CHAPTER 1

STRATEGY: DEFINED

Jollibee Foods Corporation is the country's top quick service food chain. After it became a publicly
traded company in 1993, the company was flushed with cash. The company used this opportunity
to invest in a series of businesses including the Greenwich chain of pizza outlets and the
Chowking chain of Chinese restaurants. But the flagship business of the company has always been
the Jollibee brand of stores. By 2001, the company had 800 different food stores across the
country.

The big dream, however, has always been to become a globally recognized brand, in the same
way that the McDonald's chain of stores is known worldwide. The company opened Jollibee
outlets in different locations, including the United States, Brunei, the United Arab Emirates, Kuwait,
and Hong Kong.

However, the reception toward the taste of Jollibee food products abroad was a mixed bag. While
it was true that the Filipino communities flocked to these stores, the original intention was for
foreign markets to appreciate the offerings of Jollibee, as this would enable the firm to expand
beyond just Filipino enclaves. But this was not happening, and this became a serious stumbling
block toward the company's long-term goal of opening 2,000 food outlets across the globe.

It was a painful realization for the management, having to admit that Filipino taste will not
translate across the globe so easily. But this admission was necessary for it to move forward.
What happened next was a transformation of its global strategy. Instead of trying to work its way
toward 2,000 stores worldwide by opening Jollibee brand stores across the globe, they realized
that a more efficient way of reaching this goal was through the acquisition of already established
food service brands around the world.

In 2004, Jollibee acquired Yonghe King, a popular fast food in China, giving it instant access to 70
store outlets. Ten years later, Jollibee would acquire a 40% ownership in American burger chain
Smashburger, gaining it 339 restaurant outlets across the United States, the Middle East, and
South America,

LESSON I

FROM STRATEGY TO STRATEGIC MANAGEMENT

Objectives:

At the end of this lesson, the students should be able to:

1. explain the meaning of strategy and

2. identify examples of business strategy.

 Strategy is a word that we may often find ourselves using in daily conversation. We
analyze team "strategies" in basketball games. We "strategize" whenever we play board games
such as chess or checkers. We also admire the "strategy" of a feisty lawyer in legal television
dramas. So we do have some ideas about what strategy is, albeit from a layperson's perspective.

We know, for instance, that it involves the crafting of some premeditated maneuvers. A
basketball coach would call for a time-out to huddle with his team, for instance, to plot possible
scenarios and what each player should do under the circumstances. There could even be
conditional clauses involved: if this happens, then this is what you must do. A seasoned chess
player would be thinking several steps ahead, thinking of all the possible moves that his
opponent might make, and configuring a response for each of these possibilities to enable him to
win the game.

There is also the element of envisioning the future. A showstopping lawyer may live for
the closing argument, visualizing well in advance how the performance should go and how the
judge should react.

Thus, strategy is something that seems to happen ahead of the actual

implementation. It implies a semblance of premeditation or of planning.

In lay terms, strategy is a way to get from Point A to Point B. For example, if you would
go to the mall, you can walk, ride a bike, take a cab, take a jeepney or a bus, drive a car, or take
a combination of any aforementioned ways to go there. They will all get you to the mall. But what
is the most effective and efficient way for you to get there? Some ways will be cheaper but
slower, while others will be faster but more expensive. Choosing the way to get there is what
strategy is all about, and your choice will likely be dictated by what you prioritize most in life. Do
you prioritize your time or your budget? This alone will become a significant input to your
eventual strategy for getting to the mall.

Porter's Criteria for Effective Strategies

What is strategy as applied to business and organization? Michael Porter, recognized as

an authority in strategy, noted that strategy should lead to sustainable competitive advantages.
He explained what an effective strategy should and should not be (Porter, 1996):

1. The strategy should not be about operational effectiveness. While it is always good to have
a well-run organization, this by itself is not what strategy is all about. Operational effectiveness is
all about outperforming competitors by being able to utilize resources better, and this is definitely
a plus. But it is not yet strategy. As an analogy, if a student is gifted with a higher level of
comprehension than her classmates, this will allow her to get better grades; however, this is not a
strategy perse. On the other hand, waking up earlier than one's classmates to have more study
time may be considered as a form of strategy.

2. The strategy should be about unique activities. In a competitive environment, finding a way
to do things differently from your competitors, in a way that allows you to gain distinct
advantages, is what strategy formulation leads to. Television station TV5, acknowledging that it
could not compete with the big budget dramas of GMA Network and ABS-CBN, opted instead for
showing Hollywood films that have been dubbed in Filipino-the programs were cheaper to
procure and therefore, allowed the station to keep going even with lesser ad revenues.

3. The strategic positions require trade-offs. To get to a place of competitive excellence, you
have to learn to sacrifice certain attributes to be better than others. Do you want to be the fastest
person to get to the mall? Then, you may have to sacrifice your budget as you decide to drive
your car, pay for gas and for parking. Conversely, if you want to get to the mall in the cheapest
possible manner, then be prepared to sacrifice speed, time, and possibly comfort. These trade-
offs, amplified on a larger scale, illustrate the kinds of strategic decisions that firms often face. The
success of Closeup toothpaste, for instance, was a result of its willingness to sacrifice the family
market, despite it being a huge market in favor of focusing on just the youth.

4. The strategy should fit the strategist in order to be sustainable. If you are the kind of
person who values comfort, perhaps taking public transportation as a regular strategy to get to
the mall will not last. Sooner or later, you will eventually give up and just drive your car. This is
because, as it turns out, it is a strategy that is not fit with who you are. In the same way, firms
need to identify strategies that are a good fit with their culture, organization, and resources. The
Human Nature brand of personal care products, for instance, has strong advocacies about the
environment and the empowerment of farmers as these reflect the passions of its owners and has
therefore become instilled in the corporate culture.

5. The strategy needs to be constantly revisited. The environment is ever dynamic. This means
that a strategy that once worked may eventually lose relevance under a changed environment.
Therefore, there will be a need to constantly check one's strategy to make sure that it is still the
best way to achieve what one wants to achieve. San Miguel Corporation used to be in food and
beverages only, but a review of its market share and opportunities led the firm to expand into a
number of new industries, including power and energy and real estate.

Porter (1996) believed that effective strategy should be all about giving firms advantages
that ensure their competitiveness now and in the future. Therefore, it is, by necessity, an ongoing
process.

Strategy and Competitive Advantage

Strategy can be defined as a firm's theory about how it can gain competitive advantages
(Barney & Hesterly, 2012). Each individual firm may have its own theory about how it can best
compete in a competitive marketplace. The theory may be flawed, in which case the eventual
strategy may turn out to be ineffective, or the theory may turn out to be highly explanatory, in
which case the eventual strategy may just succeed.

Integrating this with Porter's five criteria, strategy can, therefore, be thought of as a firm's
plans based on its own theories about its competitive environment to develop and sustain its own
competitive advantages (Parnell, 2014). But what exactly is a competitive advantage?

Simply put, a competitive advantage refers to any edge that a firm has over its
competition. It is an edge that ideally will be felt by consumers, and it answers the question "Why
would I buy from this firm rather than from the other firms?" (Ehmke, 2008).

Apple Inc. is one of the most profitable companies of the twenty-first century. What was
Apple's strategy? Its resurgence from 1998 onward began with an emphasis on design. Among its
competitive advantages was a roster of design talents that included industrial designer Jonathan
Ive. This led to the groundbreaking, multicolored iMac G3 computers, which revived the company,
followed by the revolutionary iPod music player, and eventually the phenomenally best-selling
iPhone. (Waugh, 2011)

But design alone will not be enough to sustain Apple because, sooner or later, its
competitors will eventually catch up on the design front. For instance, Samsung has been
aggressive in attempting to outdesign Apple products, and it has proven to be highly competitive,
particularly in the smartphones market. (Kovach, 2016)

This is where Apple's former Chief Operating Officer Tim Cook came in'. With an
expertise in supply chain management, Cook was instrumental in locking up some of the best
manufacturing plants in China (Lashinsky, 2008), as well as locking up the world's supply of
aluminum (Elmer-DeWitt, 2011). This way, it became almost impossible for other device makers to
produce best-in-class, aluminum-clad devices.

This represented a revision of strategy on the part of Apple: beginning with a strength in
industrial design, it leveraged this to come up with highly profitable new products that the market
wanted due to their well-thought-out designs. This allowed Apple to build up a huge cash surplus
from its high-margin products. While competitors tried to catch up with Apple on the design
front, Apple proceeded to use its cash surplus to create its next set of competitive advantages,
namely, in manufacturing and raw materials superiority. This way, even as competitors catch up
with its design aptitude, Apple will still have a new set of competitive advantages moving forward.

This illustrates the nature of strategy formulation: it is ever dynamic, requiring constant
updating and reassessment, Just because a strategy is working at the moment does not assure a
firm that it will work forever. As Andrew S. Grove, the Chief Executive Officer who grew Intel
Corporation into a technological behemoth, notes, "Success breeds complacency. Complacency
breeds failure. Only the paranoid survive" (Grove, 1997)

Strategy Does Not Exist in a Vacuum

A more comprehensive way of looking at strategy is by focusing on the guiding

principles that lead to the decisions on how to get from Point A to Point B. In other words,
strategy is not only about the specific strategic actions, but also the parameters, the policies, and
the operating guidelines that lead to the formulation of these specific actions in the first place.
This in a way is a more metaperspective about what strategy is. In fact, this perspective states that
strategies do not just happen in a vacuum and are dependent, if not interdependent, on other
parameters. (Watkins, 2007)
 As shown in Figure 1, the strategy ("How") is also dependent on larger elements within
the firm's purview, such as its mission and goals or what it has chosen to do, its value network or
the people and organizations that it chooses to work with, and the vision and incentives or the
compelling reasons for its organization members to work together. (Watkins, 2007)

So strategy formulation does not exist in a vacuum. Your strategy in getting to the mall
would be a function of (1) your purpose for going there in the first place, (2) the people you
interact with and the shops that you choose to go to once you are there, and (3) the resources
that are available to you. All of these factors will help determine your strategy for getting to the
mall.

While Porter espouses that strategy formulation should lead to innovative actions so as
to have competitive advantage, resulting strategies can generally be classified along these three
directions (Ovans, 2015):

1. Doing something new

2. Building on what you already have
3. Reacting to emerging opportunities

Competitive strategies can be about innovation and differentiation. They can also be about
enhancing one's core competencies and capabilities, pursuing constant incremental improvements
on them to always be ahead of competition. They can also be about spotting new trends, market
needs, and technologies before others do, which means that the firm should have a quick
reaction time.

Process of Strategic Management

While strategy refers to a broad palette of actions that are typically used as a means of
competing effectively versus a hostile environment, strategic management pertains to a process
that a firm's management can undertake to formulate and eventually implement such strategies.

The standard approach to strategic management involves five steps (Wright, 1998), each
of which will be discussed further in succeeding lessons

1. External analysis. Management needs to assess the environment in which it operates. This
includes the environment at large, such as the economic, demographic, and political situation, as
well as the more immediate competitive environment which includes competitors and potential
substitutes. This is done in order to discover possible opportunities and potential threats ahead of
time.

2 Internal analysis. Management needs to assess the internal environment of the firm: What are
its competitive advantages or strengths? What are its limitations or weaknesses? Knowing these
will help management understand what it can and cannot do to formulate strategies that will
build competitive advantages.

3. Strategy formulation. Management goes through a process of creating strategies that best
leverage the firm's strengths while avoiding having its weaknesses exposed all in pursuit of
possible opportunities or to evade potential threats.

4. Strategy execution. This pertains to management's actual implementation of the identified

strategy. Actual implementation is part of the strategic management process, while strategy in
general simply pertains to the formulation part.

5. Strategic control. As the strategy is implemented, management needs to monitor actual

performance versus planned performance. The control process enables management to have a
feedback loop in place, thereby allowing it to dynamically manage the implementation process. If
the actual performance does not live to the planned performance, management can either tweak
the strategy or adjust the targets, depending on how implementation pans out. In so doing,
management may be able to salvage a possibly questionable strategy before it is too late.

This five-step process is typically a sequential one. Even the premise of starting out with
external analysis rather than internal analysis has a purpose: it allows the organization to begin
the strategic management process with a potentially collaborative exercise management looking
at the outside world as a team-and therefore boosting teamwork before proceeding to the
potentially more divisive internal analysis, where finger-pointing can happen as management
struggles to identify sources of internal weaknesses.

The end result of the strategic management process is ideally the strategic plan, a
document which lays out the strategies that can provide the firm with competitive advantages for
years to come.

Yet, as we shall learn in future lessons, even this is not mandatory. A strategic plan is
nice to have, but is not a requirement for a firm to function effectively.

LESSON 2: LEVELS OF STRATEGY

The word "strategy" can be used in different contexts that determining the kind of strategy that is
being referred to can get confusing. It is understandable because strategy can be formulated
across the many different tiers of an organization, and each tier's strategy will be of a different
nature versus that of other tiers.

Tiers of a Corporation

To fully understand the layers involved, the following is a generalized schematic of what a
corporate organization may look like:
 Figure 2 Generalized Corporate Structure

The top layers consist of a Chief Executive Officer (CEO) along with a cohort of what are
known as C-level positions: Chief Operating Officer, Chief Finance Officer, and so on. This level of
the corporation usually resides at the headquarters of the company. They are responsible for the
corporate level strategies of the organization.

The Presidents, on the other hand, serve as the heads of their own respective business
units and are therefore responsible for the business level strategies or strategies pertaining to
their respective businesses. If a corporation has five businesses under its domain, it is expected to
have five Presidents as well, all of whom report to the CEO.

Under each President will serve the different Vice Presidents (VPs) who specialize In their
own respective fields of expertise. They are responsible for the functional level strategies of their
respective businesses. Their subordinates will then be responsible for operational or day-to-day,
strategies.

You may notice from the diagram that C-level positions do not have direct lines to the
Presidents. This is because C-level positions ideally should only serve as advisors to the CEO. They
are not supposed to have managerial or executive roles. So if, for instance, the CEO does not
have sufficient knowledge in legal matters, the CEO can create a new advisory C-level position,
the Chief Legal Officer, and this person will provide the CEO with legal advice and strategy
suggestions. If the CEO does not know much about marketing, the CEO can hire a Chief
Marketing Officer who can serve as a sounding board for top-level marketing strategies.

In actual practice, however, many firms end up using C-level officers as executives, having
the VPs of each company under the domain of the headquarters report to their respective C-level
equivalents. So the VPs for Finance of each business, for instance, report to the Chief Financial
Officer. This leads to what is often referred to as a matrix form of management, where managers
end up reporting to more than one superior. The danger with such a matrix is that the lines of
authority become blurred, and incidents where orders from the C-level "executives" clash with the
orders from the Presidents commonly occur.

Corporate Level Strategies

This is the highest level where strategy formulation can take place. At the corporate level,
the CEO is primarily concerned with managing a portfolio of businesses, each of which is being
run by their own respective business heads (the Presidents). Such enterprises that are composed
of multiple businesses under a centralized managing unit are called conglomerates.

An example of such a conglomerate is the San Miguel Corporation. Its headquarters,

situated in Pasig City, manages a growing portfolio of different and diversified business interests.
Originally started as a beer-brewing enterprise, San Miguel has grown to also have businesses in
packaging, animal feeds, beverages, and eventually real estate and power and energy

Because corporate headquarters is involved in handling a variety of business enterprises,

often of a highly-diversified nature, the corporate strategy may involve either crafting of
integrated strategies that build synergies among the different enterprises or setting goals that the
different business heads strive to accomplish using their own respective strategies. Either way, a
working relationship needs to be established between the CEO and the various business heads,
and it is typically in terms of clear targets handed down by the CEO that the business heads then
need to achieve. Achievement of these targets often means rewarding of handsome incentives
and bonuses to successful business heads. As for the business heads that do not make their
targets, at the very least, they will not be rewarded with bonuses. At most, they may be relieved
of their duties.

It should be noted that the CEO is not expected to be a master of each and every kind
of business that the conglomerate ventures into this will be nearly impossible. Instead, the CEO is
expected to be a generalist who understands how to communicate with the heads of each of the
different businesses.

Figure 3 shows the different strategies that are concerns of top management at the
corporate level of an organization. The CEO and C-level advisers are responsible for crafting
strategies that center on possible diversification strategies, establishing the corporate identity,
generating corporate-level competitive advantages and top-level initiatives for bolstering the
competitiveness of the different businesses, establishing new businesses and presence in growing
industries, divestment decisions, optimal resource allocation across the different business units,
and the scope of diversification that is to be allowed.

Who evaluates the CEO's performance? The CEO typically reports to a Board of Directors.
It is the Board that supposedly is responsible for assessing the CEO's performance, to the point of
being able to replace the CEO should the CEO not perform up to par.

Business Level Strategies

Business level strategies pertain to the strategies that are formulated at the level of the
respective business enterprises often under the helm of a company President.

"Business" here pertains to a particular product market area. A quick-service food chain,
for instance, may have its own brand and signature food preparations and target markets,
essentially making it a singular business unit (despite having several branches) Meanwhile, a
manufacturer of pens may produce different kinds of pens, but it should be clear that each pen is
not a separate business all of these pens may be produced by the same organization, using the
same logistics and distribution networks, and all of which are marketed as a portfolio of products
under its domain. A specific business can also be referred to as a strategic business unit (SBU).

It should be noted that for single-business firms, which actually applies to a great
majority of micro and small enterprises in the country, this is the topmost level of strategy that
management will be involved with, as they will not be diversified into different businesses and so
will have no need for a corporate level tier of management.

The President (or General Manager, as the business head may also be referred to) is
responsible for crafting strategies that will ensure the long-term sustainability of the business as it
carves its position of superiority in the marketplace.
 Figure 4 shows the different strategies that a business level manager can pursue to
accomplish the goal of attaining long-term competitive advantages in the marketplace. These
include strategies that seek to weather changing industry conditions, strategies for building up
the firm's capacities in the industry through vertical integrations and other alliances, strategies for
gaining new competitive advantages, strategies for preserving existing advantages and improving
on these, strategies for bolstering specific functional capabilities, and strategies versus its
competitors.

The bottom line is that the President's responsibilities are to ensure that the business is
profitable and to ensure future profitability through the continuous pursuit of marketable
competitive advantages for the business.

Eventually, if the business is part of a conglomerate, the President's performance will be

evaluated by the CEO. At worst, a President who does not deliver on what is expected from the
headquarters may be asked to resign. On the other hand, a President who manages to deliver or
even exceed expectations may be generously rewarded in terms of bonuses or other incentives.
This is how the headquarters manages the businesses that it controls.

Functional Level Strategies

Functional level strategies pertain to strategies that are pursued by functional specialists
within a business unit.

A functional organization works by ensuring that it is staffed by competent personnel

This includes specialists in functional roles, such as marketing, finance, and operations. Specialists
can gain their competence and knowledge about their particular field through education (such as
in business schools) as well as through actual experience. Job interviewers, for instance, pay
particular attention to the amount and quality of work experience that applicants have in their
respective fields.

As specialists prove themselves, they rise up the ranks. Eventually, they may become the
head of their respective fields, typically in the position of Vice President (VP). As VP for a
particular business function, the specialist now takes on the role of strategy expert and functional
executive for the President. For instance, the VP for Marketing may be given the objective of
developing a certain number of new territories. The VP will therefore be responsible for
formulating the strategies that will lead to the optimal accomplishment of the objective given the
resources that the VP has at their disposal.

The lower left corner of Figure 4 presents the strategies that functional management
seeks to accomplish, depending on their function. These include manufacturing and operations
strategies: marketing, promotion, and distribution strategies; research and development and
technology strategies, human resource and labor strategies; and financial strategies

The VP's performance will eventually be evaluated by the President, who will assess the
VP's performance vis-à-vis the expected targets and outcomes. There will likely be rewards and
penalties that have been set up to ensure that the VPs will strive to do well in achieving their
objectives.

Will a VP eventually become President? It is possible. When this happens, it is said that
the President was promoted "from within the ranks." The upside here is that such a President will
already be familiar with how the business works. The downside, however, is the President may be
biased toward a problem-solving perspective that revolves around their core specialization. In
other words, a VP for Marketing who becomes President may see all of the firm's problems as
marketing problems, while a President who rose from the ranks of Finance may see all the firm's
problems as financial problems.

This is why the best Presidents are those who have well-rounded skills. They do not need
to be experts in any single management function, but they should know enough about all the
functions to be able to understand and more importantly, coordinate with all the specialists to
develop a unified strategy.

Operational Level Strategies

This may well be the lowest level where strategy formulation can take place. Operational
level strategy pertains to the actual operations that are undertaken in an organization by the
people down the line, typically by functional specialists at supervisory levels below the VPs.
Usually, the VP's objectives will be translated into more specific goals that are then passed down
to the VP's subordinates. These subordinates in turn establish on-the-ground strategies and
action plans that will help them achieve the goals as set by their VP.

Because supervisory level personnel have access to limited company resources (as
compared to the VPs), their strategy formulations are inherently limited in scope and likely
localized in nature.
LESSON 3: STRATEGIC MANAGEMENT PROCESS

Objectives:

At the end of this lesson, the students should be able to:

1. explain the roles of strategy formulation and strategy

2. implementation in the strategic management process, and summarize the elements of the
strategic planning process.

As stated in Lesson 1, strategic management is composed of five steps: external analysis,

internal analysis, strategy formulation, strategy implementation, and strategic control

Some management theorists combine external and internal analysis with strategy
formulation, choosing to refer to all of these as the formulation phase, while strategy
implementation and control are also combined to the implementation phase. Doing so leads to
the following integrated framework of what corporate strategy (the outcome of strategic
management) looks like.

Figure 5 shows how formulation and implementation work together to form strategy
process or the process or strategic management

Formulation begins with an assessment of the environment in the form of identifying

opportunities and risks (threats) that may exist. This will be discussed in the following chapter.
 Next comes an assessment of the firm's strategic resources to come up with a
determination of what the firm's strengths and weaknesses are. Management is then expected to
identify the firm's core values in order to ensure that the culture and personality of the firm
remain consistent and relevant. Finally, management is expected to identify the firm's role in
making the world a better place. The findings from all of these will help create the corporate
strategy.

Implementation of the corporate strategy, on the other hand, begins with a distribution
of duties and responsibilities, determining who will be responsible for which aspects of the
strategy and establishing methods for clear coordination. Next, control systems are set in place,
including the establishment of incentives for performance and penalties for non-performance, as
well as the training of management on how to oversee the entire implementation process. Finally,
top management should be ready to monitor, adapt, and even revise the corporate strategy or its
implementation as needed, to ensure that the entire process continues to be relevant in the face
of new information.

A more simplified model for the strategic management process, however, may look like
the following:

Environmental scanning accounts for both external analysis (scanning for opportunities
and risks) and internal analysis (scanning of the company's resource profile). Hence, the model
has four elements to it. Note, however, how the feedback loop, represented by the bottom
arrows, clearly connects Evaluation and Control with all prior components of the process. This
acknowledges the reality that the best-laid plans may not actually be realistic, but management
will not know this until it is actually being mobilized already. Hopefully, the evaluation and control
process will immediately alert management to whatever mistaken assumptions or unrealistic goals
the process may have called for. The management can then swiftly adapt their plans based on
these findings, perhaps recalibrating their environmental scans, adjusting their strategy
formulation, or tweaking their implementation.
 Looking into the steps within the diagram as shown in Figure 7 presents us with the
elements of the strategic plan, which is the outcome, at least in principle of the strategic
management process.

Elements of the Strategic Plan

The strategic plan consists of the following elements: mission, objectives, strategies
policies, programs, budgets, procedures, and performance measures. We shall go through these
one by one to expound on the strategic plan.

Strategic Elements

Mission

The mission is the purpose of the business. If strategic planning is done at the corporate
level, this will be the reason for the existence of the conglomerate as a whole. What does the
conglomerate do? What are its immediate goals? Who are its markets? Where is the scope of its
operations? What are its core values? If the planning process is done at the strategic business unit
(SBU) level, this will pertain to the reason for the existence of that particular business alone.

Mission statements do not need to answer all of these questions. But they may opt to if
only to clearly elucidate what the business is all about. Mission statements can be very simple or
they can be very thorough. Here are some examples of mission statements of some corporations:

 Lamoiyan Corp. (makers of Hapee Toothpaste): "We exist to improve the quality of life by
bringing essential products within the reach of the common people."
 Evertel Telecommunications: "To provide clients with the best strategic
telecommunications technology. innovative products, solutions and services, delivered with
quality and exceptional customer service enabling our clients to meet their business
objective profitably; Develop productive partnerships between Evertel, its clients, dealers,
and employees; and foster a challenging, exciting, fun, professional environment while
maintaining an uncompromising focus on delivering quality, value, and satisfaction."
 Philippine Seven Corp. (7-Eleven store chain):"To offer time-conscious customers a full
range of products and services that meet their ever-changing daily needs through quality,
speed, selection, and value in a safe, friendly, and pleasant environment."

There is no right or wrong way to craft a mission. For example, in the case of a British
company called St. Ives, their mission was simply "To love our customers to death."

A good mission statement clearly explains why the business exists. It may not answer every
key question posed above, but for as long as clarity is established about why the company is in
business in the first place, this will make it a reasonably effective mission statement.

Google's mission, for instance, is "to organize the world's information and make it universally
accessible and useful This gives a clear picture of what kinds of business Google is in
(information) and what its mandate is. This mandate then drives the strategies and business
models that it will pursue. Whatever these may be, they will all be for the sake of making
information as accessible as possible to the world.

Objectives

Objectives are expected outcomes that will help the firm in its fulfillment of its mission Objectives
can be long term or short term in nature.

Long-term objectives may or may not be time bound. In other words, they may or may
not have a set deadline. Without a deadline, a long-term objective can function as a long term
ambition

Example: To be the world's largest producer of organic inks.

The firm that sets this objective may not yet be anywhere near this objective, and may in
fact be just a startup or a small enterprise. But by establishing this as their long-term objective, it
serves as an end goal that can inspire the organization toward excellence.

Long-term objectives can also be time-bound, in which case the time frame for
completion is set as well.
 Example: To become the most profitable chain of elderly care facilities in ten years.

Giving a ten-year timetable encourages the organization to be more disciplined in its

pursuit of this particular objective. A shrewd manager, for instance, may divide this long term
objective further into annual profit targets to ensure that they will always be on track toward
meeting this objective by the tenth year.

Short-term objectives, by contrast, must almost always be time-bound. This is because

the nature of short-term objectives is precisely one of urgency: the target must be met at the
soonest possible time. Therefore, there is automatically a need to make these objectives time-
bound

What is the difference between a long-term and a short-term objective then? There is no
hard-and-fast answer as to what they are. The answer lies in the "cycle time or the speed by
which things happen in the industry. In a tree farming industry, for example, the cycle time may
be very slow because it takes years before a crop of trees grows to maturity. So "short term may
be as long as 3 years. On the other hand, for the high-technology sectors where innovations
happen at breakneck speed, short term may be as short as 6 months.

Typically, though, short term often refers to a maximum of one year, while long term
refers to anything beyond that

Strategies

Strategies are the how. Given an objective, the manager will now have to formulate an
optimal strategy for ensuring its accomplishment

As mentioned in a previous lesson, there are multitudes of ways to get from Point A to
Point B. But the ideal way is the one that will make the most efficient use of the firm's resources,

This is where a thorough understanding of the opportunities and threats in the

environment, as well as an analysis of the firm's strengths and weaknesses, becomes important.
Knowing these factors can help managers in crafting strategies that make the best use of their
external and internal circumstances as they strive to accomplish their given objectives

Policies

Policies are the constraints that the firm chooses to live with. Policies serve as a
documentation of the firm's core values, beliefs, and ideals.

Because policies serve as constraints, these
be implemented. For instance, an example of a
marketplace With this policy in place, management
strategies involving the increase of prices above
acceptable.
will affect the details of how strategies are to
policy is "To offer the best prices in the
will now be constrained accordingly and any
that of the competition will no longer be

Policies serve to preserve the identity of the firm, ensuring its consistency and
predictability on how it goes about its business. This is good for the employees because if they
understand, respect, and empathize with the core values of the firm, it means that the firm
consistently follows its core beliefs in all of its undertakings. It can, of course, be argued that
predictability can be bad for the firm as shrewd competitors can take advantage of this by
introducing strategies that intentionally take advantage of the matters that the firm cannot touch.
For instance, small manufacturers of "whitening" soaps were able to take advantage of the fact
that most of the larger multinationals refused to venture into whitening products for fear of
triggering racial issues and sensitivities.

Tactical Elements

Programs

Programs are the first of the tactical or implementation components. Programs are the
detailed plans that are put together in order to actualize the strategies. Programs may include
timetables, duties and responsibilities, and goals that will have to be achieved in order to help the
strategies meet the given objectives.

Budgets

After laying out the details of the plans in the programs, next comes the budgeting. The
cost for mobilizing each activity in the program will be calculated, so that the total cost of the
programs will be clear. This is then typically sent up to higher management for approval before
the program is duly mobilized.

Procedures

Programs are then broken down into procedures. This way, errors may be reduced as the
programs are translated into specific steps that will have to be undertaken by the firm's
personnel. This is all about the details.

Performance Measurement

As the plans are set in motion, results should always be monitored in order for
management to know, as soon as possible, whether or not the entire strategy is effective in the
first place. This will allow them to make adjustments on the fly before too much damage is done
by an ineffective strategy.

This means that management should have already defined the metrics to be used to
evaluate the performance of the people who are responsible of the entire program as well. Are
sales increases happening on schedule? Why or why not? Is implementation the problem or is it
the unrealistic objectives that the programs are weighed down with?

This is where the feedback loop comes in. Once management gets a sense that the
strategy is not working, it quickly goes back to the elements of its strategic plan, so as to identify
where the wrong assumptions may lie, or why the implementation is not coming out according to
plan.
LESSON 4: STRATEGY IMPLEMENTATION

Objectives:

At the end of this lesson, the students should be able to:

1. explain the challenges that are typically encountered at the implementation end of the strategic
management process: and

2. classify the different kinds of strategy at the implementation stage.

There is planning, and then there is the actual fulfillment of the plans. After a planning
process has been completed, things may initially look good on paper. But then reality has a way
of upsetting the best-laid plans.

When plans work, firms can undergo dramatic transformations. Korean electronics brand
Samsung, for instance, was once known for cheap appliances and was perceived to be an inferior
and low-cost competitor to the more popular brand of Sony. But its Chief Executive Officer (CEO),
Lee Kun-Hee, crafted a strategy that would transform the company into one of the world's top
consumer electronics brands. Lee's vision was to turn Samsung into a premium, design-driven
brand. To do this, he first hired faculty from a top US design school to teach his entire company
all about design-not just the company's designers, but everyone, from sales, staff, and to
management. This way, everyone learned the value of good design, and this was an important
step in building a design culture at the company. Next, Lee invested a staggering amount of
money (over a hundred million dollars) for a global relaunch campaign. In the 1990s, this was
considered by Koreans to be an outrageous amount and he was vilified for this. But the
investment paid off. Samsung transformed from a cheap electronics manufacturer into one of the
world's most powerful brands.

But plans do not always work. In fact, it is rare for a plan to work perfectly. This is where
the determination and flexibility of the CEO can make all the difference, adapting to reality as it
plays out and continues to pursue the end goal.

Mintzberg's Types of Implemented Strategy

Mintzberg (1978) classified implemented strategies into the following: intended strategy,
deliberate strategy, unrealized strategy, emergent strategy, and realized strategy.
1. Intended strategy. This is the strategy as premeditated and planned. It may be on paper, or it
may all be in the CEO's head. Whatever the case, this is the ideal scenario and the envisioned
process for achieving the intended goal.

2. Deliberate strategy. These are the parts of the intended strategy that play out according to
plan. What were premeditated appear to be accurate and therefore are coming to fruition.

3. Unrealized strategy. On the other hand, there will be parts of the strategy that turn out to be
unfeasible. Perhaps, the plan was relying on inaccurate information or wrong assumptions. Maybe,
the environment changed or things simply were not as easy as they were originally thought to be.
These result in pieces of the plan that have to be waylaid and set aside.

4. Emergent strategy. The good news is that during the implementation phase, management
realizes new things and makes discoveries about how the world really works. These lead to new
strategies that were never even considered before, but which turn out to be essential in making
the end goal come to fruition.

5. Realized strategy. This is the synthesis of the remains of the deliberate strategy and the new
emergent strategies. The realized strategy is not quite what was intended, but because it now
incorporates realities as discovered during implementation, the realized strategy becomes the
new, working strategy that will be used by the firm to achieve its end goal.

An example of the above process is the story of Globe Telecom's eventual success. In the
mid-1990s, Globe Telecom was a distant third placer in the Philippine mobile telecommunications
industry after the two powerhouse brands of Piltel and Smart Piltel and Smart used similar
technologies-analog cellular technology-and basically developed the dominant cellular
infrastructure in the country.

Globe, on the other hand, decided to go with digital cellular technology, which the
company believed had a better long-term future. The company's intended strategy was to
promote its digital cellular services as superior to analog because it was "clearer Again, this was
the intended strategy.

However, reality was not that simple. As the company rolled out its marketing campaign,
it became painfully clear that consumers were not impressed with the quality of its digital
services. First, Globe, being a latecomer to the industry, did not have sufficient cell towers yet at
that point in order to provide a wide signal coverage, so it was quickly perceived to be inferior to
Piltel and Smart (which would eventually merge into Smart Communications, Inc.). Second, even
when there was signal coverage, consumers were not impressed by the "clearer" signal of Globe's
digital network. For instance, when someone is conversing over an analog phone and the signal
gets weak, the conversation gets mired in static, but is still audible. On the other hand, when a
conversation over digital ends up with a weaker signal, the line becomes choppy. Consumers
found choppy conversations to be more annoying than static-riddled ones, so the original,
intended strategy of Globe of being the "clearer" phone service did not work. Globe remained a
distant competitor to Smart.

By the late 1990s, however, Globe noted what a growing number of their subscribers
were doing; instead of using their phones to make calls, they were using them to send text
messages to one another, Back then, text messaging was an extra feature for digital cellular
services that was assumed to be for emergencies only. After all, who would even care to type out
text messages of about 160 characters in length? Text messaging was free and Globe had no idea
that people would actually even be interested in it. But they were and, before long, people were
telling their friends to subscribe to Globe, too, so that they could send each other text messages
for free, thereby saving from having to pay for expensive voice calls. This was the discovery that
became the roots for Globe's emergent strategy. Soon, Globe decided to aggressively promote
text messaging as a key feature of its service, and subscriptions grew dramatically.

Globe's intended strategy was to use the supposed clarity of its digital service to attract
consumers. However, consumers failed to appreciate this benefit, so this became Globe's
unrealized strategy. On the other hand, consumers' discovery and appreciation of the text
messaging feature of digital cellular services led to an emergent strategy of focusing on text
messaging as the key feature of the service. The realized strategy therefore blended text
messaging as the key feature while continuing to push the other benefits of digital services
(deliberate strategy) to the consumers.

Five Ps of Strategy

Mintzberg identified five different classes of strategy, mainly because he noted that it
was difficult to rely on just a single definition of what strategy was. These are strategy as plan,
pattern, position, perspective, and ploy. (Mintzberg, 1987)

The kind of strategy formulation that is evident in proactive, premeditated planning

processes is referred to as the strategy as plan. The plan is often detailed, typically documented
(although not always), and generally begs for details. It is crafted and thought about in depth. The
end result, which is the plan, is like an instruction manual that guides the organization on its
implementation phase.

But, as it turns out, a plan is not the only kind of strategy that can be implemented.
There is also the strategy as pattern, whereby an organization chooses an action that it has
familiarity with. Strategy as pattern pertains to what is tantamount to habitual behavior in an
organization. Decision-making can be a draining undertaking for management. So when faced
with a situation that is similar to a past scenario that they have already tackled with some success,
chances are that management will once again do what already worked for them in the past.

When Jollibee went public in the early 1990s, the company became flushed with cash
that it could then use to go into an acquisition spree. The company's very first acquisition is the
Greenwich Pizza chain of quick-service pizza stalls that offer "Philippine-style" pizzas, Being its first
acquisition, it can be expected that management put a lot of analysis and thought into this
purchase, Jollibee acquired the brand and retooled its operations to make it up to par with how
Jollibee manages its existing quick-service food systems. The result was a notable success, with
Greenwich becoming an attractive franchise option for the firm.

The next major acquisition for the company was Chowking, a growing chain of
Philippine-style Chinese food outlets. This time, management was already flushed with learning
from their first successful acquisition. Therefore, the process of acquiring the Chowking chain
simply involved doing what they did before down to retooling operations to bring it up to par to
Jollibee standards.

What is notable here is that, when a company resorts to strategy as pattern, the strategy
formulation phase effectively dissolves in lieu of direct implementation based on memory of a
past strategy that already worked. Without a need for a strategy formulation phase, decision-
making is swift, and the company goes straight to execution.

Strategy as position, on the other hand, is all about establishing a definite place within a
competitive field, or a clear identity that differentiates one's firm from the rest in the environment.
The following are some examples of strategies in the form of descriptions about what the firm is
all about relative to their competition:

 CD-R King decided to define itself as a retail purveyor of low-cost electronic gadgets.
 Multinational firm Nestlé chose to define its products as being of high quality and good
value.
 Philippine Airlines established Air Philippines as a more affordable, no-frills brand to
compete against budget airlines.

Having a position may be reached via a conscious plan or perhaps even emerge through a
pattern of behavior. Therefore, it is not necessarily a distinctive mode of strategy formation.
Rather, it connotes a strategy that is borne from defining one's identity relative to what others are
or what they can offer. After having defined itself accordingly, the company's position will
henceforth guide and direct all future actions. For instance, a brand like CD-R King cannot, by
virtue of its own positioning, come out with premium, high-priced electronics

There is also strategy as perspective, whereby strategy is based on the worldview,

assumptions, or even values systems of a firm's management. A firm that prides itself for being
upright and being of good moral character is going to behave in a much different manner versus
a firm that values ruthlessness and finding ways of skirting the laws for financial gain.

Citibank entered the German market to huge success based primarily on its perspective that
was very different from that of traditional German banks. Prior to their entry, large German banks
have focused on commercial and industrial clients and mostly ignored retail customers, even as
they noted that these customers were gaining more financial wealth and were therefore
becoming more and more viable. The banks simply felt that servicing retail customers was
practically beneath them. This, of course, is a matter of perspective. Citibank's perspective, on the
other hand, was that retail consumers were a tremendous opportunity. So when Citibank entered
the German market with their Familienbank ("Family Bank"), retail consumers flocked to this new
service and within five years, Citibank gained a dominant foothold in the German consumer
banking sector. (Drucker, 1985)

Perspectives shape and guide strategy. Beliefs and mindsets shape strategy. What one firm
may consider unthinkable and therefore avoid, another firm may consider it reasonable and
therefore pursue.

Finally, there is strategy as ploy. The word "ploy" already connotes certain parameters for
action. For instance, the word "ploy" implies a certain level of cunningness, cleverness, or
deception. It can be defined as a "devised or contrived move" (Merriam-Webster, n.d.) and is
essentially tactical in nature-a short-term and temporary measure that is meant to achieve a quick
win.

An example of a ploy is a company issuing statements about a new product that it is

supposedly working on, forcing their competitors to pour resources into preemptively covering
this potential threat, whereas the company is actually quietly working on something else
altogether. Another example is a brand that temporarily offers a huge price drop under the
pretense of having an anniversary promo, whereas its real purpose is to starve a new challenger
that is trying to compete by offering a lower price. Ploys are, by definition, crafty in nature
because these are meant to confuse, disorient, or deflect attention. It is like in the way that a
magician uses sleight of hand to direct attention to one thing while quietly setting up something
else altogether.

CASE STUDY

CASE 1. THE ORIGINAL BUKO PIE

Laguna is known for having some of the best, if not the best, buko pies in the country.
The problem, however, is that there are far too many buko pie shops along the main
thoroughfares, and each claim to be the first or the original maker of the famous pie. But the
true, original inventor of the buko pie is found in Los Banos, Laguna. In fact, the owners would
have wanted "The Original Buko Pie" to be their trade name, except that the Department of Trade
and Industry forbade the use of such a claim or adjective as a brand. Eventually, they resolved to
name their bakeshop Orient, which was short for Original Enterprise.

Buko pie is now considered to be a traditional Filipino dessert. It is made from young
coconut (buko), combined with sweetened condensed milk to make a dense, creamy custard filled
with buko meat. Once only available in the Philippines, today's buko pie makers and there are a
number of them-make use of blast freezing technologies to make these frozen pies available for
export as well.

Orient Bakeshop began its operations in 1965 and today remains as a family-owned
business. For over 60 years, the business had just one outlet in Anos Los Baños. But it became a
very popular outlet, with a long queue of customers regularly seen lining up by the side of the
National Highway where the store is located. Meanwhile, other imitation buko pie shops around
its periphery get only a small fraction of the market.

While this long queue may seem like an advantage at first, it is also a problem as
customers complain about the inconvenience of having to travel all the way to Anos just to buy
their products, only to be faced with such a long waiting line. Still, for the longest time, the
owners had the opinion that it was a matter of pride that people went out of their way to buy
their products. "We wanted to be the choice and not just an option says one of the owners.

It was not until 2013 when the company finally decided to open a second branch, this
time along the Sta. Rosa-Tagaytay Road. As with the original branch, the second branch did its
own baking in-house, rather than relying on deliveries from the main branch because the family
believed that the transportation expenses would eat into the profits. The Tagaytay branch
performed decently, with queues happening as well, but its sales nevertheless hovered at just
around 70% of that of the main branch. In fact, while the main branch consistently hit its sales
targets, the Tagaytay branch was only hitting around 70%.

So what makes Orient buko pies better than other bakeshops? "We only use natural
ingredients. No preservatives and we do everything by hand. No mixers." says its general
manager. "But what people say distinguishes our pies from the rest is the filling. We only use
coconut that is harvested the same day. So if on a certain day we only get a thousand coconuts,
that is all the pies we are going to bake. When we run out, we run out
 Moreover, the general manager believes that the best coconut meat comes from 40-day-
old coconuts harvested in Laguna and Batangas. Therefore, they have stringent standards
regarding the quality of the coconut meat that they receive. If the delivery fails the quality control
check (because it is either too hard or not cleaned well enough, then the vendor gets it back.
Each buko pie requires about four to five fresh coconuts worth of coconut meat.

On average, their daily sales range from 500 to 1,000 pies, with the original branch
typically selling 1,000 boxes a day during peak season and half of that during non-peak seasons,
while the Tagaytay branch sells about 500 boxes during peak and 300 boxes a day during non-
peak seasons. Orient's biggest competitors in the buko pie market are (1) Colette's Buko Pie and
Pasalubong, which had about 40 branches across Laguna, Tagaytay, Batangas, and even in Cebu;
(2) Lety's Buko Pie, which offered different pie sizes and had at least four branches around
Laguna; and (3) El Mare Buko Pie, with just one branch in San Pablo, Laguna.

Lety's Buko Pie has, in fact, been aggressive in pursuing the frozen buko pie market
Frozen buko pies has become a product strategy that, because of its longer shelf life, allowed the
business to export its products as well as provide it with the capability to open market stalls
nationwide. This is a market that Orient has not explored at all.

The family behind Orient Bakeshop is wondering about their growth options. Was
opening the Tagaytay branch a good decision, or should they just close it down and improve
production capacity at the original branch instead? Should they follow the aggressive rollout of
Colette's and pursue a wide distribution network? Should they venture into frozen buko pies?

Questions:

1. In your opinion, should the family keep the Tagaytay branch, or should they close this down
and focus on improving the capacity and service of the original outlet instead?

2. What do you think are the biggest advantages of Orient Bakeshop?

3. If you were managing Orient Bakeshop, what would be your long-term goal for the business?
Craft a strategy that will help get the company there.

4. Should Orient venture into frozen pies? Explain.

CASE 2. PINAKAMASARAP CORPORATION

The company behind the popular Marca Piña line of condiments had its beginnings in
the late 1940s, with a modest plant that was situated in San Bartolome, Novaliches. Starting as a
business with less than ten employees, it was then known as the National Soy Corporation. Its
Marca Pina brand of soy sauce, however, quickly exploded in popularity due to highly positive
word of mouth from very satisfied customers, who were delighted by its particularly rich color,
texture, and aroma.

Fueled by its phenomenal market growth, the company became big enough so that, in
the 1950s and 1960s, it was able to lock up the supply of quality raw materials, thereby making it
difficult for competitors to compete with them in the quality arena. In fact, smaller firms could not
even enter the market for lack of supplies of raw materials. It was not until the company's
contract with its suppliers ended that finally the industry opened up.

By 1973, the company became known as the Balanced Food Corporation, and it was still
growing at a fast rate. While other companies tried to imitate Marca Piña's brand of soy sauce,
they could never quite duplicate it. The company credits its selection of ingredients, its
sophisticated formulation, and its processes in enabling it to produce a soy sauce of superior
taste and quality. The company also arguably benefited from a strong advertising presence on TV,
where its ad showing a child who could not properly pronounce "Pinakamasarap" became a sort
of viral hit. By 1978, the company became known as the Pinakamasarap Corporation.

In 1993, however, the company encountered labor problems, forcing them to shut down
operations for four years. This allowed imitation products to take up market share. Most of these
imitation soy sauces were made simply from water, salt, and coloring, as opposed to the high
actual soy content of Marca Piña. However, consumers who were not picky quickly forgot about
the higher caliber taste of Marca Piña and moved to other brands. During this time, the Silver
Swan brand became the market leader and followed by Datu Puti.

By the time Piñakamasarap finally reopened its business in 1998, its market share had
dropped drastically due to its prolonged absence from the market.

As of 2014, the company

had around 70 regular employees
and anywhere from 50 to 100 contractual employees depending on the season, which peaked at
around December.

The biggest challenge facing its Chief Executive Officer (CEO) is growing its brand
gaining market share. From its distant third-place ranking in the market (with just eight percent
market share), the management wanted the firm to eventually reclaim the market dominance that
it once had. This will in turn allow the company to boost its profitability.

As an interesting side note, the CEO is also considering what its advertising options and
are. Whereas consistent TV advertising back in the 1970s might have helped it achieve market
leadership, the company today no longer had the financial resources to pursue such an option
and could no longer even keep up with the marketing budgets of the two leading brands of soy
sauce and condiments.

The number three position also further cripples Piñakamasarap from being present in a
significant retail space: sari-sari stores. Most sari-sari stores would only stock one or two brands
of any particular product category. This usually means stocking just the top two brands. This
means that Pinakamasarap Corp. was shut out from this very important retail channel.

The CEO knew that the company had the potential to grow its sales dramatically. After
all, its manufacturing plant in Novaliches was operating at just 30% of its capacity. It was now just
a matter of determining the best strategy to lead it toward its long-term dream of reclaiming
market leadership.

Questions:

1. What do you think are the biggest strengths of Pinakamasarap Corp.?

2. In your opinion, is it still realistically possible for Piñakamasarap Corp. to eventually

regain its leadership position? Why or why not?

3. Do you believe that aggressive advertising will be necessary to get the Marca Piña brand
of soy sauce back to a position of leadership? Why or why not?
4. If you were the CEO of Piñakamasarap Corp., what strategy would you recommend that
would give the company its best chance of regaining market leadership Explain your step-
by-step strategy,