TECHNICAL WRITING professionals or academicians on topics of

interest concerning their specific fields.

 Technical Writing refers to writings
about scientific subjects and about Printed Action Memo - a ready-format
various technical subjects associated memorandum that only requires a
with sciences. checkmark on the appropriate box that
 Technical Writing is characterized by contains the message.
certain formal elements, such as its
Graphic Aids - drawings, sketches and
scientific and technical vocabulary, its
illustrations that aid the readers in
use of graphic aids, and its use of
understanding the presented data.
conventional report forms.
Instructional Manuals - written to guide the
TECHNICAL WRITING readers on how to assemble, maintain, and
CONTENT factual, straight- operate an apparatus, machine or gadget.
forward
AUDIENCE specific Brochures - are pamphlets of flyers that
PURPOSE inform, instruct, endorse a product in such a way that the
persuade potential customer will be convinced that
STYLE formal, standard, the product is effective and eventually avail
academic of the product.
TONE objective
Proposals - written suggestions on how to
VOCABULARY specialized make the company or organization more
ORGANIZATION systematic productive and successful.

Memoranda - inter-office written

CREATIVE WRITING communication used to disseminate
CONTENT imaginative, symbolic information.
AUDIENCE general
PURPOSE entertain, captivate FIVE IMPORTANT PRINCIPLES IN
STYLE informal, artistic, GOOD TECHNICAL WRITING
figurative 1. Always have in mind a specific readers,
TONE Subjective real or imaginary, when you are writing a
VOCABULARY general report.
ORGANIZATION Arbitrary (SUBJECTIVE)
2. Before you start to write, always decide
what the exact purpose of your report is,
PRODUCTS OF TECHNICAL and make sure that every paragraph, every
WRITING sentence, every word makes a clear
contribution to that purpose.
Business Letter - a type of written
communication. It is written using formal 3. Use language that is simple, concrete,
language and follows formal elements of and familiar.
letter writing.
4. At the beginning and end of every
Contract - a written agreement between two section of your report, check your writing
people under mutually agreed terms. according to this principle: “First you tell the
reader what you’re going to tell him, then
Monograph - a detailed essay or book on a
you tell him what you’ve told him.”
very specific topic. It is usually written by
5. Make your report attractive.
 Persuasive writing depends on emotional
appeal. Its goal is to change one’s attitude
PURPOSES OF TECHNICAL or motivate him/her to action.
WRITING

 It serves as basis for management

decision. RELEVANT LAWS AND
 It furnishes needed information. TECHNICAL
 It gives instructions.
 It records business transactions CONSIDERATIONS
through proposals. RELATED TO TECHNICAL
 It procures business proposals. WRITING
 It serves as basis for public relations.
 It provides report to stockholders of The Four Bodies of Law Relevant to
companies. Technical Communication

PROPERTIES OF TECHNICAL 1. Copyright law - covers the protection

WRITING
1. Subject matter
2. Audience
3. Expression
4. Style
5. Arrangement of materials
WRITING CAN BE GROUPED
INTO FIVE BASIC TYPES:
Technical writing conveys specific
information about a technical subject to a
specific audience for a specific purpose.
Creative writing includes fiction—poetry,
short stories, plays and novels and far more
different from technical writing.
Expressive writing subjective response to a
personal experience—journals and diaries
—whereas technical writing might be
objective observations of a work-related
experience or research.
Expository writing “exposes” a topic
analytically and objectively, such as news
reports. Like technical writing, the goal of
expository writing is to explain or reveal
knowledge, but expository writing does not
necessarily expect a response or action
from the reader.
of the rights of the author.
2. Trademark law – pertains to federal
protection (different from registered
trademark).
3. Contract law - covers written
warranties or their implied warranties.
4. Liability law - pertains to
responsibilities or obligations of
writers especially claims they made
on their paper.
Technical writers are like researchers.
Both take into consideration the bounds
and limitations to things they write
They carefully study the information
to be presented and they are aware
that PRUDENCE has to be exercised.
Do’s of Technical Communication
 Abide by relevant laws.
 Abide by the appropriate corporate or
professional code of conduct.
 Tell the truth.
 Be clear.
 Avoid discriminatory language.
 Acknowledge assistance from others.

Don’ts of Technical Communication
 False implications - assuming the
outcomes of a project or making
sweeping generalizations.
 Exaggerations - expressing situations
in extreme proportions.
 Euphemisms - writing about situations
in seemingly good conditions even
though they are not.
 Don’t mislead your readers.
Reflect on the following situations. What will
you do if you are faced with any one of
them?
1. You are the boss of a company. You
received a report about missing milk
boxes in the shipment from one of
your employees who made the
inventory. Your company ordered 150
boxes, but two boxes were missing.
2. You are in a hurry to submit the
proposal for a very important meeting.
However, your fellow employee who is
the main proponent forgot to sign the
proposal. It is 2:50 PM and the paper
has to be submitted by 3:00 PM. What
will you do?
3. An attendance sheet is being passed
around in the seminar room. You were
asked to write your purpose for
attending because it is about
professional development. What will
you write?
THE WRITING PROCESS
 Pre-writing stage - is the first stage in
writing process where the writer
composes or supplies information
pertaining to the following:
- Purpose of the paper
- Choice of topic
- Gathering information
Pre-writing Techniques
 Keep a writer’s journal by
recording personal experiences,
perceptions, and ideas.
 Do free writing.
 Cluster by drawing lines and
circles to show connection
between ideas.
 Ask questions (5W’s and 1H).
 Read with focus.
 Listen with focus.
 Observe by noticing details
around you through the senses
 Imagine. Use “what if” approach.
 Writing Stage is the part where we
begin to write our first draft.
Do’s and Don’ts of writing a first draft:
 Do not overanalyze your writing;
 Feel free to follow the flow of
ideas;
 Do not exaggerate details;
 Work on the details as much as
possible to keep the story fresh
in your mind;
 Do not worry yet about how
good your writing is.
 Have fun!
 Re-writing stage is also known as the
“revision” stage to ensure the
following:
 The content of the paper is
relevant;
 There is organization and
coherence in the arrangement of
ideas; and
 Grammar and mechanics are
clearly observed.
CHAPTER 1
THE PROBLEM AND ITS
BACKGROUND
 Introduction
 Background of the Study
 Theoretical / Conceptual Framework
 Statement of the Problem
 Hypothesis
 Scope and Limitations of the Study
(Scope and DELIMITATIONS of the
Study)
 Significance of the Study
 Definition of Terms
INTRODUCTION
 The introduction is the first part of
Chapter I. It serves the purpose of
leading the reader from a general
subject area to a particular field of
research.
 It establishes the context of the
research being conducted
 by summarizing current
understanding and background
information about the topic,
 stating the purpose of the work
in the form of the hypothesis,
question, or research problem,
 briefly explaining your rationale,
methodological approach,
highlighting the potential
outcomes your study can reveal,
and
 Describing the remaining
structure of the paper.
 Think of the introduction as a mental
road map that must answer for the
reader these four questions:
 A roadmap is a strategic plan that
defines a goal or desired outcome.
 What was I studying?
 Why was this topic important to
investigate?
 What did we know about this
topic before I did this study?
 How will this study advance our
knowledge?
 A well-written introduction is important
because, quite simply, you never get
a second chance to make a good first
impression. 
 The opening paragraph of your paper
will provide your readers with their
initial impressions about the logic of
your argument, your writing style, the
overall quality of your research, and,
ultimately, the validity of your findings
and conclusions.
 A vague, disorganized, or error-filled
introduction will create a negative
impression, whereas, a concise,
engaging, and well-written
introduction will start your readers off
thinking highly of your analytical skills,
your writing style, and your research
approach
 Where do I begin? - It is important to
lay a foundation for understanding the
historical context underpinning the
research problem. However, this
information should be brief and
succinct and begin at a point in time
that best informs the reader of study's
overall importance.
 For example, a study about coffee
cultivation and export in West Africa
as a key stimulus for local economic
growth needs to describe the
beginning of exporting coffee in the
region and establishing why economic
growth is important. You do not need
to give a long historical explanation
about coffee exportation in Africa.
 If a research problem demands a
substantial exploration of historical
context, do this in the literature review
section; note in the introduction as
part of your "roadmap" that you are
covering this in the literature review.
 The final paragraph or sentences of
your introduction should forecast your
main arguments and conclusions and
provide a description of the rest of the
paper [a "roadmap"] that lets the
reader know where you are going and
what to expect.
 Try writing your introduction last. You
may think that you have to write your
introduction first, but that isn’t
necessarily true, and it isn’t always
the most effective way to craft a good
introduction.
 However, an introduction written at
the beginning of that discovery
process will not necessarily reflect
what you wind up with at the end. You
will need to revise your paper to make
sure that the introduction, all of the
evidence, and the conclusion reflect
the argument you intend.
 Don’t be afraid to write a tentative
introduction first and then change it
later.
 Some people find that they need to
write some kind of introduction in
order to get the writing process
started.
 That’s fine, but if you are one of those
people, be sure to return to your initial
introduction later and rewrite if
necessary.
INTRODUCTION/BACKGROUND
OF THE STUDY
 What is the difference between
introduction and background of the
study?
 Introduction sets the scene of your
research while background gives a
reason behind the research chosen
and the incidents leading up to the
study.
 The introduction only contains the
preliminary information about your
research question or thesis topic. It is
simply an overview of the research
question or thesis topic.
 The background of your study is more
in-depth - it explains why your
research topic or thesis is worth the
time of your readers.
BACKGROUND OF THE STUDY
 The background of the study is one of
the key aspects you need to get right
when you are writing a research
paper.
 It is a compilation of adequate
information that is based on the
analysis of the problem or proposed
argument, the steps and methods
needed to arrive at the design, the
implementation of the results
achieved, and feasible solutions.
 Ideally 3 to 5 paragraphs only 
 Present your arguments in the first
three paragraphs.
 Convince your readers or your panel
that there is an immediate need for
your research. Cite the problems.
 Ex. Problem in Reading
Comprehension – Many
students can read but they
cannot understand what they are
reading, and fail in the subject
because of the problem in
reading comprehension
 Present the problem, the effects, why
is there a need to do a research for
that problem.
 Tip – When you are writing a research
paper, especially in the background of
the study, use the deductive method,
from general to specific (inverted
pyramid)
 4th paragraph –Rationale of the study;
common question asked during the
oral defense – reason why you chose
to do your research
 Why did you do a research about
reading comprehension? Key word is
reason.
 Rationale – In this light the researcher
decided to conduct this study
because…
 Can also include the research gap in
the rationale. A research gap is a
question or a problem that has not
been answered by any of the existing
studies or research within your field.
 Do not fill the background of the study
with citations – at least 2 to 5 only
 Always cite your source – Plagiarism
if you do not cite the source. This is
an ethical practice in research.
 When using APA format, follow the
author, date method of in-text citation.
This means that the author's last
name and the year of publication for
the source should appear in the text,
e.g., (Jones, 1998), and a complete
reference should appear in the
reference list at the end of the paper.
RESEARCH GAP
 How do I find one?
 It will take a lot of research and
reading.   Conceptual Framework
 You'll need to be very familiar with all
the studies that have already been
done, and what those studies
contributed to the overall body of
knowledge about that topic.
 Make a list of any questions you have
about your topic and then do some
research to see if those questions
have already been answered
satisfactorily. If they haven't, perhaps
you've discovered a gap!   of the study and their results.
Are There Rules for using tenses in
Research Papers?
 Rule of Thumb – Use present or past
tense only
 Abstract: Past tense
 Introduction: Present tense
 Related Work/Citations: Past tense
 Methods/Experiments: Past tense
 Results: Past tense for results
obtained / Present tense to refer
figures, graphs, tables
 Discussion: Present tense to explain
significance of results / Past tense to
summarize findings, with present
tense to interpret results
 Conclusion: A combination of tenses
to highlight past research and future
directions
Theoretical/Conceptual Framework
 This is one of the most important parts
of a research, if not the most
important.
 Theoretical Framework – the structure
that can hold or support a theory of a
research study; based on an existing
theory.
 It introduces and describes the theory
that explains why the research
problem under study exists.
 You cannot build a house without a
strong foundation.
 If your research involves a theory –
Theoretical Framework
 If it only involves an idea or concept –
 They can independently stand alone.
 You will be citing theories or concepts
supporting your main theory or main
concept.
 Citation is quoting directly an idea or
theory from a theorist or writer stating
how they presented it.
 A theory in the form of a model or
paradigm that serves as the basis of
your study. It mentions the proponents
 Thought of as a map or travel plan.
 Important to consider the relevant
theory underpinning the knowledge
base of the phenomena under study.
 It shapes the justification of the
research problem.
 It is based on an existing theory which
may form the basis for the
researcher’s observations and
become the frame of reference by
which the conceptual framework may
be derived.
 Before you start your research, you
have to explore what theories and
models other researchers have
already developed. The goal of a
theoretical framework is to present
and explain this information.
 There may be many different theories
about your topic, so the theoretical
framework also involves evaluating,
 comparing, and selecting the most
relevant ones.
 By “framing” your research within a
clearly defined field, this part of your
thesis lays the foundations that will
support your analysis, helping you
interpret your results and make
broader generalizations.
 This is the foundation of your research
– your research will not stand if you
do not have strong theory that would
prove the strategy that you are testing
is effective, and has the potential of
helping the beneficiaries of your
research.
 Any theory or concept that you
choose should be directly relevant,
that exactly discusses the process or
steps that you are presenting in your
research.
 You have to establish the main theory
that you have chosen that describes
the process or strategy that you are
presenting in your research.
 Immediately after the citation would
be the synthesis – how theory or idea
is relevant to your research.
 Synthesis is the narrative discussion
of the relevance of the citation to your
research. It is also called reflection.
 How do we further explain citation and
synthesis?
 Bridge the gap between the idea that
you cited and the research that you
are conducting through a narrative
description of how they will be coming
together.
 This is how citation and synthesis
work hand in hand
 Do not flood with citations without any
reflection or synthesis.
CONCEPTUAL FRAMEWORK
 Concept or idea
 A conceptual framework is a written or
visual representation of an expected
relationship between variables.
Variables are simply the
characteristics or properties that you
want to study.
 It is the researcher’s own model
illustrating variables that specify the
problem and gives direction to the
study. It may be an adaptation of a
model in an early theory, with
modifications to suit the inquiry.
 The conceptual framework is the
researcher’s idea on how the research
problem will have to be explored.
 This is founded on the theoretical
framework which lies on a much
broader scale of resolution.
 The conceptual framework embodies
the specific direction by which the
research will have to be undertaken.
 Statistically speaking, the conceptual
framework describes the relationship
between specific variables identified in
the study.
 It also outlines the input, process and
output of the whole investigation.
 The conceptual framework is also
called the research paradigm.
Figure 1 shows the Conceptual Framework
of the study. The input is the profile of the
college students according to sex, year-
level, and the social media platform being
used. The research process includes
administering the questionnaires, tabulation
of students’ responses, and statistical
analysis of the data and interpretation. The
output is the level of effectiveness of using
social media in the political literacy of
college students.
Inputs are the conditions that exist prior to
group activity.
Processes are the interactions among
group members.
Outputs are the results of group activity.
Should a Research Paper Have Both
the TF and CF?
 The conceptual model gives direction
to a study and it is usually developed
taking cognizance of
relevant theories (theoretical
framework) existing literature, and
elements of logic.
 As such, a theoretical framework in
addition to representing a review of
theories relevant to a study, serves as
the fundamental basis for developing
a conceptual model.
 Therefore, depending on the context
of a study, both theoretical framework
and conceptual model are necessary.
Statement of the Problem
 A statement of the problem is used in
research work as a claim that outlines
the problem addressed by a study.
 A good research problem should
address an existing gap in knowledge
in the field and lead to further
research.
 The statement of the problem briefly
addresses the question: What is the
problem that the research will
address?
 What are the goals of SOP?
 The ultimate goal of a statement of
the problem is to transform a
generalized problem (something that
bothers you; a perceived lack) into a
targeted, well-defined problem; one
that can be resolved through focused
research and careful decision-making.
 A statement of problem need not be
long and elaborate: one page is more
than enough for a good statement of
problem.
A good research problem should
have the following characteristics:
 It should address a gap in knowledge.
 It should be significant enough to
contribute to the existing body of
research.
 It should lead to further research.
 The problem should render itself to
investigation through collection of
data.
 It should be of interest to the
researcher and suit his/her skills, time,
and resources.
 The approach towards solving the
problem should be ethical.
 The SOP should be anchored to your
research problem; questions will be
based on the research title.
 Consistency in the title, problem,
purpose, and research question
improve the logic and transparency of
research; these components should
be aligned with each other.
 1st part – introductory statement – the
general problem
 2nd part – the specific problem/s
 The SOP does not have to be long. (1
page)
 From the general problem – break
down to specific problems
 You are going to formulate questions
to be able to answer the research title
 At least 3 to 5 SOPs, also depending
on the type of research.
 Example: More questions for
experimental type of research
 Descriptive – average of 3 to 5 SOPs
only
HYPOTHESIS
 A hypothesis is a statement that
introduces a research question and
proposes an expected result.
 A prediction of what your study will
find.
 A tentative prediction about the
relationship between two or more
variables in the study.
 Translates the research question into
a prediction of expected outcomes.
 A predicted answer to your research
question.
 An intelligent guess on the
relationship between your variables.
 Hypothesis is connected to your
research question and research
variables.
Characteristics of a Well-Defined
Hypothesis
 States the expected relationship
between variables
 Testable you can determine it to be
true or false through your research
study findings
 Derived from the problem statement –
aligned with your research question
 Simple and concise
Commonly Asked Questions
Do all researches require hypotheses
formulation?
 Not all studies have hypotheses.
Sometimes a study is designed to be
exploratory. There is no formal
hypothesis, and perhaps the purpose
of the study is to explore some area
more thoroughly in order to develop
some specific hypothesis or prediction
that can be tested in future research.
A single study may have one or many
hypotheses.
Which kind of researches require
hypothesis formulation?
 A hypothesis is used more often for
the quantitative research method
approach, whereas a research
question can be answered by both
qualitative and quantitative research
methodologies.
 Common in experimental quantitative
research studies.
Essential Characteristics of a Good
Hypothesis
To help you formulate a promising research
hypothesis, you should ask yourself the
following questions:
 Is the language clear and focused?
 What is the relationship between your
hypothesis and your research topic?
 Is your hypothesis testable? If yes,
then how?
 What are the possible explanations
that you might want to explore?
 Does your hypothesis include both an
independent and dependent variable?
 Can you manipulate your variables
without hampering the ethical
standards?
Types of Research Hypothesis
1. Simple Hypothesis. It predicts the
relationship between a single
dependent variable and a single
independent variable. (Ex.
The stress level of fathers is related to
the stress level of mothers)
2. Complex Hypothesis. It predicts the
relationship between two or more
independent and dependent variables.
(Ex. The hours of reviewing and study
preference has no relationship with
students score in periodical exam).
3. Directional Hypothesis. It specifies the
expected direction to be followed to
determine the relationship between
variables, and is derived from theory.
Furthermore, it implies researcher’s
intellectual commitment to a particular
outcome. (Ex.
The types of online advertisement
positively affect the level of buying
power of customers.)
4. Non-directional Hypothesis. It does
not predict the exact direction or
nature of the relationship between the
two variables. Non-directional
hypothesis is used when there is no
theory involved or when findings
contradict previous research.
(Ex. The number of hours in reviewing
is associated with level of
performance in periodical exam.)
5. Associative and Causal Hypothesis.
Associative hypothesis defines
interdependency between variables. A
change in one variable results in the
change of the other variable. On the
other hand, causal hypothesis
proposes an effect on the dependent
due to manipulation of the
independent variable. Peer tutoring
 has no significant effect on students
reading fluency.
Null Hypothesis. It states a negative
statement to support the researcher’s
findings that there is no relationship
between two variables. Use of no or not.
Denoted as Ho.
Alternative Hypothesis. It states that there
is a relationship between the two variables
of the study and that the results are
significant to the research topic. Denoted as
H1 or HA .
Always two hypotheses:
HA: Research (Alternative)
Hypothesis
What we aim to gather evidence of
Typically that there is a  Area limit (if applicable)
difference/effect/relationship etc.
H0: Null Hypothesis
What we assume is true to begin with
Typically that there is no
difference/effect/relationship etc.
Hypothesis Testing
 An objective method of making
decisions or inferences from sample
data (evidence).
 Sample data used to choose between
two choices i.e. hypotheses or
statements about a population.
 We typically do this by comparing
what we have observed to what we
expected if one of the statements
(Null Hypothesis). was true
Scope and Limitations of the Study
 In a thesis, the scope defines exactly
what will be covered in a study, while
the limitations are the constraining
aspects that may have influenced or
affected the research.
 Three paragraphs only
What is difference between limitation and
delimitation?
 Limitations are influences that
the researcher cannot control.
 Delimitations are choices made
by the researcher which should
be mentioned. They describe the
boundaries that you have set for
the study.
Why is it important to determine the scope
limitation and delimitation of a study?
 Both are important because they help
to put the research findings into
context, and although they explain
how the study is limited, they increase
the credibility and validity of a
research project.
Describe the extent of the study
 Actual place where the study will be
conducted
 Duration of the conduct of the study
 Inclusions of the study (only specific
aspect of the study or topic)
 Limit of the number of respondents
Answers the five (5) simple questions:
 What – scope, limitation, and
delimitation
 How
 Who
 Where
 When
How do you determine the scope and
delimitation of a study?
 It is followed by an explanation of the
limitation of the research. Research
usually limited in scope by sample
size, time and geographic area. While
the delimitation of study is the
description of the scope of study. It
will explain why definite aspects of a
subject were chosen and why others
were excluded.
How do you Delimitate a study?
 Examples of delimitations include
objectives, research questions,
variables, theoretical objectives that
you have adopted, and populations
chosen as targets to study. When you
are stating your delimitations, clearly
inform readers why you chose this
course of study.
SIGNIFICANCE OF THE STUDY
 Presents the importance of the
research.
 It gives you the opportunity to prove
the study’s impact on your field of
 research, the new knowledge it
contributes, and the people who will
benefit from it.
 Purpose – to give you space to
explain to your readers how exactly
your research will be contributing to
the literature of the field you are
studying.
 It’s where you explain why your
research is worth conducting and how
significant it is to the community, the
people, and various institutions.
Steps and Guidelines on how to write the
Significance of the Study
1. Use your research problem as the
starting point.
2. State how your research will
contribute to the existing literature in
the field.
3. Explain how your research will benefit
society.
4. Mention the specific persons or
institutions who will benefit from your
study.
5. Indicate how your study may help
future studies in the field.
 Go from general to specific. Like an
inverted pyramid, you start from
above by discussing the general
contribution of your study and become
more specific as you go along.
 For instance, if your research is about
the effect of remote learning setup on
the mental health of college students
of a certain university, you may start
by discussing the benefits of the
research to the society, to the
educational institution, to the learning
facilitators, and finally, to the students.
 Beneficiaries – Those who will benefit
from your research (Ex. Students,
teachers, administrators, school,
institution, etc.)
 Hierarchy or order – The 1st
beneficiary should be the one who will
benefit the most.
 At least three (3) beneficiaries;
maximum of eight (8).
DEFINITION OF TERMS
 Definition of terms works just
like a glossary but have a different
twist.
 It is placed on the last part of Chapter
1 to tell the meaning of the terms used
throughout the said chapter.
 Here are some guidelines in writing
the Definition of terms:
 Actually, there are two types
of definition of terms: Conceptual
meaning and Operational meaning
o Conceptual
terms/meanings are based
on what a dictionary or an
encyclopedia tells.
o On the other hand,
Operational
terms/meanings are based
on how the researchers
used a term on their study.
o For thesis, we use
operational terms – should
be arranged alphabetically
and should be defined
operationally.
 Key word in your research title
 Technical terms used in your research
 Do not saturate with too many terms!
Minimum of five (5); maximum of ten
(10) terms
 Should be arranged alphabetically
 Definition should not be too long

The Investment Environment
What is an investment?
Investment - any vehicle into which funds
can be placed with the expectation that it
will generate positive income and/or that its
value will be preserved or increased
Return – the award of owning an
investment
- Current Income
- Increase in Value
Types of Investments
Securities or Property
Securities: stocks, bonds, options
Real Property: land, buildings
Tangible Personal Property: gold, artwork,
antiques
Direct or Indirect
Direct: investor directly acquires a claim
Indirect: investor owns an interest in a
professionally managed collection of
securities or properties
Debt, Equity or Derivative Securities
Debt: investor lends funds in exchange for
interest income and repayment of loan in
future (bonds)
Equity: represents ongoing ownership in a
business or property (common stocks)
Derivative Securities: neither debt nor
equity; derive value from an underlying
asset (options)
Low Risk or High Risk
Risk: chance that actual investment returns
will differ from those expected
Short-Term or Long-Term
Short-Term: mature within one year
Long-Term: maturities of longer than a year
Domestic or Foreign
Domestic: Phil.-based companies
Foreign: foreign-based companies
Suppliers and Demand of Funds
Government
–Federal, state and local projects &
operations
–Typically net demanders of funds
Business
–Investments in production of goods and
services
–Typically net demanders of funds
Individuals
–Some need for loans (house, auto)
–Typically net suppliers of funds
Key participants or rather suppliers and
demanders of funds in the financial markets
are individuals, businesses, and
government.
Governments are typically net demanders
of funds. They typically borrow more than
they save. This is because of the need to
finance State and local projects &
operations.
Business firms are are also net demanders
of funds. They typically borrow more than
they save. The borrowing can be attributed
to Investments in production of goods and
services.
Individuals as a group are the net suppliers
of funds for financial institutions (They save
more than borrow). Some are needs of
loans to finance house, auto, among others.
The individuals are therefore typically the
net suppliers of funds
FIGURE 1.1 THE INVESTMENT
PROCESS
The investment process involves
the financial institutions (banks, savings
and loans, savings banks, credit unions,
insurance companies, pension funds)
actively participate in the financial markets
as both suppliers and demanders of funds.
The financial markets (Money and capital
markets) act as forums in which suppliers of
funds and demanders of funds can transact
business directly. Then we have
the suppliers and demanders
funds whose roles are well covered above.
Types of Investors
INDIVIDUAL INVESTORS- Invest
for personal financial goals (retirement,
house)
INSTITUTIONAL INVESTORS -
Paid to manage other people’s money
Trade large volumes of securities
Include: banks, life insurance companies,
mutual funds and pension funds
Investment Vehicles
Investment vehicles are assets offered by
the investment industry to help investors
move money from the present to the future,
with the hope of increasing the value of
their money. These assets include
securities, such as shares, bonds, and
warrants; real assets, such as gold; and
real estate.
Table 1.1 Overview of Investment
Vehicles
of
Taxes in Investing Decisions
(Philippine setting)
Basic Sources of Taxes in Investing
– Income Tax: tax rates from 10% to 35%
– 0.6% stock transaction tax for every time
you sell your
– capital gains tax of 15%.
– commissions you pay to them are subject
to a 12% value-added tax
– cash dividends from your stocks, that will
be subject to a 10% final withholding tax.
– initial public offering, there's also tax
ranging from 1% to 4%
– a documentary stamp tax amounting to
P1.50 for every P200 par value of the
shares.
Types of Income for Individuals
Active Income: income from working
(wages, salaries, pensions)
Portfolio Income: income from investments
(interest, dividends, capital gains)
Passive Income: income from special
investments (rents from real estate,
royalties, limited partnerships)
Ordinary Income – Active, portfolio and
passive income included
– Taxed at progressive tax rates
(rates go up as income goes up)

Capital Gains and Losses
– Capital Asset: property owned and used
by taxpayer, including securities and
personal residence
– Capital Gain: amount by which the
proceeds from the sale of a capital asset
are more than its original purchase price
– Capital Loss: amount by which the
proceeds from the sale of a capital asset
are less than its original purchase price
Table 1.2 Philippine Tax Rates and
Income Brackets for Individuals
Investing Decisions over Investor
Life Cycle
Investors tend to follow different investment
philosophies as they move through different
stages of the life cycle.
Youth Stage
– Twenties and thirties
– Growth-oriented investments
– Higher potential growth; Higher potential
risk
– Stress capital gains over current income
What are some examples of age-
appropriate investments?
– Common stocks, options or futures
Middle-Aged Consolidation Stage
– Ages 45 to 60
– Family demands & responsibilities
become important (education expenses,
retirement savings)
– Move toward less risky investments to
preserve capital
– Transition to higher-quality securities with
lower risk
What are some examples of age-
appropriate investments?
– Low-risk growth and income stocks,
preferred stocks, convertible stocks, high-
grade bonds
Retirement Stage
– Ages 60 and older
– Preservation of capital becomes primary
goal
– Highly conservative investment portfolio
– Current income needed to supplement
retirement income
What are some examples of age-
appropriate investments?
– Low-risk income stocks and mutual funds,
government bonds, quality corporate
bonds, bank certificates of deposit
Investing in Different Economic
Environments
Market Timing: process of identifying the
current state of the economy/market and
assessing the likelihood of its continuing on
its present course
Three Conditions of the U.S. Economy
– Recovery or expansion
• Corporate profits are up, which
helps stock prices
• Growth-oriented and speculative
stocks do well
– Decline or recession
• Values and returns on common
stocks tend to fall
– Change in the general direction of the
economy’s movement

Figure 1.2 Different Stages of an
Economic/Market Cycle
The Business Cycle is the pattern of
upward and downward movement in the
general level of real economic activity.
The business cycle is divided into
four phases:
Recession: downturn when output declines
for six months or more. Unemployment
rises and economic activity declines. A
depression is a prolonged recession.
Trough: occurs when output stops falling—
when output reaches its low point.
Recovery or Expansion: the period after the
trough, when the output increases,
unemployment falls and economic activity
increases.
Peak: the final stage of the business cycle
and precedes a recession. Output growth
ceases.
Since 1924 business cycles average about
5 years in length: recessions one year and
recoveries four years.
Investing Decisions and Interest
Rates
Interest rates are the single most important
variable in determining returns to investors
for bonds and fixed-income securities.
Interest rates and bond prices move in
opposite directions:
– When interest rates go up, bond prices go
down
– When interest rates go down, bond prices
go up
The Role of Short-Term Vehicles
Liquidity: the ability of an investment to be
converted into cash quickly and with little or
no loss in value
Primary use is for emergency cash reserve
or to save for a specific short-term financial
goal
THE ADVANTAGES AND
DISADVANTAGES OF SHORT-
TERM VEHICLES
ADVANTAGES
– High liquidity
– Low risks of default
DISADVANTAGES
–Low levels of return
–Loss of potential purchasing power from
inflation
17 Best Investment Vehicles for
Filipinos
INVESTMENT IN GOVERNMENT
BONDS AND SECURITIES
On many occasions, the Philippine National
Government or its agencies issue debt
securities to finance deficits and
development projects. Selling to the buying
public originates from the Bureau of
Treasury (BTr). through a network of
licensed dealers. Government securities
(GS) are no longer certificated, they are
known as “scriptless”. GS discount and
coupons are subject to 20% final income
tax, which is withheld upon floatation of
Treasury Bills, or upon payment of the
coupon for Treasury Bonds. No other tax is
imposed on the secondary market buyer.
Government and government-owned and
controlled corporations also offer
shareholding to the public in the form of
bonds or securities. Government securities
are unconditional obligations of the State,
and backed by its full taxing power, making
them practically free from default.
1. TREASURY BILLS TREASURY BILLS
(T-BILLS) - are direct and unconditional
obligations of the national government.
They are issued by the BTr. They carry
maturity of one year or less and can be
traded in the secondary market before
maturity. Various tenors of T-bills exist: (1)
91 day, (2) 182 or (3) 364 days. Banks that
comprise majority of the Government
Security Eligible Dealers (GSED) bid for T-
bills in the weekly auctions held by the BTr.
The banks then resell the T-bills to
investors. Treasury Bills do not bear
interest. They are issued and sold at a
discount from face value and are redeemed
at maturity for the full face value of the
instrument.
2. TREASURY NOTES Fixed Rate
Treasury Notes (FXTNs) - are direct and
unconditional obligations of the national
government. They are issued by the Bureau
of Treasury (BTr). They are interest bearing
and carry a term of more than one year and
can be traded in the secondary market
before maturity. The tenors for these debt
instruments can vary.
3. Retail Treasury Bonds Retail Treasury
Bonds (RTBs) - are like treasury notes but
are usually longer in maturity (10 years and
above). They are direct and unconditional
obligations of the national government that
primarily caters to the retail market or the
end-users. They are issued by the Bureau
of Treasury (BTr). They are interest bearing
and carry a term of more than one year and
can be traded in the secondary market
before maturity. RTBs are safe, liquid and
offer attractive returns to investors. The
interest coupons of treasury bonds are paid
to the investor quarterly. Further, RTBs
serve as a critical part of the government’s
program to make government securities
available to small investors. They are
issued to mobilize savings and encourage
retail investors to purchase long-term
papers. In contrast to PhP 500,000 in the
wholesale market, the minimum placement
of RTBs is PhP 5,000.
4. Dollar Linked Peso Notes (DLPN) Dollar
Linked Peso Notes (DLPNs) - are direct
and unconditional obligations of the national
government and are issued by the BTr.
They are interest bearing and 2 carry a
term of more two (2) and three (3) years
and can be traded in the secondary market
before maturity. The notes track the
movement of the Philippine Peso and US
Dollar exchange rate. Payments of interest
and principal are linked to the movement of
the exchange rate and computed based on
the foreign exchange factor.
Investment Suitability
Short-Term Vehicles are used for:
– Savings
 Emphasis on safety and security
instead of high yield
– Investment
 Yield is often as important as safety
 Used as component of diversified
portfolio
 Used as temporary outlet waiting for
attractive permanent investments
Securities Types of Securities

Securities are shares, participation or Money Market Instruments

interests in a corporation or in a commercial
enterprise or profit-making venture and
evidenced by a certificate, contract,
instrument, whether written or electronic in
character. It includes:
1. Short-lived mortgage & asset-backed
securities
2. Foreiegn exchange swaps

 Shares of stock, bonds, debentures,

notes, evidences of indebtedness,
asset-backed securities;
 Investment contracts, certificates of
interest or participation in a profit
sharing agreement, certificates of
deposit for a future subscription;
 Fractional undivided interests in oil,
gas or other mineral rights;
 Derivatives like option and warrants;
 Certificates of assignments,
certificates of participation, trust
certificates, voting trust certificates or
similar instruments;
 Proprietary or non-proprietary
membership certificate incorporation
and
 Other instruments as may in the future
be determined by the Commission.
As defined by REPUBLIC ACT NO. 8799 -
SECURITIES REGULATION CODE OF
THE PHILIPPINES

Classifying Securities

Security Types
Our goal in this chapter is to introduce the
different types of securities that investors
routinely buy and sell in financial markets
around the world.
For each security type, we will examine:
• Its distinguishing characteristics,
• Its potential gains and losses
 Overview to Financial
Controllership
Accounting - track expenditure and profit of
the company
- store and analyze financial information
- Preparation of Financial Statement
- Create fiscal history of the company, they
can utilized it to predict the financial
success of the company. With that
prediction they can create new budget plan
and more opportunity
1. What is the task/function of
accounting in a corporation?
Traditional Accounting Function
-Accounts payable transaction processing
AP (rent, logistics, licensing, contractor- the
one who process the documents) lahat ng
perang palabas ng kompanya.
Need to determine the due date.
-Accounts receivable transaction
processing
AR pera na matatanggap ng company from
costumers
Continuous flow of revenue
Need to get AR 30 day or less
- Asset transaction processing
Recorded in sequence.
The accounting keep track the
maintenance when it comes to the asset of
the company.
- Debt transaction processing
Pursue payment owe to the creditor
New Accounting Tasks
- Coordination and Consolidation of
accounting at subsidiaries
Combine asset, liabilities and other
financial terms
- Currency Transactions
Convert currency to another one
- Marginal analysis
Cost benefit
- Non-product cost analysis
Cost when it comes to administrative
charges, financing cost, marketing activities
- Operation of accounting software
Make day to day activity easier
New Tasks assigned to the accounting
function of smaller company
- Hedging and letter-of-credit transaction
- Internal auditing programs
What are the roles and responsibility of
controller?
- Traditionally, the role of the controller has
been the one who manages a few key
transaction cycles, monitors assets, and
delivers financial statements.
- Due to the vastly increased interaction
with other departments, the controller must
be highly skilled in interdepartmental
dealings.
- In addition, the controller must govern a
group of employees that is much more
educated than was previously the case.
ERP – Enterprise resource planning
- ERP helps companies run successful
businesses by connecting their financial
and operational systems to a central
database
- it’s a software solutions to automate the
transactions of the company.
Impact of Ethics in Accounting Role
- The accounting function can have a
serious negative impact on a company's
ethical standards through nothing more
than indifference or lack of caring.
- If the controller does not maintain a high
ethical standard, the rest of the accounting
staff will have no ethical leader and will
quickly lapse into apathy.
- The controller can have an additional
impact on the pervasive attention to ethics
within the corporation by requiring its
consideration as part of the capital
budgeting process.
Illustrative topics to include in Code of
Ethics.
 Bidding, negotiating and performing
under government contracts
 Compliance with antitrust laws
 Compliance with securities laws and
regulations
 Conflicts of interest
 Cost consciousness
 Employee discrimination on any
grounds
 Gifts and payments of money
Hazardous Waste Disposal
- It involve cost
International Boycott
- It includes protest, refusal when it comes
to engaging in economic interaction
Leave for Military Service
- get a reliever when an employee leave for
military
Meals and Entertainment
Petty Cash- use in day to day transaction
for smaller amount which the company
should spend
Political Contributions
- Transaction when it comes to giving
donation in return there would be some
benefits
Preservation of Assets
- About keeping assets of the company.
Example an employee is using the car for
personal use.
Restrictive Trade practices
- Unfair practices that is deceptive or
fraudulent. Example: false advertisement,
exaggerating the product
Standard of Conduct
- Every company has its own code
Use of Company Assets
- using the assets of the company for
personal use
Workplace and Product Safety
- It is unethical if the company is using
unsafe product for the employees
A code of ethics becomes the starting point
in the series of judgements a controller
must follow when confronted with an ethical
issue. The logical series of steps to work
through are:
Consult the code of ethics
- Should or should not do, for decision
making
Discuss with immediate supervisor
Discuss with a trusted peer
Discuss with the Board's audit committee
Consider leaving the company. (If all these
avenues are untenable or result in
adequate advice, the controller should
seriously consider leaving the company in
the near future.)
Evolving role of Accounting
- The accounting function is in the midst of
a fundamental change from being a clerical
group without significant training to a cadre
of very experienced technicians and
managers.
- These trend will force the accounting
department of the future to stock up on
highly trained personnel with good
management skills
- The accounting department is likely to
become a more common route to top
management positions.
- It is likely that there will be a decrease in
the proportion of purely clerical positions in
the accounting area, in fact of more senior
personnel with extra technical and
management skills. Also, because of the
greater breadth of responsibility to be
obtained in this area, it will become more
common for senior management personnel
to come out of this area.
Research Title
 will find too
Tips for Students – Thesis Writing much
1. Make a schedule information and
2. Just start writing not be able to
3. The first draft is not the final draft focus.
4. Be flexible • Background
5. Write the introduction last reading can
6. Move around help you choose
7. Get feedback early and limit the
8. Take care of yourself scope of your
9. Give yourself breaks topic. 
10. Use a reference manager and other • Review the topic selection
online apps based on the suggestions
of AACCUP. 
Templates • Talk about research
ideas with your group. 
• Title Page / Approval / Table of
Your group mates may be
Contents / Abstract
able to help focus your
• Chapter 1 – The Problem and its
topic by discussing issues
Background
that didn't occur to you at
• Chapter 2 – Review of Related
first.
Literature
Think of the Who, What, When,
• Chapter 3 – Research Methodology
Where, and Why Questions
• Chapter 4 – Presentation, Analysis,
and Interpretation of Data • WHY did you choose the topic? 
• Chapter 5 – Summary, Conclusions, What interests you about it?  Do
and Recommendations / References you have an opinion about the
or Bibliography issues involved?
Preliminaries
 Choosing a Research Topic • WHO are the information
 Guidelines in Formulating the providers on this topic?  Who
Research Title might publish information about
it?  Who is affected by the
Research Topic topic?  Do you know of
organizations or institutions
 Choosing an interesting research affiliated with the topic?
topic is your first challenge. Here are
some tips: • WHAT are the major questions
for this topic?  Is there a debate
• Choose a topic that you about the topic?  Are there a
are interested in! The range of issues and viewpoints
research process is more to consider?
relevant if you care about
your topic. • WHERE is your topic important:
• Narrow your topic to at the local, national or
something manageable. international level?  Are there
• If your topic is specific places affected by the
too broad, you topic?
 • WHEN is/was your topic
important?  Is it a current event
or an historical issue?  Do you
want to compare your topic by
time periods?
Research Title
• The title summarizes the main idea or
ideas of your study.
• A good title contains the fewest
possible words that adequately
describe the contents and/or purpose
of your research paper.
• The title is without doubt the part of a
paper that is read the most, and it is
usually read first.
Characteristics of a Good Research
Title
• Summarizes the main idea of
the paper.
• Concise statement of the topic.
• Includes main variables.
• Shows the relationship of the
main variables under the study.
• Includes the main task of the
researcher.
• Mentions the participants and
settings in general.
Easy Way to Formulate a Research
Title
• Basic elements that should be found
in the research title:
• Goal – What do you want
to accomplish in your
research?
• Independent variable – the
variable that is
manipulated either by the
researcher or by nature or
circumstance; it is what the
researcher studies to see
its relationships or effects;
the CAUSE in the cause-
effect relationship.
• Dependent Variable – a
variable that is observed or
measured, and that is
influenced or changed by
the independent variable;
the EFFECT in the cause-
effect relationship.
• Locale – the area where
the study or research will
be conducted. (Example:
school, community,
barangay, etc.)
What is a Variable?
• Any measurable aspect of behavior or
influence on behavior that may
change; things you manipulate or
measure.
• In Math, a variable is an
alphabetic character
representing a number (like
x or y)
• In Science, a variable is
any factor that can be
controlled, changed, or
measured in an
experiment.
Independent Variable
The Independent Variable is what you, the
researcher, changes or enacts in order to
do your research.
Dependent Variable
The Dependent Variable is what changes
when the independent variable changes -
the dependent variable depends on the
outcome of the independent variable.
Independent vs. Dependent Variable • Use words that create a positive
impression and stimulate reader
interest.
• Use current nomenclature from
the field of study.
• Identify key variables, both
dependent and independent.
• May reveal how the paper will be
Research Title organized.
• Suggest a relationship between
• Reminder to students  Do not focus
variables which supports the
much on the title itself but on the
major hypothesis.
objective of your research.
• Is limited to 10 to 15 substantive
• What do you want to accomplish from
words.
your research?
• Do not include "study of,"
• The Effects of Computer Games in
"analysis of" or similar
the Academic Performance of
constructions.
Students in Juan Luna Elementary
• Titles are usually in the form of a
School
phrase, can also be in the form
• Identify the goal, IV, DV, and locale, in
of a question.
the above title.
• Use correct grammar and
The Effects of – GOAL
capitalization with all first words
Computer Games – IV
and last words capitalized,
Academic Performance of Students – DV
including the first word of a
Juan Luna Elementary School – LOCALE
subtitle. All nouns, pronouns,
verbs, adjectives, and adverbs
Working Title
that appear between the first
• The working title should be developed
and last words of the title are
early in the research process because
also capitalized.
it can help anchor the focus of the
• In academic papers, rarely is a
study in much the same way the
title followed by an exclamation
research problem does.
mark. However, a title or subtitle
• Referring back to the working title can
can be in the form of a question.
help you reorient yourself back to the
main purpose of the study if you feel
yourself drifting off on a tangent while
writing.
• Typically, the final title you submit to
Subtitles
your professor is created after the
• Subtitles are quite common in
research is complete so that the title
social science research
accurately captures what was done.
papers. Examples of why you
Final Title
may include a subtitle:
• Indicate accurately the subject
• Explains or provides additional
and scope of the study.
context, e.g., "Linguistic
• Avoid using abbreviations.
Ethnography and the Study of
Welfare Institutions as a Flow of
 Social Practices: The Case of
Residential Child Care
Institutions as Paradoxical
Institutions."
• Adds substance to a literary,
provocative, or imaginative title,
e.g., "Listen to What I Say, Not
How I Vote: Congressional
Support for the President in
Washington and at Home."
• Qualifies the geographic scope
of the research, e.g., "The
Geopolitics of the Eastern
Border of the European Union:
The Case of Romania-Moldova-
Ukraine."
• Qualifies the temporal scope of
the research, e.g., "A
Comparison of the Progressive
Era and the Depression Years:
Societal Influences on
Predictions of the Future of the
Library, 1895-1940."
• Focuses on investigating the
ideas, theories, or work of a
particular individual, e.g., "A
Deliberative Conception of
Politics: How Francesco Saverio
Merlino Related Anarchy and
Democracy."

What is an introduction for a

research paper?
Introductions to research papers do a lot of
work.
It may seem obvious, but introductions are
always placed at the beginning of a paper.
They guide your reader from a general
subject area to the narrow topic that your
paper covers. They also explain your
papers:
 • Scope: The topic you’ll be
covering
• Context: The background of your
topic
• Importance: Why your research
matters in the context of an
industry or the world
Your introduction will cover a lot of ground.
However, it will only be half of a page to a
few pages long. The length depends on the
size of your paper as a whole. In many
cases, the introduction will be shorter than
all of the other sections of your paper.
Why is an introduction vital to a
research paper?
The introduction to your research paper
isn’t just important. It’s critical.
Your readers don’t know what your
research paper is about from the title.
That’s where your introduction comes in. A
good introduction will:
• Help your reader understand
your topic’s background
• Explain why your research paper
is worth reading
• Offer a guide for navigating the
rest of the piece
• Pique your reader’s interest
Without a clear introduction, your readers
will struggle. They may feel confused when
they start reading your paper. They might
even give up entirely. Your introduction will
ground them and prepare them for the in-
depth research to come.
What should you include in an
introduction for a research paper?
Research paper introductions are always
unique. After all, research is original by
definition. However, they often contain six
essential items. These are:
 An overview of the topic. Start
with a general overview of your
topic. Narrow the overview until
you address your paper’s
specific subject. Then, mention
questions or concerns you had
about the case. Note that you
will address them in the
publication.
 Prior research. Your introduction
is the place to review other
conclusions on your topic.
Include both older scholars and
modern scholars. This
background information shows
that you are aware of prior
research. It also introduces past
findings to those who might not
have that expertise.
 A rationale for your paper.
Explain why your topic needs to
be addressed right now. If
applicable, connect it to current
issues. Additionally, you can
show a problem with former
theories or reveal a gap in
current research. No matter how
you do it, a good rationale will
interest your readers and
demonstrate why they must read
the rest of your paper.
 Describe the methodology you
used. Recount your processes
to make your paper more
credible. Lay out your goal and
the questions you will address.
Reveal how you conducted
research and describe how you
measured results. Moreover,
explain why you made key
choices.
 A thesis statement. Your main
introduction should end with a
thesis statement. This statement
summarizes the ideas that will
run through your entire research
article. It should be
straightforward and clear.
 An outline. Introductions often
conclude with an outline. Your
layout should quickly review
 what you intend to cover in the
following sections. Think of it as
a roadmap, guiding your reader
to the end of your paper.
These six items are emphasized more or
less, depending on your field. For example,
a physics research paper might emphasize
methodology. An English journal article
might highlight the overview.
Three tips for writing your
introduction
We don’t just want you to learn how to write
an introduction for a research paper. We
want you to learn how to make it shine.
finish your paper, be sure to
proofread, too. Mistakes can
seem unprofessional.
Writing an introduction
The introduction answers the questions:
• What am I studying?
• Why is it an important question? Why
should the reader read on?
• What do we know already about it?
• What basis do I need to provide (such
that the reader can understand my
study)?   

There are three things you can do that will

make it easier to write a great introduction.
You can:

 Write your introduction last. An

introduction summarizes all of
the things you’ve learned from
your research. While it can feel
good to get your preface done
quickly, you should write the rest
of your paper first. Then, you’ll The introduction
find it easy to create a clear
• includes a statement of the goal of the
overview.
study: why it was undertaken
 Include a strong quotation or
• sets the context for your proposed
story upfront. You want your
project and must capture the reader's
paper to be full of substance.
interest
But that doesn’t mean it should
• explains the background of your study
feel boring or flat. Add a relevant
starting from a broad picture
quotation or surprising anecdote
narrowing in on your research
to the beginning of your
question
introduction. This technique will
• give sufficient background information
pique the interest of your reader
to allow the reader to understand the
and leave them wanting more.
context and significance of the
 Be concise. Research papers
question you are trying to address
cover complex topics. To help
• reviews what is known about your
your readers, try to write as
research topic as far as it is relevant
clearly as possible. Use concise
to your thesis
sentences. Check for confusing
• cites relevant references
grammar or syntax. Read your
• all cited work should be directly
introduction out loud to catch
relevant to the goals of the thesis
awkward phrases. Before you
• give enough references such that a you know what the body of the
reader could, by going to the library or paper says. Consider making a
on-line, achieve a sophisticated concept map, it will help to
understanding of the context and identify the elements you need
significance of the question in the introduction.
• try to cite those who had the idea or
ideas first, but also cite those who • You can break up the
have done the most recent and introduction section into logical
relevant work. segments by using subheads.
• this is not a place to summarize
everything you have ever read on a
subject
• explain the scope of your work, what
will and will not be included (if you are
answering only part of the question
you are posing)
• should be at a level that makes it
easy to understand for readers with a
general science background, for
example your classmates (or your
class advisor)

Some writing tips

• For long introductions give the

reader already an indication
earlier of what question you'll be
addressing.

• Be sure to include a hook at the

beginning of the introduction.
This is a statement of something
sufficiently interesting to
motivate your reader to read the
rest of the paper, it is an
important/interesting scientific
problem that your paper either
solves or addresses. You should
draw the reader in and make
them want to read the rest of the
paper. Strategic Management

• It can be useful to sketch out the Topic Included

introduction backwards, start
with the specific focus of your
study and work upward to the
broader context. It is hard to
write a good introduction until
1. Definition of Strategic Management
2. Benefits of Strategic Management
3. Concept of Business Strategy, Policy
and Tactics
4. Strategic Management Process
Overview
 Strategic Management is exciting and
challenging. It makes fundamental
decisions about the future direction of
a firm – its purpose, its resources and
how it interacts with the environment
in which it operates. Every aspect of
the organization plays a role in
strategy – its people, its finances, its
production methods, its customers
and so on.
 Strategic Management can be
described as the identification of the
purpose of the organization and the
plans and actions to achieve that
purpose. It is that set of managerial
decisions and actions that determine
the long-term performance of a
business enterprise. It involves
formulating and implementing
strategies that will help in aligning the
organization and its environment to
achieve organizational goals.
 Strategic management does not
replace the traditional management
activities such as planning,
organizing, leading or controlling.
Rather, it integrates them into a
broader context taking into account
the external environment and internal
capabilities and the organization’s
overall purpose and direction. Thus,
strategic management involves those
management processes in
organizations through which future
impact of change is determined and
current decisions are taken to reach a
desired future. In short, strategic
management is about envisioning the
future and realizing it.
Basic Concept of Strategic
Management
 Simply getting to know the concept of
strategy and putting it work or
applying it is one of the many aspect
of what it takes to make the company
competitive. More importantly
integrating the concept into the
mainstream of the management
system is what matters most in terms
of giving directions that promises
delivering profit and expectations.
 Applying planning principle, strategic
management takes into
considerations various external as
well as internal factors environment.
The environment in general as well
as competitiveness and sustainability
over the long term period in the
industry or sector it belongs,
Definition of Strategic Management
STRATEGIC MANAGEMENT as referring
to the entire process of strategic decision
making that relates to its environment,
guides internal activities and determines the
long term performance of the organization
(Stahl ad Grigsby, 1992).
STRATEGIC MANAGEMENT as a set of
managerial decisions and actions that
determine the long run performance of a
corporations. It includes environmental
scanning (both external and internal)
strategy formulation (strategic and long
range planning) strategy implementation,
evaluation and control. The study of
strategic management therefore
emphasizes the monitoring and evaluation
of external opportunities and threats in the
light of a corporation strengths and
weaknesses. (Wheelen and Hunger (2004)
STRATEGIC MANAGEMENT as framework
that evolves around the idea of shaping the
destiny of an organization. (Wheelen and
Hunger , 2004)
It is about
1. Putting an organization into a
competitive position.
2. Sustaining and improving that position
by developing an acquisition of
appropriate resources and by
monitoring and responding to
environmental changes and
3. Monitoring and responding to the
demands of key stakeholders,
STRATEGIC MANAGEMENT emphasized
that strategic management is a continuous
process. Indeed it is considered a
continuous and dynamic process in the
sense that being externally – oriented and
driven by macro and micro environmental
condition, managers have to be always
conscious that business being on going
wealth creation endeavor, appropriate
efforts have to be made to ensure profitable
operations and survive in times of trouble
(Wright, Kroll and Parnell).
Benefits if Strategic Management
There is no doubt that substantial benefits
can be expected from the practice of
strategic management. As it promises and
articulates a series of activities or tasks
meant to ensure achievement of desired
outcomes both on the producers and
consumers side, embracing the ideals of
strategic management and doing it well
does not only stand to benefit business
owners but the industry and the society
at large ( including in particular the
prospective clients of the business
organizations ) as it factors in the internal
and environmental considerations in light
of offering products and services to satisfy
targeted markets.
To be particular, Wheelen and
Hunger (2004) cited a research covering
nearly 50 corporations in various countries
and industries. These authors found the
three mostly highly rated benefits of
strategic management to be:
a) clearer sense of strategic vision for
the firm;
b) sharper focus on what is strategically
important
c) improved understanding of rapidly
changing environment
Concept of Strategy
Wright Kroll, and Parnell (1996)
defined strategy as essentially referring to
top management’s plan to attain the
outcomes consistent with the organization
mission and goals. These authors regard
strategy in three vantage points namely
a) strategy formulation or developing
the strategy
b) strategy implementation ( putting the
strategy into action)
c) strategic control ( modifying the
strategy or its implementation to
ensure that the desired outcomes are
attained)
Intended or realized strategy refers to
the original strategy that management
plans and intends to implement whereas
Realized strategy refers to the actual and
eventual strategy that management actually
implements.
In pursuit of developing business
strategies for the firm or any organization
for that matter – strategy may come in the
form of various types. Wheelen and Hunger
(2004) theorized strategic type is a category
of firms based on common strategic
orientation and combination of structure
culture and process consistent with
strategy Competing firms within a single
industry can be categorized on the basis
of their general strategic orientation into
four types as follows.
Defenders – this type includes companies
with a product line that focus on improving
the efficiency of their existing operations.
Prospectors- this type of companies
includes firms with a broad product lines
that focus on product innovation and market
opportunities. The sales orientation makes
them somewhat inefficient. They tend to
emphasize creativity over efficiency.
Analyzers- this type includes business
organization that operate in at least two
different product-market areas, one stable
and one variable. In the stable areas,
efficiency is emphasized. In the variable
areas, innovation is emphasized.
Reactors - this type includes companies
that lack a consistent strategy culture
relationship. Their (often ineffective)
responses to environment pressures tend
to be piecemeal strategic changes.
Concept of Business Policy
In the world of business, the set of
rules that guides the decisions and actions
of the members of the organization is
generally called business policies. These
policies maybe informal or in writing
coming in the form of operational manual,
personnel handbook and memoranda
composed of issued from time to time and
as need arises.
With globalization trends along with
the challenges and opportunities posed by
information and communication technology
particularly the use of computers and the
popularization of the so called E -
commerce/E-business the notion of being
more concerned with internal operational
policies and procedures has alarmed
business executives that they are more
concerned nowadays with being externally
-oriented and specifically concerned
management strategic concept.
The use of variety of technologies
has made the world virtually smaller or
borderless to speak.
Business Policy generally refers to
set a rules that guides the conduct of the
business in pursuit of profit and other
objectives of the business organization.
These policies are developed in coherence
with the duties and responsibilities of
various functional units (human resource,
sales/marketing, production and the
like.)Business policies are usually
expressed in broad direction and
sometimes made specific to serve as
guidelines or rules for decision making and
execution of organizational activities.
Concept of Tactics
A tactic is a conceptual action or short
series of actions with the aim of achieving
of a short-term goal. This action can be
implemented as one or more specific tasks.
Tactics are the actions taken to support that
strategy. Most businesses deal with five
types of strategy and the tactics used to
achieve strategic goals: product, pricing,
marketing, operational and financial
strategies.
What to include in your business tactics:
Sales channels: How are you selling your
products and services? Are you selling
directly to your customers online? Are you
opening a physical storefront? Or, maybe
you’re building a product that will get sold in
other companies’ stores. In that case, you
might be working with distributors. Outline
how you plan on selling in this section.
Marketing activities: How are prospective
customers going to learn about your
company and your products? Are you going
to use traditional advertising? Perhaps you
plan on investing in a content marketing
strategy. Or, maybe you need to attend a
lot of trade shows to get in front of potential
customers in your industry.
Team: When you’re planning your
business, you have to not only think about
what you’re going to do, but who’s going to
do it. Even if you don’t have a full team yet,
think about the positions that you’re going
to need as you get up and running. Create
a list of the key roles that you’re going to
need to hire for as you grow. Don’t forget to
think about your own strengths and
weaknesses when you think about building
a team. You’ll want to hire people that can
fill in the gaps in your own skillset.
Partners and resources: Some businesses
need to work with other businesses in order
to be successful. If your business has
critical partners, list them here. This is also
a great place to list key resources your
business needs, such as a license for
intellectual property.
 Differences between Strategy and
Policy
The following are the major differences
between strategy and policy
1. The strategy is the best plan opted
from a number of plans, in order to
achieve the organizational goals and
objectives. The policy is a set of
common rules and regulations, which
forms as a base to take the day to day
decisions.
2. The strategy is a plan of action while
the policy is a principle of action.
3. Strategies can be modified as per the
situation, so they are dynamic in
nature. Conversely, Policies are
uniform in nature. However,
relaxations can be made for
unexpected situations.
4. Strategies are associated with the
organizational moves and decisions
for the situations and conditions which
are not encountered or experienced
earlier. On the contrary. Policies
define the rules for routine activities,
which are repetitive in nature.
5. Strategies are concentrated toward
actions, whereas Policies are
decision-oriented
6. The top management always frames
strategies, but sub-strategies are
formulated at the middle level. In
contrast to Policy, they are in general
made by the top management
7. Strategies deal with external
environment factors. On the other
hand, Policies are made for the
internal environment of business
8. Strategies often contain
methodologies used to achieve the
set target. In contrast, Policies
determine what is to be done and
what should not be done in specific
circumstance.
Key Differences between tactics and
Strategy
1. Tactics are the properly organized
actions that help to achieve a certain
end. The strategy is the integrated
plan that ensures the achievement of
organization objectives.
2. Tactics is a subset of strategy, i.e.
without the strategy, tactics can do
nothing.
3. Tactics try to find out the methods
through which strategy can be
implemented. Conversely, Strategy is
a unified set of activities that can help
the organization to gain an
advantageous position.
4. Tactics are formulated by middle-level
management, whereas top level
management formulates a strategy.
5. Tactics involve lower risk as
compared to strategy.
6. Tactics are preventive in nature while
Strategy is competitive in nature.
7. Tactics are defined as a trip, i.e.
typically for a short duration, but the
strategy is a journey that lets the
company travel from one position to
another. Hence it is for a long
duration.
8. Tactics frequently change with the
changes in the market conditions;
however, the strategy remains same
for a long period.
9. Tactics have a reactive approach,
unlike strategy.
10. Tactics are made for coping with the
present situation. In contrast to
strategy, they are made for future.
Bases of Policies and Strategy
May it be business policy or strategy, it has
a foundation or basis for formulation.
Having a policy in place is not a product
simply copied from other business
organization but a set of documents that
needs to be developed in a well-planned
manner on the basis of certain premises
and presumptions or set of biases, broadly,
the following are the bases from which
policies and strategies are drawn upon
a) Legal Mandate – This refers to
formulating policies on the basis of
the provisions of the charter or legal
basis for creation or existence of the
business organization including the
applicable provisions of laws and
policies or pronouncement of the
government and its statutory or
regulatory bodies. Typically, business
policies are based on the provisions of
the articles of incorporation and by-
laws of the organization.
b) Vision and mission statement – This
essentially refers to the leadership
bias as well as sense of direction and
mission for which the organization
was conceived or established. The
vision and mission statement of a
business organization emanates from
its founders and the previous or
incumbent leaders or managers of the
organization
c) Specific Objectives – These are the
corporate objectives purposely
developed for the organization and for
its members or employees at a large
to pursue stated objectives of the
business organization maybe a
product of a desire to be a competitive
of the kind of image and culture the
company would like to project.
d) Program and policies. These are
specific program and policies set forth
by the organization‘s policy makers
(i.e. . Board of Directors and top
management) in pursuit of short and
long term goals given certain
considerations at hand.
Developing Policy and Strategy
While developing or formulating,
policies and strategies should be concern of
everyone in business organization, it is an
essentially an initiative and duty of
management group in general. The
approach to developing policies and
strategies may come in any of the following
forms:
a) Top -bottom approach – In this
approach, initiatives in developing
policies and strategies come from the
top management with rank and file
tasked to implementing or following
the policies and strategies.
b) Bottom -top approach. In this
approach, policy and strategy
initiatives emanate from the bottom or
rank and file from which top
management develop concrete
policies and strategies for the lower-
ranked employees to observe or
follow -up.
c) Top-bottom -top – In this approach,
policy and strategy initiatives are
taken by the top management then
filtered down to the lower-ranked
personnel for consultations then
returned back to the top management
for refinements. The consultation
process may not be single pass but a
process involving a series of
consultative meetings and discussions
so that policies and strategies are
products of a wide participation
among employees of the business
organization including external
parties so that one can expect
minimal resistance once the The
policies and strategies are
implemented.
Whichever approach is taken in
the course of developing policies and
strategies is a matter of a management
which is usually related to the kind of
management style the management team is
trying to project and the kind of organization
it is. In contemporary and modern times
where participatory management style is
preferred, a top bottom-top approach is
ideal.
Strategic Decision
For the managers and for everyone in the
business organization, decision making is
daily if not an all the time task or duty.
Doing strategic decision, however is
somewhat distinct in that every decision is
related to a certain period and context as
well motivated by the firm’s vision
statement. Through enough decisions in
any business organizations are usually
done in observance of existence policies. In
the context of strategic management, it not
just simply making decisions but it is
important to exercise strategic decision or
something like hard and unusual decisions
that need to be done for certain strategic
considerations. At a certain times, strategic
decisions are made contrary to existing
policies, norms and practices all in the
name of strategic reasons or
considerations.
Strategic decisions usually take into
account a lot of external factors and deal
with the long run future of the entire
organization. What it takes for a decision to
be considered strategic is described by
Wheelen and Hunger (2004) as follows
a) Rare .Strategic decisions are unusual
and typically have no precedent to
follow.
b) Consequential. Strategic decision
should commit substantial resources
and demand a great deal of
commitment from people at all levels.
c) Directive. Strategic decisions set
precedents for lesser decisions and
future actions throughout the
organization
Modalities in Strategic Decision
DECISION -MAKING FUNCTION IS
A DAILY ROUTINE OR ROUTINE ASPECT
OF A MANAGERIAL FUNCTION. DOING
STRATEGIC DECISION, HOWEVER IS
NOT A SIMPLE AND CONSIDERED OR
ROUTINE TASK COMPARED TO
STRATEGIC DECISIONS. It is because
strategic decision-making transcends
factors which are observable or those with
solid and concrete basis. There are certain
unwritten considerations that strategic
managers have to consider which may not
be known to other parties particularly
among subordinates. Hence, strategic
decisions are sometimes doubted or
questioned just because there are
considerations which strategic managers or
for certain group of officers have to take
into accounts which others need be
informed or consulted.
According to Mintzberg, there are four
most typical approaches or modes of
strategic decision making as they are
follows:
a) Entrepreneurial mode. In this mode,
strategy is made by one powerful
individual and the focus is on
opportunities, problems are
secondary. Strategy is guided by the
founder’s own vision of direction and
exemplified by large, bold decisions.
The dominant goal is growth of the
corporation.
b) Adaptive mode. Sometimes referred
as “muddling through” this modes
characterized by reactive Solutions to
existing problems, rather than
proactive search for new
opportunities. Much bargaining goes
on concerning priorities of objectives.
Strategies is fragmented and is
developed to move the corporation
forward incrementally
c) Planning mode. This decision -making
mode involves the systematic
 gathering of appropriate information
for situation analysis, the generation
of feasible alternative strategies and
the rational selection of the most
appropriate strategy. It includes both
the proactive search for new
opportunities and the reactive solution
of existing problems.
d) Logical mode. It can be viewed as a
synthesis of planning, adaptive and, to
a lesser extent, the entrepreneurial
modes. In this mode, top
management has a reasonably clear
idea of the corporation’s mission and
objective, but in its development of
strategies, it chooses to use an
interactive process in which the
organization probes the future,
experiments and learns from
Strategic Decision Making Process
By its nature, making strategic
decision is not an instantaneous reaction to
market situation or scenarios but a process
that considers a variety of factors
considered directly or indirectly relevant to
strategic objectives.
Step 1 – Evaluate current
performance results in terms of a return of
investments, profitability and so forth, and
b) current mission, objectives, strategies
and policies.
Step 2 – Review corporate
governance that is the performance of the
Corporate Board of Directors and Top
Management.
Step 3 – Scan and Assess external
environment to determine the strategic
factors that pose Opportunities and
Threats.
Step 4- Scan and assess the internal
corporate environment to determine the
strategic factors that are Strengths (E
specially core competencies) and
Weaknesses.
Step 5- Analyze strategic (SWOT)
factors to a) pinpoint problem areas and b)
review and revise the corporate mission
and objectives as necessary.
Step 6- Generate, evaluate and select
the best alternative strategy in the light of
the analysis conducted in Step 5.
Step 7 - Implement selected strategies
via program, budgets and procedures.
Step 8- Evaluate and implement
strategies via feedback systems and the
control of activities to ensure their minimum
deviation from plans.
Role of the Board Directors
While it is true that the Board of
Directors is not directly or should not be
directly involved in the conduct of the
business they have to directly or indirectly
involved in the policy and strategy
development and process nevertheless.
Other than being directly and indirectly
involve in the policy and strategy making
process, this body has to be indirectly
involved in the implementation as well as
monitoring of business policy and strategy
as matter of oversight duty. While the role
of the top management is more operational
and considered acts shepherding, the role
of board directors can be likened to advisor
ship and/or mentoring.
To give emphasis on the role and
concern off the Board of Directors insofar
as policy and strategy are concerned, there
are cases where some of the members
of the Board of directors also occupy key
position in top management.( President,
Chief Executive Officer, Treasurer, Vice-
President for Finance and others). This is
well justified provided its number minimal
and insufficient to dominate in the board of
Directors to allow check and balance.
 The involvement of member of the
Board of Directors forming part of the
management team may be necessary not
only to ensure that stockholders are
assured of profits but also to see to it that
other concerns of the owners or
stockholders of the business as
represented by the Board of directors are
given due course. Having such a setup
ensures adherence to business policies and
strategies simply because such policies and
strategies are geared towards earnings a
profit and return of investments in the form
of dividends.
The specific roles of the Board of Directors
in any business organization come in the
following ways.
a) Monitor. By acting through it
committees or being a part of the
management team, the board can
keep abreast of developments inside
and outside the corporation, bringing
to management’s attention
development, it might have
overlooked. A board should at least
carry out this task.
b) Evaluate and influence. A board can
examine management proposals,
decision, and actions, agree or
disagree with them, give advice and
offer suggestions and outline
alternatives. Active board performs
this task in addition to the monitoring
one.
c) Initiate and determine. A board can
delineate a corporate’s mission and
specify strategic option to its
management. Only the most active
boards take on this task in addition to
the two previous one.
STAKEHOLDERS, MISSION,
GOVERNANCE, AND
BUSINESS ETHICS
TOPICS:
1. Stakeholders
2. The Mission Statement
3. Corporate Governance and Strategy
4. Ethics and Strategy
Overview
An important part of the strategy
making process is ensuring that the
company maintains the support of the key
constituencies—or stakeholders—upon
which it depends for its functioning and
ultimate survival. A company’s stakeholders
are individuals or groups with an interest,
claim, or stake in the company, in what it
does, and in how well it performs. We begin
by looking at the relationship between
stakeholders and a company. Then we
move on to consider the corporate mission
statement, which is the first key indicator of
how an organization views the claims of its
stakeholders. The purpose of the mission
statement is to establish the guiding
principles for strategic decision making. As
we shall see, these guiding principles
should recognize the claims of important
stakeholder groups. Next we explore the
issue of corporate governance. By
corporate governance, we mean the
mechanisms that exist to ensure that
managers pursue strategies that are in the
interests of an important stakeholder group
— shareholders. We consider how
managers can make sure that their
strategic decisions are founded on strong
principles that treat all stakeholders in an
entity.
Stakeholders
A company’s stakeholders can be divided
into internal stakeholders and external
stakeholders
Internal stakeholders are
stockholders and employees, including
executive officers, other managers, and
board members.
External stakeholders are all other
individuals and groups that have some
claim on the company. Typically, this group
comprises customers, suppliers, creditors
(including banks and bondholders),
governments, unions, local communities,
and the general public.
All stakeholders are in an exchange
relationship with the company. Each
stakeholder group supplies the organization
with important resources (or contributions),
and in exchange each expects its interests
to be satisfied (by inducements).
Stakeholders
 Stockholders provide the enterprise
with risk capital and in exchange
expect management to try to
maximize the return on their
investment. Creditors such as
bondholders provide the company
with capital in the form of debt, and
they expect to be repaid on time with
interest. Employees provide labor and
skills and in exchange expect
Stakeholders Individuals or groups
with an interest, claim, or stake in the
company, in what it does, and in how
well it performs. Commensurate
income, job satisfaction, job security,
and good working conditions.
 Customers provide a company with its
revenues and in exchange want high-
quality reliable products that represent
value for money.
 Suppliers provide a company with
inputs and in exchange seek
revenues and dependable buyers.
 Governments provide a company with
rules and regulations that govern
business practice and maintain fair
competition. In exchange they want
companies that adhere to these rules
and pay their taxes.
 Unions help to provide a company
with productive employees and in
exchange they want benefit its for
their members in proportion to their
contributions to the company.
 Local communities provide companies
with local infrastructure and in
exchange want companies that are
responsible citizens.
 The general public provides
companies with national infrastructure
and in exchange seeks some
assurance that the quality of life will
be improved as a result of the
company’s existence.
 It must identify the most important
stakeholders and give highest priority
to pursuing strategies that satisfy their
needs. Managers cannot always
satisfy the claims of all stakeholders.
The goals of different groups may
conflict, and in practice few
organizations have the resources to
satisfy all stakeholder claims. For
example, union claims for higher
wages can conflict with consumer
demands for reasonable prices and
stockholder demands for acceptable
returns. Often, the company must
make choices. To do so, it must
identify the most important
stakeholders and give highest priority
to pursuing strategies that satisfy their
needs. Stakeholder impact analysis
can provide such identification.
Typically, stakeholder impact analysis
follows these steps:
1. Identify stakeholders
2. Identify stakeholders’ interests and
concerns
3. As a result, identify what claims
stakeholders are likely to make on the
organization
4. Identify the stakeholders who are most
important from the organization’s
perspective
5. Identify the resulting strategic challenges.
Such an analysis enables a company
to identify the stakeholders most critical to
its survival and to make sure that the
satisfaction of their needs is paramount.
Most companies that have gone through
this process quickly come to the conclusion
that three stakeholder groups must be
satisfied above all others if a company is to
survive and prosper: customers,
employees, and stockholders
THE MISSION STATEMENT
A company’s mission statement is a
key indicator of how an organization views
the claims of its stakeholders.
The Mission
The mission describes what it is that
the company does. For example, the
mission of Kodak is to provide “customers
with the solutions they need to capture,
store, process, output, and communicate
images—anywhere, anytime. ”6 Kodak is a
company that exists to provide imaging
solutions to consumers. This missions
focuses on the customer need that the
company is trying to satisfy (the need for
imaging), as opposed to the products that
the company produces (fi lm and cameras).
This is a customer-oriented rather than
product-oriented mission. An important first
step in the process of formulating a mission
is to come up with a definition of the
organization’s business. Essentially, the
definition should answer these questions:
1. What is our business?
2. What will it be?
3. What should it be?
The responses guide the formulation of the
mission. To answer the question, “What is
our business?” a company should define its
business in terms of three dimensions:
1. Who is being satisfied (what customer
groups),
2. What is being satisfied (what
customer needs), and how customers’
needs are being satisfied (by what
skills, knowledge, or competencies.)
This approach stresses the need for a
customer-oriented rather than a product-
oriented business definition. A
characteristics of the products sold and
markets served, not on which kinds of
customer needs the products are satisfying.
Such an approach obscures the company’s
true mission because a product is only the
physical manifestation of applying a
particular skill to satisfy a particular need for
a particular customer group. In practice,
that need may be served in many different
ways, and a broad customer-oriented
business definition that identifies these
ways can safeguard companies from being
caught unaware by major shifts in demand.
By helping anticipate demand shifts, a
customer-oriented mission statement can
also assist companies to capitalize on
changes in their environment. It can help
answer the question, “What will our
business be?” Recall that Kodak’s mission
emphasizes the company’s desire to
provide customers with the solutions they
need to capture, store, process, output, and
communicate images. This is a customer-
oriented mission statement that focuses on
customer needs, as opposed to a particular
product (or solution) for satisfying those
needs. This customer-oriented business
definition has helped drive Kodak’s
investments in digital imaging technologies,
since the early 1990s, which have replaced
much of Kodak’s traditional business based
on chemical film processing.
FOR A MISSION TO BE
EFFECTIVE IT MUST INCLUDE
THE FOLLOWING 9
COMPONENTS
For a mission to be effective it must include
the following 9 components:
1. Customers. Who are your customers?
How do you benefit them?
2. Products or services. What are the
main products or services that you
offer? Their uniqueness?
3. Markets. In which geographical
markets do you operate?
4. Technology. What is the firm’s basic
technology?
5. Concern for survival. Is the firm
committed to growth and financial
soundness?
6. Philosophy. What are the basic
beliefs, values and philosophies that
guide an organization?
7. Self-concept. What are the firm’s
strengths, competencies or
competitive advantages?
8. Concern for public image. Is the firm
socially responsible and
environmentally friendly?
9. Concern for employees. How does a
company treat its employees?
Vision
The vision of a company lays out some
desired future state—it articulates, often in
bold terms, what the company would like to
achieve. For example, Nokia, the world’s
largest manufacturer of mobile (wireless)
phones, has been operating with a very
simple but powerful vision for some time: “If
it can go mobile, it will!” This vision implied
that not only would voice telephony go
Values
The values of a company state how
managers and employees should conduct
themselves, how they should do business,
and what kind of organization they should
build to help a company achieve its
mission. Insofar as they help drive and
shape behavior within a company, values
are commonly seen as the bedrock of a
company’s organizational culture: the set of
values, norms, and standards that control
how employees work to achieve an
organization’s mission and goals. An
organization’s culture is often seen as an
important source of its competitive
advantage. Nucor Steel is one of the most
productive and profitable steel fi rms in the
world. Its competitive advantage is based in
part on the extremely high productivity of its
workforce, something, the company
maintains, that is a direct result of its
cultural values, which shape how it treats its
employees
These values are as follow:
• “Management is obligated to manage
Nucor in such a way that employees will
have the opportunity to earn according to
their productivity.”
• “Employees should be able to feel
confident that if they do their jobs properly,
they will have a job tomorrow.”
• “Employees have the right to be treated
fairly and must believe that they will be.”
• “Employees must have an avenue of
appeal when they believe they are being
treated unfairly.”
At Nucor, values emphasizing pay for
performance, job security, and fair
treatment for employees help to create an
atmosphere within the company that leads
to high employee productivity. In turn, this
has helped to give Nucor one of the lowest
cost structures in its industry, which helps
to explain the company’s profitability in a
very price-competitive business
Major Goals
Having stated the mission, vision, and
key values, strategic managers can take
the next step in the formulation of a mission
statement: establishing major goals. A goal
is a precise and measurable desired future
state that a company attempts to realize. In
this context, the purpose of goals is to
specify with precision what must be done if
the company is to attain its mission or
vision. Well-constructed goals have four
main characteristics:
1. They are precise and measurable.
Measurable goals give managers a
yardstick or standard against which they
can judge their performance.
2. They address crucial issues. To maintain
focus, managers should select a limited
number of major goals to assess the
performance of the company. The goals
that are selected should be crucial or
important ones.
3. They are challenging but realistic. They
give all employees an incentive to look for
ways of improving the operations of an
organization. If a goal is unrealistic in the
challenges it poses, employees may give
up; a goal that is too easy may fail to
motivate managers and other employees.
4. They specify a time period in which they
should be achieved when that is
appropriate. Time constraints tell
employees that success requires a goal to
be attained by a given date, not after that
date. Deadlines can inject a sense of
urgency into goal attainment and act as a
motivator. However, not all goals require
time
Well-constructed goals also provide a
means by which the performance of
managers can be evaluated. Although most
companies operate with a variety of goals,
the central goal of most corporations is to
maximize shareholder returns, and
maximizing shareholder returns requires
high profitability and profit growth.
Thus, most companies operate with
goals for profitability and profit growth.
However, it is important that top managers
do not make the mistake of
overemphasizing current profitability to the
detriment of long-term profitability and profit
growth. The overzealous pursuit of current
profitability to maximize short-term
performance can encourage such
misguided managerial actions as cutting
expenditures judged to be nonessential in
the short run—for instance, expenditures
for research and development, marketing,
and new capital investments.
Although cutting current expenditure
increases current profitability, the resulting
underinvestment, lack of innovation, and
diminished marketing can jeopardize long-
run profitability and profit growth. These
expenditures are vital if a company is to
pursue its long-term mission and sustain its
competitive advantage and profitability over
time. Despite these negative
consequences, managers may make such
decisions because the adverse effects of a
short-run orientation may not materialize
and become apparent to shareholders for
several years or because they are under
extreme pressure to hit short-term
profitability goals. It is also worth noting that
pressures to maximize short-term
profitability may result in managers’ acting
in an unethical manner. This apparently
occurred during the late 1990s at a number
of companies including Enron Corporation,
Tyco, WorldCom, and Computer
Associates. In these companies, profits
were systematically inflated by managers
who manipulated financial accounts in a in
a manner that misrepresented the true
performance of the firm to shareholders
Ethics and Strategy
The term ethics refers to accepted
principles of right or wrong that govern the
conduct of a person, the members of a
profession, or the actions of an
organization. Business ethics are the
accepted principles of right or wrong
governing the conduct of business people.
Ethical decisions are those that are in
accordance with those accepted principles
of right and wrong, whereas an unethical
decision is one that violates accepted
principles. This is not as straightforward as
it sounds. Managers may be confronted
with ethical dilemmas, which are situations
where there is no agreement over exactly
what the accepted principles of right and
wrong are, or where none of the available
alternatives seems ethically acceptable. In
our society, many accepted principles of
right and wrong are not only universally
recognized, but are also codified into law. In
the business arena there are laws
governing product liability (tort laws),
contracts and breaches of contract
(contract law), the protection of intellectual
property (intellectual property law),
competitive behavior (antitrust law), and the
selling of securities (securities law). Not
only is it unethical to break these laws, it is
illegal. It is important to realize, however,
that behaving ethically goes beyond staying
within the bounds of the law. There are
many cases of strategies and actions that
while legal, do not seem to be ethical. For
example, in their quest to boost profitability,
during the 1990s managers at Nike
contracted out the production of sports
shoes to producers in the developing world.
Unfortunately for Nike, the working
conditions at several of these producers
were very poor and the company was
subsequently attacked for using “sweatshop
labor”. Typical of the allegations were those
detailed in the CBS news program “48
hours.” The report told of young women at a
Vietnamese subcontractor who worked 6
days a week, in poor working conditions
with toxic materials, for only 20 cents an
hour. The report also stated that a living
wage in Vietnam was at least $3 a day, an
income that could not be achieved without
working substantial overtime. Nike was not
breaking any laws, nor were its
subcontractors, but this report, and others
like it, raised questions about the ethics of
using “sweatshop labor.” It may have been
legal. It may have helped the company to
increase its profitability. But was it ethical to
use subcontractors who by Western
standards exploited their workforce? Nike’s
critics thought not, and the company found
itself the focus of a wave of demonstrations
and consumer boycotts. In this section, we
take a closer look at the ethical issues that
managers may confront when developing
strategy, and at the steps managers can
take to ensure that strategic decisions are
not only legal, but also ethical.
The Roots of Unethical Behavior
Why do some managers behave
unethically? Although there is no simple
answer to this question a few
generalizations that can be made.
First, it is important to recognize that
the business ethics are not divorced from
personal ethics—which are the generally
accepted principles of right and wrong
governing the conduct of individuals. As
individuals, we are taught that it is wrong to
lie and cheat—it is unethical— and that it is
right to behave with integrity and honor, and
to stand up for what we believe to be right
and true. The personal ethical code that
guides our behavior comes from a number
of sources, including our parents, our
schools, our religion, and the media. Our
personal ethical code will exert a profound
influence on the way we behave as
business people. An individual with a strong
sense of personal ethics is less likely to
behave in an unethical manner in a
business setting, and in particularly, they
are less likely to engage in self-dealing and
more likely to behave with integrity.
Second, many studies of unethical
behavior in a business setting have come to
the conclusion that business people
sometimes do not realize that they are
behaving unethically, primarily because
they simply fail to ask the relevant question
—is this decision or action ethical? Instead,
they apply a straightforward business
calculus to what they perceive to be a
business decision, forgetting that the
decision may also have an important ethical
dimension. The fault here lies in processes
that do not
Incorporation
A fourth cause of unethical behavior that
is related to this may be pressure from top
management to meet performance goals
that are unrealistic, and can only be
attained by cutting corners or acting in an
unethical manner. An organizational culture
can “legitimize” behavior that society would
judge as unethical, particularly when this is
mixed with a focus on unrealistic
performance goals, such as maximizing
short-term economic performance, no
matter what the costs. In such
circumstances, there is a greater than
average probability that managers will
violate their own personal ethics and
engage in behavior that is unethical. By the
same token, an organization culture can do
just the opposite and reinforce the need for
ethical behavior. The ethical considerations
into business decision making respect for
people, open communication, and concern
for the individual employee.
This brings us to a fifth root cause of
unethical behavior—leadership. Leaders
help to establish the culture of an
organization, and they set the example that
others follow. Other employees in a
business often take their cue from business
leaders and if those leaders do not behave
in an ethical manner, nor might they. It is
not what leaders say that matters, but what
they do.
BEHAVING ETHICALLY
What is the best way for managers to make
sure that the ethical considerations are
taken into account when making business
decisions? There is no easy answers to this
question, for many of the most vexing
ethical problems arise because there are
very real dilemmas inherent in them and no
obvious right course of action.
Nevertheless, there are many things that
managers can and should do to make sure
that basic ethical principles are adhered to,
and that ethical issues are routinely
inserted into business decisions. However,
as discussed below, there are a number of
things that managers can do to make sure
that ethical issues are considered in
business decision.
It seems obvious that businesses should
strive to hire people who have a strong
sense of personal ethics, and would not
engage in unethical or illegal behavior.
Similarly, you would rightly expect a
business to not promote people, and
perhaps fire people, whose behavior does
not match generally accepted ethical
standards. But when you think about it,
doing so is actually very difficult. After all,
how do you know that someone has a poor
sense of personal ethics? In our society,
immoral individuals have an incentive to
hide a lack of personal ethics from public
view. Once people realize that you are
unethical they will no longer trust you. Is
there anything that businesses can do to
make sure that they do not hire people who
subsequently turn out to have poor
personal ethics, particularly given that
people have an incentive to hide this from
public view (indeed, the unethical person
may well lie about their nature)?
Businesses can give potential employees
psychological tests to try and discern their
ethical predisposition and they can check
with prior employees regarding someone’s
reputation (e.g., by asking for letters of
reference, and talking to people who have
worked with the prospective employee).
The latter is certainly not uncommon and
does indeed influence the hiring process.
As for promoting people who have
displayed poor ethics, that should not occur
in a company where the organization
culture places a high value on the need for
ethical behavior, and where leaders act
accordingly.
To foster ethical behavior, businesses
need to build an organization culture that
places a high value on ethical behavior.
Three things are particularly important in
building an organization culture that
emphasizes ethical behavior.
First, the businesses must explicitly
articulate values that place a strong
emphasis on ethical behavior. Many
companies now do this by drafting a code
of ethics, which is a formal statement of the
ethical priorities a business adheres to.
Others have incorporated ethical
statements into documents that articulate
the values or mission of the business. The
food and consumer products giant Unilever
has a code of ethics that includes the
following points “We will not use any form of
forced, compulsory or child labor” and “No
employee may offer, give or receive any gift
or payment which is, or may be construed
as being, a bribe. Any demand for, or offer
of, a bribe must be rejected immediately
and reported to management.” Unilever’s
principles send a very clear message about
the appropriate ethics to managers and
employees within the organization.
Having articulated values in a code of
ethics or some other document, it is
important that leaders in the business give
life and meaning to those words by
repeatedly emphasizing their importance,
and then acting on them. This means using
every relevant opportunity to stress the
importance of business ethics and making
sure that key business decisions not only
make good economic sense, but also are
ethical. Many companies have gone a step
further, hiring independent firms to audit the
company and make sure that they are
behaving in a manner consistent with their
ethical code. Nike, for example, has in
recent years hired independent auditors to
make sure that subcontractors used by the
company are living up to Nike’s code of
conduct. Finally, building an organization
culture that places a high value on ethical
behavior requires incentive and promotional
systems that reward people who engage in
ethical behavior and sanction those who do
not.
3. Decision-Making Processes - In addition
to establishing the right kind of ethical
culture in an organization, business people
must be able to think through the ethical
implications of decisions in a systematic
way. To do this, they need a moral
compass. Some experts on ethics have
proposed a straightforward practical guide
—or ethical algorithm—to determine
whether a decision is ethical. A decision is
acceptable on ethical grounds if a business
person can answer “yes” to each of these
questions
4. Ethics Officers - To make sure that a
business behaves in an ethical manner, a
number of firms now have ethics officers.
These are individuals who are responsible
for making sure that all employees are
trained to be ethically aware, that ethical
considerations enter the business decision-
making process, and that the company’s
code of ethics is adhered to. Ethics officers
may also be responsible for auditing
decisions to make sure that they are
consistent with this code. In many
businesses, ethics officers act as an
internal ombudsperson with responsibility
for handling confidential inquiries from
employees, investigating complaints from
employees or others, reporting findings and
making recommendations for change
5. Strong Corporate Governance - Strong
corporate governance procedures are
needed to make sure that managers adhere
to ethical norms, and in particular, to make
sure that senior managers do not engage in
self-dealing or information manipulation.
The key to strong corporate
governance procedures is an independent
board of directors that is willing to hold top
managers into account for self-dealing, and
is able to question the information provided
to them by managers.
If companies like Tyco, WorldCom,
and Enron had a strong board of directors,
it is unlikely that they would have been
subsequently racked by accounting
scandals, and top managers would not
have been able to view the funds of these
corporations as their own personal
treasuries.
6. Moral Courage - It is important to
recognize that on occasion, managers may
need significant moral courage. It is moral
courage that enables a manager to walk
away from a decision that is profitable, but
unethical. It is moral courage that gives an
employee the strength to say no to a
superior instructing her to pursue unethical
actions. And, it is moral courage that gives
employees the integrity to go public to the
media and blow the whistle on persistent
unethical behavior in a company. Moral
courage does not come easily—there are
well known cases where individuals have
lost their jobs because they blew the whistle
on corporate behaviors they thought
unethical, telling the media about what was
occurring. Companies can strengthen the
moral courage of employees by committing
themselves to not take retribution on
employees that exercise moral courage,
say no to superiors or otherwise complain
about unethical actions. For example,
consider the following extract from
Unilever’s code of ethics: Any breaches of
the Code must be reported in accordance
with the procedures specified by the Joint
Secretaries. The Board of Unilever will not
criticize management for any loss of
business resulting from adherence to these
principles and other mandatory policies and
instructions. The Board of Unilever expects
employees to bring to their attention, or to
that of senior management, any breach or
suspected breach of these principles.
Provision has been made for employees to
be able to report in confidence and no
employee will suffer as a consequence of
doing so. This statement gives “permission”
to employees to exercise moral courage.
Companies can also set up ethics hotlines
that allow employees to anonymously
register complaints with a corporate ethics
officer
  When we define words or unfamiliar
terms, we give concise but exact
meanings of unfamiliar words and
special meanings of familiar words.

Exploring Expository
Techniques Two Methods of Defining Terms

Exposition is a writing technique of a writer  Simple definition

with the intention to explain something, to  Extended definition
analyze an idea, to classify a thing, to give
correct definition of term, to make others Simple definition can be formulated
follow directions, to point out similarities or by its three parts:
differences, to clarify cause and effect, to
present data, to interpret research works,  Species
and others.  Genus
 Differentia
Expository Techniques:
 Classification Note: This method of definition is usually
 Definition used in technical writing whether formally,
 Description of a process semi-formally, or non-formally.
 Description of a mechanism
Species (Term Genus (the Differentia (a
Classification to be defined) class characteristic
 it is dividing something into groups where the of the term)
classes, categories, etc. tem
 normally done in accordance with belongs)
several criteria (standards or Language is a form of
principles based on judgement) communicatio
 done when the writer believes that n
there are shared qualities or An architect is a who designs
characteristics about a subject matter professiona building
l
How to classify? Communication is a of giving and
 One way of classifying idea or object process receiving
is to look for the relationships among information in
them and organize them into group. an
 It may either be on the basis of their understandabl
similarities or differences. e manner

Definition
 Definition is a useful technique in oral
or written communication.
 It is a must for a technical writer to be
able to define the terms with multiple
meanings and those that are
unfamiliar to the reader.
Expanded definition is done by
stipulation, operation, explication, cause
and effect, classification, example, and
other rhetorical functions
Communication is a systematic process in
which people interact with and through
symbols to create and interpret meanings.
Species, Genus, Differentia (containing
explication and example)
Pointers in defining terms
1. Never give definitions of a term that
include any of its derivatives (for
example: definition is the act of
defining).
2. Do not use “is where” or “is when” to
define a term (Do not say “Christmas
is when Jesus Christ is born” or “A
classroom is where you will find
students).
3. Use the simple present tense (active
and passive voice).
4. Use relative clauses to give additional
information.
Description of a Process
There are writing task that entail an
explanation of:
 how something works;
 how something is done;
 how something is made.
Process description includes:
 Sequence
 Instruction
 Procedure
Two separate concepts in description of a
process:
 how to do something
 how something occurs
Process of Description
 It is also a description of equipment,
materials, and procedures.
 Graphic materials are used for
detailed presentation of the process.
 The writer makes use of sequence
markers (first, second, then, next,
subsequently, finally, at last) to follow
the natural or mechanical system.
 In describing a process or procedure,
use the present passive tense : is/are
+ verb + ed (For example: is
manufactured, is controlled, etc.)
Description of Mechanism
 It is an explanation of a system or
parts of an apparatus.
 It includes the characteristics and
functions of a piece of the device and
the totality of the mechanism.
 It also explains the arrangement and
shape of an object in space.
In writing a description of a mechanism, the
writer may be guided by the following
questions:
 What is it (equipment, machine,
device, apparatus)?
 What are its principal parts?
 What is its function?
 What does it look like?
 How does it work?
1. In your field of specialization, what types
of tasks would entail the use of
classification, definition, description of a
process, and description of mechanism?
2. Which of the above mentioned expository
techniques are particularly useful in your
field of specialization? How?
3. Which of the expository techniques do
you think are less likely to be used? Why?
4. Aside from discourse markers, what
other knowledge did you gain from this
chapter?
5. What do you need to strengthen as a
future professional in order to become a
good or better expository writer?
Writing Effective Business
Correspondence
Introduction
People are highly engaged in various daily
communications through email, texting,
chatting, formal presentation or even face
to face conversation. This phenomenon
leads to unending quest on how to
communicate effectively to survive the
digital era. No matter how technological the
workplace may become, there will always
be the real power in the written world
(Roberts, 1999). Technology has not
eliminated the need for people to write
clearly, it merely simplified the writing
process.
If we compare writing with the other macro
skills such as listening, speaking, reading,
viewing, writing probably is the most difficult
skill because it covers a great deal of
knowledge as well as principles of
organization to produce a good composition
(Tangpermpoon, 2008). Since then, writing
business correspondence never goes out of
styles especially in the corporate world.
Employers keep on looking for
professionals who can communicate
messages well both in written and oral,
inside and outside of an organization.
Communication in Business
 Effective communication is the key to
success.
 Business depends so much on
communication.
 People must communicate to plan
products, hire, train, and motivate
workers, coordinate manufacturing
and delivery, persuade customers to
buy, and bill them for sale (Locker,
2006).
 Communication can’t be set apart
from business for it gives life and light
to any business transactions.
Business communication refers to how
people communicate, whereas
organizational communication deals with
whom to communicate.
 Communication in business is a two-
way process that follows the common
communication process of sending
and receiving messages.
 However, business communication
differs on the medium for it uses,
paper, pen, typewriter or computer to
make the message tangible to the
receiver.
Communication in Organization
 Communication in organization is
relaying messages or information
between or among people inside and
outside an organization.
 There are several written documents
needed to run an organization.
 Every single document has one or
more of the three basic functions of
organizational writing which is to
inform, to promote goodwill, or to
persuade.
Table 1: Internal Documents Produced in
one Organization
Monthly Report Inform; customer Purpose(s)
Description of
or summarizing build Document request to of
Document
quarterly profitability, image be given Documents
report productivity, and and Memo credit for Inform:
problems during good will accompanyin
defective persuade
period. Used to (report g document,
goods reader to
plan activity for is Transmittal telling why it to read Inform;
Report
next month or accurate is being stockholderdocument;
persuade
quarter , forwardeds to build stockholders
image
complet the receiver
summarizin and goodwill
to retain stock
e; writer g financial and others to
understa Annual report information buy; build
nds for year goodwill
compan (company is a
y) good
Evaluation of an Inform; corporate
employee’s persuad citizen)
performance, e Letter to Promote
Performan with employe suppliers, goodwill
ce recommended e to customers,
appraisal areas of improve or other
improvement or Thank you people who
recommendatio letter have
n for promotion helped
Congratulations Promote individuals
to an employee goodwill or the
who have won company
Memo of
awards, been
congratul
promoted, or
ations Two basic structures that make up the
earned
community communication channels of an organization
recognition
1. Formal channel of communication follows
the usual pattern of an organizational chart
Table 2: External Documents Produced in where the superiors are classified from the
one Organization subordinates through connecting the lines
of communication to every member of the
Description organization
Purpose(s) of
Document of
Documents
Document 2. Informal channel of communication
Letter follows an unstructured channel of
giving price communication where lines and patterns of
Inform;
for a the organization are vague. This is
promote
Quotation specific
goodwill (price sometimes referred to as grapevine
product,
reasonable) because it usually relays more information
fabrication,
or service than the formal communication through
Claim/ Letter Inform; chismis or rumor-mongering.
adjustment granting or promote
denying goodwill Letters
Personal Letter Structure: A personal letter
Business letter does not follow
A personal letter is a written type of follows officially any recognized
communication between individuals recognized structure.
concerning personal or family affairs rather structure
than business affairs.

 This type of letter does not follow Business Letter Personal Letter
certain rules or structures and uses Formality: Personal letter is
less formal wording or colloquial Business letter informal.
language. The personal letter maintains formal
maintains and develops personal rules and
relationships with people whom you procedure
consider a friend or family. This type Size: Business Personal letters
of letter can be typewritten or letters are may be concise or
generally concise large in size.
handwritten depending on the length
in size and avoid
of the content.
irrelevant matters.
Business Letter Types: Business Personal letters
letters can be generally cannot
 Business letter is a formal type of categorized be categorized.
written letter concerning business differently.
transactions and other business- Salutation: Personal letter
related issues and information. This Business letter salutation can be
salutation can be: Dear Friends, my
type of letter must adhere to certain
Sir, Madam, Dear dear X, Dear Ex.
rules, restrictions, and formats and
Mr. .. Ms. ….
must use formal language.
Language: Personal letter
 Business letter is commonly written on Business letter language may be
8 ½ X 11 inch-size clean bond paper. language should easy, poetic,
 It follows a certain margin and is free be easy and emotional, etc.
from dirt and scratches in order to simple.
build a good impression to the reader. Copy: Business A personal letter
letter copy should copy may or may
Personal vs Business Letters always be not be preserved.
preserved.
Business Personal Method: Business The personal
Nature: Fully personal in letter uses the letter uses only
Impersonal and nature direct and direct method.
universal persuasive
Purpose: Exchanging method.
Exchanging personal or family
various business related affairs.
related issues
and information
Scope: Wide and The scope is
compose of limited and
various business- contains only
related issues and personal
information information. Technique of Writing Business Letter
To make your business letters effective in 4. Make your copy live. The reader should
terms of today’s business world, you should feel what you say. If possible, create a
understand and make use of the four basic visual experience. Let the reader see
psychological techniques according to himself doing something running a
Mager and Mager (1968) machine, telling his friends about his
triumphs, and selling more accounts.
1. Write from the “you” attitude. Every
person is primarily interested in himself and
thus responds to a letter written from his
point of view. To test the effectiveness of
your letter count the number of I’s and
You’s in your letter. A good letter should
have a preponderance of you’s and a
minimum of I’s

2. Accentuate the positive. Even a letter

that has to say “No” can be written from a
positive point of view. Make it an absolute
rule never to start or end your letter with a
negative. Avoid words with a negative
connotation, such as argument, careless,
complaint, disagreeable, error, neglect, and
unfair.

Example:

Positive: Thank you for your order. The

merchandise will go out to you as soon
as…

Negative: We regret to inform you that we

will not be able to ship your order until…

3. Make your letter smile. A business letter

should leave a pleasant impression.

Get a smile into your letter, a bit of your

personality, and an atmosphere of goodwill.

A sour letter-piqued attitude, and

complaining undertone, are comparable to
a surly manner in your conversation. Some
phrases with a built-in smile.

Example: We shall be glad to…

It is a pleasure…
Thank you….
We appreciate it very much…
 MODULE 5- ORGANIZATIONAL
APPRAISAL INTERNAL
ASSESSMENT -2
Topics
1. Strategy and Culture
2. Value Chain Analysis
3. Organizational Capability Factors
4. Benchmarking
Strategy and Culture
An organization’s culture can exert a
powerful influence on the behavior of all
employees. It can, therefore, strongly affect
a company’s ability to adopt new strategies.
A problem for a strong culture is that a
change in mission, objectives, strategies or
policies is not likely to be successful if it is
in opposition to the culture of the company.
Corporate culture has a strong tendency to
resist change because its very existence
often rests on preserving stable
relationships and patterns of behavior.
For example, the male-dominated
Japanese centered corporate culture of the
giant Mitsubishi Corporation created
problems for the company when it
implemented its growth strategy in North
America.
The alleged sexual harassment of its
female employees by male supervisors
resulted in lawsuits and a boycott of the
company’s automobiles by women activists.
There is no one best corporate culture.
An optimal culture is one that best supports
the mission and strategy of the company.
This means that, like structure and
leadership, corporate culture should
support the strategy. Unless strategy is in
complete agreement with the culture, any
significant change in strategy should be
followed by a change in the organization’s
culture.
Although corporate cultures can be
changed, it may often take long time and
requires much effort. A key job of
management therefore involves “managing
corporate culture”.
In doing so, management must evaluate
what a particular change in strategy means
to the corporate culture, assess if a change
in culture is needed and decide if an
attempt to change culture is worth the likely
costs. ‘FIT’ between Strategy and Culture
FIT’ between Strategy and Culture
A culture grounded in values, practices
and behavioral norms that match what is
needed for good strategy implementation,
helps energize people throughout the
company to do their jobs in a strategy
supportive manner.
But when the culture is in conflict with
some aspects of the company’s direction,
performance targets, or strategy, the culture
becomes a stumbling block. Thus, an
important part of managing the strategy
implementation process is establishing and
nurturing a good ‘fit’ between culture and
strategy.
Matching Strategy with Culture
When matching strategy with culture, it is
important to understand:
1. There is no ‘best’ and ‘worst’ culture.
The issue is how well the culture matches
and supports the strategy of the
organization. Cultural mismatches are likely
to occur when organizations are trying to
adapt a new strategy.
2. This matching of strategy and culture is
likely to become embedded over a period of
time. That is, key elements of the strategy
and the culture will reinforce each other
gradually.
In other words, the relationship between
strategy and culture is usually self-
perpetuating, each matching and
reinforcing the other over a period of time.
Value Chain Analysis
Every organization consists of a chain of
activities that link together to develop the
value of the business. They are basically
purchasing of raw materials, manufacturing,
distribution, and marketing of goods and
services. These activities taken together
form its value chain. The value chain
identifies where the value is added in the
process and links it with the main functional
parts of the organization. It is used for
developing competitive advantage because
such chains tend to be unique to an
organization. It then attempts to make an
assessment of the contribution that each
part makes to the overall added value of the
business. Essentially, Porter linked two
areas together:
1. the added value that each part of the
organization contributes to the whole
organization; and
2. the contribution that each part
makes to the competitive advantage of the
whole organization
In a company with more than one product
area, the analysis should be conducted at
the level of product groups, not at corporate
strategy level.
Value Chain thus views the
organization as a chain of value-creating
activities. Value is the amount that buyers
are willing to pay for what a product
provides them. A firm is profitable to the
extent the value it receives exceeds the
total cost involved in creating its products.
Creating value for buyers that exceeds the
cost of production (i.e. margin) is a key
concept used in analyzing a firm’s
competitive position.
The concept of value chain analysis was
introduced by Michael Porter in 1985 in his
seminal book “Competitive Advantage”.
This concept is derived from an established
accounting practice that calculates the
value added to a product by individual
stages in a manufacturing or service
process. Porter has applied this idea to the
activities of an organization as a whole,
arguing that it is necessary to examine
activities separately in order to identify
sources of competitive advantage.
According to Porter, customer value is
derived from three basic sources.
1. Activities that differentiate the product
2. Activities that lower its costs
3. Activities that meet the customer’s need
quickly.
According to Porter, value chain activities
are divided into two broad categories,
1. Primary activities
Primary activities contribute to the
physical creation of the product or service,
its sale and transfer to the buyer and its
service after the sale.
2 .Support activities
Support activities include such activities
as procurement, HR etc. which either add
value by themselves or add value through
primary activities and other support
activities.
Primary Activities
Inbound Logistics These activities focus on
inputs. They include material handling,
warehousing, inventory control, vehicle
scheduling, and returns to suppliers of
inputs and raw materials.
Operations These include all activities
associated with transforming inputs into the
final product, such as production,
machining, packaging, assembly, testing,
equipment maintenance etc.
Outbound Logistics Notes These activities
are associated with collecting, storing,
physically distributing the finished products
to the customers. They include finished
goods warehousing, material handling and
delivery, vehicle operation, order
processing and scheduling.
Marketing and Sales These activities are
associated with purchase of finished goods
by the customers and the inducement used
to get them buy the products of the
company. They include advertising,
promotion, sales force, channel selection,
channel relations and pricing.
Services This includes all activities
associated with enhancing and maintaining
the value of the product. Installation, repair,
training, parts supply and product
adjustment are some of the activities that
come under services.
Support Activities
Procurement Activities associated with
purchasing and providing raw materials,
supplies and other consumable items as
well as machinery, laboratory equipment,
office equipment etc.
Porter refers to procurement as a
secondary activity, although many
purchasing gurus would argue that it is (at
least partly) a primary activity. Included are
such activities as purchasing raw materials,
servicing, supplies, negotiating contracts
with suppliers, securing building leases and
so on.
Technology Development Activities relating
to product R&D, process R&D, process
design improvements, equipment design,
computer software development etc.
Human Resource Management Activities
associated with recruiting, hiring, training,
development, compensation, labor
relations, development of knowledge-based
skills etc.
Firm Infrastructure Activities relating to
general management, organizational
structure, strategic planning, financial and
quality control systems, management
information systems etc.
Conducting a Value Chain Analysis
Value chain analysis involves the
following steps.
1. Identify Activities
The first step in value chain
analysis is to divide a company’s operations
into specific activities and group them into
primary and secondary activities. Within
each category, a firm typically performs a
number of discrete activities that may
reflect its key strengths and weaknesses.
2. Allocate Costs
The next step is to allocate costs
to each activity. Each activity in the value
chain incurs costs and ties up time and
assets. Value chain analysis requires
managers to assign costs and assets to
each activity. It views costs in a way
different from traditional cost accounting
methods. The different method is called
activity-based costing.
 3. Identify the Activities that Differentiate
the Firm
Scrutinizing the firm’s value chain
not only reveals cost advantages or
disadvantages, but also identifies the
sources of differentiation advantages
relative to competitors.
Examine the Value Chain
Once the value chain has been
determined, managers need to identify the
activities that are critical to buyer
satisfaction and market success. This is
essential at this stage of the value chain
analysis for the following reasons:
If the company focuses on low-cost
leadership, then managers should keep a
strict vigil on costs in each activity. If the
company focuses on differentiation,
advantage given by each activity must be
carefully evaluated .
2. The nature of value chain and the
relative importance of each activity within it,
vary from Notes industry to industry.
3. The relative importance of value chain
can also vary by a company’s position in a
broader value system that includes value
chains of upstream suppliers and
downstream distributors and retailers.
4. The interrelationships among value-
creating activities also need to be
evaluated.
The final basic consideration in applying
value chain analysis is the need to use a
comparison when evaluating a value
activity as a strength or weakness. In this
connection, RBV and SWOT analysis will
supplement the value chain analysis
To get the most out of the value-
chain analysis, as already noted, one needs
to view the concept in a broader context.
The value chain must also include the firm’s
suppliers, customers and alliance partners.
Thus, in addition to thoroughly
understanding how value is created within
the organization, one must also know how
value is created for other organizations
involved in the overall supply chain or
distribution channel in which the firm
participates.
Therefore, in assessing the value
chains there are two levels that must be
addressed.
1. Interrelationships among the activities
within the firm.
2. Relationships among the activities
within the firm and with other organizations
that are a part of the firm’s expanded value
chain
Usefulness of the Value Chain Analysis
The value chain analysis is useful to
recognize that individual activities in the
overall production process play an
important role in determining the cost,
quality and image of the end-product or
service.
That is, each activity in the value chain
can contribute to a firm’s relative cost
position and create a basis for
differentiation, which are the two main
sources of competitive advantage. While a
basic level of competence is necessary in
all value chain activities, management
needs to identify the core competences that
the organization has or needs to have to
compete effectively. Analyzing the separate
activities in the value chain helps
management to address the following
issues:
1. Which activities are the most critical
in reducing cost or adding value? If quality
is a key consumer value, then ensuring
quality of supplies would be a critical
success factor.
2. What are the key cost or value
drivers in the value chain?
3. What linkages help to reduce cost,
enhance value or discourage imitation?
4. How do these linkages relate to the
cost and value drivers?
Cost and Value Drivers
Porter identified the following as the most
important cost and value drivers: Cost
Drivers
1. Economies of scale
2. Pattern of capacity utilization (including
the efficiency of production processes and
labor productivity)
3. Linkages between activities (for example,
timing of deliveries affect storage costs,
just-in time system minimizes inventory
costs)
4. Interrelationships (for example, joint
purchasing by two units reduces input
costs)
5. Geographical location (for example,
proximity to supplies reduces input costs)
6. Policy choices (such as the choices on
the product mix, the number of suppliers
used, wage costs, skills requirements and
other human resource policies affect costs)
7. Institutional factors (which include
political and legal factors, each of which
can have a significant impact on costs).
Value Drivers
Value drivers are similar to cost drivers, but
they relate to other features (other than low
price) valued by buyers. Identifying value
derivers comes from understanding
customer requirements, which may include:
1. Policy choices (choices such as product
features, quality of input materials,
provision of customer services and skills
and experience of staff).
2. Linkages between activities (for
example, between suppliers and buyers;
sales and aftersales staff).
The cost and value drivers vary between
industries. The value chain concept shows
that companies can gain competitive
advantage by controlling cost or value
drivers and/or reconfiguring the value chain,
that is, a better way of designing,
producing, distributing or marketing a
product or service.
For example, Ryanair has become one of
the most profitable airlines in Europe
through concentrating on the parts of its
value chain, such as ticket transaction
costs, no frills etc.
Organizational Capability Factors
Organizations capabilities lies in its
resources. The resources are the means by
which an organization generates value. It is
this value that is then distributed for various
purposes. Resources and capabilities of a
firm can be best explained with the help of
Resource Based View (RBV) of a firm
which is popularized by Barney. RBV
considers the firm as a bundle of resources
– tangible resources, intangible resources,
and organizational capabilities. Competitive
advantage, according to this view, generally
arises from the creation of bundles of
distinctive resources and capabilities.
Resources
A ‘resource’ can be an asset, skill,
process or knowledge controlled by an
organization. From a strategic perspective,
an organization’s resources include both
those that are owned by the organization
and those that can be accessed by the
organization to support its strategies. Some
strategically important resources may be
outside the organization’s ownership, such
as its network of contacts or customers.
Typically, resources can be grouped
into four categories:
1. Physical resources include plant
and machinery, land and buildings,
production capacity etc.
2. Financial resources include capital,
cash, debtors, creditors etc.
3. Human resources include
knowledge, skills and adaptability of human
resources.
4. Intellectual capital is an intangible
resource of an organization. This includes
the knowledge that has been captured in
patents, brands, business systems,
customer databases and relationships with
partners. In a knowledge-based economy,
intellectual capital is likely to be the major
asset of many organizations.
Capabilities
Resources are not very productive on
their own. They need organizational
capabilities. Organizational capabilities are
the skills that a firm employs to transform
inputs into outputs. They reflect the ability
of the firm in combining assets, people and
processes to bring about the desired
results.
Prahalad and Hamel describe an
organizational competence as a “bundle of
skills and technologies”, which are
integrated in people skills and business
processes. Capabilities are, therefore a
function of the firm’s resources, their
application and organization, internal
systems and processes, and firm specific
skill sets.
Capabilities are rarely unique, and can
be acquired by other firms as well in that
industry. Some of these capabilities may
become “distinctive competencies”, when a
firm performs them better than its rivals.
Core Competence
Core competence refers to that set of
distinctive competencies that provide a firm
with a sustainable source of competitive
advantage. Core competencies emerge
over time, and reflect the firm’s ability to
deploy different resources and capabilities
in a variety of contexts to gain and sustain
competitive advantage.
Core competences are activities or
processes that are critically required by an
organization to achieve competitive
advantage. They create and sustain the
ability to meet the critical success factors of
particular customer groups better than their
competitors in ways that are difficult to
imitate.
In order to achieve this advantage,
core competences must fulfill the following
criteria. It must be:
1. an activity or process that provides
customer value in the product or service
features.
2. an activity or process that is
significantly better than competitors.
3. an activity or process that is difficult
for competitors to imitate.
An organization uses different types of
resources and exhibits a certain type of
organizational capabilities to leverage those
resources to bring about a competitive
advantage.
 It is important to emphasize that
resources by themselves do not yield a
competitive advantage. Those resources
need to be integrated into value creating
activities. Thus the central theme of RBV is
that competitive advantage is created and
sustained through the bundling of several
resources in unique combinations. Thus,
1. Competence is something an
organization is good at doing.
2. Core competence is a proficiently
performed internal activity
3. Distinctive competence is an activity
that a company performs better than its
rivals.
4. Distinctive competencies become
the basis for competitive advantage
Strategic Importance of Resources
Johnson and Sholes (2002 ) explain
the strategic importance of resources with
the concept of ‘strategic capability’.
According to them, strategic capability is
the ability of an organization to put its
resources and capabilities to the best
advantage so as to enable it to gain
competitive advantage. There are three
type of resources:
Available Resources
Strategic capability depends on the
resources available to an organization
because it is the resources used in the
activities of the organization that create
competences. As already explained above,
resources can be typically grouped under
four headings: Physical resources, human
resources, financial resources and
intellectual capital.
T
hreshold Resources
A set of basic resources are needed
by a firm for its existence and survival in the
marketplace. These resources are called
‘threshold resources’. But this threshold
tends to increase with time. So, a firm
needs to continuously improve this
threshold resource base just to stay in
business
Unique Resources
Unique resources are those resources that
are critically required to achieve competitive
advantage. They are better than
competitors’ resources and are difficult to
imitate. The ability of an organization to
meet the critical success factors in a
particular market segment depends on
these unique resources. To illustrate unique
resources, Johnson and Sholes quote the
example of some libraries having unique
collection of books, which contain
knowledge not available elsewhere, and the
example of retail stores located in prime
locations, which can charge higher than
average prices. Similarly, some
organizations have patented products or
services that are unique, which give them
advantage.
Critical Success Factors
Critical Success Factors (CSFs) are
defined as the resources, skills and
attributes of an organization that are
essential to deliver success in the market
place. CSFs are also called “Key Success
Factors” (KSFs) or “Strategic Factors”.
They are the key factors which are critical
for organizational success and survival.
 Critical success factors will vary from
one industry to another. For example, in the
perfume and cosmetics industry, the critical
success factors include branding, product
distribution and product performance, but
are unlikely to include low labor costs,
which is a very important CSF for steel
companies. CSFs can be used to identify
elements of the environment that are
particularly worth exploring
It is very important to identify the CSFs
for a particular industry. Many elements
relate not only to the environment but also
to the resources of organizations in the
industry. To identify the CSFs in an
industry, it is therefore useful to examine
the type of resources and the way they are
employed in the industry and then use this
information to analyze the environment
outside the organization. Hence CSFs
require an exploration of the resources and
skills of the industry before they can be
applied to the environment.
Importance of Critical Success Factors
The Japanese strategist Kenichi Ohamae,
the former head of the management
consultants Mc Kinsey, in Japan, has
suggested that the CSFs (or key success
factors, as he calls them) are likely to
deliver the company’s objectives. He
argues that, when resources of capital,
labor and time are scarce, it is important
that they should be concentrated on the key
activities of the firm, that is, those activities
that are considered most important to the
delivery of whatever the organization
regards as success.
Rockart has also identified four major
sources of CSFs:
1. Structure of the industry: Some
CSFs are specific to the structure of the
industry. For example, the extent of service
support expected by the customers.
Automobile companies have to invest in
building a national network of authorized
service stations to ensure service delivery
to their customers.
2. Competitive strategy, industry position
and geographic location: CSFs also arise
from the above factors. For example, the
large pool of English-speaking manpower
makes India an attractive location for
outsourcing the BPO needs of American
and British firms.
3. Environmental factors: CSFs may
also arise out of the general/business
environment of a firm, like the deregulation
of Indian Industry. With the deregulation of
telecommunications industry, many private
companies had opportunities of growth.
4. Temporal factors: Certain short-term
organizational developments like sudden
loss of critical manpower (like the
charismatic CEO) or break-up of the family
owned business, may necessitate CSFs
like “appointment of a new CEO” or
“rebuilding the company image”.
Temporarily such CSFs would remain CSFs
till the time they are achieved.
Benchmarking
Benchmarking is the process of
comparing the business processes and
performance metrics including cost, cycle
time, productivity, or quality to another that
is widely considered to be an industry
standard benchmark or best practice.
Essentially, benchmarking provides a
snapshot of the performance of a business
and helps one understand where one is in
relation to a particular standard.
The result is often a business case and
"Burning Platform" for making changes in
order Notes to make improvements. Also
referred to as "best practice benchmarking"
or "process benchmarking", it is a process
used in management and particularly
strategic management, in which
organizations evaluate various aspects of
their processes in relation to best practice
companies' processes, usually within a peer
group defined for the purposes of
comparison.
This then allows organizations to
develop plans on how to make
improvements or adapt specific best
practices, usually with the aim of increasing
some aspect of performance.
Benchmarking may be a one-off event, but
is often treated as a continuous process in
which organizations continually seek to
improve their practices.
Types of Benchmarking
Benchmarking can be of following types:
1. Process benchmarking: the initiating firm
focuses its observation and investigation of
business processes with a goal of
identifying and observing the best practices
from one or more benchmark firms. Activity
analysis will be required where the
objective is to benchmark cost and
efficiency; increasingly applied to back-
office processes where outsourcing may be
a consideration.
2. Financial benchmarking: performing a
financial analysis and comparing the results
in an effort to assess your overall
competitiveness and productivity.
3. Benchmarking from an investor
perspective: extending the benchmarking
universe to also compare to peer
companies that can be considered
alternative investment opportunities from
the perspective of an investor.
4. Performance benchmarking: allows the
initiator firm to assess their competitive
position by comparing products and
services with those of target firms.
5. Product benchmarking: the process of
designing new products or upgrades to
current ones. This process can sometimes
involve reverse engineering which is taking
apart competitors products to find strengths
and weaknesses
6. Strategic benchmarking: involves
observing how others compete. This type is
usually not industry specific, meaning it is
best to look at other industries.
7. Functional benchmarking: a company will
focus its benchmarking on a single function
in order to improve the operation of that
particular function.
Complex functions such as Human
Resources, Finance and Accounting and
Information and Communication
Technology are unlikely to be directly
comparable in cost and efficiency terms
and may need to be disaggregated into
processes to make valid comparison.
8. Best-in-class benchmarking: involves
studying the leading competitor or the
company that best carries out a specific
function
9. Operational benchmarking: embraces
everything from staffing and productivity to
office flow and analysis of procedures
performed.
There is no single benchmarking process
that has been universally adopted. The
wide appeal and acceptance of
benchmarking has led to various
benchmarking methodologies emerging.
The first book on benchmarking, written by
Kaiser Associates, offered a 7-step
approach. Robert Camp (who wrote one of
the earliest books on benchmarking in
1989) developed a 12-stage approach to
benchmarking.
Benchmarking Methodology
The following is an example of a typical
benchmarking methodology:
1. Identify your problem areas: Because
benchmarking can be applied to any
business process or function, a range of
research techniques may be required. They
include: informal conversations with
customers, employees, or suppliers;
exploratory research techniques such as
focus groups; or in-depth marketing
research, quantitative research, surveys,
questionnaires, re-engineering analysis,
process mapping, quality control variance
reports, or financial ratio analysis. Before
embarking on comparison with other
organizations it is essential that one knows
one's own organization's function,
processes; base lining performance
provides a point against which improvement
effort can be measured.
of measures and practices used to identify
business process alternatives and leading
companies. Surveys are typically masked to
protect confidential data by neutral
associations and consultants.
5. Visit the "best practice" companies to
identify leading edge practices: Companies
typically agree to mutually exchange
information beneficial to all parties in a
benchmarking group and share the results
within the group.
6. Implement new and improved business
practices: Take the leading edge practices
and develop implementation plans which
include identification of specific
opportunities, funding the project and
selling the ideas to the organization for the
purpose of gaining demonstrated value
from the process.

2. Identify other industries that have similar

processes: For instance if one were
interested in improving hand offs in
addiction treatment he/she would try to
identify other fields that also have hand off
challenges. These could include air traffic
control, cell phone switching between
towers, transfer of patients from surgery to
recovery rooms.

3. Identify organizations that are leaders in

these areas: Look for the very best in any
industry and in any country. Consult
customers, suppliers, financial analysts,
trade associations, and magazines to
determine which companies are worthy of
study.

4. Survey companies for measures and

practices: Companies target specific
business processes using detailed surveys

EXTERNAL ASSESSMENT
External assessment is a step where a firm
identifies opportunities that could benefit it
and threats that it should avoid. It includes
monitoring, evaluating, and disseminating
of information from the external and internal
environments to key people within the
corporation
Concept of Environment
 Environment literally means the
surroundings, external objects,
influences or circumstances under
which someone or something exists.
The environment of any organization
is “the aggregate of all conditions,
events and influences that surround
and affect it.” Davis, K, The Challenge
of Business, (New York: McGraw Hill,
1975), p. 43.
 Environment refers to all external
forces which have a bearing on the
functioning of business.
 Jauch and Gluecke has defined the
environment as “The environment
includes factors outside the firm which
can lead to opportunities or a threat to
the firm. Although there are many
factors, the most important of the
sectors are socio-economic,
technological, supplier, competitor
and govt.”
Importance of Business Environment
1.Environment is Complex: The
environment consists of a number of
factors, events, conditions and influences
arising from different sources. All these
interact with each other to create new sets
of influences.
2. It is Dynamic: The environment by its
very nature is a constantly changing one.
The varied influences operating upon it
impart dynamism to it and cause it to
continually change its shape and character.
3. Environment is multi -faceted: The same
environmental trend can have different
effects on different industries. For instance,
GATS is an opportunity for some
companies but a threat for others.
4. It has a far-reaching impact: The
environment has a far-reaching impact on
organizations in that the growth and
profitability of an organization depends
critically on the environment in which it
exists.
5. Its impact on different firms with in the
same industry differs: A change in
environment may have different bearings
on various firms operating in the same
industry. In the pharmaceutical industry in
India, for instance, the impact of the new
IPR (Intellectual Property Rights) law will
different for research-based pharmacy
companies such as Ranbaxy and Dr.
Reddy’s Lab and will be different for smaller
pharmacy companies.
6. It may be an opportunity as well as a
threat to expansion: Developments in the
general environment often provide
opportunities for expansion in terms of both
products and markets.
7. Changes in the environment can change
the competitive scenario: General
environmental changes may alter the
boundaries of an industry and change the
nature of its competition. This has been the
case with deregulation in the telecom sector
in India. Since deregulation, every second-
year new competitors emerge, old foes
become friends and M&As follow every new
regulation.
8.Sometimes developments are difficult to
predict with any degree of accuracy:
Macroeconomic developments such as
interest rate fluctuations, the rate of
inflation, and exchange rate variations are
extremely difficult to predict on a medium or
a long-term basis. On the other hand, some
trends such as demographic and income
levels can be easy to forecast.
Porter’s Five Force Analysis
The Five Forces
The Five Forces model developed by
Michael E. Porter
1. Threat of new entrants
2. Intensity of rivalry among
industry competitors
3. Bargaining power of buyers
4. Bargaining power of suppliers
5. Threat of substitute products
and services.
1. The Threat of New Entrants: New
entrants bring new capacity and often
substantial resources to an industry with a
desire to gain market share. And the threat
of entry in an industry depends on the
height of entry barriers (i.e. factors that
make it costly for new entrants to enter
industry) that are present and on the
retaliation from the entrenched competitors.
There are seven major sources:
a) Economies of scale: These are relative
cost advantages associated with large
volumes of production, that lower a
company’s cost structure.
Example: In microprocessors, existing
companies such as Intel are protected by
economies of scale in research, chip
fabrication and consumer marketing.
b) Product differentiation: Brand loyalty is
buyer’s preference for the differentiated
products of any established company.
Strong brand loyalty makes it difficult for
new entrants to take market share away
from established companies
(c) Capital requirements: The need to
invest large financial resources in order to
compete can deter new entrants
For example, in airlines industry, financing
is available to purchase expensive aircrafts
because of their resale value, and that is
why there have been a number of new
airlines in almost every region.
(d) Switching costs: Switching costs are
the one-time costs that a customer has to
bear to switch from one product to another.
(e) Access to distribution channels: The
more limited the wholesale or retail
channels are, tougher will be the entry into
an industry.
For example, a new food item may have to
displace others from the supermarket shelf
via price breaks, promotions, intense selling
efforts or some other means
 (f) Cost disadvantages independent of
size: Some existing companies may have
advantages other than size or economies of
scale. These are derived from:
(i) Proprietary technology
(ii) Preferential access to raw material
sources
(iii) Government subsidies
(iv) Favorable geographical locations
g) Government policy: The government can
limit or even foreclose entry into industries,
with such controls as license requirements
and limits on access to raw materials.
Expected Retaliation: How new entrants
believe that the existing companies may
react
New entrants are likely to fear expected
retaliation if:
(a) Existing companies have previously
responded vigorously to new entrants
(b) Existing companies possess substantial
resources to fight back
(c) Existing companies seem likely to cut
prices to protect their market share
(d) Industry growth is slow, so newcomers
can gain volume only by taking the market
share from existing companies.
2. Intensity of Rivalry among Competitors:
Rivalry means the competitive struggle
between companies in an industry to gain
market share from each other. Firms use
tactics like price discounting, advertising
campaigns, new product introductions and
increased customer service or warranties.
The intensity of rivalry is greatest under the
following conditions:
a) Numerous competitors or equally
powerful competitor
b) Slow industry growth
c) High fixed but low marginal costs:
d) Lack of differentiation or switching
costs
e) Capacity augmentation in large
increments
f) High exit barriers
Common exit barriers
1. Investment in specialized assets like
plant and machinery are of little or no
value, and cannot be put to alternative
use. So, they have to be continued.
2. High costs of exit such as
retrenchment benefits, etc. that have
to be paid to the redundant workers
when a company ceases to operate
3. Emotional attachment to an industry
keep owners or employees unwilling
to exit from an industry for sentimental
reasons.
4. Economic dependence on the industry
when the firm depends on a single
industry for revenue and profit.
5. Government and social pressures
discourage exit of industries out of
concern for job loss.
6. Government and social pressures
discourage exit of industries out of
concern for job loss.
7. Strategic interrelationships between
business units and others prevent exit
because of shared facilities, image
and so on.
3.Bargaining power of buyers: refers to the
ability of buyers to bargain down prices
charged by firms in the industry or driving
up the costs of the firm by demanding
better product quality and service
According to Porter, buyers are most
powerful under the following conditions:
(a) There are few buyers
(b) The products are standard or
undifferentiated
(c) The buyer faces low switching costs:
(d) The buyer earns low profits:
(e) The quality of buyer’s products
Retailers can gain significant bargaining
power over manufacturers when they can
influence consumers.
4.Bargaining power of suppliers: Suppliers
are companies that supply raw materials,
components, equipment, machinery and
associated products. Powerful suppliers
make more profits by charging higher
prices, limiting quality or services or shifting
the costs to industry participants.
A supplier’s bargaining power will be high
under the following conditions:
(a) Few suppliers: When the supplier group
is dominated by few companies and is more
concentrated than the firms to whom it
sells, an industry is called concentrated.
The suppliers can then dictate prices,
quality and terms.
- The buyer’s switching costs to the
substitutes is low
Industry Analysis
An industry is thus a group of firms
producing similar products or services. By
similar products we mean products that
customers perceive to be substitutes for
one another.
The basic purpose of industry analysis is to
assess the strengths and weaknesses of a
firm relative to its competitors in the
industry.
1. Industry Features:. An industry’s
dominant economic features include
such factors as:
- Overall size
- Market growth rate
- Geographic boundaries of the
market - Number and sizes of
competitors
- Pace of technological change
- Product innovations etc.

(b) Product is differentiated: Example: Video games, computers and

(c) Dependence of supplier group on the pharmaceuticals
firm:
2. Industry Boundaries: Firms within the
(d) Importance of the product of the firm: (e)
same industry could differ across
Threat of forward integration:
various parameters, such as:
(f) Lack of substitutes:
(a) Breadth of market
(b) Product/service quality
5. Threat of substitute products: A
(c) Geographic distribution
substitute performs the same or a similar
(d) Level of vertical integration
function as an industry’s product
(e) Profit motives
Thus, according to Porter, “substitutes limit
3. Industry Environment: Based on their
the potential returns of an industry by
environment, industries are basically of two
placing a ceiling on the prices firms in the
types:
industry can profitably charge”.
(a) Fragmented Industries: A fragmented
It will suffer in terms of profitability and
industry consists of a large number of small
growth potential in the following
or medium-sized companies, none of which
circumstances:
is in a position to determine industry price.
- It offers an attractive price and
Many fragmented industries are
performance:
characterized by low entry barriers and
commodity type products that are hard to
differentiate.
(b) Consolidated Industries: A consolidated
industry is dominated by a small number of
large companies (an oligopoly) or in
extreme cases, by just one company (a
monopoly). These companies are in a
position to determine industry prices.
According to Michael Porter, industries can
be categorized into:
Emerging industries: Are those in the
introductory and growth phases of their life
cycle.
Mature industries: Are those who reached
the maturity stage of their life cycle.
Declining industries: Are those in the
transition stage from maturity to decline.
Global industries: Are those with
manufacturing bases and marketing
operations in several countries. Competition
varies during each stage of industry life
cycle.
4. Industry Structure: Structural attributes
are the enduring characteristics that give an
industry its distinctive character.
Industry structure consists of four elements:
(a) Concentration: It means the extent to
which industry sales are dominated by only
a few firms.
(b) Economies of scale: Firms that enjoy
economies of scale can charge lower prices
than their competitors, because of their
savings in per unit cost of production.
(c) Product differentiation: Real perceived
differentiation often intensifies competition
among existing firms.
(d) Barriers to entry: Are the obstacles that
a firm must overcome to enter an industry,
and the competition from new entrants
depends mostly on entry barriers.
5. Industry attractiveness: Industry
attractiveness is dependent on the
following factors:
- Profit potential
- Growth prospects
- Competition
- Industry barriers etc.
6. Industry performance: This requires
an examination of data relating to:
(a) Production
(b) Sales
(c) Profitability
(d) Technological advancements
7. Industry practices: refer to what a
majority of players in the industry do with
respect to products, pricing, promotion,
distribution etc.
This aspect involves issues relating to:
(a) Product policy
(b) Pricing policy
(c) Promotion policy
(d) Distribution policy
(e) R&D policy
(f) Competitive tactics.
8. Industry’s future prospects: The future
outlook of an industry can be anticipated
based on such factors as:
(a) Innovation in products and services
(b) Trends in consumer preferences
(c) Emerging changes in regulatory
mechanisms
(d) Product life cycle of the industry
(e) Rate of growth etc.
Competitive Analysis
Competitive analysis is the process of
identifying competitors and evaluating their
strategies in order to determine their
weaknesses and strengths in order to better
your own company.
There are four types of competition in a free
market system:
There are two theories of economics –
theory of monopoly and theory of perfect
competition. These represent two extremes
of industry competition.

perfect competition In a monopoly context, a single firm is

monopolistic competition protected by barriers to entry, and has an
oligopoly opportunity to appropriate all the profits
monopoly generated in the industry.
 Under monopolistic competition, many
sellers offer differentiated products— In a “perfectly competitive industry,
products that differ slightly but serve competition is unbridled and entry to the
similar purposes. By making industry is easy.
consumers aware of product
differences, sellers exert some control
over price.
 In an oligopoly, a few sellers supply a
sizable portion of products in the
market. They exert some control over
price, but because their products are
similar, when one company lowers
prices, the others follow.
 In a monopoly, there is only one seller
in the market. The market could be a
geographical area, such as a city or a
regional area, and does not
necessarily have to be an entire
country. The single seller is able to
control prices. Most monopolies fall
into one of two categories: natural and
legal.

Most monopolies fall into one of two

categories: natural and legal

 Natural monopolies include public

utilities, such as electricity and gas
suppliers. They inhibit competition, but
they’re legal because they’re
important to society.
 A legal monopoly arises when a
company receives a patent giving it
exclusive use of an invented product
or process for a limited time, generally
twenty years.