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    Preface... CHAPTER Strategy: Defined Lesson 1 From Strategy to Strategic Management 2 Levels of Strategy: 3. Strategic Management Process 4 Strategy Implementati Research Activity. Case 1. The Original Buko Pie. Case 2. Piflakamasarap Corporation. References .. CHAPTER II The Organization 3 3 Negi ais tes ope sts wl SUE Lesson 1 Organizational Structures. 4 2 Stakeholder Management... 39 3. The Chief Executive Officer. 4a 4 The CEO and Strategy. a7 1 Research Activity. 51 j Case 3. S&C Garments... 53 Case 4. Triple State Hardware Corporatior 55 4 References 58 2 CHAPTER Il i The Environment ’ Lesson 1 Macro-Environment. 60 i 2. Micro-Environment 64 3 Internal Environment, 70 4 SWOT Analysi 74 Research Activit 79 Case 5. Fil General Blower Corporation. 80 82 Case 6. Chef's Secret, In« References Scanned with CamScanner CHAPTER IV 8 5 Creating Value at the Business Level , Lesson 1 Value Creation Model 86 2. Value Chain Analysis 90 3 Business Modeling and Strategy Maps. 95 4 Determining Competitive Potential 100 Research Activity... Case 7. CNJ Plastic Enterprise Case 8, PULP Magazine. References CHAPTER V Competitive Strategy Lesson 1 Generic Strategies 2. Competitive Dynamics 3 Life Cycle Strategies . Research Activity Case 9, Health Plus Case 10. The Manila Times .. References CHAPTER VI Corporate Level Strategy Lesson 1 C-Level Position: 2 Corporate Headquarters (CHQ) 3 Vision and Mission ... 4 Managing the Business Portfolio. Research Activity. Case.11. Creative Food Technologies Corporation. Case 12, Robin Co, Ltd. References Scanned with CamScanner CHAPTER VII Transformation and Growth 1 6 3 Be Lesson 1. Managing Strategic Change ... 2. Mergers, Acquisitions, and Integration 3° Global Strategies Research Activity .. Case 13. Meridian IT. Case 14. KPH Enterprises Scanned with CamScanner STRATEGY: DEFINED Jollibee Foods Corporation is the country’s top quick- service food chain. After it became a publicly traded company in 1993, the company was flushed with cash. The company used this opportunity to invest in a series of businesses including the Greenwich chain of pizza outlets and the Chowking chain of Chinese restaurants. But the flagship business of the company has always been the Jollibee brand of stores. By 2001, the company had 800 different food stores across the country. The big dream, however, has always been to become a globally recognized brand, in the same way that the McDonald's chain of stores is known worldwide. The company opened Jollibee outlets in different locations, including the United States, Brunei, the United Arab Emirates, Kuwait, and Hong Kong. However, the reception toward the taste of Jollibee food products abroad was a mixed bag. While it was true that the Filipino communities flocked to these stores, the original intention was for foreign markets to appreciate the offerings of Jollibee, as this would enable the firm to expand beyond just Filipino enclaves. But this was not happening, and this became a serious stumbling block toward the company's long-term goal of opening 2,000 food outlets across the globe. It was a painful realization for the management, having to admit that Filipino taste will not translate across the globe so easily. But this admission was necessary for it to move forward. What happened next was a transformation of its global strategy. Instead of trying to work its way toward 2,000 stores worldwide by‘opening Jollibee brand stores across the globe, they realized that a more efficient way of reaching this goal was through the acquisition of already established food service brands around ‘the world. In 2004, Jollibee acquired Yonghe King, a popular fast food in China, giving it instant access to 70 store outlets. Ten years later, Jollibee would acquire a 40% ownership in American burger chain Smashburger, gaining it 339 restaurant outlets across the United States, the Middle East, and South America. OC amlas Scanned with CamScanner 2. Busnes Poucy mo Strareoy LESSON 1 FROM STRATEGY TO STRATEGIC MANAGEMENT Strategy is a word that we may often find ourselves using in daily conversation. Wq analyze team strategies" in basketball games. We “strategize” whenever we play boar games such as chess or checkers. We also admire the “strategy” of a feisty lawyer in legay television dramas. So we do have some ideas about what strategy is, albeit froma layperson'y Perspective, We know, for instance, that it involves the crafting of some premeditated maneuvers, A basketball coach would call for a time-out to huddle with his team, for instance, to plot Possible scenarios and what each player should do under the circumstances, There coule even be conditional clauses involved: if this happens, then this is what you must do. A seasoned chess player would be thinking several steps ahead, thinking of all the possibla ‘moves that his opponent might make, and configuring a response for each of thesq possibilities to enable him to win the game, . There is also the element of envisioning the future. A showstopping lawyer may live fon the closing argument, visualizing well in advance how the performance should go and how, the judge should react. Thus, strategy is something that seems to happen ahead of the actual implementation, Itimplies a semblance of premeditation or of planning, i In lay terms, strategy is a way to get from Point A to Point B. For example, if you would] go to the mall, you can walk, ride a bike, take a cab, take a jeepney or a bus, drive a car, or: take a combination of any aforementioned ways to go there. They will all get you to the: ‘mall. But what is the most effective and efficient way for you to get there? Some ways will be cheaper but slower, while others will be faster but more expensive. Choosing the way to get there is what strategy is all about, and your choice will likely be dictated by what you Prioritize most in life. Do you prioritize your time or your budget? This alone will become a significant input to your eventual strategy for getting to the mall. * Porter’s Criteria for Effective Strategies What is strategy as applied to business and organization? Michael Porter, recognized as an authority in strategy, noted that strategy should lead to sustainable competitive Scanned with CamScanner Charen |. SteAtear: Derneo 3 advantages. He explained what an effective strategy should and should not be (Porter, 1996): 1. ‘The strategy should not be about operational effectiveness. While it is always good to have a well-run organization, this byitselfis not what strategy is all about. Operational effectiveness is all about outperforming competitors by being able to utilize resources better, and this is definitely a plus, But itis not yet strategy. As an analogy, if a student is gifted with a higher level of comprehension than her classmates, this will allow her to get better grades; however, this is not a strategy per se. On the other hand, waking up earlier than one’s classmates to have more study time may be considered asa form of strategy. The strategy should be about unique activities. Ina competitive environment, finding a way to do things differently from your competitors, in a way that allows you to gain distinct advantages, is what strategy formulation leads to. Television station TV5, acknowledging that it could not compete with the big budget dramas of GMA Network and ABS-CBN, opted instead for showing Hollywood films that have been dubbed in Filipino—the programs were cheaper to procure and, therefore, allowed the station to keép going even with lesser ad revenues. The strategic positions require trade-offs. To get to a place of competitive excellence, you have to learn to sacrifice certain attributes to be better than others. Do you want to be the fastest person to get to the mall? Then, you may have to sacrifice your budget as you decide to drive your car, pay for gas and for parking. Conversely, if you want to get to the mall in the cheapest possible manner, then be prepared to sacrifice speed, time, and possibly comfort. These trade-offs, amplified on a larger scale, illustrate the kinds of strategic decisions that firms often face. The success of Closeup toothpaste, for instance, was a result of its willingness to sacrifice the family market, despite it being a huge market in favor of focusing on just the youth. The strategy should fit the strategist in order to be sustainable. If you are the kind of pérson whe values comfort, perhaps taking public transportation as a regular strategy to get to the mall will not last. Sooner of later, you will eventually give up and just drive your caf. This is because, as it turns out, it is a strategy that is not fit with who you are. In the same way, firms need to identify strategies that are a good fit with their culture, organization, and resources. The Human Nature brand of personal care products, for instance, has strong advocacies about the environment and the empowerment of farmers as these reflect the passions of its owners and haé therefore become imbued in the corporate culture. The strategy needstobe constantly revisited. The environmentis ever dynamic. This means that a strategy that once worked may eventually lose relevance under a changed environment. Theréfore, there will be a need to constantly check one’s, strategy to make sure that it is still the best way to achieve what one wants to achieve. San Miguel Corporatiori used to be in food and beverages only, but a review of its market share and opportunities led the firm to expand into a number of new industries, including power and energy and real estate. Scanned with CamScanner 4 Busnes Poucy ano Strareay Porter (1996) believed that effective strategy shduld be all about giving § advantages that ensure their competitiveness now and in the future. Therefore, ii, necessity, an ongoing process. Strategy and Competitive Advantage Strategy can be defined asa firm's theory about how it can gain competitive advantageg (Barney & Hesterly, 2012), Each individual firm may have, its own theory about how it ca best compete in a competitive marketplace. The theory may be flawed, in which case the eventual strategy may turn out to be ineffective, or the theory may turn out to be highjy explanatory, in which case the eventual strategy may just succeed. Integrating this with Porter's five criteria, strategy can, therefore, be thought of as . firm's plans based on its own theories about its competitive environment to develop ang, sustain its own competitive advantages (Parnell, 2014). But what exactly is a competitive advantage? Simply put, a competitive advantage refers to any edge that a firm has over ity competition. Itis an edge that ideally will be felt by consumers, and it answers the questiory “Why would I buy from this firm rather than from the other firms?" (Ehmke, 2008). Apple Inc. is one of the most profitable companies of the twenty-first century. Whay was Apple's strategy? Its resurgence from 1998 onward began with an emphasis on designy ‘Among its competitive advantages was a roster of design talents that included industria designer Jonathan Ive. This led to the groundbreaking, multicolored iMac G3 computers) which revived the company, followed by the revolutionary iPod music player, and eventually) the phenomenally best-selling iPhone. (Waugh, 2011) But design alone will not be enough to sustain Apple because, sooner or later, its, competitors will eventually catch up on the design front. For instance, Samsung has been, aggressive in attempting to outdesign Apple products, and it has proven to be highly competitive, particularly in the smartphones market. (Kovach, 2016) This is where Apple's former Chief Operating Officer Tim Cook came in’. With an: expertise in supply chain management, Cook was instrumental in locking up some of the best manufacturing plants in China (Lashinsky, 2008), as well as locking up the world’s supply of aluminum (Elnier-DeWitt, 2011). This way, it became almost impossible for other, device makers to produce best-in-class, aluminum-clad devices. This represented a revision of strategy on the part of Apple: beginning with a strength in industrial design, it leveraged this to come up with highly profitable new products that) the market wanted due to their well-thought-out designs. This allowed Apple to build up a huge cash surplus from its high-margin products. While competitors tried to catch up with Apple on the design front, Apple proceeded to use its cash surplus to create its next set of competitive advantages, namely, in manufacturing and raw materials superiority. This way, even as competitors catch up with its design aptitude, Apple will still have a new set of | ‘competitive advantages moving forward, "Tim Cook wll eventualy become the Che Executive Offcerof App nc. Scanned with CamScanner ne ‘Quorer |. Sreatecy: Deseo 5 This illustrates the nature of strategy formulation: it is ever dynamic, requiring constant updating and reassessment. Just because a strategy is working at the moment does not | assure a firm that it will work forever. As Andrew S. Grove, the Chief Executive Officer who grew Intel Corporation intoa technological behemoth, notes, “Success breeds complacency. Complacency breeds failure. Only the paranoid survive (Grove, 1997) + | Strategy Does Not Exist in a Vacuum ‘A more comprehensive way of looking at strategy Is by focusing on the guiding principles that lead to the decisions on how to get from Point A to Point B. In other words; | strategy is not only about the specific strategic actions, but also the parameters, the policies, and the operating guidelines that lead to the formulation of these specific actions in the first place. This in a way is a more metaperspective about what strategy Is. In fact, this perspective states that strategies do not just happen in a vacuum and are dependent, if not interdependent, on other parameters. (Watkins, 2007) Figure 1. Strategy is interdependent with other aspects of business strategy. (Watkins; 2007) ‘As shown in Figure 1, the strategy (“How”) is also dependent on larger elements within the firm’s purview, such as its mission and goals or what it has chosen to do, its value nétwork or the people and organizations that it chooses to work with, and the vision and incentives or the compelling reasons for its organization members to work together. (Watkins, 2007) So strategy formulation does not exist in a vacuum. Your strategy in getting to the mall would be a function of (1) your purpose for going there in the first place, (2)the people you interact with and the shops that you choose to go to once you are there, and (3) the fesources that are available to you. All of these factors will help determine your strategy for getting to the mall. : Scanned with CamScanner © Busness Poucy ano Sreateay aR Bee Reg IPS CNA While Porter espouses that strategy formulation should lead to innovative actions as to have competitive advantage, resulting strategies can generally be classified along these three directions (Ovans, 2015): j 1. Doing something new 2. Building on what you already have 3, Reacting to emerging opportunities Competitive strategies can be about innovation and differentiation. They can also by about enhancing ones core competencies and capabilties, pursuing constant increment improvements on them toal ‘of competition. They can also be about spotting new trends, market needs, a ich means that the fir should havea quick reaction time. lways be ahead ind technologies before others do, whit Process of Strategic Management While strategy refers to a broad palette of actions that are typically used as a meang of competing effectively versus a hostle environment, strategic management pertains toz process that a firm's management can undertake to formulate and eventually implemen such strategies. ‘Te standard approach to strategic management involves five steps (Wright, 1998), each of which will be discussed further in succeeding lessons: | 1. External‘analysis. Management needs to assess the environment in which it operates, This includes the environment at large, such as the economic, demographic, and politcal situation, as well as the more immediate competitive) environment which includes competitors and potential substitutes. This is doney in order to discover possible opportunities and potential threats ahead of time, 2. Internal analysis. Management needs to assess the internal environment of the firm: What are its competitive advantages or strengths? What are its limitations or weaknesses? Knowing these will help management understand what it can and cannot do to formulate strategies that will build competitive advantages. 3, Strategy formulation, Management goes through a process’ of creating strategies that ‘best leverage the firm's strengths while avoiding ‘having its) weaknesses exposed all n pursuit of possible opportunities orto evadé potential} threats. 4. _ Strategy execution. This pertains to management's actual implementation ofthe identified strategy. Actual implementation is part of the strategic management) process, while strategy in general simply pertains to the formulation part. 5, Strategic control. As the strategy is implemented, management needs toy monitor actual performance versus planned performance: The control process enables management to have a feedback loop in place, thereby allowing it to} dynamically manage the implementation process. if the actual performance, does not live up to the planned performance, management can either tweak the strategy or adjust the targets, depending on how implementation pans out. Inj so doing, management may be able to salvage a possibly questionable strategy) before itis too late. : Scanned with CamScanner Coarten |, Strateay: Dernco 7 ___ This five-step process is typically a sequential one. Even the premise of starting out with external analysis rather than Internal analysis has a purpose: It allows the organization to begin the strategic management process with a potentially collaborative exercise— management looking at the outside world as a team—and therefore boosting teamwork before proceeding to the potentially more divisive internal analysis, where finger-pointing can happen as management struggles to Identify sources of internal weaknesses. ‘The end result of the strategic management process Is Ideally the strategic plan, ‘a document which lays out the strategies that can provide the firm with ‘competitive advantages for years to come. Yet, as we shall learn in future lessons, even this is not mandatory. A strategic plan is nice to have, but is not a requirement for a firm to function effectively. STRATEGIC QUESTIONS AND EXERCISES Using your own words, explain what strategy is. Why should strategy be constantly reviewed and updated? Elaborate on the differences between strategy and strategic management. 4, Youare home and about to cook when you realize that you are out of cooking oil. What will be your strategy for getting cooking oil? Explain the parameters that led to this decision. Relate these to the parameters that affect strategy formulation. we GROUP ACTIVITY Interview the owner or manager of a small enterprise in your neighborhood. ‘Ask them about what makes their business competitive, Determirie whether this isa true strategy and explain whether or not itis effective as per Porter’ criteria for effective strategy. NETWORK Search online for an example of a successful business strategy. 1. Explain what the business is all about. 2. Identify the challenge that the strategy was supposed to overcome. 3, Describe the strategy and why it worked. 4, What does this teach you about the nature of strategy? Scanned with CamScanner 8 Busness Pouey so Staatcay Sa RS eh MIGROS eel ae Se LESSON 2 LEVELS OF STRATEGY Objectives: uceM RA seu Ue ou ee ead Cre RONG CCM mmc amu organization; and Sr nCMnetcisem nite same Mucus Pen Iu The word “strategy” can be used in different contexts that determining the kind of strategy that is being referred to can get confusing, It is understandable because strategy can be formulated across the many different tiers ofan organization, and each tier’s strategy will be of a different nature versus that of other tiers. ‘Tiers of a Corporation To fully understand the layers involved, the following is a generalized schematic of what a corporate organization may look like: Corporate Level i Level s Figure 2. Generalized Corporate Structure The top layers consist of a Chief Executive Officer (CEO) along with a cohort of what a known as C-level positions: Chief Operating Officer, Chief Finance Officer, and so on. is level of the corporation usually resides at the headquarters of the company. They are responsible for the corporate level strategies of the organization. The Presidents, on the other hand, serve as the heads of thei i : , , s of thelr own respective business Units and are therefore responsible for the business level strategies or strategies pertaining Scanned with CamScanner Coworten |, Stratton: Dermeo 9 to their respective businesses. If a corporation has five businesses under Its domain, it Is expected to have five Presidents as well, all of whom report to the CEO, Under each President will serve the different Vice Presidents (VPs) who specialize in their own respective fields of expertise. They are responsible for the functional level strategies oftheir respective businesses. Thelr subordinates will then be responsible for operational, or day-to-day, strategies. You may notice from the diagram that C-level positions do not have direct lines to the Presidents. This is because C-level positions Ideally should only serve as advisors to the CEO. They are not supposed to have managerial or executive roles. So if, for instance, the CEO does not have sufficient knowledge in legal matters, the CEO can create a new advisory C-level position, the Chief Legal Officer, and this person will provide the CEO with egal advice and strategy suggestions. If the CEO does not know much about marketing, the CEO can hire a Chief Marketing Officer who can serve as a sounding board for top-level marketing strategies. In actual practice, however, many firms end up using C-level officers as executives, having the VPs of each company under the domain of the headquarters report to their respective C-level equivalents. So the VPs for Finance of each business, for instance, report to the Chief Financial Officer. This leads to what is often referred to as a matrix form of ‘management, where managers end up reporting to more than one superior. The danger with such a matrixis that the lines of authority become blurred, and incidents where orders from the C-level executives" clash with the orders from the Presidents commonly occur. Corporate Level Strategies This is the highest level where strategy formulation can take place. At the corporate level, the CEO is primarily concerned with managing a portfolio of businesses, each of which is being run by their own respective business heads (the Presidents). Such enterprises that are composed of multiple businesses under a centralized managing unit are called conglomerates. ‘An example of such a conglomerate is the San Miguel Corporation. Its headquarters, situated in Pasig City, manages a growing portfolio of different and diversified business interests. Originally started as a beer-brewing enterprise, San Miguel has grown to also have businesses in packaging, animal feeds, beverages, and eventually real estate and power and energy. Because corporate headquarters is involved in handling a variety of business, enterprises, often of a highly-diversified nature; the corporate strategy may involve ‘either, crafting of integrated strategies that build synergies among the different enterprises of setting goals that the different business heads strive to. accomplish using their own, respective strategies, Either way, a working relationship needs to be established between, the CEO and the various business heads, and itis typically in terms of clear targets handeq) down by the CEO that the business heads then need to achieve. Achievement of these targets often means rewarding of handsome incentives and bonuses to successful busines: heads, As for the business heads that do not make their targets, at the very least, they wi not be rewarded with bonuses. At most, they may be relieved of their duties. Scanned with CamScanner 10 Busness Poucy ano Strareoy ote Itshould be noted that the CEO is not expected to be a master of each and every kip, usiness that the conglomerate ventures into—this will be nearly impossible. Insteag the CEO is expected to be a generalist who understands how to communicate with thy heads of each of the different businesses. Extent of Diversification Capital Investment Decisions across Business Units + Pruning off LUnderperforming Business Units Diversification to Types of Venture Into Building Strong Corporate Identity Building Corporate-Level Competitive Advantages through Diversification Strengthening Competitiveness of New Businesses and Industries to Existing Business Units Venture Into Figure 3. Corporate Strategies fora Diversified Firm ‘(Adapted fiom Thompson & Strickland, 2003) Figure 3 shows the different strategies that are concerns of top management at the corporate level of an organi ization, The CEO and C-level advisers are responsible for crafting strategies that center on possible diversification strategies, establishing the corporate identity, generating corporate-level competitive advantages and top-level initiatives foy bolstering the competitiveness of presence in growing industries, the different businesses, establishing new businesses anc divestment decisions, optimal resource allocation acros: the different business units, and the scope of diversification that is to be allowed. Who evaluates the CEO's performance? The CEO typically reports to a Board of Directors tis the Board that supposedly is responsible for assessing the CEO's performance to the point of being able to replace the CEO should the CEO not perform up to par. Business Level Strategies Business level strategies pertain to the strategies that are formulated at the level of they respective business enterprises often under the helm of a company President. “Business” here pertains to a particular product market area. A quick-service food chain, for instance, may have its own brand and signature food preparations and target markets, essentially making it a singular business unit (despite having several-branches} Meanwhile, a manufacturer of pens may produce different kinds of pens, but it should be leat that each pen is not a separate business—all of these pens may be produced by the same organization, using the same logistics and distribution networks, and all of which} are marketed as a portfolio of products under its domain. A specific business can also be) referred to as a strategic business unit (SBU). Scanned with CamScanner Ciweten |. Srratecr: Derneo 11 It should be noted that for single-business firms, which actually applies to a great majority of micro and small enterprises in the country, this Is the topmost level of strategy that management will be involved with, as they will not be diversified into different businesses and so will have no need for a corporate level tler of management. ‘The President (or General Manager, as the business head may also be referred to) Is responsible for crafting strategies that will ensure the long-term sustainability of the business as It carves its position of superiority in the marketplace. ‘Moves made to deal with changing Industry conditions and other emerging developments in the extemal environment Basic competitive ‘Approach to vertical approach: Low-cost/low Integration (full, partial, price? Differentiation (what ‘or none) and other kind?) Focus on a specific moves to establish the market niche? ‘company’s competitive scope within the Industry Moves to secure hto ancand acompetve ‘and operations advantage Approach to marketing, ‘promotion, and Recent movesto distribution srenothen corres R&D/technol position and improve Potted performance ‘Approach to ‘human resources/ laborrelations, Financial approaches Figure 4, Strategies at the Business Level (Thompson & Strickland, 2003) Figure 4 shows the different strategies that a business level manager.can pursue to accomplish the goal of attaining long-term competitive advantages in the marketplace. These include strategies that seek to weather changing industry conditions, strategies for building up the firm’. capacities in the industry through vertical integrations and other alliances; strategies for gaining new.competitive advantages, strategies for preserving existing advantages and improving on these, strategies for bolstering specific functional capabilities, and strategies versus its competitors. _ The bottom line is that the President's responsibilities are to ensure that the business isprofitable and to ensure future profitability through the continuous pursuit of marketable competitive advantages for the business. Scanned with CamScanner 12. Busnes Poucy aio Steatesy See ee Eventually, if the business is part of a conglomerate, the President's performance be evaluated by the CEO. At wost,a President who does not deliver on what is expect from the headquarters may be asked to resign, On the other hand, a President who managay to deliver or even exceed expectations may be generously rewarded in terms of bonuses other incentives. This is how the headquarters manages the businesses that it controls, Functional Level Strategies Functional level strategies pertain to strategies that are pursued by function, specialists within a business unit. ‘functional organization works by ensuring that it is staffed by competent personne, This includes specialists in functional roles, such as marketing, finance, and operations Specialists can gain their competence and knowledge about their particular field throug, ‘education (such asin business: schools) aswellas through actual experience. Jobinterviewerg for instance, pay particular attention to the amount and quality of work experience the applicants have in their respective fields. As specialists prove themselves, they rise up the ranks. Eventually, they may becom the head of their respective fields typically in the position of Vice President (VP). As VP fo) a particular business function, the specialist now takes on the role of strategy expert an functional executive for the President. For instance, the VP for Marketing may be give the’objective of developing a certain number of new territories. The VP will therefore b responsible for formulating the strategies that will lead to the optimal accomplishment o} the objective given the resources that the VP has at their disposal. The lower left comer of Figure 4 presents the strategies that functional managemen| is to accomplish, depending on their function. These include manufacturing ang romotion, and distribution strategies; research ang id financie seel operations strategies; marketing, pr development and technology strategies; human resource and labor strategies; an strategies. . The VP's performance will eventually be evaluated by the President, who will assess thy VP's performance vis-a-vis the expected targets and outcomes. There will likely be reward and penalties that have been set up to ensure that the VPs will strive to. do well in achieving their objectives. Will a VP eventually become President? It is possible. When this happens, itis sai that the President was promoted “from within the ranks.’ The upside here is that such i President will already be familiar with how the business works. The downside, however, | the President may be biased toward a problem-solving perspective that revolves arounc their core specialization. In other words, VP for Marketing who becomes President may s® allofthe firms problems as marketing problems, while. President who rosé from the rank of Finance may see all the firm's problems as financial problems. : This is why the best Presidents are those who have well-rounded skills. They do no need to be experts in any single management function, but they should know enougly about all the functions to be able to understand and mére importantly, coordinate with al the specialists to develop a unified strategy. Scanned with CamScanner Chapter |, Stratear: Dermeo 13 Operational Level Strategies ‘Thismay wellbe the lowest level where strategy formulation can take place, Operational level strategy pertains to the actual operations that are undertaken in an organization by the people down the line, typically by functional specialists at supervisory levels below the VPs, Usually, the VP's objectives will be translated Into more specific goals that are then passed down to the VP's subordinates. These subordinates in tum establish on-the-ground strategies and action plans that will help them achieve the goals as set by their VP. Because supervisory level personnel have access to limited company resources (as compared to the VPs), their strategy formulations are inherently limited In scope and likely localized in nature. ‘STRATEGIC QUESTIONS AND EXERCISES Why is there a need for different levels of strategy? Compare and contrast the objectives of a CEO with those of a President under.a conglomerate. Explain how CEOs ensure that the business heads reporting to them will do what they are tasked to do. What are the advantages and disadvantages of having a President who rose up the ranks of a particular management function? Explain why C-level positions should not serve as executives under whom managers from the different businesses shoulld report to. GROUP ACTIVITY Find a copy of the organization chart of a large, local, and publicly-traded enterprise. Identify the different management levels. Based on the nature of the firm, deduct the possible strategic decisions that have to be made at each of the different management levels. NETWORK Research on the life story of a successful CEO (e.g, Jeff Bezos of Amazon or Mark Zuckerberg of Facebook). Describe how they were able to build their own enterprises. Analyze what their personal core competencies are and where they’ may need C-level assistance. Search for organization charts if possible and make inferences as to whether or not they did get help from these competencies. Scanned with CamScanner 14 Busness Pour ano Staaresr pe een LESSON 3 a STRATEGIC MANAGEMENT PROCESS Cyc eee saa eu ai wn TNR ee nares anced UMC astas eee Kuce cca Ma PRP eee en stokes) ue te ‘As stated in Lesson 1, strategic management is composed of five step y implementation, and strategy analysis, internal analysis, strategy formulation, strates control. Some management theorists combine external and internal analysis with ‘strateg formulation, choosing to refer to all of these as the formulation phase, while strateg implementation and control re also combined tothe implementation phase. Doing So leac to the following integrated framework of what corporate strategy (the outcome of strateg) management) looks like. [Ls tetotenet |. cnginizton ace sd = opouniyodiok rlsonstins tt uti labor ote Contato of ded cps conronare srearect ‘oor as ‘technical nancial nd Pattem of purposes and 2. Organizational proces mpefece eae | eh eeaaea lee t pny we siceayint 3 Pesonal vauesand ‘Motivation and incentive systems }-— aspirations of senior Control systems nnwerent fecutmentond denlopment af OE mone 4 oa fe 2 spLendenniy ; ———_—> [* sromn ‘Seaege eno > Ogonzaon! esond igure 5. The Strategy Process: Formulation and implementation (Andrews, 1980) Figure 5 shows how formulati im lation and implementati stratec ion work te rategy process or the process of strategic management. yetheto, fort Scanned with CamScanner Crusten 1, Strarecy: Dereon 15 Formulation begins with an assessment of the environment in the form of identifying opportunities and risks (threats) that may‘exist. This will be discussed in the following chapter. Next comes an assessment of the firm's strategic resources to come up with a determination of what the firm's strengths and weaknesses are. Management is then expected to Identify the firm's core values in order to ensure that the culture and personality of the firm remain consistent and relevant. Finally, management Is expected to identify the firm's role in making the world a better place. The findings from all of these will help create the corporate strategy. Implementation of the corporate strategy, on the other hand, begins witha distribution of duties and responsibilities, determining who will be responsible for which aspects of the strategy and establishing methods for clear coordination. Next, control systems are set in place, including the establishment of incentives for performance and penalties for non-performance, as well as the training of management on how to oversee the entire implementation process. Finally, top management should be ready to monitor, adapt, and even revise the corporate strategy or its implementation as needed, to ensure ‘that the entire process continues to be relevant in the face of new information. ‘Amore simplified model for the strategic management process, however, may look like the following: Figure 6, Basic Elements ofthe Strategic Management Process. (Wheelen & Hunger, 2012) Environmental scanning accounts for both external analysis (scanning for opportunities and risks) and internal analysis (scanning of the company’s resource) profile). Hence, the model has four elements to it. Note, however, how the feedback loop, represented by the bottom arrows, clearly connects Evaluation and Control with all prior components of the process. This acknowledges the reality that the best-laid plans may not actually be realistic, but management will not know this until it is actually being mobilized already. Hopefully, the evaluation and control process will immediately alert managemenl to whatever mistaken assumptions or‘unrealistic goals the process may have called for The management can then swiftly adapt their plans based on these findings, perhaps recalibrating their environmental scans, adjusting their strategy formulation, or tweakinc their implementation. Scanned with CamScanner 16 Buswess Poucy a0 Srear Expanded further, the strategic management process can look like this: Feudbacl/Lerring: Make crectonsas needed Figure 7. Detailed Strategic Management Process (Wheelen & Hunger, 2012) Looking into the steps within the diagram as shown in Figure 7 presents us with the elements of the strategic plan, which is the outcome, at least in principle, of the strategic management process. Elements of the Strategic Plan The strategic plan corisists of the following elements: mission, objectives, strategies policies, programs, budgets, procedures, and performance measures. We shall go through these one by one to expound on the strategic plan. Strategic Elements Mission e The mission is the purpose of the business. Ifstrategic planning is done at the corporate) level, this will be the reason for the existence of the conglomerate as a whole. What does they conglomerate do? What are its immediate goals? Who are its markets? Where is the scope), of its operations? What are its core values? If the planning process is done at the strategic business unit (SBU) level, this will pertain to the reason for the existence of that particular, business alone. Scanned with CamScanner Cupren |, Sraareor: Dernco 17, Mission statements do not need to answer all of these questions. But they may opt to if only to clearly elucidate what the business is all about. Mission statements can be very simple or they can be very thorough. Here are some examples of mission statements of some corporations: * Lamoiyan Corp. (makers of Hapee Toothpaste): “We exist to Improve the quality of life by bringing essential products within the reach of the common people” « Evertel Telecommunications: “To provide clients with the best strategic telecommunications technology, innovative products, solutions and services, delivered with quality and exceptional customer service enabling our clients to meet their business objective profitably; Develop productive partnerships between Everte, its clients, dealers, and employees; and foster a challenging, exciting, fun, professional environment while maintaining an uncompromising focus on delivering quality, value, and satisfaction.” ‘* Philippine Seven Corp. (7-Eleven store chain):*To offer time-conscious ‘customers. a full range of products and services that meet their ever-changing daily needs through quality, speed, sélection, and value in a safe, friendly, and pleasant environment” There is no right or wrong way to craft a mission. For example, in the case of a British company called St. Ives, their mission was simply “To love our: ‘customers to death.” ‘A good mission statement clearly explains why the business exists. It may not answer every key question posed above, but for as long as clarity is established about why the company is in business in the first place, this will make it a reasonably effective mission statement. Google's mission, for instance, is “to, organize the world’s information and make it universally accessible and useful! This gives a clear picture of what kinds of business Google is in (information) and what its mandate is. This mandate then drives the strategies and business models that it will pursue. Whatever these may be, they will all be for the sake of making information as accessible as possible to the world, Objectives Objectives are expected outcomes that will help the firm in its fulfilment ofits mission. Objectives can be long term or short term in nature. Long-term objectives may or may not be time-bound. In other words, they may or may not have a set deadline. Without a deadline, a long-term objective can function as a long- term ambition. Example:To be the world’s largest producer of organic inks. ‘The firm that sets this objective may not yet be anywhere near this objective, and may in fact be just a startup or a small enterprise. But by establishing this as their long-term objective, it serves as an end goal that can inspire the organization toward excellence. Scanned with CamScanner 18 Busnes Poucy aio Strareay ) SEE GR TURP GS Ty Long-term objectives can also be time-bound, in which case the time frame fy completion is set as well. ] Example:To become the most profitable chain of elderly care facilities in ten years, | Giving a ten-year timetable encourages the organization to be more disciplined ini pursuit of this particular objective. A shrewd manager, for Instance, may divide this long, term objective further into annual profit targets to ensure that they will always be on track toward meeting this objective by the tenth year. Short-term objectives, by contrast, must almost always be time-bound, Tiss because term objectives Is precisely one of urgency: the target must be met the nature of short : automatically a need to make these objective, the soonest possible time. Therefore, thereis time-bound. What is the difference between a long-term and a short-term objective then? Thereis ro hard and. fast answer as to what they are. The answer lies in the “cycle time” or the speed by which things happen in the industry. In atree farming industry, for example the cjce time may be very slow because it takes years before a crop of trees grows to maturity. Sy ‘short term* may be as long as 3 years. On the other hand, for the high-technology sectox here innovations happen at breakneck speed, short term may be as short as 6 months, ‘Typically, though, short term often refers to a maximum of one year, while long term, refers to anything beyond that. Strategies Strategie are the how. Given an objective, the manager will now have to formulatean ‘optimal strategy for ensuring its accomplishment. ‘As mentioned in a previous lesson, there are multitudes of ways to get from Point A to Point B. But the ideal way is the one that will make the most efficient use of the firms resources. This is where a thorough understanding of the opportunities and threats in the environment, as well as an analysis of the firm's strengths and weaknesses, becomes important. Knowing these factors can help managers in crafting strategies that make the best use oftheir external and internal circumstances as they strive to accomplish their given object Policies Policies are the constraints that the firm chooses to live with. Policies serve as a documentation of the firm's core values, beliefs, and ideals. Because policies serve as constraints, these will affect the details of how strategies are to be implemented, For instance, an example of a policy is “To offer the best prices in the marketplace’ With this policy in place, management will now be constrained accordingly and any strategies involving the increase of prices above that of the competition will no longer be acceptable. i Scanned with CamScanner CCuoren |, Starecr: Dernco 19 Policies serve to preserve the Identity of the firm, ensuring Its consistency and predictability on how it goes about its business. This Is good for the employees because if they understand, respect, and empathize with the core values of the firm, it means that the firm consistently follows its core beliefs in all of its undertakings. It can, of course, be argued that predictability can be bad for the firm as shrewd competitors can take advantage of this by introducing strategies that intentionally take advantage of the matters that the firm cannot touch, For instance, small manufacturers of ‘whitening’ soaps were able to take advantage of the fact that most of the larger multinationals refused to venture into whitening products for fear of triggering racial issues and sensitivities. Tactical Elements Programs Programs are the first of the tactical or implementation components. Programs are the detailed plans that are put together in order to actualize the strategies. Programs may include timetables, duties and responsibilities; and goals that will have to be achieved in order to help the strategies meet the given objectives. Budgets After laying out the details of the plans in the programs, next comes the budgeting. The cost for mobilizing each activity in the program will be calculated, so that the total cost of the programs will be clear. This is then typically sent up to higher management for approval before the program is duly mobilized. Procedures Programs are then broken down into procedures. This way, errors may be reduced as the programs are translated into specific steps that will have to be undertaken by the firm's personnel. This is all about the details. Performance Measurement As the plans are set in motion, results should always be monitored in order for management to know, as soon as possible, whether or not the entire strategy is effective in the first place. This will allow them to make adjustments on the fly before too much damage is done by an ineffective strategy. This means that management should have already defined the metrics to be used to evaluate the performance of the people who are responsible of the entire program as well. Are sales increases happening on schedule? Why or why not? Is implementation the problem or is it the unrealistic objectives that the programs are weighed down with? This is where the feedback loop comes in, Once management gets a sense that the strategy is not working, it quickly goes back to the elements of its strategic plan, so as to identify where the wrong assumptions may lie, or why the implementation is not coming ‘out according to plan. Scanned with CamScanner 20 Busness Poucy avo Strarecy STRATEGIC QUESTIONS AND EXERCISES Explain the purpose of a mission statement. Why is it useful for a firm? 2. What is the use of an objective that has no deadline? 3, What are the advantages of a time-bound objective? Explain why the feedback loop is important in the strategic management process. 5, Whyare policies referred to as constraints? GROUP ACTIVITY ‘Approach a large organization and interview a member of its senior management to learn about their: strategic management process. Map out their process from planning to implementation. Inquire as to the length of the entire process. 1 2. 3, _ Ask about the effectiveness of the process: Has it helped in pushing the organization toward its goals? How? NETWORK Search online for examples of strategic plans. Compare and contrast these plans with the format presented in this lesson. What are common elements and what are the differences? Assess which formats preferable, from your perspective, and explain why. Scanned with CamScanner Ciweren |. Srearear: Derinco 21 LESSON 4 : STRATEGY IMPLEMENTATION Ob ees ‘At the end of this lesson, the students should be able to: » PCAN ase eusent ec roy aed Mcursol cs ts Maa ACS CM caCeNC At Neeser cot nT oltel<=9 and classify the different kinds of strategy at the implementation Belen There is planning, and then there is the actual fulfillment of the plans. After planning process has been completed, things may initially look good on paper. But then reality has a way of upsetting the best-laid plans. When plans work, firms can undergo dramatic transformations. Korean electronics brand Samsung, for instance, was once known for its cheap appliances and was perceived to be an inferior and low-cost competitor to the more popular brand of Sony. But its Chief Executive Officer (CEO), Lee Kun-Hee, crafted a strategy that would transform the ‘company into one of the world’s top consumer electronics brands. Lee's vision was to turn Samsung into a premium, design-driven brand. To do this, he first hired faculty from a top US design school to teach his entire company all about design—not just the company’s designers, but everyone, from sales, staff, and to management. This way, everyone learned the value of good design, and this was an important step in building a design culture at the company. Next, Lee invested a staggering amount of money (over a hundred million dollars) for a global relaunch campaign. In the 1990s, this was considered by Koreans to be an outrageous amount and he was vilified for this. But the investment paid off. Samsung transformed from a cheap electronics manufacturer into one of the world’s most powerful brands. But plans do not always work. Infact, itis rare for a plan to work perfectly. This is where the determination and flexibility of the CEO can make all the difference, adapting to reality as it plays out and continues to pursue the end goal. Scanned with CamScanner 22 Busnes Pouicy avo Stasteay Mintzberg’s Types of Implemented Strategy Mintzberg (1978) classified: implemented strategies into th strategy, deliberate strategy, unrealized strategy, emergent strategy, ¢ following: intendey, and realized strategy. Unrealized Emergent SaeaT Strategy Figure 8. ‘Mintebergs Types of implemented Strategy ‘editated and planned. It may be on strategy as prem 2 is is the ideal scenario 1. Intended strategy. This is the P paper, or it may all be in the CEO's head. Whatever the case, this ea the envisioned process for achieving the intended goal. 2. Deliberate strategy. These are the parts of the intended strategy that play out ) according to plan. What were premeditated appear to be accurate and therefore are coming to fruition. 3. Unrealized strategy. On the other hand, there will be parts of the strategy that tum out to be unfeasible. Perhaps, the plan was relying on inaccurate information or wrong assumptions. Maybe, the environment changed or things simply were not as easy as) they were originally thought to be. These result in pieces of the plan that have to be waylaid and set aside, hase, | strategy. The good news is that during the implementation. pI ccoveries about how the world really but which. 4, Emergent management realizes new things and makes dis works. These lead to new strategies that were never even considered before, tur out to Be essential in making the end goal come to fruition. 5, _ Realized strategy. This is the synthesis of the remains of the deliberate strategy and the new emergent strategies. The realized strategy is not quite what was intended, but because it now incorporates realities as discovered during implementation, the realized strategy becomes the new, working strategy that will be used by the firm to achieve its end goal. ‘An example of the above process is the story of Globe Telecom's eventual success. In the mid-1990s, Globe Telecom was a distant third placer in the Philippine mobile telecommunications industry after the two powerhouse brands of Pltel and Smart. Piltel and ‘Smart used similar technologies—analog cellular technology—and basically developed the dominant cellular infrastructure in the country. Globe, on the other hand, decided to go with digital cellular technology, which the company believed had a better long-term future. The company’s intended strategy was to promote its digital cellular services as superior to analog because it was “clearer.” Again, this was the intended strategy. Scanned with CamScanner ‘Queter |. Strateay: Dermeo 23. However, reality was not that simple. Asthe company rolled out its marketing campaign, it became painfully clear that consumers were not impressed with the quality of its digital services. First, Globe, being a latecomer to the industry, did not have sufficient cell towers yet at that point in order to provide a wide signal coverage, so it was quickly perceived to be inferior to Piltel and Smart (which would eventually merge into Smart Communications, Inc). Second, even when there was signal coverage, consumers were not impressed by the “clearer” signal of Globe's digital network. For instance, when someone Is conversing over an analog phone and the signal gets weak, the conversation gets mired in static, but is still audible, On the other hand, when a conversation over digital ends up with a weaker signal, the line becomes choppy. Consumers found choppy conversations to be more annoying than static-riddled ones, so the original, intended strategy of Globe of being the ‘cleater” | phone service did not work. Globe remained a distant competitor to Smart. By the late 1990s, however, Globe noted what a growing number of their subscribers were doing; instead of using their phones to make calls, they were using them to send text | messages to one another, Back then, text messaging was an extra feature for digital cellular services that was assumed to be for emergencies only. After all, who would even care to type out text messages of about 160 characters in length? Text messaging was fee and Globe had no idea that people would actually even be interested in it. But they were and, before long, people were telling their friends to subscribe to Globe, too, so that they could send each other text messages for free, thereby saving from having to pay for expensive voice calls, This was the discovery that became the roots for Globe's emergent strategy. Soon, Globe decided to aggressively promote text messaging as a key feature ofits service, and subscriptions grew dramatically. Globe's intended strategy was to use the supposed clarity of its digital service to attract consumers. However, consumers failed to appreciate this benefit, so this became Globe's unrealized strategy. On the other hand, consumers’ discovery and appreciation of the text messaging feature of digital cellular services led to an emergent strategy of focusing on text messaging as the key feature of the service. The realized strategy therefore blended text messaging as the key feature while continuing to push the other benefits of digital services (deliberate strategy) to the consumers. Five Ps of Strategy Mintzberg identified five different classes of strategy, mainly because he noted that it was difficult to rely on just a single definition of what strategy was. These are strategy as plan, pattern, position, perspective, and ploy. (Mintzberg, 1987) ‘The kind of strategy formulation that is evident in proactive, premeditated planning processes is referred to.as the strategy as plan. The plan is often detailed, typically documented (although not always), and generally begs for detail. Itis crafted and thought about in depth. The end result, which is the plan, is like an instruction manual that guides the organization on its implementation phase. : But, as it turns out, a plan is not the only kind of strategy that can be implemented. There is also the strategy as pattern, whereby an organization chooses an action that it has familiarity with. Strategy as pattern pertains to what is tantamount to habitual behavior in an organization. Decision-making can be a draining undertaking for management. So when faced with a situation that ig similar to a past scenario that they have already tackled with Scanned with CamScanner 24 Busness Poucy ano Sraateoy some success, chances are that management will once again do what already worked for them in the past, When Jollibee went public in the early 1990s, the company became flushed with cash that it could then use to go into an acquisition spree. The company’s very first acquisition is the Greenwich Pizza chain of quick-service pizza stalls that offer “Philippine-style” pizzas, Being its first acquisition, it can be expected that management put a lot of analysis and thought into this purchase. Jollibee acquired the brand and retooled its operations to make it up to par with how Jollibee manages its existing quick-service food systems. The result was a notable success, with Greenwich becoming an attractive franchise option for the firm, | The next major acquisition for the company was Chowking, a growing chain of Philippine-style Chinese food outlets. This time, management was already flushed with learning from their first successful acquisition. Therefore, the process of acquiring the Chowking chain simply involved doing what they did before, down to retooling operations to bring it up to par to Jollibee standards. What is notable hereis that, when a company resorts to strategy as pattern, the strategy formulation phase effectively dissolves in lieu of direct implementation based on memory of a past strategy that already worked. Without a need for a strategy formulation phase, decision-making is swift, and the company goes straight to execution. Strategy as position, on the other hand, is all about establishing a definite place within a competitive field, or a clear identity that differentiates one’s firm from the rest in the environment. The following are some examples of strategies in the form of descriptions about what the firm is all about relative to their competition: * CD-R King decided, to define itself as a retail purveyor of low-cost electronic gadgets. * Multinational firm Nestlé chose to define its products as being of high quality and good value. * Philippine Airlines established Air Philippines as a more affordable, no-frills brand to compete against budget airlines. Having a position may be reached via a ‘conscious plan or perhaps even emerge through a pattern of behavior. Therefore, it is not necessarily a distinctive mode of strategy formation. Rather, it connotes a strategy that is borne from defining one’s identity relative to what others are or what they can offer. After having defined itself accordingly, the company’s position will henceforth guide and direct all future actions. For instance, a brand like CD-R King cannot, by virtue of its own positioning, come out with premium, high-priced electronics. There is also’ strategy as perspective, whereby strategy is based on the worldview, assumptions, or even values systems of a firm’s management. A firm that prides itself for being upright and being of good moral character is going to behave in a much different manner versus a firm that values ruthlessness and.finding ways of skirting the laws for financial gain. Citibank entered the German market to huge success based primarily on its perspective that was very different from that of traditional German banks. Prior to their entry, large German banks have focused on commercial and industrial clients and mostly ignored retail customers, even as they noted that these customers were gaining more financial wealth é Scanned with CamScanner Cworer |, Strareoy: Derneo 25 and were therefore becoming more and more viable. The banks simply felt that servicing retail customers was practically beneath them. This, of course, is a matter of perspective. Citibank’s perspective, on the other hand, was that retall consumers were a tremendous opportunity. So when Citibank entered the German market with thelr Familienbank (‘Family Bank’), retail consumers flocked to this new service and within five years, Citibank gained a dominant foothold in the German consumer banking sector. (Drucker, 1985) Perspectives shape and guide strategy. Beliefs and mindsets shape strategy. What one firm may consider unthinkable and therefore avoid, another firm may consider it reasonable and therefore pursue. : Finally, there is strategy as ploy. The word “ploy” already connotes certain parameters foraction. For instance, the word “ploy” implies a certain level of cunningness, cleverness, or deception. It can be defined as a “devised or contrived move" (Merriam-Webster, n.d) and is essentially tactical in nature—a short-term and temporary measure that is meant to achieve aquick win. ‘An example of a ploy is a company issuing statements about a new product that it is supposedly working on; forcing their competitors to pour resources into preemptively covering this potential threat, whereas the company is actually quietly working on something else altogether. Another example is a brand that temporarily offers a huge price drop under the pretense of having an anniversary promo, whereas its real purpose is to starve a new challenger that is trying to compete by offering a lower price. Ploys are, by definition, crafty in nature because these are meant to confuse, disorient, or deflect attention. It is like in the way that a magician uses sleight of hand to direct attention to one thing while quietly setting up something else altogether. STRATEGIC QUESTIONS AND EXERCISES Explain the difference betweén the intended strategy and the deliberate strategy. Compare and contrast intended strategy and realized strategy. Given that strategies do not always come out according to plan, what personality traits, must a CEO have in order to be successful? 4. What are the differences between strategy as plan and strategy'as. pattern? Explain why a ploy is essentially tactical or short term in nature. GROUP ACTIVITY Identify behavioral patterns that the members of your group have grown to live with: wake-up patterns, eating patterns, study habits; and the like. How did these patterns emerge? Trace the process of pattern adoption and spot ‘commonalities among your group mates. What do your findings tell you about strategy as pattern? Scanned with CamScanner 26 Busnes Pour mo Staarecr 4 NETWORK : A “pivot” refers to a dramatic transformation ina firms strategy, typically after struggling and falling to make headway with its previous strategy. Search online for successful pivots" and study the situations that made them decide to evolve, What insights can you gather from these examples? RESEARCH ACTIVITY Interview the owner of a micro enterprise. It could be a modest single proprietorship, such as a retail shop (tiangge) or a small diner (karinderya). Ask the owner about the following: 1 What is their big dream for their business? This is the equivalent of a vision y statement forthe owner. ‘a. If theré is a clear long-term vision for the business, ask the owner the step. , by-step plan of how to get there. b. If there is no clear long-term vision for the business, ask the owner what motivates therm to continue with the business. Do they foresee growth, or is this already as big as the business can get?” 2. Evaluate the business. Do you see a better way for it to grow? If so, discuss these

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