MOTIVATORS AND

DRIVERS OF STRATEGIC
MANAGEMENT
CHAPTER 2

Reporter:
Siobe Alberca
Bridget Taño
Geral Bolito
The learner should be able:
1. Explain the factors in driving and motivating business organization 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 framework associated with change and strategic
management.
2.1 Why the Need for Strategic Management
• In the era where there are only a few business
organization offering the same or similar products in a
given market and demands of prospective clients are
not that sophisticated, strategic management or
strategizing per se may not be that critical or
important.
• In the 1970s up to this date, competition has become so
stiff and sometimes at cutthroat levels resulting to the
bankruptcy or closure of some firms.
2.2 The Dynamic Nature of the Market and the
Business
• The business and the market are not static but dynamic in nature.
Given the old adage that one thing constant in this world is change
itself.

The following circumstances and realities:

a) The ever changing market conditions – driven by supply and
demand situations, entrepreneurs and business strategists.
b) The changing taste of the market – other than purely demand
and supply market conditions or factors, the taste and
preferences of the buyers/consumers change over time.
c) Sociopolitical changes – it cannot be denied that political changes affect
the conduct of the business in other countries.
d) The impact of global developments vis-à-vis the local markets – the
world of business is getting smaller and borderless on account of
globalized scheme.
e) The changes in the conduct of businesses – the increasing role of
technology resulting to the popularization of e-commerce/e-business.

2.3 The triggering Events

-Refers to the situations or scenarios that may have caused or resulted to the
actions or initiatives of the top management of the firm.
• Wheelen and Hunger (2004) simply described triggering events
as something that acts as stimulus for a change in strategy.
Triggering events may come in two forms namely:
1) Internal Triggering Events – are those situations and scenarios
intervening or disturbing the business organization.
a) New CEO/President
b) Performance gap
c) Change in ownership
d) Management team shake up
e) Corporate reorganization/restricting
f) New products or services
2) External Triggering Events – are those factors external to the firm or matters
where the business organization itself may not like or want to happen.
Triggering events considered external are mostly socio-economic or even
political and social in nature.
External Triggering Events include the following:
a) The overall economic environment;
b) Government – its leadership, policies, and regulatory functions;
c) The sociopolitical environment;
d) The legal environment;
e) The technological environment;
f) The global/regional environment;
g) Market factors (demand and supply situation);
h) The religious environment; and
i) Occurrence of calamities and other natural phenomena.

Strategic inflection point – is a term coined by Andy Groove, Chairman of

the Board of Intel Corporation and cited by Wheelen and Hunger (2004) as
another factor considered as triggering event. It is a generic term that takes
into account both internal and external factors that influence business
direction.

2.4 Theory of the Firm

The concept of the theory of the firm suggests that under ideal conditions,
there are four categories of market conditions that can be either favorable
or unfavorable to the business.
The market condition;
1. Monopoly
2. Oligopoly
3. Monopolistic competition
4. Perfect competition
In other words, there are certain types of market structures also often
referred to collectively as theory of the firm (Litman, 1988). The so-called
theory of the firm also referred as the types of market structures
described are as follows:
a) Monopoly – it is a market structure characterized by the existence of a
single seller of a product which dominates the market.
b) Oligopoly – this type of market has more than one producer or seller of a
product, which may be either homogenous or differentiated.
c) Monopolistic competition – it exists when many sellers offer similar
products that are not perfect substitutes for one another.
d) Perfect competition – it is a market structure characterized by many
producers or sellers and a homogenous 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.
Rapid developments and innovations in technologies have given so much
impact upon the level of business competition anywhere in the world.
The development and introduction of personal computers
on a massive scale along with meteoric rise of the Internet
technology has changed the course of doing business
worldwide. From an 8-hour day conduct of business in the
brick-and-mortar era, the global introduction of e-
Commerce/e-Business resulted to the so-called click-and-
mortar era whose mode of doing business transcends
beyond traditional business hours with business
transaction happening round-the-world and round-the-
clock or on a borderless scenario and on a real-time basis.
2.6 The Product Life Cycle
The product life cycle
sometimes referred to as the
S-curve is a living proof that
just like humans, there is
beginning and end for
everything and the same is
true for every product or
service in this world.
Life cycle or S-curve is rising
to the top.
2.7 Experience Curve
The theory of the experience
curve suggests that as the
business organizations stay much
longer in the business or the
industry, the business
organization accumulates a body
of knowledge and experience that
enables the firm to do its business
better.
Experience curve is also referred
to as the learning curve.
2.8 Economies of Scale
Economies or diseconomies of scale
appears similar to the experience
curve.
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.
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
In the field of production management
and engineering science, there is a point
of machine use (and any resource for
that matter) that rebounds to the best
mix resulting to best operating level in
technical terms.
In other words, there is an optimum
level (one that is between the minimum
and maximum) of operating machines or
using resources that can result to the
lowest possible cost of production of a
product or service.
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,
competitiveness of the product
will be eventually eroded and
hence it must be continually
built up.
2.11 Other Relevant Theories Influencing
Strategic Management
• Pitts and Lei (2000) and several other authors have discussed some
of these theories in their works in the area of strategic management.
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.
b) Industrial organization theory – considered a branch of
microeconomics, this theory emphasizes the influence of industry
environment upon the firm.
c) Chamberlin’s economic theories – 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.
e) Resource-based theory – somehow related or similar to
contingency theory.
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.
h) Transactions cost economies – 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 Unions 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.
The collapse of centrally-planned economies is the active pursuit of
globalized trade scenario under the auspices of the General Agreement on
Tariffs and Trade (GATT) that eventually metamorphosed into what is now
known as the World Trade Organization (WTO).

2.13 Challenges and Opportunities of e-

Commerce/e-Business
The practice of e-Commerce embraces the broader context involving inter-
business organization concerning the use of information and
communication technology.
The biggest threat and impact of e-Commerce/e-Business in the
competition aspect of the business.
The bandwagon to go for e-Commerce/e-Business thus
threatening the traditional brick-and-mortar business.
The features and amenities of e-Commerce/e-Business schemes
have indeed brought forth a new paradigm in business.
The world has just begun in exploring the tip of the iceberg that
e-Commerce/e-Business promises.
THANK YOU FOR LISTENING!