MOTIVATORS

AND DRIVES OF
STRATEGIC
MANAGEMEN
Presented by Group one
 learning outcomes
1.Explain the factors in driving and motivating business organizations to stay competitive
or adopt the concepts of strategic management;
2. Discuss the importance of some market and economic theories relevant to strategic
management;
3.Illustrate and appreciate the importance of competencies as tool for strategic
advantage;
4. Discuss the importance of strategic management vis-à-vis the technological
and global developments; and
5. Explain and appreciate the relevance and importance of other theoretical frameworks
associated with change and strategic management.
 2.1 Why the Need for
Strategic Management
• The idea of strategic management was never heard of or that popular back in the 1960s or even
in the 1970s. in those days, many of the business organizations operated as independent
business entities with each of them having their products to sell without much restraint and
having their turfs or markets.
• The ever-growing population primes up demand for a variety of products or services and so is
the number of business organizations scampering to take advantage of market demand.
• It is acknowledged that the profit motive and the nature of competition have been dominant
factors that motivated and driven business organizations to edge out or outcompete each other.
 2.2 The dynamic nature of the
market and the business
The business and the market are not static but dynamic in nature. Business managers need
to live and accept that to be competitive; one has to live with a constantly changing
environment and get the best out of it. The following circumstances and realities:
1. The ever-changing market conditions
2. The changes in taste of the market
3. Sociopolitical changes
4. The impact of global developments; the local markets
5. The changes in the conduct of businesses
 2.3 The Triggering events
Triggering events refers to situations or scenarios that may have caused or resulted to the
actions or initiatives of the top management of the firm to consider certain strategic
options to make the firm competitive or to achieve certain strategic objectives.
TWO FORMS of TRIGGERING EVENTS
1. Internal triggering events – are those situations and scenarios intervening or
disturbing the business organization on account of factors internal or inherent to
the firm itself and one that the company can exercise a certain level of control.
New CEO/President – new leadership in any business organization generally
results to some changes. 
Performance gap – exists when performance does not meet expectations.
Change in ownership – a change in ownership either by the way of acquisition,
sellout, merger, or changes in the majority of ownership of stockholdings
amount publicly listed firms can trigger or may result in a new set of strategies.

Management team shake-up – although strategy-making is largely influenced
by the President or CEO of the firm, having a new President or CEO may not
trigger a new set of strategies.
Corporate reorganization/restructuring – resulting from internal decisions or driven by
external factors necessarily requires new schemes or strategies to achieve a new
mission-vision statement or desired goals. 
New products or services – a change in products or services offered by the firm may
also trigger or result in another kind or at least change an enhanced strategy given
the new kind of products or services offered by the company
External triggering events – are those factors external to the firm or matters where
the business organization itself may not like or what to happen but there is nothing much
it can do – as compared to internal triggering events
• The overall economic environment 
• Government 
• The sociopolitical environment
• The legal environment 
• The technological environment 
• The global/regional environment  Market factors 
• The religious environment 
• Occurrence of calamities
 2.4 Theory of Firm
Theory of the firm also referred as the type of market structures described as follow:
1. Monopoly. It is a market structure characterized by the existence of a single seller of a
product that dominates the market.
2. Oligopoly. This type of market has more than one producer or seller of a product, which
may be either homogenous or differentiated.
3. Monopolistic competition. It exists when many sellers offer similar products that are not
perfect substitutes for one another. Barriers to entry are fewer than in an oligopoly.
4. Perfect competition. It is a market structure characterized by many producers or sellers
and a homogeneous product.
 2. 5 Technology Developments
and Innovations
As cited by Bitter and Pierson (2002), technology is an agent of change spurring the
traditional definition of time and space. These authors cited a situation in the United States
circa 1998 where for the first time in 50 years, young people's television viewing time
declined. Television viewing gave way to the Internet, video games, palm pilots, pagers,
cell phones, and personal digital assistants. With emerging technologies rapidly becoming
a commonplace, the need to keep pace is a constant challenge and opportunity for
managers and strategists.
TABLE 1. EMERGENCE OF NEW
TECHNOLOGIES
 2.6 The Product Life Cycle

Every product or service in any industry or sector has its life cycle as typified by the
diagram shown in Figure 7. The same product or service life cycle translates to what is
also known as the market or industry life cycle. What the diagram suggests is that
there is no such product, service, industry, or market that continues to grow for life or
over the infinite period - and will never come to its maturity, peak, and decline stage.
 2.7 Experience
Curve
The theory of the experience curve is shown in Figure 9. The theory of the experience
curve suggests that as business organizations stay much longer in the business or the
industry, the business organization accumulate a body of knowledge and experience that
enables the firm to do its business better.
 2.8 Economies of Scale

A popular theory in economics, the theory of economies or diseconomies of scale appears

similar to the experience curve as shown in Figure 11. Economies of scale postulates that
there is a decline in the per unit cost of production (or activity) as the volume of
production (or services rendered) is increased. A large organization can produce so much
that it enjoys economies of scale and can produce high volumes of goods at successively
lower costs than a smaller rival (Pitts and Lei, 2000).
 2.9 Best Operating Level

The concept of the best operating level is diagrammatically explained in Figure 12.
In the field of production management and engineering science, there is a point of
machine use (and any resource for that matter) that redounds to the best mix
resulting to the best operating level in technical terms.
 2.10 Building Competitive
Strategies
The theory behind the product life cycle or S-curve suggests that unless nothing is
being done about the product or service and given the ever-changing market conditions,
the competitiveness of the product will be eventually eroded - and hence it must be
continually built up. This notion is explained by the diagram shown in Figure 13.
 2.11 Other Relevant Theories
Influencing Strategic
Management
• While developing business policies and strategies is biased towards knowing the
current and future factors that will influence industry operations, it is also known
that strategists do consider proven theories including those that are empirical in
nature.
• Pitts and Lei (2000) and several other authors have discussed some of these
theories in their works in the area of strategic management. Among the theories
that have found their way as basis for strategic management purposes are
organizational adaptation and economics theories as well as learning theories
hereunder briefly discussed:
A. Evolution and revolution theories. In its most basic form as espoused by Charles
Darwin, this theory suggested that environmental change forces each species into
incremental, but continuous, mutation or transformation. Through such a change, a living
entity can adapt to its environment and survive.
B. Industrial organization theory. Considered a branch of microeconomics, this theory
emphasizes the influence of the industry environment on the firm.
C. Chamberlin's economic theories. The theories of economist Edward Chamberlin are
anchored on the context of evolutionary environmental change and he specifically
espoused that a single firm could clearly distinguish itself from its competitors.
D. Contingency theory. The basic premise of this theory is that higher financial returns are
associated with those firms that most closely develop a beneficial fit with their environment.
Unlike evolutionary and industrial organization theories others find as having a high level of
abstraction, contingency theorists view organizational performance as the joint outcome of
environmental forces and the firms, strategic actions.
E. Resource-based theory. Somehow related or similar to contingency theory, resource-
based theory accords more weight to the firm's choice to be proactive capitalizing on the
firm's unique resources to comprise the key variables that allow it to develop and sustain a
competitive strategic advantage.
F. Institution theory. This theory holds that organizations can adapt to changing conditions by
imitating other successful organizations.

G. Organization learning theory. It holds that organizations adjust defensively to a changing

environment and use knowledge offensively to improve the fit between the organization and
its environment.
H. Transaction cost economics. It proposes that vertical integration is more efficient than
contracting goods and services in the marketplace when the transaction cost of buying
goods in the open market becomes too great.
2.12 Geopolitical Developments
and the Globalized Market
• The collapse of communism in Europe and disintegration of the Union of Soviet
Socialist Republics (USSR), new and now smaller states have to embrace the concept
of democracy setting aside the theories of centrally-planned economies.
• In Asia, China embraced some aspects of capitalism and theories of the West opening
up the Chinese market to competition-conscious entrepreneurs of the United States.
• What is clear in the globalized trade scenario is that having removed or at least
reduced a lot of trade barriers and import restrictions, there is now a free or open flow
of goods and services across nations. This means opening up local markets to
competition with foreign investors or multinational business organizations now in
direct competition with local businessmen.
 2.13 Challenges and
Opportunities of e-Commerce/e-
Business
• As mentioned earlier in connection with the role played by technology development
and innovation, among the biggest threats to competition is the advent of computers or
the variety of technologies falling under the generic term, information and
communication technology; in particular, the invasion of the Internet in the world of
business or the popularization of the so-called e-Commerce and e-Business.

• The practice of e-commerce embraces the broader context involving inter-business

organizations concerning the use of information and communication technology, the
Internet in particular, in the conduct of trade and commerce.
• The practice of e-commerce embraces the broader context involving inter-business
organizations concerning the use of information and communication technology, the
Internet in particular, in the conduct of trade and commerce.

• The biggest threat and impact of e-Commerce/e-Business in the competition aspect of

the business is its capability to conduct business operations anytime of day or on a
round-the-clock and round-the-year basis and the mode of doing so anywhere where
there is access to a computer, may it be on the ground or in the business class of
intercontinental airlines.
• The bandwagon to go for e-Commerce/e-Business thus threatening the traditional
brick-and-mortar business is that contrary to some beliefs, e-Commerce/e-Business
technologies are not really meant for large or multinational business organizations
but they can be also applied in either small or medium-scale business organizations.

• The features and amenities of e-Commerce/e-Business schemes have indeed brought

forth a new paradigm in business that makes business competition much more
difficult to address given the fact that business players in cyberspace are not
physically visible, unlike the traditional business organizations in the brick-and-
mortar era.