COBSTRM NOTES

CHAPTER 1: STRATEGY, BUSINESS MODELS, AND COMPETITIVE ADVANTAGE

- According to The Economist, in business, strategy is king because it makes or breaks a firm. A
well-crafted, well-executed, constantly evolving strategy can explain why an elite set of
companies manages to rise to the top and stay there.
- The tasks of crafting and executing strategy are core management functions and the execution of
an excellent strategy is the most reliable recipe for turning a company into a standout performer
over the long term.
- Strategy: the coordinate set of actions that its managers take to outperform the company’s
competitors and achieve superior profitability.
- Explains why the company matters in the marketplace by specifying an approach to
creating superior value for customers and determining how capabilities and resources
will be utilized to deliver the desired value to customers
- How to create products or services that attract and please customers
- How to position the company in the industry
- How to develop and deploy resources to build valuable competitive capabilities
- How each functional piece of the business will be operated.
- How to achieve the firm’s performance targets.
- The objective of a well-crafted strategy is not only for short-term success but also to support
growth and secure the company’s future in the long run which entails making managerial
commitment to a coherent array of well-considered choices about how to compete.
- Companies have the freedom to choose the hows of strategy. Rivals strive to create superior
value for customers by achieving lower costs than rivals while others pursue product superiority,
personalized customer service, or development of capabilities that rivals cannot match.
- For a company to matter in the minds of customers, its strategy needs a distinctive element that
sets it apart from rivals and produces a competitive edge to draw in customers.
- Strategy must fit a company’s situation but competitive success requires managers to make
strategic choices about the key building blocks of its strategy that differ from the choices made
by competitors.
- A strategy stands a chance of succeeding only when it is predicated on actions, business
approaches, and competitive moves aimed at appealing to buyers in ways that set a company
apart from rivals.
- Strategy is about competing differently–doing what rival firms don’t do or do what they can’t
do.
- Business Model: sets forth how its strategy and operating approaches will create value for
customers while generating ample revenues to cover costs and realizing a profit.
- A firm’s business model sets forth the logic for how its strategy will create value for
customers, while at the same time generate revenues sufficient to cover costs and
realize a profit.
- 2 elements of a company’s business model: customer value proposition and profit
formula
 - Customer Value Proposition: established by the company’s overall strategy and
lays out the company’s approach to satisfying buyer wants and needs at a price
customers will consider a good value. The greater the value and the lower the
price, the more attractive the value proposition. What you offer your customers.
- Profit Formula: the company’s approach to determining a cost structure that will
allow for acceptable profits given the pricing tied to its customer value
proposition.the lower the costs given the customer value proposition, the
greater the ability to be a moneymaker.
- NOTE: A competitor’s customer value proposition is affected by the product
price which impacts its profit formula. These values in turn affect and are
affected by the competitor’s per-unit cost structure and its profit margin.
- A company’s business model is the management’s blueprint for delivering a valuable product or
service to customers in a manner that will yield an attractive profit.
- 5 dependable strategic approaches for setting a company apart from rivals and winning a
sustainable competitive advantage
- Low-Cost Provider Strategy
- Cost-based advantage over rivals
- Produce durable competitive edge when rivals find it hard to match the low-cost
leader’s approach to driving costs out of the business
- a business approach where a company aims to achieve a competitive advantage
by offering products or services at a lower price than competitors.
- attracting price-sensitive customers or expanding market share, leading to
increased profitability and growth.
- E.g. Walmart, Netflix
- Broad Differentiation Strategy
- Seeking to differentiate the company’s products and services from rivals in ways
that will appeal to a broad spectrum of buyers
- Can be powerful so long as a company is sufficiently innovative
- It involves the company developing a product line, which includes several
different but related products. This allows the company to offer customers a
wide range of products with different features and benefits.
- E.g. Johnson and Johnson & Apple
- Focused Low-Cost Strategy
- Concentrating on a narrow buyer segment and outperforming rivals by having
lower costs than rivals and being able to serve niche members at a lower price
- E.g. Ikea
- Focused Differentiation Strategy
- Concentrating on a narrow buyer segment and outperforming rivals by being
able to offer niche members customized attributes that meet their tastes and
requirements better than rivals products
- E.g. luxury brands
- Best-Cost Provider Strategy
 - Giving customers more value for the money by satisfying buyers' expectations
on key quality/features/performance/service attributes, while beating their
price expectations. This approach is a hybrid strategy that blends elements of
low-cost provider and differentiation strategies; the aim is to have the lowest
(best) costs and prices among sellers offering products with comparable
differentiating attributes.
- The ultimate goal of the best-cost strategy is to keep costs and prices lower than
other providers of similar products with comparable quality and features.
- A creative, distinctive strategy is a company's most reliable ticket for developing a sustainable
competitive advantage and earning above-average profits. A sustainable competitive advantage
allows a company to attract sufficiently large numbers of buyers who have a lasting preference
for its products or services over those offered by rivals, despite the efforts of competitors to
offset that appeal and overcome the company's advantage. The bigger and more durable the
competitive advantage, the better a company's prospects for winning in the marketplace and
earning superior long-term profits relative to rivals.
- Winning a sustainable competitive edge over rivals with any of the previous five strategies
generally hinges as much on building competitively valuable capabilities that rivals cannot
readily match as it does on having a distinctive product offering. Clever rivals can nearly always
copy the attributes of a popular product or service, but it is substantially more difficult for rivals
to match the know-how and specialized capabilities a company has developed and perfected
over a long period.
- The appeal of a strategy that yields a sustainable competitive advantage is that it offers the
potential for an enduring edge over rivals. However, managers of every company must be willing
and ready to modify the strategy in response to the unexpected moves of competitors, shifting
buyer needs and preferences, emerging market opportunities, new ideas for improving the
strategy, and mounting evidence that the strategy is not working well.
- Regardless of whether a company's strategy changes gradually or swiftly, the important point is
that the task of crafting strategy is not a one-time event but is always a work in progress.
- The evolving nature of a company's strategy means the typical company strategy is a blend of (1)
proactive moves to improve the company's financial performance and secure a competitive edge
and (2) adaptive reactions to unanticipated developments and fresh market conditions-see
- The biggest portion of a company's current strategy flows from ongoing actions that have proven
themselves in the marketplace and newly launched initiatives aimed at building a larger lead
over rivals and further boosting financial performance. This part of management's action plan
for running the company is its proactive, deliberate strategy.
- A deliberate strategy is a strategy that is carefully planned and controlled by the
organization
- At times, certain components of a company's deliberate strategy will fail in the marketplace and
become abandoned strategy elements. Also, managers must always be willing to supplement or
modify planned, deliberate strategy elements with as-needed reactions to unanticipated
developments. Inevitably, there will be occasions when market and competitive conditions take
unexpected turns that call for some kind of strategic reaction. Novel strategic moves on the part
 of rival firms, unexpected shifts in customer preferences, fast-changing technological
developments, and new market opportunities call for unplanned, reactive adjustments that form
the company's emergent strategy.
- A company's realized strategy is a combination of deliberate planned elements and unplanned
emergent elements. Some components of a company's deliberate strategy will fail in the
marketplace and become abandoned strategy elements.
- A winning strategy must fit the company's external and internal situation, build sustainable
competitive advantage, and improve company performance.
- The strategy must fit competitive conditions in the industry and other aspects of the
enterprise's external environment. At the same time, it should be tailored to the
company's collection of competitively important resources and capabilities.
- Winning strategies enable a company to achieve a competitive advantage over key rivals
that is long lasting. The bigger and more durable the competitive edge that the strategy
helps build, the more powerful it is.
- The mark of a winning strategy is strong company performance. Two kinds of
performance improvements tell the most about the caliber of a company's strategy: (1)
gains in profitability and financial strength and (2) advances in the company's
competitive strength and market standing.
- NOTE: Strategies that come up short on one or more of these tests are plainly less
appealing than strategies passing all three tests with flying colors. Managers should use
the same questions when evaluating either proposed or existing strategies.
- Three questions can be used to distinguish a winning strategy from a so-so or flawed strategy
(both existing and planned strategies):
- How well does the strategy fit the company's situation?
- Is the strategy helping the company achieve a sustainable competitive advantage?
- Is the strategy producing good company performance?
- High-achieving enterprises are nearly always the product of astute, creative, and proactive
strategy making.
- Good strategy and good strategy execution are the most telling signs of good management. The
rationale for using the twin standards of good strategy making and good strategy execution to
determine whether a company is well managed is therefore compelling: The better conceived a
company's strategy and the more competently it is executed, the more likely that the company
will be a standout performer in the marketplace.

CHAPTER 1 DISCUSSION NOTES (SEPT. 11)

- STRATEGY: Aligning goals forward and making sure there is no ambiguity and confusion; make it
as clear as possible
- Strategic management is the Alignment between different departments (e.g. sales,
marketing, finance, accounting, etc.)--striking a balance
- Avoiding bias
 - Creating, implementing, auditing the strategy
- Creating: no strategy, the business will collapse
- Strategy supports entrepreneurial mindset which must be sustainable (look at it in the long-term
perspective). Entrepreneurship is about networking and connections that will lead you to success.
- Strategy must be competitive, winning strategy and sustainable
- Competition will always be stiff.
- Money will only come after what you love doing (passion–enables you to come up with a better
strategy as the best possible decision moving forward)
- Motivation factors are part of strategic management

CHAPTER 1 DISCUSSION NOTES (SEPT. 21)

- strategic management gives us a holistic approach to decision making.

- LONG-TERM PERSPECTIVE, ALIGNMENT OF GOALS, RISK ASSESSMENT, RESOURCE
ALLOCATION, ADAPTATION AND FLEXIBILITY
- When we say that strategy provides a holistic approach to decision making, it means
that strategic thinking and planning encompass a comprehensive and integrated
perspective that takes into account various aspects of an organization, project, or
situation. This approach considers not only immediate goals and short-term outcomes
but also the long-term vision, mission, and objectives of an entity.
- It is about striking a balance between different departments and aligning goals.
- In summary, strategy provides a structured framework for decision-making that
considers a wide range of factors, both internal and external, and aims to align actions
with long-term goals and values. This holistic approach helps organizations and
individuals make informed and purposeful decisions that lead to more sustainable and
successful outcomes.
- A strategy enables us to see organizations differently. It is what we make or decide on to make
the best possible decisions for the organization.
- A well-developed strategy enables individuals and organizations to view themselves and
their operations from a different perspective. It serves as a guiding framework that helps
them make the best possible decisions to achieve their goals and objectives.
- SHIFT IN PERSPECTIVE (LONG-TERM), ALIGNMENT OF EFFORTS (INDIVIDUALS AND
DEPARTMENTS WORKING TOWARDS COMMON OBJECTIVES)
- strategy provides a framework for looking at organizations through a different lens. It
encourages a forward-looking, holistic, and purpose-driven perspective that takes into
account various factors, internal and external dynamics, and the organization's
long-term goals. This shift in perspective allows stakeholders to make informed decisions
and guide the organization toward its desired future state.
- We have to explore and understand the best possible decisions that arises from conflicts
- What is a long-term objective
- Objectives: this could either be short term or long term. It could also include all types of
strategies. These strategies must always align with the objectives of the org. It must be
able to support certain strategies.
- For an organization to succeed, its strategies must align with its objectives. This
alignment ensures that the actions and plans put in place are directly
contributing to the attainment of the desired outcomes.
- Represents the results expected from pursuing certain strategis
- Strategies represent the actions to be taken to accomplish long term objectives
- Strategies are indeed the planned actions and approaches an organization or
individual intends to take to achieve their long-term objectives or goals. These
actions are carefully designed and executed to move an entity from its current
state to a desired future state.
- In essence, strategies provide the roadmap for how an organization or individual
plans to navigate the complex journey from the present to a future state where
their long-term objectives are realized. They are the bridge that connects vision
and action, helping to ensure that efforts are focused and effective in achieving
the desired outcomes.
- The time frame for objectives and strategies should be consistent
- Consistency in time frames ensures alignment and coordination throughout the
organization. When objectives and strategies have different time frames, it can
lead to confusion and conflicting priorities. Consistency helps ensure that
everyone is working toward the same overarching goals within a coherent
timeline.
- A consistent time frame provides clarity of purpose.
- Strategies are aligned with vision so it has to be aligned with mission as well
- strategies are typically aligned with both an organization's vision and mission.
Vision and mission are two critical components of an organization's strategic
framework, and they work together to guide the development and execution of
strategies.
- The vision statement outlines the long-term aspirations and future state that an
organization strives to achieve. It represents the overarching goal or destination
that the organization aims to reach. Strategies are designed to help the
organization move closer to this vision over time. They are the means by which
an organization intends to fulfill its vision. It is about what you want to be in the
future.
- The mission statement defines the fundamental purpose and reason for the
organization's existence. It describes what the organization does, for whom it
does it, and why it does it. Strategies are aligned with the mission because they
should be geared toward achieving the mission's objectives and fulfilling the
organization's core purpose. The mission defines the fundamental purpose of the
organization and its reason for its existence.
- Vision is the end goal and supported by objectives and strategies.
 - an organization's vision represents the ultimate destination it aims to reach, and
objectives and strategies serve as the practical steps and plans to make that
vision a reality. Together, they provide a structured and purpose-driven approach
to guiding an organization toward its long-term aspirations.
- Strategy will only be words if we don't turn it into action
- Strategy, no matter how well thought out or articulated, remains ineffective if it
is not translated into action. It's the action that breathes life into strategy and
moves an organization or individual closer to their goals.
- Addressing the gap between theory and practice is important for us to achieve the main
goal of the org.
- This gap represents the disparity between what is theoretically understood or
planned and what actually occurs in real-world situations.
- addressing the gap between theory and practice is essential for organizations to
navigate the complexities of the real world, make informed decisions, adapt to
changing circumstances, and ultimately realize their main goals and objectives.
It ensures that strategic plans and theoretical knowledge are translated into
practical actions that drive success.
- The nature of long-term objectives
- Quantifiable
- Measurable
- Realistic
- Understandable
- Challenging
- Hierarchical
- Obtainable
- Timeline
- Congruent among organizations
- Being SMART (specific, measurable, attainable, realistic and time-bound)
- In the context of long-term objectives, the SMART criteria help ensure that these
objectives are not vague or overly ambitious but are instead well-defined, realistic, and
aligned with the organization's strategic direction. This enhances the organization's
ability to track progress, allocate resources wisely, and stay on course to achieve its
long-term vision and mission.
- Why stated and communicated strategies are vital to success
- Objective help stakeholders understand their role in an organizations future
- Provide a basis for consistent decision making by managers whose values and attitudes
differs
- By reaching a consensus on objectives during strategy-formulation activates the
organization can minimize potential conflicts later during the implementation
- Objectives serves as standards by which individuals, groups, departments, divisions and
entire organizations can be evaluate
- Objectives also provide direction and allow for organizations synergy
- Financial vs strategic objectives
- Financial
- Growth in revenues
- Growth in earnings
- Higher dividends
- Higher profits
- Greater return on investments
- Higher earnings per share
- Rising stock price
- Improves cash flow
- Financial objective is only part of strategic objective
- If there is conflict between financial objectives and strategic, which will weigh
more?
- We have to finalize the strategic before financial objectives
-
- Strategic objectives must be holistic–it defines the success of an organization; it
encaptures the whole organization
- Strategic (will not just benefit one part of the company)
- Development in brands
- Larger market share
- Quicker delivery
-
- NOTE: Financial objectives tend to focus more on the economic aspect of the
organization which includes percentage increase in revenues, ROI, and dividends while
strategic objectives are more broad and it takes into consideration of the organization as
a whole. These are sets of actions that the organization takes that would benefit not just
one part of the organization. Financial objectives usually result from the company’s
strategic objectives.
- Not managing by objectives
- Managing by extrapolation - if it is not broken, dont fix it
- Managing by crisis - manage crisis accordingly; ability to fix problems; we have to be
able to manage and forecast and anticipate crises (crisis management)
- Managing by subjective - do your own thing, the best way you knwo how
- Managing by hope - have to be optimistic; The future is full of uncertainty and if first you
don’t succeed, then you may succeed on the second or third try.
- Balanced Scorecard (Kaplan and Norton)
- Strategy evaluation and control technique
- Balance financial measures with nonfinancial measures
- This looks at the organization as a whole
- Balance shareholder objectives with customer and operational objectives
- A firm of listing all possible objectives for the total business
- Human resources, market expansion, quality production
- Types of Strategy
- Growth strategy (offensive)
- Increasing investment
- Aggressively trying to change its industry and competition condition
- Retrenchment strategy (defensive)
- You are already a market leader
- The company seek to protect its position and minimize exposure to risk
- Stability strategy
- Maintain the status quo
- Not make any action to protect the current position
- Be content with what you have
- Alternative types of strategies (what will these strategies mean to your business)
- Vertical integration (forward)
- Gaining ownership and increased control over distributors or retailers
- The main purpose of forward integration is to achieve larger market
share.
- Vertical integration (backward)
- Buying stocks
- Seeking ownership or increased control of a firm’s ownership
- The main purpose of backward integration is to achieve economies of
scale.
- cost advantages reaped by companies when production becomes
efficient. Companies can achieve economies of scale by increasing
production and lowering costs.
- Horizontal integration
- Seeking ownership or increased control over competitors
- If you can’t beat them, buy them
- Horizontal integration is a business strategy in which one company
grows its operations at the same level in an industry. Horizontal
integrations help companies grow in size and revenue, expand into new
markets, diversify product offerings, and reduce competition
- Market penetration
- Seeking increased market share for existing products or services in
existing markets through greater market effort; tapping existing market
of competitors (also aggressive)
- Market development
- Introducing existing product into new geographic area
- Product development
- Seeking increased sales by improving and modifying the existing product
- Innovation
- Introducing completely new product or service
- Related diversification
 - Adding new but related products or services
- Unrelated diversification
- Adding new unrelated products or services
- Retrenchment
- Regrouping through cost and asset reduction to reverse declining sale
and profit
- Divestiture
- Selling a division or part of the company
- Liquidation
- Selling of a company’s assets
- Most organizations simultaneously pursue a combination of these strategies
- We have to decentralize and disseminate information from top to bottom. Everyone must
be involved in making decisions because if you do that, you can entice everyone to be
part of the organization
- Types of strategies
- Integration strategies
- Vertical (forward) - seeks to have control over distributors and retailers
- Vertical (backward) - seeks for control over ownership
- Horizontal - if you can’t beat them, buy them; control over competition
- Intensive strategies
- Market penetration - increase market share of products and services
within the current market
- Market development - develops new products and services for a new
niche market
- Product Development - innovates and makes current products and
services better; disrupts the competition and delights the customers
- Innovation
- Diversification strategies
- Related - add new products but are related to the business of the
organization
- Unrelated - adding new products that are not related to the business of
the organization
- Defensive strategies
- Retrenchment - cost cutting;
- Divestiture - letting go or selling a part of the organization
- Liquidation - selling of a company’s assets
- Michael Porter’s Generic Strategies
- Cost Leadership Strategies
- Low cost and best value
- Producing standardized products at a very low per unit cost for
consumers who are price sensitive
- Differentiation strategies
 - Means producing product and services considered unique across the
industry
- Focus strategies
- Means creating products and services that can be applied to specific
groups
- Means for achieving strategies
- Joint venture / partnering
- Mergers and acquisitions
- Private equity
- First mover advantage
- Outsourcing
- Strategic management in nonprofit and governmental organizations
- Strategic planning and management is not only for private companies
- These are step by step process on how we can formulate strategies and make strategic
decisions

DISCUSSION (SEPT. 28)

- 8 MOST IMPORTANT FEATURES OF BUSINESS OBJECTIVES

- Objectives should be understandable
- In order for a company to establish a business objective, it must first understand
where it stands and where it has been. It then determines what its goals are and
how it will attain them.
- a company should conduct a comprehensive assessment of its current
situation and historical performance. This analysis forms the foundation
for setting objectives that are realistic, achievable, and in alignment with
the company's mission, resources, and market conditions. It ensures that
objectives are grounded in a deep understanding of where the company
stands and where it wants to go.
- Once the objectives are set, it must be properly understood by the team
members because it helps in proper implementation for achievement of the
objectives.
- Effective communication of objectives is essential for ensuring that
everyone in the organization is aligned, motivated, and working towards
the same goals.
- The business objectives should be made in an understandable way. This helps in
communicating your objectives to your investors, employees, partners etc.
Without this communication of business objectives, it becomes very difficult to
reach them.
- Making business objectives understandable is essential for effective
goal-setting and achievement. Clear and comprehensible objectives
 empower team members, drive alignment, and promote motivation and
accountability throughout the organization.
- Objectives should be measurable
- ​To be measurable, an objective should describe an achievement or outcome
which is or can be related to a percentage, a frequency, rate or number.
- measurable objectives are essential for effective planning, execution, and
evaluation of goals. They provide a solid foundation for tracking progress and
ensuring that efforts are aligned with desired outcomes.
- Hierarchy of objectives
- The hierarchy of objectives is a tool that helps analyze and communicate the
project objectives.
- It organizes these objectives into different levels of a hierarchy or tree.
- A hierarchy of objectives is a structured framework in which objectives are
organized into levels or tiers, with each level contributing to the achievement of
broader, higher-level objectives. This structured approach enhances an
organization's ability to achieve its mission and vision by breaking down
overarching goals into manageable and actionable steps.
- Multiplicity of objectives
- At every level in the hierarchy of objectives, goals are likely to be multiple.
- But too many objectives tend to dilute the need for their accomplishment and
way unduly highlight minor objectives to the detriment of major objectives. It is
true that minor goals should not be given the status of important objectives.
- While goals at various levels of an organization or project may be numerous, it's
crucial to prioritize and focus on the most critical ones.
- It's not uncommon for organizations to have numerous goals and objectives at
different levels, from high-level strategic goals to more tactical operational
goals. However, not all goals are of equal importance. Prioritization helps ensure
that resources, time, and effort are directed toward achieving the most critical
objectives.
- Objectives at all levels should align with the overarching organizational strategy.
This ensures that every goal contributes to the strategic direction of the
organization and doesn't distract from the core mission.
- Achievable
- Goal must be achievable and attainable.
- It sets realistic expectations.
- This will help you figure out ways you can realize that goal and work towards it
- Setting unrealistic and unachievable goals can leave team members to feel
unmotivated, stress and burnouts, and decreased confidence.
- Objectives should be specific
- Specific objectives are those objectives of the organization that specifies the
strategic goals and are measurable, achievable and assigned to accountable
persons.
- To leave no room for misinterpretation and everyone is aligned
 - Clear goals and objectives allow employees to monitor their own progress all
year 'round and correct their efforts as necessary. If employees know what they
need to accomplish, they can look at their results as they go and identify barriers
to achieving those goals.
- Quantitative and Qualitative
- This is usually related to the quantifiable aspect of goals and many believe that
qualitative goals can only be observed (maybe by a manager) and cannot be
measured.
- Flexible
- Flexibility means, ‘that keeps on changing’. Business objectives should be flexible.
- It must not be rigid. Business environment keeps on changing.
- Objectives can be changed and modified according to the situation.
- The objectives must be able to reframe in the light of changes in the
environment.
- Flexibility in objectives is an important consideration, especially in today's
dynamic and rapidly changing business environment. While objectives provide
direction and focus, rigidly adhering to them without room for adjustment can
be counterproductive. flexibility in objectives is crucial for adaptability, risk
mitigation, innovation, and long-term success. It allows organizations to
navigate an ever-changing business landscape while staying aligned with their
overall mission and vision.
- 11 TYPES OF STRATEGY
- STRATEGICALLY ADRIFT
- "Strategically adrift" is a term used to describe a situation in which an
organization lacks a clear and effective strategy, leading to a sense of
aimlessness, confusion, or stagnation. When an organization is strategically
adrift, it means that it doesn't have a well-defined direction or a coherent plan
for achieving its goals and objectives. This can result in a variety of negative
consequences, including poor performance, missed opportunities, and a lack of
competitive advantage.
- To address being strategically adrift, organizations typically need to engage in a
strategic planning and management process. This involves defining a clear
mission, vision, and values; setting specific and achievable goals; conducting a
thorough analysis of the internal and external environment; and developing a
coherent strategy to achieve the desired outcomes.
- Regular strategic planning and ongoing monitoring and adjustment are essential
to prevent an organization from becoming strategically adrift and to ensure that
it remains focused, competitive, and aligned with its long-term objectives.
- UNDIFFERENTIATED
- Undifferentiated companies have products and services that compete
effectively, but they lack a focused identity that sets them apart.
- Undifferentiated companies are businesses that lack clear and distinctive
characteristics or unique selling propositions (USPs) that set them apart from
 their competitors in the marketplace. These companies often offer products or
services that are perceived as highly similar to those offered by other companies
within the same industry or market segment. As a result, they may face
challenges in attracting and retaining customers and may primarily compete on
factors such as price or convenience.
- UNDERLEVERAGED
- Underleveraged companies have a relevant strategic direction and good
execution; they do many things right. But their strategy lacks coherence — it is
based on following multiple directions, even if they fit together poorly. These
companies risk losing to more focused competitors.
- Portfolio-constrained
- Portfolio-constrained companies offer a diverse group of products and services,
which makes it very difficult to agree on company-wide priorities (although
they’d like to do so).
- Unfocused
- Unfocused companies are pretty good at a lot of things, but not great at
anything — and thus, although they value coherence, they struggle to choose
which capabilities to prioritize.
- Four archetypes refer to companies that have developed a coherent strategy but
struggle to execute it:
- Distracted
- Distracted companies have defined a coherent identity for their company, but
they have a hard time resisting diversions. They pursue market opportunities
that aren’t in line with their strategy
- Resource-constrained

- Resource-constrained companies struggle to find the funds to execute their

strategy. Building differentiating capabilities is difficult and expensive, and the
executives at these companies don’t think their financial situation allows them
to make the bold moves they need

- Capability-constrained

- Capability-constrained companies lack the knowledge, skills, or technology

needed to build out their capabilities to a world-class level, or to scale them
throughout the organization.

- Overstretched

- Overstretched companies have defined a coherent identity for themselves, but

it is so far away from the company’s current status — and their ability to enlist
customers, employees, and investors on their behalf — that they can’t
successfully realize their goals.

- Coherent
 - Coherent companies have a powerful value proposition and a system of a few
differentiating capabilities that support that value proposition.

- Super competitors

- Super competitors use their coherence to shape their future.

- They apply their capabilities to a broader range of challenges and loftier goals,
serve the fundamental needs and wants of their customers, and ultimately lead
their industries.

- Market penetration

- Market penetration rate: assessment of how much a product is being sold relative to the
total estimated market for that product, expressed as a percentage.

- Market penetration is a business growth strategy that focuses on increasing the market
share of an existing product or service within its CURRENT market or customer base. The
goal of market penetration is to capture a larger share of the market's existing customers
or to encourage current customers to buy more of the product or service. This strategy
can be pursued in various ways, often involving sales and marketing efforts.

- How to create a Market Penetration Strategy

- Lowering or raising prices

- Acquiring a competitor in the market

- Revamping your digital marketing roadmap to increase brand awareness

- Modifying your products or to specifically solve the customer’s problems

- Developing new products to attract new customers

- Market Development Strategy

- focuses on introducing existing products to NEW MARKETS.
- Companies can also use a market development strategy to create a new product line to
sell to new customers or upsell to existing customers.

- Product Development Strategy

- enables product organizations to create a stream of innovative offerings that disrupt

the competition and delight customers.

- Product development strategy is a subset of corporate strategy. It sets the direction for
new products by establishing goals and through funding decisions.

- a business growth strategy that involves creating and introducing new products or
services to the market or improving existing ones. This strategy aims to expand a
 company's product offerings, enhance its competitive position, and capture new market
opportunities. Product development is a fundamental aspect of innovation and can lead
to increased revenue and market share

- Porter’s Generic Strategies

- Cost Leadership Strategy: establishing a competitive advantage by having the lowest cost
of operation in the industry. It is often driven by company efficiency, size, scale, scope
and cumulative experience

- Differentiation: a business must offer products or services that are valuable and unique
to buyers above and beyond a low price.

- Cost focus: A cost focus strategy is when businesses attempt to attract customers based
on price

- Porter’s 5 Forces Model

- to assess the competitive forces within an industry or market. It helps businesses

evaluate their competitive position and make strategic decisions. Analyzing these five
forces helps organizations understand the competitive dynamics of their industry and
make informed decisions about strategy, pricing, and market positioning.

- Threat of New Entrants: This force assesses how easy or difficult it is for new
competitors to enter the market. High barriers to entry, such as economies of scale,
brand loyalty, and government regulations, can make it less attractive for new entrants.

- Bargaining Power of Suppliers: This force examines the influence suppliers have over the
industry. If there are few suppliers or they provide unique resources, they can exert
more power and potentially raise prices.

- Bargaining Power of Buyers: This force looks at the power of customers to negotiate for
lower prices or better terms. If buyers have many choices or can easily switch suppliers,
their bargaining power increases.

- Threat of Substitute Products or Services: This force considers the availability of

alternative products or services that can meet the same needs as the ones offered by
the industry. The higher the availability of substitutes, the greater the threat to the
industry's profitability.

- Rivalry Among Existing Competitors: This force assesses the intensity of competition
within the industry. Factors like the number of competitors, their market share, and the
degree of product differentiation can impact rivalry. High rivalry can lead to price wars
and reduced profitability.

- Non-profit organization
- A not-for-profit can simply serve the goals of its members.
 - A non-profit organization (NPO), also known as a not-for-profit organization, is a type of
entity that operates for a specific social, charitable, educational, religious, or
philanthropic purpose rather than to generate profits for its owners or stakeholders. The
primary objectives of non-profit organizations are typically centered around benefiting
the public or a particular community, addressing social issues, or advancing a specific
cause.
- Example: Philippines World Vision, Gawad Kalinga, Philippines Red Cross
- For Profit-organizations
- one that operates with the goal of making money.

- Most businesses are for-profits that serve their customers by selling a product or service.

- The business owner earns an income from the for-profit and may also pay shareholders
and investors from the profits.

- A for-profit organization, also known as a business or a commercial enterprise, is an

entity or company that operates with the primary goal of generating profits and financial
returns for its owners, shareholders, or investors. The fundamental purpose of for-profit
organizations is to engage in economic activities that generate revenue and, ideally,
produce a surplus after covering all expenses and costs.

NOTES (OCT. 09)

CHAPTER 2 - THE BUSINESS VISION AND MISSION

- VISION: A company vision, often referred to as a "vision statement," is a concise and aspirational
statement that outlines the long-term goals and aspirations of an organization. It is a
forward-looking declaration that describes what the company aims to achieve or become in the
future. A well-crafted company vision statement serves as a guiding beacon for the organization,
providing direction, inspiration, and purpose.
- MISSION: A company mission, often referred to as a "mission statement," is a concise and clear
declaration of an organization's purpose, primary objectives, and core values. It outlines what
the company does, why it exists, and for whom it exists. A well-crafted mission statement serves
as a guiding principle and framework for the organization's daily operations and decision-making
processes.
- Mission and vision statements provide a clear sense of purpose and direction for the
organization. They help align the efforts of employees and stakeholders toward a common goal.
These statements serve as a strategic framework for decision-making. Well-crafted mission and
vision statements inspire and motivate employees. They provide a sense of meaning and
belonging, which can boost morale and productivity.These statements communicate the
organization's identity, values, and goals to both internal and external stakeholders. They help
employees understand the company's purpose and what it stands for. Externally, they can attract
customers, investors, and partners who align with the company's mission and vision.
- Mission and vision statements are essential tools for defining a company's identity, setting goals,
and providing a sense of purpose and direction. They help guide strategy, inspire employees,
communicate values, and contribute to the overall success and sustainability of the organization.
- Company core values are the fundamental beliefs, principles, and ethical standards that guide
and shape an organization's culture, behavior, and decision-making processes. These values
serve as a foundation for the company's identity and define how it operates both internally and
externally.
- THE STRATEGY FORMULATION, STRATEGY EXECUTION PROCESS
- Crafting and executing strategy are the heart and soul of managing a business
enterprise.
- The managerial process f crafting and executing a company’s strategy is a n ongoing,
continuous process
- STAGES:
- Developing a strategic vision, mission statement and core values
- To chart long-term direction, describe the company’s business and to
guide the pursuit of the strategic vision and mission
- Setting objectives
- To measure the company’s performance and track its progress
- Crafting a strategy
- To advance the company along the path to management’s envisioned
future and achieving its performance objectives
- NOTE: THESE FIRST 3 STAGES MAKE UP FOR A STRATEGIC PLAN
- Implementing and executing the chosen strategy
- Should be done efficiently and effectively
- Evaluating and analyzing the external environment and the company’s internal
and external situation and performance
- Identify corrective adjustments that are needed
- There is a need for management to evaluate a number of internal and external factors in
deciding upon a strategic direction, appropriate objectives, and approaches to crafting
and executing strategy
- Management’s decisions that are made in the strategic management process must be
shaped by the prevailing economic conditions and competitive environment and the
company’s own internal resources and competitive capabilities.
- There is also a need for management to evaluate the company’s performance on an
ongoing basis and any indication that the company is failing to achieve its objectives calls
for corrective adjustments.
- The company’s implementation efforts may have fallen short so new tactics must be
developed to fully exploit the potential of the company’s strategy which must be fit with
the company’s competitive conditions and internal capabilities.
- A change in the company’s vision should only be necessary when it becomes evident
that the industry has changed in a significant way that renders the vision obsolete
(strategic inflection points)
 - Responding to unfolding changes in the marketplace in a timely fashion lessens the
company’s chances of becoming trapped in a stagnant or declining business or letting
attractive growth opportunities slip away
- Strategic Plan: maps put where a company is headed, establishes strategic and financial
targets, and outlines the competitive moves and approaches to be used achieving the
desired business results; it serves as a roadmap for achieving long-term goals and
objectives; clear direction and alignment;
- STAGE 1: DEVELOPING A STRATEGIC VISION, MISSION AND CORE VALUES
- Top management’s views about the company’s direction and future
product-customer-market-technology focus constitute a strategic vision for the company
- A clearly articulated strategic vision communicates themamangement’s
aspirations to stakeholders about “where we are going” and helps steer the
energies of company personnel in a common direction
- It serves as a basis for crafting the company’s strategic actions, and aided
internal efforts to mobilize and direct the company’s resources
- Well-conceived visions are distinctive and specific and not something that coils
be applied to numerous organizations
- Nicely worded vision statements with no specifics about the company’s
product-market-customer-technology focus fall short of what it takes for a vision
to measure up.
- For a strategic vision to function as a valuable managerial tool, it must provide
understanding of what management wants its business to look like and provide
managers with a reference point in making strategic decisions. It must say
something definitive about how that company’s leaders intend to position the
company beyond where it is today
- Characteristics of Effectively Worded Vision Statements
- Graphic - paints a picture
- Directional - forward-looking
- Focused - specific
- Flexible - not so focused that it makes it hard to adjust
- Feasible - within the company’s capabilities
- Desirable - indicates why the directional path makes good business
sense
- East to communicate - explainable and memorable
- Common Shortcomings in Company Vision Statements
- Vague or incomplete - short on specifics about where the company is
headed
- Not forward looking -
- Too broad
- Bland or uninspiring
- Not distinctive
- Too reliant on superlatives
- Importance of Communication Strategic Vision
- A strategic vision has little value to the organization unless it is effectively
communicated down the line to lower-level managers and employees. It would
be difficult to provide direction and motivation in working towards long-term
goals unless it is communicated and the management’s commitment to that
vision is clearly observed
- Communicating the vision means putting “where we are going and why: in
writing, distributing the statement organization-wide, and having executives
personally explain the vision and its rationale to as many people as feasible
(should be in a manner that reaches out and grabs people’s attention for
motivational value and it is an important element of effective strategic
leadership).
- Through a Catchy or easily remembered slogan: this helps rally organization
members to hurdle whatever obstacles lie in the company’s path ans maintain
their focus
- Benefits of a Well-Communicated Strategic Vision
- It crystallizes senior executives’ own views about the firm’s long-term
direction
- It reduces the risk of rudderless decision making by management at all
levels
- It is a tool for winning the support of employees to help make the vision
a reality
- It provides a beacon for lower-level managers in forming departmental
missions
- It helps an organization prepare for the future
- Developing a company Mission statement
- A missions statement describes the enterprise’s present business scope and
purpose
- “Who we are, what we do, and why we are here”
- A company mission statement (1) identifies the company’s products and/or
services, (2) specifies the buyer needs that the company seeks to satisfy and the
customer group or markets that it serves, and (3) gives the company its own
identity
- A mission statement that provides scant indication of “who we are and what we
do” has no apparent value
- Profit is an objective and a result of what a company does. It is the
management’s answer to “make a profit doing what and for whom?” that
reveals the substance of a company’s true mission and business purpose
- Linking the strategic vision and mission with company values
- Values or Core Values: to guide the actions and behavior of company personnel
in conducting the company's business and pursuing its strategic visions and
mission
 - These are designated beliefs and desired ways of doing things at the
company
- E.g. fair treatment, honor and integrity, ethical behavior, innovativeness,
teamwork, etc.
- Sometimes, companies do and do not practice what they preach when it comes
to their professed values.
- STAGE 2: SETTING OBJECTIVES
- The managerial purpose of setting objectives is to convert the strategic vision into
specific performance targets. Objectives reflect management’s aspirations for company
performance in light of the industry’s prevailing economic and competitive conditions
and the company’s internal capabilities.
- Must be SMART

NOTES (OCT. 09)

THE INTERNAL ASSESSMENT

- Key Internal Forces
- Distinctive Competencies
- A firm’s strength that cannot be easily matched or imitated by competitors
- Building competitive advantages involves taking advantage of distinctive
competencies
- These competencies give the company a competitive edge by enabling it to
perform better, offer superior products or services, or operate more efficiently
than its rivals. This advantage can lead to increased market share, profitability,
and customer loyalty.
- Distinctive competencies are a key consideration in a company's competitive
strategy. They can help a company focus on its unique strengths, differentiate
itself in the market, and create value for its customers and shareholders. It is
important for companies to continually assess and nurture their distinctive
competencies to maintain their competitive advantage in a rapidly changing
business environment.
- The Internal Audit
- Requires gathering and understanding information about the firm’s
management, marketing, finance/accounting, production/operations,
research and development (R&D), and management information
systems operations
- Provides more opportunity for participants to understand how their
jobs, departments, and divisions fit into the whole organization.
- To internally audit means to conduct an independent and systematic
evaluation or examination of an organization's activities, processes,
operations, financial records, and internal controls. The purpose of an
 internal audit is to assess and ensure the effectiveness, efficiency, and
compliance of various aspects of the organization's operations.
- In summary, internal audit provides valuable insights and assurance to
help companies evaluate their capabilities, mitigate risks, and enhance
their competitiveness. By identifying strengths and weaknesses,
addressing inefficiencies, and ensuring compliance, internal audit
contributes to the company's overall health and its ability to thrive in a
competitive business environment.
- Assessing a company's strengths and weaknesses is a fundamental step
in the strategic planning process because it provides a realistic view of
the organization's internal environment. This knowledge forms the basis
for effective strategy formulation, ensuring that strategies build on
existing strengths, address weaknesses, and are aligned with the
company's resources and capabilities. It ultimately leads to more
successful and sustainable strategic outcomes
- The Internal factor Evaluation Matrix
- Internal Factor Evaluation (IFE) matrix is a strategic management tool
for auditing or evaluating major strengths and weaknesses in functional
areas of a business.
- IFE matrix also provides a basis for identifying and evaluating
relationships among those areas.
- IFE matrix together with the EFE matrix are used in strategy
formulation.
- When used in conjunction with the External Factor Evaluation (EFE)
Matrix, organizations can gain a comprehensive understanding of their
internal and external environments, informing their strategic planning
efforts.
- The Resource-Based View (RBV)
- Contends that internal resources are more important for a firm than external
factors in achieving and sustaining competitive advantage.
- The Resource-Based View (RBV) is a strategic management framework and
theory that emphasizes the importance of a firm's internal resources and
capabilities as key determinants of its competitive advantage and long-term
success. RBV suggests that sustainable competitive advantages are primarily
derived from the unique and valuable resources and capabilities an organization
possesses. These resources can include tangible assets (such as physical facilities
and equipment) and intangible assets (such as intellectual property, brand
reputation, and knowledge).
- Supporters of the RBV argue that organizational performance will mainly be
determined by internal resources that can be grouped into three all-inclusive
categories: physical resources (plant and equipment, location, technology, raw
materials, machines), human resources (employees, training, experience,
intelligence, knowledge, skills, abilities), and organizational resources (firm
structure, planning processes, information systems, patents, trademarks,
copyrights, databases, and so on.).
- For a resource to be valuable, it must be either (1) rare, (2) hard to copy, or (3)
not easily substitutable.
 - These three characteristics of resources enable a firm to implement strategies
that improve its efficiency and effectiveness and lead to a sustainable
competitive advantage.
- Integrating Strategy and Culture
- Organizational culture significantly affects business decisions and thus must be
evaluated during an internal strategic-management audit
- Organizational culture significantly affects business decisions in several ways, as it
shapes the values, norms, beliefs, and behaviors of individuals within the organization.
The impact of organizational culture on decision-making can be profound and can
influence various aspects of the business, including strategy, innovation, risk tolerance,
and ethical considerations.
- If strategies can benefit from cultural strengths, then management often can quickly and
easily implement change
- Org Culture: refers to the shared values, beliefs, customs, behaviors, and norms that
shape the way individuals within the organization interact and make decisions
- Culture is a critical factor in strategy formulation because it shapes the organization's
values, behaviors, and decision-making processes. Organizations need to align their
strategic goals with their culture to ensure that strategies are consistent with the beliefs
and norms of the workforce. A culture that supports and aligns with the chosen strategy
is more likely to foster successful strategy execution. Conversely, cultural misalignment
can lead to strategy implementation challenges and hinder overall organizational
effectiveness
- Management
- The functions of management consist of five basic activities: planning, organizing,
motivating, staffing, and controlling.
- These activities are important to assess in strategic planning because an organization
should continually benefit from its management strengths and improve on its
management weaknesses.
- Planning: It involves setting organizational goals and objectives, determining the means
and resources required to achieve them, and developing a detailed plan of action.
Effective planning helps organizations anticipate challenges, allocate resources
efficiently, and establish a clear direction for the future. It includes strategic planning
(long-term goals), tactical planning (short-term goals), and operational planning (daily
activities).
- Organizing: Organizing involves structuring the organization's resources, including
people, materials, technology, and processes, in a way that aligns with the established
plans and objectives. This function encompasses tasks such as defining roles and
responsibilities, creating job positions, establishing reporting relationships, and
designing workflows. Organizing ensures that the organization's resources are
coordinated and utilized effectively to achieve its goals.
- Motivating: Leading is the function of management that focuses on guiding, motivating,
and influencing employees to perform their tasks and contribute to the attainment of
organizational goals. It involves effective communication, leadership, and
decision-making. Managers in leadership roles inspire and empower their teams,
provide guidance, and resolve conflicts. Leadership also includes setting a positive
organizational culture and values.
- Staffing: Staffing involves activities related to the acquisition, development, and
management of human resources within an organization. Effective staffing ensures that
the organization has the right people with the right skills in the right positions,
contributing to its success and sustainability.
- Controlling: Controlling is the process of monitoring and evaluating the organization's
performance against established goals and standards. It involves comparing actual
results with planned outcomes, identifying deviations or variances, and taking corrective
 actions when necessary. Control mechanisms can include performance metrics, key
performance indicators (KPIs), feedback systems, and regular performance reviews.
Controlling helps ensure that the organization stays on track and makes adjustments as
needed to achieve its objectives.
- Marketing
- the process of defining, anticipating, creating, and fulfilling customers’ needs and wants
for products and services.
- Marketing is a multifaceted and essential business function that involves the process of
creating, communicating, delivering, and exchanging value to customers, clients,
partners, and society at large. Marketing encompasses a wide range of activities aimed
at understanding customer needs and preferences, promoting products or services, and
building strong customer relationships. It plays a central role in driving business growth
and profitability.
- Functions of Marketing:
- Customer analysis
- the examination and evaluation of consumer needs, desires, and wants.
- Selling products/services
- the process of persuading potential customers to make a purchase.
Selling is one of the key functions within the broader marketing process
and is often considered the culmination of various marketing efforts.
- Product and service planning
- includes activities such as test marketing; product and brand
positioning; devising warranties; packaging; determining product
options, features, style, and quality; deleting old products; and providing
for customer service.
- Pricing
- Five major stakeholders affect pricing decisions: consumers,
governments, suppliers, distributors, and competitors
- Sometimes an organization will pursue a forward integration strategy
primarily to gain better control over prices charged to consumers.
- determining the monetary value or price that customers will pay for a
product or service offered by a business
- Distribution
- includes warehousing, distribution channels, distribution coverage, retail
site locations, sales territories, inventory levels and location,
transportation carriers, wholesaling, and retailing.
- movement and flow of products or services from producers or
manufacturers to end-users or customers.
- Marketing research
- the systematic gathering, recording, and analyzing of data about
problems relating to the marketing of goods and services
- can uncover critical strengths and weaknesses.
- Its primary purpose is to provide organizations with valuable insights
and knowledge that can inform marketing strategies, decision-making,
and the development of products or services. Marketing research is a
systematic and organized approach to understanding various aspects of
the market and its dynamics.
- Opportunity analysis
- systematic process of identifying and evaluating potential opportunities
and market gaps that a business can leverage to achieve its strategic
objectives and drive growth. This analysis is a critical component of the
marketing planning process and involves assessing both internal and
 external factors to identify areas where the organization can create
value, differentiate itself, or expand its market presence.
- Finance / Accounting Functions
- 3 decisions:
- Investment decision
- the allocation and reallocation of capital and resources to projects,
products, assets, and divisions of an organization.
- Financing decision
- determines the best capital structure for the firm and includes
examining various methods by which the firm can raise capital.
- Dividend decision
- concern issues such as the percentage of earnings paid to stockholders,
the stability of dividends paid over time, and the repurchase or issuance
of stock.
- determine the amount of funds that are retained in a firm compared to
the amount paid out to stockholders.
- Production / Operations
- consists of all those activities that transform inputs into goods and services.
- deals with inputs, transformations, and outputs that vary across industries and markets.
- Research and Development Audit
- systematic evaluation of an organization's research and development activities and
processes. The primary purpose of an R&D audit is to assess the effectiveness, efficiency,
and strategic alignment of an organization's R&D efforts. It helps identify strengths,
weaknesses, opportunities, and threats in the R&D function, ultimately informing
decisions on resource allocation, innovation strategy, and research priorities.
- Research and Development (R&D) is a critical function within organizations, and it is
used for various purposes to drive innovation, improve products and services, remain
competitive, and achieve long-term growth and sustainability.
- Management Information Systems
- to improve the performance of an enterprise by improving the quality of managerial
decisions
- An effective information system thus collects, codes, stores, synthesizes, and presents
information in such a manner that it answers important operating and strategic
questions
- designed to support the efficient and effective operation of an organization's
management and decision-making processes. MIS provide managers and
decision-makers with timely, relevant, and accurate information that helps them make
informed choices, solve problems, plan for the future, and monitor the performance of
various aspects of the organization.
- Value Chain Analysis
- refers to the process whereby a firm determines the costs associated with organizational
activities from purchasing raw materials to manufacturing product(s) to marketing those
products
- aims to identify where low-cost advantages or disadvantages exist anywhere along the
value chain from raw material to customer service activities
- a strategic management framework that helps organizations understand and analyze the
sequence of activities and processes involved in delivering a product or service to
customers. The primary goal of value chain analysis is to identify opportunities for
creating and capturing value, improving efficiency, and gaining a competitive advantage
within an industry.
- Benchmarking
 - an analytical tool used to determine whether a firm’s value chain activities are
competitive compared to rivals and thus conducive to winning in the
marketplace
- entails measuring costs of value chain activities across an industry to determine
“best practices”
- Benchmarking in value chain analysis is a process in which an organization
compares its own value chain activities and performance metrics to those of
industry peers or best-in-class companies in order to identify areas for
improvement and learn from best practices. The goal of benchmarking is to
understand how the organization's processes, costs, and performance stack up
against industry standards or leaders and then take steps to close performance
gaps.

NOTES (OCT. 16)

THE EXTERNAL ASSESSMENT

- EXTERNAL ASSESSMENT: In a business context, external assessment refers to the process of

evaluating various aspects of a company's operations, performance, and environment by
individuals or entities that are not part of the organization. These external assessments are
typically conducted by independent third parties or experts who have the necessary knowledge
and expertise to provide an objective and unbiased evaluation. The primary purposes of external
assessments in business are to gain insights into the company's strengths and weaknesses,
identify opportunities and threats, and make informed decisions to improve performance and
competitiveness
- This looks at the competitive conditions in the industry in which the company operates,
drivers of market change, the market positions of rival companies and the factors that
determine competitive success
- Charting a company’s long-term direction, conceiving its customer value proposition,
setting objectives or crafting a strategy without first gaining an understanding of the
company’s external and internal environments hamstrings attempts to build competitive
advantage and boost company performance. Management’s decisions that are made in
the strategic management process must be shaped by the prevailing economic
conditions and competitive environment and the company’s own internal resources and
competitive capabilities.
- This analysis helps businesses understand the factors and dynamics outside their control
that can impact their operations and success
- externally assessing the organization's environment is essential for strategy formulation
because it provides critical insights, allows for informed decision-making, enhances
adaptability, and helps organizations to proactively respond to opportunities and
challenges in a complex and ever-changing business landscape
- External Strategic Management Audit: evaluating and analyzing factors and forces
outside of an organization's control. This audit aims to assess the external environment
 in which the organization operates to understand the opportunities and threats that can
impact the organization's strategic planning and decision-making. identifying
opportunities and threats is fundamental to effective decision-making, risk
management, and strategy development. It enables organizations to leverage favorable
conditions and prepare for challenges, ultimately contributing to their overall success
and sustainability in a dynamic business environment.
- Understanding external factors is essential for strategic planning. It helps organizations
anticipate changes, opportunities, and challenges in the environment, which informs the
development of effective strategies.
- Identifying external factors allows organizations to assess potential risks and
vulnerabilities. By recognizing threats early, firms can take measures to mitigate or adapt
to these risks, reducing potential damage.
- External factors also include opportunities that can benefit an organization. Recognizing
these opportunities enables firms to proactively seize them, gaining a competitive
advantage.
- Before we make a decision, we have to take into consideration factors we cannot control
- PESTLE ANALYSIS AND 5 FORCES
- We have to convert threats into opportunities and opportunities to strengths
- The strength of the org does not mean that it should be the basis of decision
making
- External factor eval is related to internal factor evaluation
- Any decision leading from external factors should be a result of collaboration
and decentralization
- We have to assess external factors and critical success factors
- What does it mean to perform external audit
- Long-term Orientation
- External auditing as part of strategic management involves analyzing the
external environment and considering various factors and trends that
can impact an organization's long-term strategic decisions
- External audits help organizations recognize and understand long-term
trends in the external environment. This includes shifts in customer
preferences, technological advancements, evolving regulatory
frameworks, and societal changes. This understanding is crucial for
developing strategies that position the organization for success over the
long term
- Incorporating external auditing into strategy formulation encourages
organizations to look beyond short-term goals and consider the broader
context in which they operate. By examining external factors and trends,
organizations are better equipped to develop strategies that are not only
effective in the present but also sustainable and competitive over the
long term
- Measurable
 - To ensure measurability in external auditing for strategy formulation, it's
crucial to define specific metrics, establish baseline data, set target
values or benchmarks, and regularly monitor and report progress. These
metrics can vary based on the specific objectives and strategies being
pursued, but they should always be linked to the organization's overall
goals and provide a basis for informed decision-making and
performance improvement
-
- A company’s external environment includes the immediate industry and competitive
environment and broader macro-environmental factors such as general economic conditions,
societal values and cultural norms, political factors, the legal and regulatory environment,
ecological considerations, and technological factors.
- 2 levels of a company's external environment:
- Border outer ring macro-environment (PESTLE)
- Political factors: This category examines the influence of political factors on an
organization. It includes assessing government stability, policies, regulations, and
the overall political climate. political factors are concerned with the broader
political landscape, including government policies, stability, and decisions that
may affect the business environment
- Economic conditions: Economic factors involve evaluating the economic
conditions and trends that can affect an organization's financial performance
(INCLUDE THE GENERAL ECONOMIC CLIMATE AND SPECIFIC FACTORS SUCH AS
INTEREST RATES, EXCHANGE RATES, INFLATION RATES ETC.)
- sociocultural forces: Social factors focus on the demographics, lifestyle, cultural
norms, and societal changes that may affect the organization (societal values,
attitudes, cultural factors and lifestyle)
- Technological factors: This category examines technological advancements,
innovations, and the level of technology adoption that could impact the
organization (pace of technological change and developments)
- Environmental forces: Environmental factors encompass issues related to
sustainability, climate change, and environmental regulations
- legal/regulatory factors: Legal factors involve evaluating the legal framework,
regulations, and laws that can affect the organization's operations and industry.
focus specifically on the legal requirements and regulations that govern an
organization's operations
- Immediate inner ring industry and competitive environment (5 FORCES)
- Suppliers
- Substitute products
- Buyers
- New entrants
- Rival firms
 - NOTE: In practice, organizations often use both PESTLE analysis and Porter's Five Forces
to gain a comprehensive understanding of their external environment. By integrating the
insights from these two tools, they can develop more robust and effective strategic plans
that consider both industry-specific factors and the broader macro-environmental
context. This integrated approach helps organizations make informed decisions and
adapt to changes in their external environment
- NOTE: While PESTLE analysis primarily focuses on external factors and industry-wide
trends, some factors, like regulatory changes and government policies (political and
legal), can directly influence the competitive forces analyzed by Porter's Five Forces.
Information from a PESTLE analysis can significantly affect Porter's Five Forces analysis
by providing valuable insights into the external factors that shape the competitive
dynamics within an industry.
- By integrating PESTLE insights into a Five Forces analysis, organizations can make more
informed decisions regarding competitive positioning, entry strategies, and competitive
advantage in the industry. This integrated approach allows for a more comprehensive
and strategic understanding of the competitive landscape.
- Macro-environment: encompasses all of the relevant factors making up the broad environmental
context in which a company operates; factors that are important enough that should shape the
management’s decisions regarding the company;s long-term direction, objectives, strategy, and
business model.
- evaluated using the PESTLE analysis
- PESTLE Analysis: used to assess the strategic relevance of the 6 principal components of
the macro-environment. It helps organizations evaluate and understand the external
factors that can impact their operations, both positively and negatively. PESTLE analysis
is a valuable tool for assessing the external factors that can impact an organization's
operations and strategic decisions. It provides a systematic framework for understanding
the external environment and helps organizations proactively respond to changes and
challenges.
- The impact of the broader outer ring on a company’s choice of strategy can be big or small (even
though it may have a small or low impact to the business, it is still important to keep a watchful
eye on it)
- As company managers scan the external environment, they must be alrt for potentially
important outer ring developments, assess their impact and influence, and adapt the company’s
direction and strategy as needed.
- Managers must adopt an external perspective that scans all elements of the macro-environment
to identify anomalies (potential important developing trends) that might shape the emergence
of new customer needs.
- However, the factors and forces in a company’s external environment that have the biggest
strategy-shaping impact typically pertain to the company's immediate inner ring industry and
competitive environment.
- The nature and subtleties of competitive forces are never the same from one industry to another
and must be wholly understood to accurately assess the company’s current situation.
 - 5 Forces Model of Competition: most powerful and widely used tool for assessing the
strength of the industry’s competitive forces. This model holds that competitive forces
affecting industry attractiveness go beyond rivalry among competing sellers and include
pressures stemming from 4 coexisting sources. It is a way for us to know if we have a
competitive advantage in the industry

- Threat of New Entrants: This force assesses how easy or difficult it is for new
competitors to enter the market. High barriers to entry, such as economies of scale,
brand loyalty, and government regulations, can make it less attractive for new entrants.

- Bargaining Power of Suppliers: This force examines the influence suppliers have over the
industry. If there are few suppliers or they provide unique resources, they can exert
more power and potentially raise prices. These are entities that give us means and ways
for us to produce the output.

- Bargaining Power of Buyers: This force looks at the power of customers to negotiate for
lower prices or better terms. If buyers have many choices or can easily switch suppliers,
their bargaining power increases.

- Threat of Substitute Products or Services: This force considers the availability of

alternative products or services that can meet the same needs as the ones offered by
the industry. The higher the availability of substitutes, the greater the threat to the
industry's profitability.

- Rivalry Among Existing Competitors: This force assesses the intensity of competition
within the industry. Factors like the number of competitors, their market share, and the
degree of product differentiation can impact rivalry. High rivalry can lead to price wars
and reduced profitability. competitors play a significant role in shaping the business
landscape. By considering competitors in decision-making processes, organizations can
adapt to market conditions, gain a competitive advantage, and make informed choices
that are more likely to lead to success. Competitor analysis is a fundamental aspect of
strategic planning and management

- Value of external factor evaluation: assess and analyze the external environment in which an
organization operates. An EFE matrix is a strategic management tool used to evaluate an
organization's key opportunities and threats. It assigns weighted scores to each factor based on
their significance, and these scores are used to determine the organization's overall ability to
respond to its external environment
- The intensity of competitive forces and the level of industry analysis are almost always fluid and
subject to change. It is essential for strategy makers to understand the current competitive
dynamics of the industry and how the industry is changing and the effect of the industry changes
- Industry and competitive forces are enticing or pressuring certain industry participants to alter
their actions in important ways.
 - Driving Forces: biggest influences in reshaping the industry landscape and altering
competitive conditions
- 3 Steps of Driving Forces Analysis
- Identifying what the driving forces are
- Assess whether the drivers of chang are individually or collectively acting to
make the industry more or less attractive
- Determining what strategy changes are needed to prepare for the impact of the
driving forces

NOTES (OCT. 26)

CHAPTER 8: STRATEGY GENERATION AND SELECTION

- NATURE OF STRATEGY ANALYSIS AND CHOICE

- This process seek to determine alternative courses of action that would best enable the
firm to best achieve its mission and long run objectives
- Analyzing strategy in business is essential for various reasons. It serves as a critical
component of the strategic management process and plays a pivotal role in the success
and sustainability of a business.
- By evaluating multiple alternatives, a firm can identify the one that is most likely to be
effective in achieving its mission and long-term goals. It allows for a comprehensive
exploration of options, increasing the chances of selecting the best course of action.
- Different alternatives come with different risks. Evaluating various options helps the firm
assess and mitigate potential risks associated with each alternative. This is especially
important for avoiding costly mistakes.
- The business environment is dynamic, and conditions can change rapidly. Considering
alternatives allows the firm to be more flexible and adaptive. If the chosen course of
action becomes less viable due to unexpected changes, having alternatives in mind can
facilitate a quick response.
-
- ALTERNATIVE STRATEGIES ARE DERIVED FROM:
- VISION
- Alternative strategies should be derived from an organization's vision by aligning
with and supporting the long-term aspirations and goals outlined in the vision
statement
- MISSION
- Alternative strategies can be derived from an organization's mission by ensuring
that they align with and support the core purpose and values outlined in the
mission statement.
- OBJECTIVES
 - Alternative strategies are derived from objectives through a strategic planning
process that involves assessing the current state of an organization, setting clear
objectives, and then developing various courses of action to achieve those
objectives. The process of deriving alternative strategies from objectives is not a
one-time event but a continuous cycle. The organization must adapt to changing
conditions and continuously seek opportunities for improvement and growth to
achieve its objectives effectively
- EXTERNAL AUDIT
- Alternative strategies can be derived from an external audit through a
comprehensive analysis of the external environment, which includes factors
such as the industry, market, competition, regulatory changes, and economic
conditions. This analysis helps an organization identify potential opportunities
and threats. An external audit is an essential component of strategic planning as
it helps organizations make informed decisions about their future direction
based on an understanding of the external forces and competitive dynamics
affecting their industry
- INTERNAL AUDIT
- Alternative strategies can be derived from an internal audit by thoroughly
assessing an organization's internal strengths and weaknesses. This assessment
provides insights into the organization's capabilities and resources, helping to
identify potential opportunities for improvement and challenges that need to be
addressed. An internal audit is crucial for developing strategies that leverage an
organization's strengths while addressing its weaknesses. It provides the
foundation for making informed decisions about the allocation of resources and
the pursuit of strategic objectives
- PAST SUCCESSFUL STRATEGIES
- Deriving alternative strategies from past successful strategies involves building
upon and expanding upon what has worked well in the past. Deriving alternative
strategies from past successful strategies involves a combination of building on
proven principles, adapting to changing circumstances, and maintaining a
culture of continuous improvement and innovation within the organization
- GENERATING ALTERNATIVES
- Participation in generating alternative strategies should be as broad as possible
- Alternative strategies proposed by participants should be considered, discussed, and
ranked in order of attractiveness
- COMPREHENSIVE STRATEGY-FORMULATION FRAMEWORK
- INPUT STAGE (BASIC INPUT INFORMATION)
- IFE MATRIX: The IFE Matrix is used to assess and evaluate an organization's
internal strengths and weaknesses. These internal factors are usually related to
an organization's resources, capabilities, and performance.
- EFE MATRIX: The EFE Matrix, or External Factor Evaluation Matrix, is a strategic
management tool used for assessing an organization's external environment. It
 helps organizations identify and evaluate key external factors that can affect
their performance and competitiveness
- CPM: a strategic management tool used to assess and compare the competitive
strengths and weaknesses of a company and its rivals within a particular
industry. The matrix is a part of the competitive analysis process. The CPM
Matrix is a useful tool for analyzing a company's competitive position relative to
its rivals. It helps identify areas where the company has a competitive advantage
and areas where it may be lagging behind the competition. This information can
be valuable in developing strategies to capitalize on strengths and address
weaknesses to enhance the organization's competitive position.
- MATCHING STAGE: Finding the match between organization’s internal resources & skills
and the opportunities & risks created by its external factors
- SWOT MATRIX: a strategic planning tool that helps organizations identify and
evaluate their internal strengths and weaknesses as well as external
opportunities and threats. "SWOT" stands for Strengths, Weaknesses,
Opportunities, and Threats. The matrix is used to provide a visual representation
of these factors, making it easier for an organization to develop strategies and
make informed decisions.
- four types of strategies
- SO: use strengths to take advantage of opportunities
- WO: overcoming weaknesses by taking advantage of
opportunities
- ST: use strengths to avoid threats
- WT: minimize weaknesses and avoid threats
- SPACE MATRIX: a strategic management tool used to analyze and determine the
appropriate strategic direction for an organization. The SPACE Matrix helps
organizations assess their current position and determine the best strategy
based on various internal and external factors.
- 4-quadrants indicate whether the most appropriate strategy is:
- Aggressive: Organizations that fall in this quadrant should
pursue aggressive strategies.
- Conservative: Organizations in this quadrant should follow
conservative strategies.
- Defensive: Organizations in this quadrant should adopt
defensive strategies.
- Competitive: Organizations in this quadrant should maintain
their current strategies or possibly consider stability strategies.
- 2 INTERNAL DIMENSIONS
- FINANCIAL STRENGTH: Evaluates an organization's financial
stability and performance.
- COMPETITIVE ADVANTAGE: Assesses an organization's
competitive position in the industry.
 - 2 EXTERNAL DIMENSIONS
- ENVIRONMENTAL STABILITY: Examines the stability of the
organization's external environment.
- INDUSTRY STRENGTH: Evaluates the overall attractiveness of the
industry.
- BCG MATRIX: used to evaluate a company's portfolio of products or business
units based on their market growth rate and relative market share. designed to
help organizations allocate resources and make strategic decisions about their
various business units or product lines.
- QUESTION MARKS:
- DOGS:
- STARS:
- CASH COWS:
- IE MATRIX:
- GRAND STRATEGY MATRIX:
- DECISION STAGE:
- QSPM: to determine the relative attractiveness of feasible alternative actions
-