunes of others. Some Filipinos leave their life to the natural course of events.
7. The virtue of resiliency. Filipinos are flexible people. They are born survivors.
8. The idea of kanya-kanya. At times, Filipinos tend to be selfish and are indifferent to
the plight of others.
9. The consciousness of being politically involved. Filipinos are highly politicized.
Everyone has their own political views, leanings and biases

STAKEHOLDERS:THE BUSINESS INVESTORS

Organizations exist because there are individuals who are willing to take risks, invest
their capital, and engage in business activities in exchange for a return.
Stakeholders are business investors; they are the assets to the country. They provide
opportunities fair exchange products and services. They energize economic activity and
provide employment paying business taxes.
These are the individuals or entities that stand it benefit from the investment of the
owners. They are the employees, the government and the community.

COMPETITORS:THE BUSINESS THREATS

There are various forms of competition as well as several types of competitors. Competition
is an economic scenario where nations, communities, companies, and individuals offer and
sell their products and services.
Competitors continuously strive to outplay and outsmart each other, hoping to get larger
share of the target market. They fall in different categories.
1. Same Products
2. Similar Product
3. Substitute Product.
4. Different Products
Competitors also differ with respect to the strategies they adopt,
1. Complementary Competition

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 2. Collaborative Competition
3. Corrupted Competition
A company could identify in different ways who are their competitors by:
1. Determining Similarity in Characteristics
2. Studying Consumers
3. Researching Company Data
4. Considering Corporate success

CUSTOMERS: THE BUSINESS CHALLENGE

Competitors continuously compete to capture a bigger share of the market.
Customers make the market. They are the very reason why companies pursue new product
of developments and differentiates their existing product and services. Customers are the
focus of the company business plan programs and thrust of the strategies.
Consumer behavior is marketing reality that is discern, understand, and study with
definiteness. The following facts on customer approval, customer patronage and customer
loyalty can help address the “uncertainty.”
Customer delight. A condition where customers become excited over the products or the
services offered.
Customer intimacy. Refers to the relationship between the company and the customers.
This is best described as warm, complimentary, supportive, and “businessly” personal.
Customer loyalty. Refers when the customer intimacy seals customer patronage due to
continuous support to the product or service.
Customer Relationship Management (CRM) – is the emphasis of most companies wherein
it revolves around the interplay of three significant variables: the company that produces
the product, the product produced, and the customers who buy the product.

SUPPLIERS:THE BUSINESS PARTNER

In an environment characterized by cut-throat competition, businesses have to
produce quality products. This degree of quality is greatly dependent on a number of
variables, one of which is the supplier component.
Suppliers refer to individuals and companies engaged in the delivery of raw materials,
machinery, technology ,labor, expertise, skills and other form of services. They are the
essentially business partners. Without them, certain product cannot be produced and some
services cannot be rendered.

The supplier component is important for the following reasons:

1. It is responsible for the quality of the product produced and the services rendered.

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 2. It affects continuity in operational process.

COMMUNITY: THE BUSINESS CONCERNS

The community is the intermixture of peoples coming from all walks of with different
provincial or city cultures, different values, attitudes, aspirations, traditional beliefs, standards
of living family background, religions and educationally homogenous in its educational
attainments.
Community has to be self-reliant. In instances when a community is not able to attain this
level of self-sufficiency the government, stakeholders, customers, competitors, and suppliers
have a societal responsibility to help the deprived and marginalized poor improve and attain
quality life.

PORTER’S FIVE FORCES MODEL

Organizations, particularly businesses, are the lifeblood of any nation. They sustain the
continued existence and staying power of countries. As drivers of survival, growth, and
development, businesses create and energize the pulse of selling, producing, venturing, and
transacting activities.
Competitive Environment is best described and illustrated by Michael Porter’s Five
Forces Model of Industry Competition wherein it mentions ways of strategizing to attain
profitability and market share.
COMPETITIVE RIVALRY WITHIN THE INDUSTRY
● Bargaining Power of Customer
● Threats of New Entrants
● Bargaining Power of Suppliers
● Threats of Substitute Product

Competitive Strategy (1980) of Porter enumerated five forces that determine the intensity,
profitability, and attractiveness of an industry:

1. Suppliers are sources of input needed to produce goods and services. The
bargaining power of suppliers is high when:
a. few large suppliers dominate the market where they form a powerful
oligopolistic bloc
b. there are no substitutes for the specified input
c. switching costs from one supplier to another are high
d. customers of suppliers are not united but fragmented.
2. The bargaining power of customers is high when:

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 a. customers buy in large volumes
b. their products are not unique, such that they can be replaced or customers
can produce those products themselves
c. suppliers are fragmented and few
d. product switching is easy
3. Factors that heighten barriers to threats of new entrants are;
a. Financial in nature like economies of scale, high initial investments, fixed
costs, and cost advantage due to the learning curve
b. Marketing advantages that include brand loyalty of customers, controlled
distribution channel, protected intellectual property on products and services,
and good supplier-customer relationships
c. Production and operation pluses like access to raw materials and scarcity and
costs of qualified labor.
4. Threats of substitutes are present when complementary, alternative, and similar
products are in existence and sold at lower prices.
5. Competitive rivalry among players is high when:
a. There are many players with similar strategies
b. Rivalry is not differentiated
c. The barriers for exit are high
d. The growth of a company is at the expense of the other.

Porter enumerated three (3) fundamental generic strategies:

1. Cost leadership, which can be achieved by exploiting economies of scale
2. Optimizing the learning curve
3. Stressing on operational excellence.

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 PART IISTRATEGY FORMULATION

CHAPTER IV: BUSINESS STRATEGIES

Because of the volatility of the environment, business survival has become more
challenging than ever. There is a greater demand for an honest review of functional activities
and development of a proactive mindset through various strategic modes of growth and
competitiveness.

VALUE CHAIN ANALYSIS

As global markets widen, businesses have to pay closer
attention to where their raw materials come from, how they are

produced, how finished products are stored and transported, and what
their end products users are really asking for.
Value Chain – is a general term that refers to a sequence of
interlinked undertakings that an organization operating in a specific

industry engages in.

SUPPLY CHAIN MANAGEMENT

Supply chain management is a broad continuum of specific activities employed by a
company. It consists of the following:
● Purchasing or Supply management (sourcing, ordering, inventory storing of raw
materials, parts and services)
● Production and Operations (manufacturing and assembly)
● Logistics(warehousing, inventory tracking, order entry, management, distribution and
delivery to customers)
● Marketing and Sales (promoting and selling to customers)

SUPPLY MANAGEMENT
Supply management is now a popular term used for purchasing which was formerly termed
as procurement It is a key business function that is responsible for the following:
1. Identifying material and service needs
2. Locating and selecting ;negotiating and closing contracts
3. Acquiring the needed materials, services and equipment
4. Monitoring inventory stocks keeping unit and tracking supplier performance.

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The goal of supply management is to obtain the right materials by meeting quality
requirements in the right quantity, for delivery at the right time and the right place, from the
right source, with the right service, and at the right price.
SOURCING AND ORDERING
1. Specify the needs clearly by writing down the details.
2. Identify and analyze the possible sources of supply.
3. Ask potential suppliers.
4. Compare and Evaluate
5. Prepare, Place, Follow up and expedite the purchase order.
6. Confirm the place order
7. Invoice clearing and payments follows.

INVENTORY MANAGEMENT
The role of Inventory Management is to buffer uncertainty. It includes all purchased
materials and goods, partially completed materials and component parts and finished goods.

There are four broad categories of inventories as follows:

1. All unprocessed purchased input or raw materials for manufacturing.
2. Work in Process (WIP)
3. Finished goods include all completed products for shipment.
4. Maintenance, repair and operating supplies (MRO)

INVENTORY MODELS

Inventory management is ordering the right quantity of SKUs (stock keeping unit) at
minimum inventory costs.
Inventory cost is the sum total of ordering costs and carrying cost.
Ordering costs(set up cost)are variable cost associated with placing an order with the
supplier like managerial and clerical cost in preparing the purchase.
Carrying costs (holding costs) are costs incurred for holding inventory in storage like
handling charges, warehousing expenses, insurance, shrinkage, taxes and cost capital.

The inventory model answers the questions:“how much to order?” and “when to order?”
How much to order: is answered by determining the economic order quantity (EOQ).
EOQ: seeks to determine an optimal order quantity where the sum of the annual
order costs and annual carrying costs is minimized.
When to order: is answered by computing for the reorder point (RP).

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The application of the EOQ model presupposes that the following are known and constant:
demand, order lead time, price, carrying cost, and ordering cost.
Lead time refers to the span of time (in days) it takes for a stock to be delivered from the
time it was ordered.
Instantaneous replenishment is delivery of stocks all the same time
Just-in-time (JIT) is an operational strategy whereby the company estimates its demand for
raw materials and makes sure that they are delivered on time.

PRODUCTION AND OPERATIONS

Productions and Operations are processes that transform operational input into output to
satisfy consumer needs and requirements. This transformation process consists of
manufacturing and assembly.
Manufacturing is the process of producing goods using people or machine resources. It
commonly refers to industrial production where raw materials are converted into finished
goods.
Assembly is the process of putting together raw materials into desired output. Quality raw
materials and parts, efficient production layouts and processes.

Once achieved, value can be generated through appealing product designs quality
and reliability, efficient service performance, accessible location sites, attractive store
displays, affordable prices and good customer service.

THE LOGISTIC CIRCLE

Now a popular term in supply chain management, logistics management includes the
supervision of certain sequential processes. These includes warehousing, scheduling,
dispatching, transportation and delivery.
1. Warehousing. The function of physically packing finished goods or merchandise in a
building, room, and any space for temporary storage.
2. Scheduling. The act of organizing these inventory units and booking them for
delivery.
3. Dispatching where products are for transfer. This may include posting, mailing,
shipping out, transmitting, forwarding or releasing commodities.
4. Transportation scheduling and other logistic are necessary to make dispatching cost
efficient. The goal is to minimize transportation costs.
5. Delivery to the specified site is undertaken. It closes the entire logistics circle.

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MARKETING AND SALES
Products are produced and services are rendered for ultimate release to customers.
There is a need to market these merchandises to interested buyers.
Companies can adopt different modes of marketing to attract and sell customers.
They can aggressively promote the products through advertisement in newspapers,
magazines, radio, television, and other forms of promotional mediums.
Companies will need to complement their efforts while developing sales people
through result-oriented sales trainings, giving competitive salaries that will motivate them to
contract sales, providing good working conditions for better productivity coupled with
inspirational leadership.
Supply chain management is a complete sequence of processes that includes
purchasing, production and operations, delivery, and marketing and sales. It is actually a
complete management cycle where efficiency between and among the procedures
essentially brings about optimum output.

GROWTH STRATEGIES
Growth strategies are carefully studied and deliberately carried out by organization for
the following reason: they want to survive the hypercompetitive environment and not perish;
they want to increase their earnings or income; they want to create their advantage among
competitors; or they want to increase their market leadership in a given industry.
Growth Strategy is a mode adopted by an organization to achieve its main objectives of
increasing in volume and turn over.

INTERNAL GROWTH STRATEGIES

Internal growth strategies are approaches adopted within the company. These broad
growth strategies can be any of the following: market penetration, market development,
product development and diversification.
Current Products “New” Products
Current Markets Market Penetration Product Development
New Markets Market Development Diversification
MARKET PENETRATION – suggest that for an organization to increase its growth, market
penetration can be actualized by selling more of its current product/services to its current
customers or buyers.
MARKET DEVELOPMENT – is the process where a company can sell more of its current
products by seeking and tapping new markets.

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PRODUCT DEVELOPMENT – is an internal growth strategy where the company sells “new”
products to am existing market.
DIVERSIFICATION – is a product/market mix growth strategy that involves creating
differentiated products for new customers.
COMPETITIVE STRATEGIES
Organizations cannot avoid the permeating competition existing in the business environment.
Competitive strategies are essentially long-term action plans prepared with the end goal of
directing how an organization will survive and compete.
Types of competitive strategies consist of low-cost leadership strategy, broad differentiation
strategy, best cost, provider strategy, focused/market niche strategy based on lower cost and
focused/market based on differentiation.
Competitive Cost Leadership Differentiation Market Niche
Strategies
Cost Leadership Low-cost leadership Best-cost provider Focused/market-
strategy strategy niche lower cost
strategy
Differentiation Best-cost Leadership Broad differentiation Focused/market-
Strategy strategy niche differentation
strategy

Competitive Strategies are the following:

o Low-Cost Leadership Strategy. The objective of the low-cost leadership competitive
strategy is to offer products and services at the lowest cost possible in the industry.
o Broad Differentiation Strategy. The objective of the broad differentiation competitive
strategy is to provide a variety of products, services or product/service features that
competitors do not offer or are not able to offer to consumers.
o Best-Cost Provider Strategy. This strategy is a combination of the low-cost
leadership and broad differentiation strategies. The end goal is keeping its customers.
o Focused/Market Niche Lower Cost Strategy. This strategy is implemented when
the organization concentrates on a limited market segment and creates a market
niche based on lower costs.
o Focused/Market Niche Differentiation Strategy. This strategy is implemented when
the organization concentrates on a limited market segment and creates a market
niche based on differentiated features like design, utility, and practicality.

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Other Competitive Strategies are as follows:
o Innovation Strategy. The goal of a competitive innovation strategy is to radically
catapult or leapfrog the organization by introducing completely new and highly
differentiated products and services that give an organization a competitive posturing.
o Operational Effectiveness Strategy. The objective of an operational effectiveness
strategy is to make an organization perform better by making the structure lean,
streamlining wasteful ad inefficient processes, harnessing better facility and
equipment maintenance, and increasing work force productivity.
o Economies of Scale. This strategy lowers costs because of volume. The more a
product/service is produces, the lower the costs are for producing the product and
rendering the service.
o Technology Strategy. Technology can be applied system-wise through digital
integration. As organizations realize the benefits of going digital, the aggressively
pursue this thrust.

LIFE CYCLE STRATEGY

The life cycle of any product/services refers to the lifespan that a commodity/service
undergoes from its introduction stage to its growth, maturity, and decline stages.
While a product undergoes its life cycle, external and internal forces in the environment affect
the product/services ranging from customer expectations, technological development ,and
competition to other wide-ranging issues and challenges.

Here are the different life cycle patterns products and services:
o The Introduction Stage – is the period of launching the product/services for
acceptance.
o The Growth Stage – is the phase where the product/service gained acceptance by
the consumers.
o The Maturity Stage – is the period where the product has reached its penultimate
level.
o The Decline Stage – is the period where the product/services begin to reach or us
reaching its lowest point.

STABILITY STRATEGIES
For organizations that are doing fine or are doing better in their existing businesses,
they may choose not to implement any growth strategy. They may not want to apply any
competitive strategy and hence, decide to keep the status quo.

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 For example, there are businesses that are successful monopolies in their own right
with no new entrants. They continue to enjoy their profit. On the other hand, there are
organizations that have not decided and become big. They are just content with what they
have.

RETRENCHMENT STRATEGIES
Sometimes, companies encounter serious difficulties. When a company’s survival is
threatened or when it is not competing effectively, it usually takes time to sit down and review
its current situation
There are different modes of dealing with the situation and here are the following:
1. LIQUIDATION. The most radical action a company takes when a company is losing
money and thus, is further compounded by disinterest on the part of the stockholders
to do anything more to save it.
2. DIVESTMENT. Implemented when a company consistently fails to reach the set
objectives or when the company does not fit well in the organization.
3. TURNAROUND STRATEGY. Adopted when the organization has reached a
significant level of a non-performance, non-productivity, demoralization and
unprofitability, and therefore, has to implement restorative strategies.

In a turnaround strategy, the organization should focus on the following areas:

Climate and Culture – Toughest and most challenging area for any organization
undergoing a turnaround strategy is the climate and culture.
Product and Services – a review of the products offered and services rendered is
needed.
Production and Operation – in the implementation of turnaround strategies, this is
the easiest phase to sort out and manage.
Infrastructure – turnaround strategies can easily achieve significant improvements
when the infrastructure is correctly assessed and appropriate interventions are
introduced or reinforced.
Finances – this may mean that the organization is losing money or marginally
profitable, causing concerns to investors.

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 CHAPTER V: CORPORATE STRATEGIES

INTEGRATIVE GROWTH STRATEGIES

Integrative growth strategies, which are essentially external growth strategies, involve
investing the resources of the organization in another company or business to achieve growth
goals.

Types of integrative growth strategy: HORIZONTAL and VERTICAL INTEGRATION

1. Horizontal Integration – is a strategy where the organization acquires another
competing business.
• Organizations may employ horizontal integration in order to eliminate real or
potential competitors because some competitors can present themselves as
deadly threats to an organization.
• The desire of the organization to simply expand its market status as a market
leader, market challenger, or a market follower.
• Organization undergoes horizontal integration to help increase its revenues.

2. Vertical Integration–is the process of consolidating into an organization other

companies involved in all aspects of a product’s or a service’s process from raw
materials to distribution. Vertical integration can either be backward or forward:
● Backward Integration – is another integrative acquisition growth strategy where the
organization buys one of its suppliers.
● Forward Integration – is carried out when the organization buys distribution
companies that of its distribution chain.

THE BOSTON CONSULTING GROUP MODEL

The Boston Consulting Group Growth-Share Paradigm started to make its impact on
corporate strategy in early 1970s. The BCG model was developed by Bruce Henderson of
the Boston Consulting Group. This model classifies the products or business units of an
organization in terms of market share and market growth.
o Market Share is the relative sales percentage of a company in relation to the total
sales percentage of the market in consideration. This metric value gives a general
idea of how the company stands with respect to the market and its competitors.

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 o Market Growth refers to an increase in demand over time. It may be high or low. The
BCG model illustrates four broad categories in relation to market share (low, high)
and market growth (low, high). As described below:

o A high market share in a high

market growth defines stars. They are
the market leaders and if the market
continues to grow, they are likely to
become cash cows.

o A high market share in a low

market growth defines cash cows.
Since they are the market leaders in a

mature market growth, establishing a

competitive advantage can generate a lot
of cash and bring about high profit
margins.
o A low market share in a high market growth defines question marks. These

essentially new products need promotional strategies.

o A low market share in a low market growth defines dogs. They should essentially
be minimized, if not avoided. They can be expensive to the company.

THE GENERAL ELECTRIC MODEL

McKinsey conceptualized the General Electric (GE) Model for the company. This model is
an improvement of the BCG Model. It is used to assess the strength of strategic business
unit (SBU) of an organization. it takes consideration two parameters (market attractiveness
and business strength)to determine the overall strength of an SBU.

GLOBAL STRATEGIES
In some instances, organizations pursue global strategies for external business expansion.
Global strategies cover three main areas;
o International strategies – companies who might want to sell their excess products
outside their home markets.
o Multinational strategies – when a company is involved in a number of markets
outside the home country.
o Global strategies – the company treats or considers the world as market
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 and source of supply with slight local variations. a whole, one

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BENEFITS OF GLOBAL STRATEGIES
Pursuing global strategies can be beneficial to companies. Some of the benefits are the
following:
o Companies can enjoy larger sales and earnings
o Benefit from global branding of their products and services as well as the earning
form economies of scale.
o Higher production volume with efficiency increases savings and creates greater
advantage for companies.
o Sourcing of labor can be studies to optimize labor costs.

RESOURCES REQUIRED
In building a global strategy, certain resources are necessary to establish a level of
competitiveness. They are:
o Substantial capitalization because funding requirements can be demanding
o Managerial and strategic leadership to be able to come up with the best strategies for
success
o Expertise and capabilities on the part of management and employees
o Quality and differentiated products and services

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 PART III - STRATEGY IMPLEMENTATION

CHAPTER VI – ORGANIZATIONAL SYSTEMS

To successfully implement the strategies of the organization, its structure must support
unique system while the entire machinery of the company must be aligned to the direction
where it wants to go.
Organizational Structure – refers to the system of mode by which a group of individualsis
using to achieve its desired goals.

TYPES OF ORGANIZATIONAL STRUCTURES

Functional Organizational Structures
– Where organizations adopt a specific structural arrangement for a reason.
– Structuring an organization effectively requires that the management should know the
goals of the organization, the skills of its people, the needs and goals of its subordinates, the

General Manager

Human Resources Marketing Productions/Operation Financ

s e

Functional Organizational
Structure
available resources, and the time, cost and the environmental constraints that are existing.

Territorial Organizational Structure

– the target market is divided into geographical units according to certain criteria.
ADVANTAGES DISADVANTAGES
Personnel familiar with the history of The product line becomes more varied,
customers in the area, their culture, their the territory structure becomes more
preferences, expectations, and habits of cumbersome.
living can cultivate the local
markets
The company and its sales force can The creation of multiple territory offices
respond quickly to changes in the results in duplication of services and
competitive environment. possibly the appointment of less
qualified individuals to supervisory
positions.
Closer contact between managers Increase in expenses. Negative effect in
familiar with the territory and their sales.

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 subordinates.
Create a damaged public image, and
Can make quicker strategic decision may lower morale among employees.
since the management is familiar with
local conditions.

Manager

NATIONAL

Territorial Organizational
Structure
Product Organizational Structure
–businesses are assigned to product group managers,
Marketing
each of them is given key operating and functions.
– Marketing managers follow their products from
conception to the time it is made available to the
Manufacturing
consumers.
– Marketing managers are the one responsible for
gathering and centralizing all information relating to
the products, preparing product strategy alternatives,
preparing forecasts, defining the market strategies to
achieve planned objectives, ensuring the profitability
of the product, monitoring its cycle, monitoring the
accomplishments of programs previously drawn up,
and suggesting ways to improve or create new or
improved products. Product Organizational
Structure
Four (4) courses of action that an organization can implement to improve or replace
any product management structure:
1. Conducting training programs in forecasting, interpersonal skills, planning,
motivation, and control to improve the ability of product managers to do the jobs.
2. Switching from a marketing manager to a marketing team that implements activities
to market the product effectively
3. Eliminating product managers of minor brands and consolidating them with other
products.
4. Establishing divisions around the major company products and using functional
structural arrangements within divisions.

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Note: The key to good performance is top management support with reasonable budget,
planning, and resource allocation.
Market-Centered Organizational Structure
– A market-centered organizational structure describes the wide range of structural forms
that center on a group of customer needs rather than a region, product line, or function.
– Organizations in the following situations are suited for the market-centered structures:
o When a competitor threatens market leadership, market centering can restore a
competitive advantage by improving knowledge on customer, distributor and retailer
needs.
o When a new product is introduced and is affecting a company to a certain extent, a
market-centered approach can stimulate new ideas because the firm’s technical
specialists receive more information about market needs.
o When a product manufacturer can achieve high profit by diversifying into services
with larger margins of returns.
o When marketing-related products or services requires the so-called marketing
intelligence by conducting or implementing smart customer strategies.
o When a manufacturer who has been selling product-performance benefits shifts
marketing strategies to feature the financial benefits of customer profit improvement,
market centering makes it easier to gather information on how customers make their
profits.
o When a marketer wants to attract more entrepreneurial managers, market-centering
offers managers wide responsibilities and a variety of supervisory duties.

–A market-centered organizational structure groups company activities around important and

relevant criteria and forms SBUs that will formulate marketing strategies, among others.

Manager

SBU Organizational Structure

Matrix Organizational Structure

– The matrix structure is efficient for establishing specialist resources but is best for
integrated functions.
- A matrix is any organization that employs a multiple “boss” arrangement.
– Matrix structures have been adopted in manufacturing, service, professional, and non-
profit organizations.

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e
– In an organization that uses a matrix structure, one must cut across departmental
boundaries to get a job done. A team working on a job is comprised of a group of specialists
so that the ability to work together is very important.
Note: The key feature is that both the functional and product lines of authority overlap where
both product and functional managers share managerial authority over the people in each
cell.

Matrix Organizational Structure

CHOICE OF AN ORGANIZATIONAL STRUCTURE

Factors which may influence the firm’s decision to adopt the type of organizational structure
appropriate to its needs such as:
o Size of the Firm. The size of the firm will indicate the complexity of its organization.
A firm producing and selling in a restricted territory may find the functional
organization the best form for their purposes, whereas a larger firm which produces
several products and sells to a wider market may opt for a regional form of
organization to maximize selling efforts.
o The Products. The nature of the product or products to be sold is another factor that
influences the choice of an organizational structure.
- Consumer and individual goods may require different types of services from
the producer.
- Some products require extensive after-sale servicing to customers and the
marketing organizational structure can take care of this task.
- Technical products may require a different type of salesmanship and
advertising as compared to non-technical products.
o The Market. Characteristics of the market like geographic dispersion, income class,
and buyer behavior need to be considered in organizing the marketing unit.
o Competition. A firm may find it necessary to organize its marketing efforts following
the requirements of competition. If a major competitor uses an existing pattern of
distribution, the firm may find it necessary to accommodate such a pattern. If a change
on the organizational structure proves to be successful in an already established firm,
then other firms may imitate such change.

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 o Philosophy of Management. In each case, the structure of the business unit differs.
Some companies are more business-oriented than others and will have a business
unit that is involved in a wider scope of activities. If a management firmly believes in
centralization rather than in decentralization, so most of the responsibilities will be
borne by the home office rather than by district regional offices.

Evaluation of an Organizational Structure

o Facilitating Control. Control in an organization involves a comparison of actual
performance with pre-established standards or plans.
o Coordination. The coordination of individual actions is often called team effort.
The presence of effective teamwork is usually indicative of an efficient and well-
organized marketing operation.
o Providing Information. Markets are dynamic and subject to change; it is
essential for managers to gather information in order to anticipate changes and
make decisions accordingly. A good organization should have an adequate
information system and proper channels through which information flows.
o Cost of the System. A firm can choose from the simplest to the most complex
type of organization. However, it has to strike a balance among three important
factor – the organizational information it desires; the organizational control it
wishes to employ; and the costs of organizing its personnel. A basic procedure in
this evaluation is to weigh the performance against its costs.
o Flexibility. Flexibility is necessary to attain good performance. To be able to cope
with the dynamic and changing environment, the firm should have an organization
that can adjust to changes.

ORGANIZATIONAL COMPONENTS
An organization is an entity composed of people that is structured and managed in such a
way that is able to achieve its set goals and objectives. An organization generally consists of
elements that act and work together through coordinated activities.
Management refers to the administrative supervision of an organization.
Leadership is foremost in the management of any business. A good leader, regardless
of whether he owns or works for the organization, is someone who inspires his
employees and stretches them to their optimum productivity. He is the prime mover
and is expected to lead his employees in the attainment of the organization’s set
goals.

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 Tasks of a Leader
Planning where he sets the objectives to be attained and the means to achieve
them
Organizing where he identifies, divides, groups, and coordinates various activities
to achieve set goals
Staffing where he recruits, selects, hires, and develops human resources
Directing where he leads and communicates with his employees to attain
objectives
Controlling where he monitors processes and functions
Institutes connective actions when needed
Roles of a Leader
A strategist, a facilitator and an administrator
A leader who inspires and motivates his employees to attain quality and
productivity
An information man who understands critical facts, issues, problems, and other
concerns about the industry and the business environments
A conceptualizer who concretizes the vision, mission and plans of the enterprise in
accordance to set goals and objectives
An officer who serves as conduit for the employees who belong to different groups
A mediator who settles concerns, issues, and other problems within management
A facilitator who negotiates the allocation of resources
A delegate who assigns responsibilities, empowers employees, and monitors them
periodically and efficiently
A problem-solver who tackles organizational concerns and provides solutions
A decision-maker who makes appropriate decisions both qualitative and
quantitative
Skills of a Leader
Technical skills or being competent in his respective field to portray his role
adequately and to perform his tasks effectively
Human relations skills or adept in dealing with personal and interpersonal
employee relationships
Vision - refers to the image that the organization aims to establish and project to both
employees and the public.
Mission – refers to the purpose of the organization.

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 Mission Statement should:
Express the image of the organization wants to project to the public
Clearly state the objectives of the organization
Enumerate the product/service of the organization
Describe the customers it serves
Explain the technology or the process being adopted by the organization

Goals – are general, macro, and long-term in nature

Objectives – Are specific, micro, and short term.
Organizational Objectives should be:
Immediate or short term Quantifiable
Prioritized Consistent
Carefully chosen Aligned to the vision-mission of the
Attainable organization
Flexible Realistic

EMPLOYEES
Employees – constitute a significant part of the organization’s milieu.
– They are the very people who work, support and earn profits for the organization.
– They are found in all levels, performing tasks ranging from the sophisticated to the difficult,
practical to the odd ones.
– They work in different functional areas of marketing, finance, and production either formally
or informally structured.
LEVELS OF RELATIONSHIPS DESCRIPTION
Employee Satisfaction It is an emotional state where the employee
experiences feeling of content in the workplace.
Employee Involvement Satisfied with his work conditions, therefore the
employee will participate more in company activities
and essentially aim to contribute to the growth of the
company.
Employee Commitment The employee cultivates within himself an attitude and
a “sense of owning” where he treats the interests and
welfare of the enterprise as if he owns it.

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FACILITIES AND EQUIPMENT
These facilities and equipment may be simple and crude as long as they are functioning and
desired output. Organizations with sufficient capitalization, use the most sophisticated and
the latest machinery and technology.
FACILITIES DESCRIPTION
Management of Buildings and Needs to be appropriate for the type of business the
Site Maintenance organization is engaged in. Physical structures have to
be maintained properly, secured for safety, and
optimized when it comes to layouts.
Management of Machinery Making sure that the right types of equipment or
machinery are in place and including the right
quantities as needed by the organization.
Management of Facilities Amenities such as washrooms and canteens need to
be in good and healthy working conditions as these are
important to the workforce.
Application of Technology Business processes and enabling information system
that support the management of both physical and non-
physical assts of the organization.

FINANCIAL RESOURCES
Organizations need sufficient financial resources. The financial resources of the organization
determine the direction the organization will take and affect its capability to realize its set
business goals and objectives.
ORGANIZATIONAL POLICIES
The organizational milieu includes company policies, which are the lifeblood of an
organization. They put organizational structure and system in place. They ensure the order,
hierarchy of authority, clear delineation of functions, efficiency, productivity and good
interpersonal relationships. They make possible the smooth actualization of operations and
functions and facilitate the attainment of set goals and objectives, whether measurable or
otherwise.

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 CHAPTER VII – STRATEGIC ASSET MANAGEMENT

Strategies are appropriate courses of action formulated by organization to attain their set
objectives in the light of their vision and mission statement.
INTELLECTUAL PROPERTY ASSET
Intellectual property assets – are assets that result from the activities of the mind. These
properties may be products of purposive research like outcome of a person’s ingenuity,
brilliance, and creativity, or may just be discovered accidentally.
TYPES DESCRIPTION
Trademarks Include all service marks, trade names, designs, logos, seals,
and symbols that are uniquely developed by an individual, a
group of individuals, or an organization.
Software Organized information in the form of operating systems,
utilities, programs, and applications that enable computers to
work.
System Software: control basic functions of a computer and
usually come preinstalled with the computer.
Application Software: handle common and specific tasks
Original Compositions Literary, music and art compositions that are unique and
distinct
Trade Secrets All types of information, technical, or otherwise, like
organizational philosophy, programs, strategies, processes,
financial data, transaction data, and lists of customers and
suppliers

ORGANIZATIONAL MONOPOLY
When an organization possesses intellectual property assets, the entity is said to have
created a competitive edge called organizational monopoly. By virtue of this so-called
monopoly-ownership –
1. The organization solely enjoys the opportunity to use this intellectual property and
optimize its worth, and enjoy the benefits akin to it;
o The organization carries the reputation to have invented/conceptualized an
idea of a product, service, process, technology, a distinct way of doing things,
a novel approach, or an inimitable mindset.

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 o The organization gains an internal advantage in terms of efficiency and
productivity pride in the organization, heightened level of motivation, and
employs involvement.
o The organization can draw financial returns from the production, utilization,
and sales of this intellectual property.
2. It safeguards corporate assets by providing a legal mechanism for brand protection,
protection of trade secrets by non-disclosure agreements, and provision for patents
and copyrights;
o Because the government believes and respects the intellectual properties,
individuals and organizations, it provides legal protection from infringement.
The copying, duplication, and reproduction are not allowed unless with the
permission of the rightful owners.
o Brand protection is guaranteed and trade secrets are safeguarded by non-
disclosed agreements. Patents and copyrights are proofs of legal ownerships.
3. It allows organizations to enjoy low-cost leadership and increase its competitive
strength.

HUMAN RESOURCE ASSETS

Human resource assets are the strengths of organizations that consist of collective
“expertise”, personal traits, creative and problem-solving capabilities, managerial,
entrepreneurial, andcompetency asset skills, and organizational human-centered assets.
Collective “expertise” in an organization can result to:

Impressive educational attainment does not necessarily mean obtaining the highest level
of formal schooling. However, fields of specialization and degree of academic
achievement add value to individuals.
For professional competence to create leverage, it must be distinctive, highly inimitable,
and forward-looking. Ownership of these traits creates worth in individuals.
Work-related knowledge in marketing, production, operations, finance, human resource,
and information and communication technology does not automatically constitute
intellectual capital.
Individuals who are considered human resource assets are smart and strategic. They
possess the ability to adequately evaluate the environment “intelligently”.
Individuals with historical knowledge are people who have stayed in the organization for a
long time.

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 Personal traits considered as human resource assets;
Transformational leadership or the ability to inspire others and optimize their potentials
toward productivity and effectiveness
Ingenuity to differentiate existing ideas, products, or services and to conceptualize new
ones
First rate problem-solving capabilities
A personality that is self-motivated and vibrant
Sustained energy
Other essential attributes like adaptability, pro activity, initiative, industry and integrity.
Managerial, entrepreneurial, and competency asset skills include;
Planning, organizing, delegating, staffing, and monitoring skills that do not simply
emphasize efficiency but rather effectiveness
Cutting-edge business expertise, critical and reliable business intelligence, and a “futuring”
business outlook of the environment
Competency assets like skills in communication, expertise in information technology,
practical and vocational qualifications, and other allied abilities that can create a
competitive advantage in the individual and the organization.

Human Resource leverage is created in conditions where:

o Employees have “high” emotional quotients, attributes of self-awareness, self-
acceptance, and personal responsibility, skills in decision-making, managing feelings
and handling stress, traits like insight, assertiveness, and empathy, and affiliation
skills and communication, group dynamics, and conflict resolution.
o Synergistic interrelationships exist between management and employees, between
supervisors and subordinates, among peers, and between the organization and its
customers, suppliers, the community, and government.
o Commitment or a “sense of owning” is instilled in employees, thus, resulting in social
relationship enrichment and healthy interactions, optimum productivity, and
competitive advantage.

HUMAN RESOURCE LEVERAGE

Possession of human resource assets creates both leverage and a competitive edge. The
organization greatly benefits from ownership of these assets.
1. Organizations with employees owning remarkable “expertise” assets are different
from other.
2. Good personal qualities possessed by employees although uniquely individualized
can create a convergent impact on the organization.

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 3. Managerial, entrepreneurial, and competency asset skills shore up effectiveness and
organizational success, thus, creating comparative advantage in relation to other
organizations.
4. Organizational human-centered assets like the presence of employees with “high”
emotional quotients, synergy, and employee involvement open more window to
organizational opportunity, realization, and achievement.

Human resources possess multi-talents. They contribute to the “robustness” of the

intellectual capital of the organization. When employees leave the organization, they bring
with them these assets. This is a loss to the organization.
MARKETING ASSETS
Market assets are results of market-related intangibles;
1. BRANDS. Are considered as effective means to attain market supremacy. Marketing
experts believe that if a product or service is not a recognized brand, then it is not a
commodity. Brand names that promote substantial sales are considered market
asset.
2. COMPANY NAME. Some company names are considered market sales. They have
gainfully created an impression to the consumers. They don’t need to advertise. Their
“names” simply “SELL”.
3. CUSTOMER LOYALTY. Helps the organization attain a bigger market share. It is a
result of the intimate relationship between the customer and the supplier and is
characterized by sustained concern and support.
4. DISTRIBUTION CHANNELS. What is important is the presence of efficient
distribution channels that are structured and systematized, and comprehensive. This
enables organizations to extend beyond their existing reach.
5. ORGANIZATIONAL ALLIANCES AND LINKAGES. Needs to be strategic and
collaborative. They should look into the best practices of each of their organizational
partners, benchmark on them and be even better, if possible.

MARKET DOMINANCE
The competitive edge or dominance brought about by market assets includes:
1. An effective but less expensive medium for product and service identification.
2. A company name that is well-known, recognized, established, and reputable
significantly increases the financial worth of an organization.
3. Repeat business is a by-product of customer loyalty.
4. Increased product and service sales result from the efficient and well-organized
modes of bringing goods and services to the public.

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INFRASTRUCTURE ASSETS
1. A lean organizational structure is considered an infrastructure asset when a flat
framework is able to beneficially lessen bureaucracy, streamline job tasks, and
simplify mode of administration.
2. Organizational culture refers to a unique way of thinking. It is a way of life. It is the
result of a smooth blending of four essentials:
–organizational beliefs, attitudes, and values
– interest and expectations of its members
– the intra- and interrelationships existing.
– Philosophies, managerial styles, and ethical practices adopted by organizations.
Dynamic organizational culture is characterized by the following:
–Personal and organizational values that translate into unswerving beliefs and
positive attitudes.
– Interests and expectations of members that are linked to organizational goals while
pursuing personal objectives.
– Emotionally balanced intra-relationship of individuals that are characterized by self-
confidence.
– Organizational philosophies that are zealously embodies; management styles that
are genuinely participative and highly transformational; and ethical practices that are
observed to the highest standards without discrimination.
3. Managerial and functional work practices typified by high involvement reinforce
competitiveness and are further enhanced when the organization faithfully adopts
quality standards.
– Demonstration of high involvement practices brings into the organization both
internal and external fit.
– Managerial processes focus on effectiveness while functional administration needs
to be purposively geared toward efficiency.
– Whether self-formulated or adopted, the logical by-products of implementing quality
standards are competitiveness and financial returns
4. Technology is broad in scope and perspective. Its applications are in the fields of
agriculture, business, science, and education among others. It is an infrastructure
asset when its impact produces phenomenal outcomes.

COMPARATIVE ADVANTAGE
Possession of infrastructure assets brings about a comparative advantage to organizations.

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 1. A streamlined organizational structure makes communication between management
and employees easier because it eliminates bureaucracy.
2. Organizational cultures aptly create infrastructure advantage in the following ways:
a. A juxtaposition of personal, organizational, and universal beliefs, attitudes, and
values brings about a corporate milieu that is characterized both by divergence
and by commonality or purpose.
b. Diverse interests and expectations among members in organizations are realties.
c. When management philosophies contextualize organizational thrust, they
inevitably accentuate organizational rationale and infuse substance to its
existence.
d. Ethical practices adopted in organizations are viewed as infrastructure assets.
3. With high involvement work practices, managerial and functional processes that are
guided by quality management systems, the organization inevitably possesses
intellectual capital
a. High involvement work practices have a substantial and positive impact on
organizational performance.
b. Managerial and functional processes are both administrative and operational.
c. When functional processes are trouble-free and cost-effective, operational costs
are greatly minimized, and consequently, profitability is increased.
d. The adoption of quality standards includes having an agreed quality philosophy, a
quality policy, quality management systems, continuous quality assurance, and
periodic quality control.
4. As the principal catalyst of change, information technology has brought about radical
transformations in the global skyline.
a. A database of human resource skills and competencies facilitates accurate
matching of employee abilities with corresponding job tasks, insures placing the
right people to fill up job requirements, and identifies correctly the people who are
qualified to undergo training for capability development or enrichment;
b. A database of customers allows organizations to anticipate consumer needs and
requirements and be ahead of its competitors;
c. A database of suppliers monitors inventory requirements, determines lead-time
and delivery dates, and checks quality and quantity of raw materials delivered
with precision;
d. A database of buyers helps organizations to create timely “switching costs”. This
versatility helps sustain the loyalty of the buyers.

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ASSET MANAGEMENT STRATEGIES
Considered as pillars of effective competitive asset management, three distinct but
interrelated approaches are presented. They are competency learning, strategic
enhancement, and competitive innovation.

Competency Learning: “Laying the Groundwork”

Competency refers to the knowledge, attitudes, and skills expected of an individual in
carrying out his job tasks.
Precise and clear job descriptions result in the following benefits:
a. Provide employees a performance framework with respect to requisite knowledge,
skills, and attitudes.
b. Assure management that employees performing definite job tasks possess the
necessary competencies.
c. Streamline organizational management in terms of ill-equipped employees,
redundancy, low productivity, and cost-related wastes to inefficiency and
ineffectiveness.
d. Serve as bases for evaluating work output for reward and promotion purposes,
monetary, or otherwise.
e. Provide the blueprint for preparing and conducting recruitment, selection, hiring, and
training development programs.
f. Allow young people possessing competencies to move up the corporate ladder faster
than those who are inept and deficient.

CLASSIFYING COMPETENCIES
The realization of organizational vision-mission coupled by the attainment of its goals and
objectives are largely dependent on its people, namely, leadership and support of top
management, managerial skills, effectiveness of middle managers, efficiency, and synergy
among the regular members.
Classification of competencies include core, functional, and managerial.
a. Core competencies are basic. They include all fundamental competencies expected
of every employee.
b. Functional competencies are expected of employees performing job functions in
marketing, production, human resource, technology, and finance.
c. Managerial competencies are administrative and attitudinal in nature. They include
competencies in planning, organizing, delegating, staffing, and monitoring, as well as
people skills, leadership, and behavioral maturity.

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STRATEGIC ENHANCEMENT: “WIDENING THE HORIZON”
Given a dynamic environment where product cycles are shorter, and where the need to be
efficient and cost-effective has never been critical, organizations of today have no other
alternative but to be uniquely knowledgeable to survive and compete.
Different ways in strategically enhancing an organizational memory-based system:
1. Maximize the reach of the organization’s infrastructure technology.
2. Corporate entities need to appreciate the business value of knowledge, information,
and communication technology. By managing infrastructure capabilities, business
performance can be actualized and improved by doing the following:
o Creating a data-based portfolio of customers, suppliers, competitors, and all
information allied to these entities.
o Seriously undertaking systematic computer-based recording and application
of knowledge in systems, programs, and processes.
o Engaging in e-marketing and e-trading to sell, promote, and distribute its
products or services
o Involving in business to business (B2B) exchanges to take advantage of
discounts and other low pricing promotions offered by suppliers
o Using computer software that produce attractive and unique product designs
and packaging.
o Using communication technology to minimize time “leaks”
o Availing of courier hubs for fast delivery of products and services to cross-
spanning boundaries
3. Continuously conduct formal and informal types of training. Training is a good source
of knowledge generation and enhancement.
4. Systematize a process of enriching job pathing of employees beginning from being
starters with zero or negligible knowledge to becoming learners through supervised
apprenticeship.
5. Empower employees to reach sustainable self-development by promoting valuable
knowledge, rewarding those who unselfishly share their knowledge to others and to
the organization.
6. Interact with experts who have proven their worth and expertise in their specialized
fields.
7. Prepare programs for employees leading to attitudinal change.
8. Provide access to needed resources Resource can be in the form of:
o Market data to help create appropriate market plans and competitive product
positioning

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 o Infrastructure technology to reinforce high performance and organizational
sustainability through efficient processes and operations
o Human resource expertise to help hone professional competence, attitudinal
maturity, and competency skills
o Intellectual property rights to safeguard corporate memory in the form of trade
secrets and copyrights.
o Financial resources to provide funding for corporate memory generation,
development, and enrichment in whatever form and nature
o Management resources to support though leadership, organizational
direction, and operations.
9. Broaden networking through strategic alliances, which can come from within and
from the outside.
o Within the organizational unit, functional and managerial collaborations need
to be promoted.
o From the outside, partnering can be done with other organization, the industry,
the government and the community.
o Strategic enhancement if organizational memory can be done through
competitive and collaborative bench learning in terms of product, service,
operations, technology and marketing.
o Bench learning illustrates productivity and reinforces efficiency in
organizational learning. It is actualized by studying the best learning practices
of different organizations, how they plan things and adopt to urgent issues
within and outside the organization, and by emphasizing the human element,
more specifically, the attitudes in organizational growth and development
o Inputs can likewise be drawn from the government with regard to its priorities
and programs and from the society most especially, the consumers with
respect to communal needs, wants, demands, and expectations.
10. Analyze cultures. Culture is continuously evolving and it largely emanates from the
top.
o Nation’s culture: provides explanations as to why and how people live, think,
talk, act and relate
o Corporate culture: explains how employees perceive work, perform job tasks,
and react to workplace interrelationships.
o Intra-cultures: although attempts are exerted to adjust to the culture of the
organization, individuals of different nationalities generally keep their own
culture.

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COMPETITIVE INNOVATION: “CREATING BARGAINING POWER”
Innovation – is the best assurance in achieving business sustainability, competitive
advantage and consequently, creating bargaining power. Innovation may refer to any of the
following:
1. Creating, conceptualizations, or inventing new ideas. It is re-engineering new insights
and knowledge. It is “originality in action”.
2. Bringing a paradigm shift from the usual conservative mindset to that of openness,
willingness, aggressiveness, initiative, focus, and adaptability to needed changes in
the context of changing environmental and organizational variables.
o Revitalizes an innovative climate characterized by an atmosphere of
readiness and flexibility for “new opportunities” and “new possibilities” among
employees
o Shapes an innovative culture where all the hard and soft facets of an
organization and results and management style are “open” to “new learnings”
and “new systems”.
3. “Revolutionizing” a synergistic outlook and willingness to invent a spectrum of “new
perspectives,” unique insights and knowledge between and among organizational
units and departments.

INNOVATION SCENARIOS
1. Differentiating existing products and services
2. Reinventing products and services. These changes may be:
o In the product itself like logos, colors, size, attributes, texture, and purpose, or
in service like nature, quality, efficiency and productivity
o In pricing scheme like “opportunity” offers
o In attractive promotions that have unique mass appeal
o In supplier-customer intimacy relationships like cost-effectiveness,
performance management, and after-sales service
o In channels of distribution like efficient scheduling and minimum
transportation costs.
3. Continuously experimenting.
o Producing new products or services that are demanded by the local and global
marketplaces
o Designing new approaches that will create competitive advantage for the
organization
o Reshaping for a robust organizational built
o Streamlining processes and operations for maximum productivity

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 4. Applying recent and new technologies in information or communication that will
significantly change organizational structures and systems for optimality
5. Changing business models.
6. Creating new products and services to “futurize” the organization
7. Widening the breadth and depth of intellectual capital found in individuals, teams,
and departments, particularly, intellectual property assets and ownership.

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