Tarlac State University

COLLEGE OF BUSINESS AND ACCOUNTANCY

Tarlac City

Module 2

STRATEGIC
MANAGEMENT
COURSE STRATEGIC MANAGEMENT
DEVELOPER AND THEIR CHRISTINE JANELLE M. SANTIAGO
BACKGROUND Faculty, CBA-FM Department
cjsmsantiago@gmail.com
DENNIS C. SANTOS
Faculty, BS-Entrep Department

COURSE DESCRIPTION This course covers the identification and description of strategies that
managers must use to achieve better performance and have a
competitive advantage for their organization. It deals with making and
implementing decisions about future directions of the organization.
(CMO19-s series of 2017)

COURSE OUTLINE I. Introduction to Strategic Management

II. Motivators and drivers of Strategic Management
III. Business Competition
IV. Business and Functional Level Strategies
V. Value Chain
VI. Strategic Management Models
VII. Task 1:Environmental Scanning
VIII. Task 2. The Vision and Mission Statement
IX. Task 3. Setting Strategic Management
X. Task 4 Crafting Strategies
XI. Task 5. Implementing and executing Strategies
XII. XIII Competitive Strategies
CHAPTER # II
TITLE Motivators and drivers of Strategic Management
RATIONALE This module covers the basic concepts in strategic management.
The subtopics are:
Module 2 MOTIVATORS AND DRIVERS OF STRATEGIC MANAGEMENT

At the end of this module, the learner should be able to:

1. Explain the factors in driving and motivating business organization to stay competitive
or adopt the concepts of strategic management;
2. Discuss the importance of some market and economic theories relevant to
strategic management;
3. Illustrate and appreciate the importance of competencies as tool for strategic
management;
4. Discuss the importance of strategic management vis-à-vis the technological and global
developments.
5. Explain and appreciate the relevance and importance of other theoretical framework
associated with change and strategic management

The idea of strategic management was never that popular during 1960’s or even 1970’s where there are only few
business organizations offering the same or similar products in a given market and demands of prospective clients
are not sophisticated. In that era, many of the business organizations operated as independent business entities with
each of them having their own markets. The only thing that matters during those days is a business plan or feasibility
study to initiate and operationalize a business.

Because of the fast growing rate of population, demand increases and so is the number of business organizations
scampering to take advantage of market demand. With technological advancements and innovations, many
businesses from 1970’s up to this date, competition has become so stiff and sometimes at cutthroat levels
resulting to the bankruptcy or closure of some firms.

The dominant factors that motivated and driven businesses to edge out or outcompete each other were profit motive
and the nature of competition. Much more than this, however, there are many other reasons as well as applicable
theories and principles including situations that drive business organizations to plan their business well and apply
the principles of strategic management. On this module, we will discuss some of the motivators and drivers as well
as reasons and theories that challenge business managers to be conscious mof competitiveness and consider
strategic management a vital aspect of organizational culture.

The dynamic Nature of the Market and the Business

The business and the market are not static but dynamic in nature. Given the old adage that one thing constant in this
world is change, business managers need to live and accept that to be competitive, one has to live with constantly
changing environment and get the best out of it. The dynamic nature of the market and the business itself, is in part
due to the following circumstances and realities:

A.) The ever changing market conditions

B.) The changing taste of the market
C.) Sociopolitical changes
D.) The impact of global development vis-à-vis the local market
E.) The changes in the conduct of businesses
 Triggering events refer to situations or scenarios that may have caused or resulted to the actions or
initiatives of the top management of the firm to consider certain strategic options to make the firm
competitive or to achieve certain strategic objectives. They may come into two forms:
1.) Internal triggering events-situations or scenarios intervening or disturbing the business organization on
account of factors internal or inherent to the firm itself and one that the company can exercise certain level
of control
2.) External triggering events-factors external to the firm or matters where the business organization itself
may not like or want to happen but there is nothing much it can do.

Some of the internal triggering events are as follows:

a.) New CEO President
b.) Performance gap
c.) Change in ownership
d.) Management team shake up
e.) Corporate reorganization/ restructuring
f.) New products or services

Some of the external triggering events are as follows:

a.) Overall economic environment
b.) Government
c.) The sociopolitical environment
d.) The legal environment
e.) The technological environment
f.) The global/regional environment
g.) Market factors(demand and supply situations)
h.) The religious environment
i.) Occurrence of calamities and other natural phenomena

Strategic Inflection point by Andy Groove is a generic term that takes into account both internal and external factors
that influence the business direction. It represents what happens to a business when a major change takes place due
to introduction of new technologies, a different regulatory environment, a change in customer’s values, or a
change in what customers prefer.

Theory of the firm-this concept suggests that under ideal condition, there are four categories of market
conditions that can be either favorable or unfavorable to the business. The market condition can either be under
the following market structures:

a.) Monopoly-a market structure consisting of single seller selling/ offering a unique
product/service

b.) Oligopoly-it has more than one producer or seller selling homogenous or differentiated
product
 c.) Monopolistic competition-many sellers offering similar products that are not perfect
substitute for one another.

d.) Perfect competition-hundreds of seller offering similar or homogenous products.

Product Life Cycle

Product life cycle is the process a product goes through from when it is first introduced into the
market until it declines or is removed from the market. The life cycle has four stages - introduction,
growth, maturity and decline.
While some products may stay in a prolonged maturity state, all products eventually phase out of the
market due to several factors including:

1. Introduction
Once a product has been developed, the first stage is its introduction stage. In this stage, the product is
being released into the market. When a new product is released, it is often a high-stakes time in the
product's life cycle - although it does not necessarily make or break the product's eventual
success. During the introduction stage, marketing and promotion are at a high - and the company often
invests the most in promoting the product and getting it into the hands of consumer saturation,
increased competition, decreased demand and dropping sales.
2. Growth
By the growth stage, consumers are already taking to the product and increasingly buying it. The
product concept is proven and is becoming more popular - and sales are increasing. Other companies
become aware of the product and its space in the market, which is beginning to draw attention and
increasingly pull in revenue. If competition for the product is especially high, the company may still
heavily invest in advertising and promotion of the product to beat out competitors. As a result of the
product growing, the market itself tends to expand. The product in the growth stage is typically tweaked
to improve functions and features.
3. Maturity
When a product reaches maturity, its sales tend to slow or even stop - signaling a largely saturated
market. At this point, sales can even start to drop. Pricing at this stage can tend to get competitive,
signaling margin shrinking as prices begin falling due to the weight of outside pressures like competition
or lower demand. Marketing at this point is targeted at fending off competition, and companies will
often develop new or altered products to reach different market segments.

4. Decline
Although companies will generally attempt to keep the product alive in the maturity stage as long as
possible, decline for every product is inevitable. In the decline stage, product sales drop significantly and
consumer behavior changes as there is less demand for the product. The company's product loses more
and more market share, and competition tends to cause sales to deteriorate.
Economies of scale can be implemented by a firm at any stage of the production process. In this case, production refers to the economic
concept of production and involves all activities related to the commodity, not involving the final buyer. Thus, a business can decide to
implement economiesEconomies
of scale in itsofmarketing division
Scale refer to bythe
hiring a large
cost number experienced
advantage of marketing professionals.
by a firm whenA business
it can also adopt
the same in its input sourcing division
increases by moving
its level from human
of output. The labor to machine
advantage labor.
arises due to the inverse relationship
between per-unit fixed cost and the quantity produced. The greater the quantity of
output produced, the lower the Economies of scale also result in a fall in
average (average non-fixed costs) with an increase in output. This is brought about by
operational efficiencies and as a result of an increase in the scale of production.
Other relevant theories influencing Strategic Management:

Pitts and Lei(2000) and several other authors have discussed some of these theories in their works in the
area of strategic management:
1.) Evolution and Revolution theories-this theory suggested that environmental change
forces each species into incremental, but continuous, mutation or transformation.
2.) Industrial organization theory-it emphasizes the influence of industry environment
upon the firm.
3.) Chamberlin’s economic theories-by Edward Chamberlin and is anchored on the context
of evolutionary environmental change and he specifically espoused that a single firm
could clearly distinguish itself from competitors.
4.) Contingency theory-the basic premise of this theory is that higher financial returns are
associated with those firms that most likely develop a beneficial benefit with their
environment.
5.) Resource-based theory-it is somehow related to contingency theory. This theory
accords more weight to the firm’s choice to be proactive capitalizing on the firm’s
unique resources to comprise the key variables that allow it to develop and sustain a
competitive strategic advantage.
6.) Institution Theory- it holds that organizations can adapt to changing conditions by
imitating other successful organizations.
7.) Organization learning theory-it holds that organizations adjust defensively to a
changing environment.
8.) Transaction cost economics-it proposes that vertical integration is more efficient than
contracting goods and services in the marketplace when the transaction cost of
buying goods in the open market becomes too great.

Exercise Questions
1. Briefly discuss the concept of triggering events and its relevance to strategic management.
2. Why is the theory of firm relevant to strategizing?
3. Why are the organizational competencies relevant to strategic management?
4. Differentiate internal from external triggering events.