1.

0 Learning
Outcome and
Topics

Learning Outcomes
At the end of the topic, as a student you must be able to:

1. Recognize the nature and characterics of Strategic Management

2. Determine the major steps of the Strategic Management Model
3. Apply the guidelines of effective strategic planning
4. Evaluate and formulate vision and mission statement.
Module Topics:
1.1 Nature of strategic Management

1.1.1 Introduction to Strategic Management

1.1.2 Strategic Management Model

1.1.3 Benefits of Strategic Management

1.1.4 Guidelines for Effective Strategic Planning

1.2 Vision and Mission

1.2.1 Vision and Mission Statements

1.2.2 Importance and Characteristics of Vision and Mission Statements

1.1.1 Introduction
to Strategic
Management
According to Charles Darwin:

"It is not the strongest of the species that survive, nor the most intelligent, but the
one most responsive to change.“

Businesses faces many situational challenges brought about by changes in its

environment, such as the presence of competition, the regulations, cultural changes,
advent of technology, ethical concerns, supply chain and recently the impact of the
Covid-19 Global Pandemic which became a global health issue. It entails a derailment
in many business operations both local and international, This phenomenon brought a
new normal, that is now considered as one of the biggest business environment factor
that affects the directions of every business, that pose a clear and present danger to
the very existence of business continuity.

In order for every business organization to survive they should be prepared. Positioning
the business to all challenges is a must. The common approach to succeed is to set
the direction by means of Strategic Management.

Strategic Management is the art & science of formulating, implementing, and

evaluating, cross-functional decisions that enable an organization to achieve its
objectives.

Watch the attached video by Fred David the author of our reference book as he
discussed the overview of Strategic Management:
Overview of Strategic Management

(Links to an external site.)

The concept of strategic management is basically deals on strategic plans for the
organization towards its envision direction. In essence, the strategic plan is a company’s
game plan.

The term strategic planning originated in the 1950s and was very popular between the
mid-1960s and the mid-1970s. During these years, strategic planning was widely
believed to be the answer for all problems. At the time, much of corporate America was
“obsessed” with strategic planning. Following that “boom,” however, strategic planning
was cast aside during the 1980s as various planning models did not yield higher
returns. The 1990s, however, brought the revival of strategic planning, and the process
is widely practiced today in the business world as part of business strategic
management.

Strategic Management achieves a firm’s success through integration of

various basic organizational functional units namely:
1. Management
2. Marketing
3. Research and Development
4. Production/Operation
5. Management Information System
6. Finance and Accounting

To know more about History of Strategic Management please click the link:

History of Strategic Management

(Links to an external site.)

1.11.1.2 Strategic
Management
Model

In developing a strategic plan, there are three important questions to answer in

developing a strategic plan, which as follows:

1. Where are we now?

2. Where do we want to go?
3. How are we going to get there?

An organization is always dynamic in its process. Usually a large organizations are

more formal and adapting and practicing the strategic management process.

Below is the Model of the Strategic Management Process developed by Professor Fred
David:
Steps in Strategic Management Model

There are 3 major stages and 7 steps which as follows:

Stage 1: Strategic Formulation which includes:

● Step 1: Developing vision and mission statement

Vision Statement refers to "What do we want to become"

Mission Statement - "What is our business"

● Step 2: External environment analysis / Audit external environment which

concerns the organizational threats and opportunitites
● Step 3: External environment analysis / Audit internal environment which
concerns the organizational strengths and weaknesses.

Step 2 and 3 is popularly known as the SWOT analysis,

 ● Step 4: Establish long-term objectives
● Step 5: Generate, evaluate & select strategies

Strategy formulation is viewed as the most difficult stage because it includes:

● Mobilization of employees & managers

● Interpersonal skills critical
● Consensus on goal pursuit

Stage 2: Strategy Implementation includes:

● Step 6: Implementing strategies consisting of

1. Annual objectives
2. Policies
3. Employee motivations
4. Resource Allocation

Strategies means by which long-term objectives are achieved.

Annual Objectives means a short-term milestones that firms must achieve to attain
long-term objectives

Policies means by which annual objectives will be achieved

Stage 3: Strategy Evaluation known as the final stage which includes:

Step 7: Measure and Evaluate Performance consisting of:

1. Internal review
2. External review
3. Performance metric
4. Corrective actions

The Basic Tenets of Strategic Management are in Strategy formulation:

1. By taking advantage of external opportunities
2. Avoid/minimize the impact of external threats
 According to Peter Drucker:

Think through the overall mission of a business. Ask the key question: “What is
our Business?”.

The strategic management process attempts to organize quantitative and qualitative

information under conditions of uncertainty that includes intuition and analysis.

Intuition is based on:

● Past experiences
● Judgment
● Feelings

Intuition is useful for decision making in:

● Conditions of great uncertainty

● Conditions with little precedent
● Adapting to Change

An organizations must monitor events during on-going process, internal and external
events to apply timely changes.

Strategic Management should be gaining and maintaining a:

Competitive Advantage which refers to "anything that a firm does especially well
compared to rival firms”

Achieving Sustained Competitive Advantage can be attained by:

 ● Adapting to change in external trends, internal capabilities and resources
● Effectively formulating, implementing & evaluating strategies

Strategic Management and attaining competitive advantage needs the Strategists.

Strategists are the individuals who are most responsible for the success or failure of an
organization.

Strategists have various job titles, usually top executives of organization such as chief
executive officer, president, owner, chair of the board, executive director, chancellor,
dean, or even the entrepreneur.

1.1.3 Benefits of
Strategic
Management
In these topic we are going discuss the various benefits of strategic management in the
organization.

Benefits of Strategic Management includes the following:

1. Proactive in shaping firm’s future
2. Initiate and influence firm’s activities
3. Formulate better strategies

Benefits can be both Financial and Non-Financial

According to Gordon Greenley there are generic Benefits of Strategic

Management which as follows:
1. Identification of Opportunities
2. Objective view of management problems
3. Improved coordination & control
4. Minimizes adverse conditions & changes
5. Decisions that better support objectives
6. Effective allocation of time & resources
7. Internal communication among personnel
8. Integration of individual behaviors
9. Clarify individual responsibilities
10. Encourage forward thinking
11. .Encourages favorable attitude toward change.
12. Provides discipline and formality to the management of the business
1.2.1 Vision and
Mission
Statements

It is especially important for managers and executives in any organization to agree on the basic
vision that the firm strives to achieve in the long term.

A vision statement should answer the basic question, “What do we want to become?”

A clear vision provides the foundation for developing a comprehensive mission statement.

Many organizations have both a vision and mission statement, but the vision statement should
be established first and foremost. The vision statement should be short, preferably one
sentence, and as many managers as possible should have input into developing the statement.

Here are some of the Vision Statement examples with Author's

comment:
1. San Miguel Corporation
We are San Miguel, guided by a strong sense of social, environmental and economic
responsibility, our businesses will lead efforts to deliver on national goals, setting the pace of
progress in the Philippines.

Comment: Good Statement, they are engage on related and unrelated diversiified businesses
such as manufacturing, construction(MRT and expressway), gasoline(Petron) ,etc.

2. General Motors’ vision is to be the world leader in transportation products and

related services.

Comment: Good statement

3. PepsiCo’s responsibility is to continually improve all aspects of the world in which

we operate—environment, social, economic—creating a better tomorrow than today.

Comment: Statement is too vague; it should reveal beverage and food business
 4. Dell’s vision is to create a company culture where environmental excellence is
second nature.

Comment: Statement is too vague; it should reveal computer business in some manner; the
word environmental is generally used to refer to natural environment so is unclear in its use
here)

5. Procter & Gamble’s vision is to be, and be recognized as, the best consumer
products company in the world.

Comment:Statement is too vague and readability is not that good)

What Is Our Business?

Peter Drucker "father of modern management" says that asking the question “What is our
business?” is synonymous with asking the question “What is our mission?” An enduring
statement of purpose that distinguishes one organization from other similar enterprises, the
mission statement is a declaration of an organization’s “reason for being.” It answers the
pivotal question “What is our business?” A clear mission statement is essential for effectively
establishing objectives and formulating strategies.

Mission statement is sometimes called a creed statement, a statement of purpose, a

statement of philosophy, a statement of beliefs, a statement of business principles, or a
statement “defining our business,” a mission statement reveals what an organization wants to
be and whom it wants to serve. All organizations have a reason for being, even if strategists
have not consciously transformed this reason into writing.
A business mission is the foundation for priorities, strategies, plans, and work
assignments. It is the starting point for the design of managerial jobs and, above all, for the
design of managerial structures. As indicated in the strategic-management model, clear vision
and mission statements are needed before alternative strategies can be formulated and
implemented. As many managers as possible should be involved in the process of developing
these statements becausethrough involvement, people become committed to an organization.

Attached is a video that will distinguish the vision and mission:

The Difference Between Vision and Mission Statement with example

(Links to an external site.)

1.2.2 Importance
and
Characteristics of
Vision and
Mission

Vision and Mission is very important to the success of every organization, here are
some of the views on why it is important:

Based on study of Rarick and Vitton found that firms with a formalized mission
statement have twice the average return on shareholders’ equity than those firms
without a formalized mission statement have.

King and Cleland recommend that organizations carefully develop a written mission
statement in order to reap the following benefits:

● Must be broad but should not be excessively specific nor overly general.
● Should be reconciliatory.
● Short
● Memorable
● Inspiring
● Market focused
● “What do you want to be remembered for?”
A good mission statement comprises nine components, the customers, products or
services, market, technology, concept for survival, growth and profitability, philosophy,
self-concept, concern for public image and concern for employees.