1

Module in
CBMEC 02
(Strategic Management)

BY

Joyce C. Decendario, PhD.

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La Carlota City College

City of La Carlota
-o0o-
BUSINESS AND MANAGEMENT (BAM)
DEPARTMENT

MODULE IN CBMEC 02
2nd Semester, AY 2020-2021

JOYCE C. DECENDARIO, PhD.

Contact No. : 09668653474
Email Add : [email protected]

I. COURSE TITLE : CBMEC 02 (Strategic Management)

Prerequisite: Finance, Mgmt.

II.NUMBER OF UNITS : 3 units

III. COURSE DESCRIPTION : The course enables the student to have an integrated
view of the management of a financial institution. Topics include corporate environmental
scanning, situation audit, objective setting, strategy and tactics formulation, financial
planning and control in the context of a periodic planning cycle. Case studies of planning in
financial institutions will be extensively used. The profit/cost center performance via the
transfer pool pricing management information requirements as well as designing the
database management system will also be discussed.

IV. COURSE OUTCOMES :

At the end of the semester, the students can:
1. explain and define strategic management and financial planning;
2. identify the strategic management components and its corresponding outcome;
3. identify the strategic management models; the external and internal forces that may
prove beneficial or detrimental to an organization;
4. perform environmental scanning and employ SWOT analysis;
5. compare organization climate and organizational culture;
6. discuss the business and corporate strategies;
7. analyze and evaluate the social, political, economic, technological, and
environmental forces affecting the country; and
8. formulate a sample company vision, mission statement, and company goals and
objectives.

V. COURSE OUTLINE :
A. Prelim Period
Module 1: Strategic Analysis and Decision-Making
1.1 A Strategic Management Model
1.2 Challenges in the External Environment
1.3 Challenges in the Internal Environment
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B. Midterm Period
Module 2: Strategy Formulation
2.1 Business Strategies
2.2 Corporate Level Strategies

C. Semi-Final Period
Module 3: Strategy Implementation
3.1 Organizational Systems
3.2 Strategic Asset Management

D. Final Period
Module 4: Strategic Control and Monitoring
4.1 Strategic Control Mechanisms

VI. CONTENT DISCUSSION :

A. Prelim Period
Module 1: STRATEGIC ANALYSIS AND DECISION-MAKING
1.1 A STRATEGIC MANAGEMENT MODEL
The 21st century epitomizes the reality of dynamism. In fact, today’s milieu
is a state of fluidity. It is not static. Rather, changes and fluctuations are
constantly happening in the surroundings. These actualities are characterized by
the occurrence of phenomenal situations, continuous challenges, and triggering
forces that provoke corresponding reactions. The certainty of change is
universal and this foregone conclusion is largely experienced by all nations and
peoples- whether developed or underdeveloped, large or small, powerful or
weak. As a result, the current landscape of competition is highly threatening and
daunting. With an environment that is characterized by drive, energy, and
pursuit and transformation, volatility is a ruthless reality. Impermanence and
unpredictability are certainties. Nothing is stable; neither is regularity a logical
expectation. Competition has gone beyond nations, peoples, cultures,
geographic frontiers, and industries. As the global economy expands, blurring
boundaries, any business needs to create its own impact in any part of the world.
Thus, it is urgent for organizations and businesses to strategize.

Hypercompetition is a fundamental feature of the new economy. As the

word implies, it carries a note of overexcitement and agitation. It occurs when
product/service offerings and technologies are so new that standards become
unstable and competitive advantage is not sustainable. It is a condition where
strategic maneuverings have escalated to bigger business exposure, more
sophisticated marketing positioning, aggressive selling, and innovative products
and services. Doing business has become intense and more deliberate. It seems
like a big waste not to discern and take advantage of every opportunity. The
business atmosphere is characterized by activities such as outdoing each other,
surpassing sales, taking competitors by surprise, capturing a bigger market
share, winning the business battle, and seizing the number one slot.
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In a strict sense, hypercompetition is a situation where both globalization and

technology collaborate to create a heightened cut-throat situation. It means that
business compete with each other whether they have same products, similar
products, substitute products, and different products. Competitors continuously
strive to outplay and outsmart each other. They need to devise ways and means
to survive and deal with this super competitive and turbulent reality. New value
creation, competitive pricing, innovation in supply chain management, and high
degrees of quality are logical responses of companies. In short, the name of the
game today is tougher and smarter competition, quantitative and qualitative
organizational changes, and sustainable competitive advantage. In this
hypercompetitive environment, only the most adaptive and nimble
organizations will survive. Thus, there is the need to strategize.

Questions 1.1
1. How will you describe in your own words the reality of dynamism? Cite
examples to prove why the environment is considered dynamic.

2. Define hypercompetition. Give two important catalyst of competition and

expound on their respective roles in setting off hypercompetition in the global
environment.

Strategic management is a continuous process of strategy creation. It

involves strategic processes like strategic analysis and decision making, strategy
formulation and implementation, and strategy control with the primary
objectives of achieving and maintaining better alignment of corporate policies,
priorities and success.
Strategic Processes:
Strategic analysis consists of a systematic evaluation of variables currently
existing in the external and internal environment.
Strategic decision making is deliberately bringing together the right resources
for the right markets at the right time.
Strategy formulation is designing strategies on the business and corporate
levels.
Strategy implementation is employing these crafted strategies to achieve
organizational set goals and objectives.
Strategic control is the application of an appropriate monitoring and feedback
system.

Strategic management is also defined as the science of creating, executing,

and evaluating cross-functional decisions to enable an organization to achieve
its goals and objectives, the components of its process have to be effective. As
shown in Figure 1.1, output may materialize when each of the components of
the strategic management process is appropriately executed.
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Figure 1.1 The Strategic Management Process

Strategic Analysis Strategic Intelligence

Strategic
Decision-making Strategic Thinking

Strategy Organizational
Formulation Competitiveness

Strategy Comparative
Implementation Advantage

Strategic Control Strategic

Performance

 If strategic analysis is accurately conducted, organizations can develop strategic

intelligence. Like an antenna, strategic intelligence is the capability of an
organization to possess relevant and related knowledge, abilities, foresight, and
systems thinking, such that it is able to assess its own strengths and vulnerabilities,
the pressing challenges confronting the organization, as well as the trends and
opportunities existing in the environment.

 If strategic decision-making is correctly effected, organizations can acquire the

capability of thinking strategically. Strategic thinking is the cognitive process of
competently and analytically weighing factors and arriving at critical decisions in
the context of the current milieu of which an organization is part.

 If strategy formulation is uniquely designed and effectively communicated,

organizations have greater possibilities of attaining organizational competitiveness.
Organizational competitiveness pertains to the ability of any business/company to
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utilize its resources optimally and sustainably for maximum performance and
productivity.

 If strategy implementation is efficiently employed, organizations can achieve

comparative advantage. Comparative advantage refers to the ability of an
organization to produce a particular good or service at lower marginal and
opportunity costs than its competitors.

 If strategic control is productively monitored, organizations can realize strategic

performance. Strategic performance is the accomplishment of a high level of
productivity that is characterized by efficiency in the context of lean and
quantifiable management.

Thus, the strategic management model is illustrated as follows:

Organizational Strategic Organizational

Input Management Process Success
 Management/ * Strategic Analysis * Strategic
Employees * Strategic Intelligence
 Financial Decision-making * Strategic Thinking
Resources * Strategy * Organizational
 Facilities/ Formulation Competitiveness
Equipment * Strategy * Comparative
 Infrastructures Implementation Advantage
 Processes * Strategic Control * Strategic
Performance

Figure 1.2 A Strategic Management Model

The strategic management model (Figure 1.2) shows the relationships between and
among the input, process, and output. The input in this model includes organizational
variables like management and employees, financial resources, facilities and equipment,
infrastructures, and processes. The strategic management process consists of strategic
analysis, strategic decision-making, strategy formulation, strategy implementation, and
strategic control. When these specific processes are executed and managed creatively,
distinctly, and strategically, the organization can ultimately achieve organizational success.
In particular, the output are exhibited in the strategic intelligence acquired, strategic
thinking mode developed, organizational competitiveness, comparative advantage, and
strategic performance attained by the organization.
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Questions 1.2
1. What roles do organizational input play in the attainment of the success of
an organization? Identify each of these inputs.
2. When does an organization enjoy competitiveness? Explain by giving an
example.
3. What role does strategic control play in the strategic management of an
organization? Give examples.

Strategic Planning is defined as a continuous, repetitive, and competitive process

of setting the goals and objectives that an organization aims to attain, defining the means to
achieve them, and assessing the best way to realize them in the context of the prevailing
environment while measuring performance through set standards, and periodically but
continuously conducting reassessments.

Strategic management differs from strategic planning, in that the former is tackled
in the context of an academic environment where it is approached and treated theoretically
while the latter is the buzzword in the business world. Strategic management is the
springboard of strategic planning. Strategic management is a generic approach while
strategic planning is a distinct and focused approach that is unique to the specific
organization. Successful implementation of strategic planning is largely dependent on
responsibility, support, and sustained leadership coupled with acceptance and involvement
of employees. There should be synergistic interrelationships between departments and
intra-relationships within departments.

Types of Strategic Plans

There are two principal types of plans:
1. Medium/long-range plan- prepared in the context of the coming three to five, ten
or more years. It describes the major factors that affect the organization’s long-term
objectives, strategies, and resources required.
2. Annual/yearly plan- short-term; succinctly describes the organization’s present
situation, its goals and objectives, strategies, monitoring mechanism, and the budget
for the year ahead.

Whether the plan is long-range or annual, it can be strategic when the organization
formulates its action plans and takes advantage of opportunities in the constantly changing
environment while maintaining a tactical alignment between the organization’s goals,
capabilities, and opportunities.

Strengths and Limitations of Strategic Planning

Strengths:
1. It provides organizations the opportunity to assess the milieu and specify strategies
to achieve their goals.
2. It helps organizations to stay focused.
3. It makes things happen.
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4. It helps reduce the chances of committing mistakes.

5. It helps in the more efficient allocation of organizational resources, better
collaboration among cross-departmental employees and functional units, and
communication between managers/supervisors of all levels.
6. It provides leverage and competitive advantage to the organization.

Limitations:
1. Strategic plans prepared in some instances are good only “in paper.”
2. If followed religiously, some organizations may not be flexible enough to make the
needed adjustments and realignments due to inevitable or forthcoming external or
internal challenges.
3. It entails costs that can be expensive to organizations.

Questions 1.3
1. Why is there a need for strategic planning?
2. Discuss the strengths and limitations of strategic planning.

Organizational Vision
To help organizations achieve strategic direction, they need to articulate and have a
commonality in vision, mission, and goals. The interrelationships between and among these
three variables are essentials in the organizations’ thrust of achieving competitiveness.

The organizational vision is an inspirational statement of what the organization

hopes to achieve at some point in the future. It is the image of what an organization desires
to achieve. It is short and succinct, but it carries an extraordinary force that will stir,
motivate, and inspire employees to work and refocus toward its desired optimal future
state. Having a strong sense of vision can move the organization to be what it wants to be.
Like an unseen force, the organizational vision binds the company and its employees
together.

Mission Statement
The mission statement differs from the organizational vision. The mission statement
defines the current purpose of an organization; it answers what the organization does, for
whom it is done, and how it does what it does. Mission statements are likewise short and
easy to remember. It gives employees a better perspective on how their tasks contribute to
the attainment of organizational goals. Oftentimes, vision statements are more enduring
compared to mission statements. Mission statements are expected to change in the context
of shifting economic realities or unexpected circumstances like challenges, threats, and
even opportunities.

Organizational Goals and Objectives

To operationalize the mission statement, organizational goals and objectives are
defined. All organizations have set goals. These are referred to as organizational goals.
Organizational goals are pursued to make the specified strategies succeed. They vary and
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are essentially dependent on their respective purpose and direction. One of the implied
basic goals of any organization is to use economic resources efficiently and effectively
such that survival, if not profit, is at least secured, thus, ensuring the continuity of the
organization. Goals are macro, encompassing in perspective, and prospective in nature. In
fact, goals represent the overall vision of an organization. By their very nature, goals have
the following properties:
1. Goals provide organizations focus and direction.
2. Goals move organizations to action.
3. Goals develop in organizations the trait of persistence.

Nevertheless, for goals to be attained, they have to be supported by objectives.

Objectives are different from goals, in that they are micro and specific in perspective. They
should possess the following characteristics:
1. Objectives need to be clearly defined and formulated, carefully chosen, specific,
and definite.
2. It may be immediate or short-term.
3. They need to be prioritized into a hierarchy of objectives.
4. It needs to be realistic, attainable, flexible, consistent, and strategic.
5. It needs to be measurable over time.

According to Peter Drucker (2008), Objectives fall into Eight Major Classifications:
1. Market Standing (e.g., desired share of the current and new markets);
2. Innovation (e.g., development of new goods, services, and of skills and methods
required to supply them);
3. Human Resources (e.g., selection and development of employees);
4. Financial Resources (e.g., identification of sources of capital and their uses);
5. Physical Resources (e.g., equipment and facilities and their uses);
6. Productivity (e.g., efficient use of the resources relative to output);
7. Social Responsibility (e.g., awareness and responsiveness to the effects on the
community of the stakeholders); and
8. Profit Requirements (e.g., achievement of measurable financial well-being and
growth).

Values and Value System

Organizations are guided by values, which vary from one organization to another.
Values are inherent roots of motivation within an individual, an organization, a
community, or a nation. They are by nature, ingrained and thus, are more stable and
enduring. They are both intellectual and behavioral, serving as bases for the organization’s
actions and way of thinking.

Values are generally exhibited in two different ways, namely, beliefs and attitudes.
More particularly, beliefs are cognitive manifestations while attitudes are
characteristically behavioral. They are fundamental and intricately integrated in the
particular organization’s value system. Take note that the values projected by organizations
are largely dependent on any or all of the following: the stockholders, the Board of
Directors, and the top management.
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Figure 1.3 Value System of an Organization

Value System

Values Interests

Dreams and Leadership and

Aspirations Management
Styles

Philosophies
Ethical Practices

Expectations

Strictly speaking, the values of an organization are not synonymous to its value
system. The value system is characteristically broader in scope; aside from values, it
includes other variables such as the organization’s dreams, aspirations, interests,
expectations, philosophies, as well as leadership and management styles and ethical
practices. Moreover, the value system indicates the hierarchy of values ranked by
organizations. Because values are distinct, they differ from ne organization to another. This
explains why one organization may be perceived as socially and community-active, while
another is business-oriented. Hence, the importance of these value qualities and value
systems for organizations cannot be underestimated.

Organizational Climate and Culture

The concepts of organizational climate and culture are interrelated, interdependent,
and sequential. They are interrelated, in that organizational climate is often defined as the
regular and repetitive patterns of attitudes and behavior exhibited by employees of an
organization. It is a measure of the health of an organization. It manifests whether its
employees are happy, hardworking, and motivated, or otherwise; whether good
interpersonal relationships exist between and among different levels of management; and
whether the work environment is acceptable and conducive to productivity. Organizational
climate is easier to assess and change. It lends to flexibility. It precedes and somehow
contributes to the solidification of the culture of an organization.

On the other hand, organizational culture denotes a wide range of social

phenomena, including an organization’s customary dress, language, behavior, beliefs,
values, symbols of status and authority, myths, ceremonies and rituals. And modes of
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deference and subversion; all of which help to define an organization’s character and
norms (Scott et. al. 2003). Culture, in the sense that it is used here, can be understood as an
idealized system (Schein 1999) because a system focuses on types of meanings represented
by values, formal rules, knowledge, beliefs, and expressive forms (Pettigrew 1990; Parker
1992; Patrick 2010).

Questions 1.4
1. Define organizational vision by using an example.
2. Why is the mission statement important to an organization?
3. Are organizational goals and objectives similar? In what way/s are they
different?
4. What values/value system do you want an organization to demonstrate?
Explain your answer.
5. Differentiate organizational climate from organizational culture.

1.2 CHALLENGES IN THE EXTERNAL ENVIRONMENT

Scanning the Environment

Organizations exist to survive. Given their vision and mission statements
and set goals and objectives, it is for organizations to conduct themselves clearly,
deliberately, and strategically. To achieve this, organizations should develop
“organizational intelligence”. Organizational intelligence refers to the expertise,
insight, and wisdom possessed by an entity. It serves as a valuable guide to its
journey to becoming competitive. Thus, organizations need to possess this
capability to be able to accurately audit the environment and come up with creative
and cutting-edge strategies.

Environmental scanning is the study and interpretation of the forces

existing in the external and internal environments. The external environment
includes social, economic, political, technological, and environmental forces that
may influence an organization, an industry, or any entity. The competitive
environment covers competitors, suppliers, customers, stakeholders, culture, and
the government. Environmental scanning is carefully monitoring the surroundings
with the end goal of ascertaining early indications of prospects and challenges that
may influence the organization’s present and future plans.

Conducting environmental scanning is both easy and difficult. For informal

scanning, experience and expertise will help make the process effortless and
straightforward. The competencies, skills, and intelligence of the individual will
allow for easy scanning of the environment. On the other hand, environmental
scanning can be demanding, in that there is a need for comprehensive, as well as
accurate information. It will be mostly dependent on the following: (1) the speed of
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the organization to conduct scanning; (2) the presence and availability of complete
information; and (3) the physical and financial capability to do so.

Strategic information consists of the facts and data used by organizations to assist
them in achieving their vision, mission, and goals. Strategic information can be drawn from
both external and competitive environments. Both external and internal environments
symbiotically interplay and directly or indirectly affect organizations. Information is either
primary or secondary. Primary data are gathered through personal experience, observation,
and experimentation while secondary information are data collected from reports, Internet
sources, and other published materials.

Modes of Environmental Scanning

Scanning the environment involves two processes. The first one is looking at or
simply viewing information, and the second one is looking for or searching for information.
According to Aguilar (1967), there are four ways of environmental scanning, namely:
1. Undirected viewing. The individual is exposed to information with no specific
informational need in mind. It is a significant mode of feeling the environment
as this increases awareness in the organization to undertake needed proactive
strategic moves.
2. Conditioned viewing. The individual directs viewing of information to
specified facts and data to be able to assess their general impact on the
organization. It is not an active search but a mere viewing of information.
3. Informal search. The individual actively looks for information to increase
knowledge of a particular issue. It essentially involves a relatively unstructured
effort where the objective is to gather information to expound on the issue, thus,
determining whether a strategic move is needed by the organization.
4. Formal search. The effort exerted by the individual is deliberate and planned.
The search is both focused and structured and the research methodology is
clearly enumerated and followed. These search approaches can include industry
analysis, market studies, and competitor and customer analyses, among others.
Appreciably, results of the formal search normally provide organizations bases
for decision-making and courses of action.

The SWOT Matrix Analysis

The SWOT matrix is a structured assessment tool used to evaluate an organization,
industry, a place or even a person in terms of set parameters like strengths, weaknesses,
opportunities, and threats. Credited to Albert Humphrey in 1960, the SWOT matrix
classifies strengths and weaknesses as internal dynamics characterizing an organization and
threats and opportunities as external influences to the organization. Specifically:
 Strengths are features that organizations possess, thus, giving it significant
advantage over other.
 Weaknesses are characteristics that place organizations at a disadvantage relative to
others, and may just be limitations or vulnerabilities of organizations.
 Opportunities are possibilities in the external environment that organizations can
exploit to their advantage.
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 Threats are challenges in the external environment that can cause problems to
organizations.

Table 1. SWOT Analysis Matrix

Strengths (Internal) Weaknesses (Internal)

Strengths/Opportunities Weaknesses/Opportunities
* Obvious natural priorities * Potentially attractive options

* Likely to produce greater ROI * Likely to produce good returns if

(Return on Investment) capability and implementation
are viable
Opportunities * Likely to be quickest and
(External) easiest to implement * Potentially more exciting,
stimulating and rewarding than
* Probably justifying S/O due to change, challenge,
immediate surprise tactics and benefits from
action planning, feasibility addressing and achieving
study, or business plan improvements

Strengths/Threats Weaknesses/Threats
* easy to defend and counter * Potentially high risk

* only basic awareness, * Assessment of risks is crucial

planning, and implementation
Threats are required to meet these * When risk is low, ignore these
(External) challenges issues and do not be distracted
by them
* Investment in these issues is
generally safe and necessary * When risk is high, assess
capability gaps and plan to
* Primary Question: “Are we defend or avert in specific
properly informed and controlled ways
organized to deal with these
issues and are we certain * Primary Question: “Have we
there accurately assessed the risks of
are no hidden surprises?” and these issues and when risks are
“Since we are strong here, high, do we have specific
can controlled reliable plans to
any of these threats be turned avoid/avert/defend?”
into opportunities?”

The External Environment

The external environment today is highly complex. Specifically, the eternal
environment presents varying forces that influence organizational direction and strategic
decision-making. These forces are social, political, technological, economic,
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environmental, and legal in perspective. The confluence of these forces can present
themselves as threats and challenges to organizations. On the other hand, they could
provide valuable opportunities. The analysis of the external environment is referred to as
PEEST (Political, Economic, Environmental, Social, and Technological) Analysis.

Political Forces
There are crucial concerns confronting nations today. Geopolitical issues have become the
focus of major political powers. Some of these issues are political independence,
changing governments, balance of power, terrorism, suicide bombings, global
alliances, and chemical and nuclear warfare. These critical problems are affecting the
global political balance.

Economic Forces
Economic realities have concomitantly come to the forefront. Economic issues greatly
affect the growth and development of a nation. Nations are strategizing to maintain a
continuum of financial stability. Most often, trade and investments are transacted to ensure
monetary security. Economic realities include globalization of products and services, the
presence of aggressive competitors and suppliers, the fall of large and “supposedly”
financially stable organizations, increasing oil prices, economic trade agreements, the
emergence of new markets, and the rise of China as a major economic player in the
world.

Environmental Forces
Environmental responsibility is the urgent call of the global neighborhood. Ecological
damage is happening everywhere. There seems to be an utter disregard or seeming
indifference about the environment. Environmentally, no country can claim complete
isolation. The safety and survival of one should be the concern of others. After all, nations
share water boundaries.
Factors in the Environmental Forces:
 Climate change/use of biodegradable
 Environmental waste management
 Preservation of rainforests and marine life

Social Forces
Social forces refer to important issues that are characteristic of global and local societies.
Society consists of individuals, families, and communities, including their beliefs,
aspirations, traditions, and practices. Significant societal factors in the environment create
varying impacts on organizations. Some of the more critical social concerns today are
changing social structures; the world’s aging population (aging population), the great
demand for health services, the evolving sophistication in the lifestyles of people
(sophisticated lifestyles of people), and the cross-cultural implications of mobility of
peoples including migration (cross-cultural diversity), among others.

Technological Forces
We live in a digital world. Another important catalyst of competition is technology.
In the 1980’s, information technology began its journey toward radical communication and
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technology growth. Significant changes happening in the world today have been the result
of rapid developments in information technology. These technological advances are
observed in the fields of communication (Communication technology), business
(Computer-integrated Business), banking (E-banking), education (E-learning),
medicine (Digital Medicine), security (E-security), and in all facets of everyday living.

1.3 CHALLENGES IN THE INTERNAL ENVIRONMENT

While the external environment plays an essential role in the survival and
competitiveness of an organization, the internal environment presents a more direct impact
on how organizations should conduct themselves toward success.

The Internal Environment

The internal environment (local milieu) is the setting in which an organization
locally exists. These areas are government, culture, the stakeholders, competitors,
suppliers, customers, and the community.

Government: The Business Caretaker

The government is the sole legitimate institution tasked with overseeing
organizational operations in the country. In implementing these administrative functions
and responsibilities, the government undertakes the following:
1. Provide the needed infrastructure.
2. Creates an atmosphere of fair and robust competition among industry and
company players, monitors and regulates monopolies and oligopolies, and
eliminates unfair and illegitimate practices.
3. Formulates business policies, implements business operating guidelines, and
regulates the conduct of business activities such as payment of taxes, health and
safety practices in food, manufacturing, construction, and other service
industries, ensures quality of products and services, and mandates minimum
wages of employees, and their fair and just treatment.

Culture: A communal Convergence

A nation’s culture is the communal aggregation and convergence of the country’s
philosophy, beliefs, traditions, values, attitudes, aspirations, and practices that have
historically evolved since a nation’s inception. Through many years of national growth and
development, this culture has been shaped by environmental variables happening within
and outside the country and until today, continues to change, mature, and transform. Worth
mentioning are the following:
1. The trait of hospitality
2. The practice of bayanihan
3. Family-centeredness (Filipinos generally take care of their parents, old
relatives, and siblings)
4. Pakikisama and utang na loob
5. The habits of ningas kugon, mañana, and ‘Filipino time’
6. The attitudes of crab mentality and bahala na
7. The virtue of resiliency
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8. The idea of kanya-kanya

9. The consciousness of being politically involved
One can see that culture plays an important role in the growth of any country.

Stakeholders: The Business Investors

Organizations exist because there are individuals who are willing to take risks,
invest their capital, and engage in business activities in exchange for a return. This return
on their investments is profit. Stakeholders are business investors. Some are actively
involved in the conduct of their business while others prefer to be silent investors.
Stakeholders are assets to the country. They provide opportunities for exchange of products
and services. They initiate business operations and compete among themselves. These are
individuals or entities that stand to benefit from the investments of the owners. They are the
employees, the government, and the community.

Competitors: The Business Treats

Competition is an economic scenario where nations, communities, organizations,
companies and individuals offer and sell their products and services. Competitors
continuously strive to outplay and outsmart each other, hoping to get a large share of the
target market. They fall in different categories:
1. Same products. They are companies who sell exactly the same products or
offer the same services.
2. Similar products. They are companies who sell similar products. Tea and
coffee are similar products.
3. Substitute products. Some companies sell substitute products.
4. Different products. Still, there are companies who sell different products but
market to the same market segments.

Competitors also differ with respect to the strategies they adopt:

1. Complementary competition
2. Collaborative competition
3. Corrupted competition

How can a company then know who its competitors are?

1. Determine similarity in characteristics
2. Study consumers
3. Research company data
4. Consider corporate success

Customers: The Business Challenge

Competitors continuously compete to capture a bigger share of the market.
Customers make the market. They are the very reason why companies pursue new product
developments and differentiate their existing products and services. Customers are the
focus of companies’ business plans and programs and the thrust of their strategies. Without
consumers, companies have no reason to exist. Because of the changing needs, wants,
demands, and sophisticated lifestyles of consumers, there is an exigent need to employ
various approaches to ensure their patronage and loyalty. Consumer behavior is a
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marketing reality that is difficult to discern, understand, and study with definiteness. The
following facts on customer approval, customer patronage and customer loyalty can help
address this “uncertainty.”

At the very least, any product or service should provide customer satisfaction. In
other words, any product must fulfill its intended use, and that is to attract customers and
gain customer approval. For example, a shampoo should be able to clean the hair. It should
satisfy the minimum requirement of cleanliness.

However, customer satisfaction is not enough. More than this, emphasis is now on
customer delight, a condition where customers become excited over the products or
services offered. Customer delight may come from experiencing quality service, product
excellence, product versatility, or any attribute that will greatly gratify and create a distinct
impact on them. Attaining this level will assure customer patronage. In other words, aside
from cleaning the hair, a shampoo can delight its customers with other added attributes like
fragrance, smoothness, and softness.

The last level of change in customer behavior is customer intimacy. Customer

intimacy refers to the relationship between the company and the customers. This is best
described as warm, complimentary, supportive, and “businessly” personal. Customer
intimacy is manifested in varied forms like sending birthday cakes, cards or sharing one’s
expertise with a “customer” who is in bad financial shape. In addition to being pleased
about the product, customers continue supporting the product. Customer intimacy seals
customer patronage or better referred to as customer loyalty.

Suppliers: The Business Partners

In an environment characterized by cut-throat competition, businesses have to
produce quality products. This degree of quality is greatly dependent on a number of
variables, one of which is the supplier component. Doing business involves supplier-
customer relationship. By definition, suppliers refer to individuals and companies engaged
in the delivery of raw materials, machinery, technology, labor, expertise, skills, and other
forms of services. They are essentially business partners. Without them, certain products
cannot be produced and some services cannot be rendered. The supplier component is
important for the following reasons:
1. It is responsible for the quality of the products produced and the services rendered.
2. It affects continuity in operational processes (e.g., production, scheduling, and
delivery).

Community: The Business Concern

The community is the intermixture of peoples coming from all walks of life with
different “provincial or city cultures,” different values, attitudes, aspirations, traditional
beliefs, standards of living, family backgrounds, religions, and educational attainments. It
is essentially heterogeneous but characteristically homogeneous in its end goal of attaining
quality life. As such, the community, in principle, is the rationale of the “business
framework.” It is the very reason why stakeholders invest their capital and venture into
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business. It provides opportunities for businesses to thrive. It is “customers, suppliers, and

competitors” all bundled as one. It is the primary concern of the government.
Porter’s Five Forces Model
Organizations, particularly businesses, are the lifeblood of any nation. They sustain
the continued existence and staying power of countries. As drivers of survival, growth, and
development, businesses create and energize the pulse of selling, producing, venturing, and
transacting activities. Companies, corporation, conglomerates, partnerships, transnational,
multinationals, enterprises, firms, and organizations are entities engaged in trade and
commerce. As players in any economy, they are essentially competitors. Call them by any
term, competition is the name of the game.

Figure 1.4 Porter’s Five Forces Model

Bargaining Power of
Customers

Threats of Substitute Competitive Rivalry Threats of New

Products within the Industry Entrants

Bargaining Power of
Suppliers

One of the more popular ways of strategizing an organization to attain profitability

and market share is to scan the competitive environment. The competitive environment is
best described and illustrated by Michael Porter’s Five Forces Model of Industry
Competition. An aerospace and mechanical engineer, Porter pursued his doctorate degree
in Industrial economics. He was a professor at the Harvard Business School. His book
Competitive Strategy (1980), enumerated five forces that determine the intensity,
profitability, and attractiveness of an industry: (1) bargaining power of suppliers; (2) the
bargaining power of buyers/customers; (3) ease of entry of new firms; (4) availability of
substitute products; and (5) rivalry among existing firms within the industry. Porter
enumerated three fundamental generic strategies: (1) cost leadership, which can be
achieved by exploiting economies of scale; (2) optimizing the learning curve; and (3)
stressing on operational excellence. Furthermore, differentiation can be portrayed through
product and service leadership and customer intimacy. Lastly, focus can be demonstrated
by segmentation.
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Questions 1.5
1. Why should organizations possess “organizational intelligence?”
2. How will you define environmental scanning? Explain why conducting
environmental scanning is important.
3. What is SWOT Matrix Analysis? Explain its relevance to organizations.
4. What is the external environment? What are the forces interplaying in the
external environment?
5. Why is there a need for the government to regulate business activities?
Explain your answer.
6. Why is the mañana habit a bad Filipino practice?
7. Explain Michael Porter’s Five Forces Model of Industry Competition and
discuss one by one when is each of these five forces high and proposed
ways of reducing these situations.

VII. ASSESSMENT :
Assignment/Outputs - 20
Quizzes - 20
Periodic Exam - 60
Total - 100%

VIII. REFERENCES :
David, Fred R. c2000. Strategic Management: Concepts & Cases, 7th
Ed. Singapore: Pearson Education Asia Pte Ltd.

Dessler, Gary, c2001. Management: Leading People and Organizations in the 21st
Century.Singapore: Pearson Education Asia Pte Ltd.

Young, Felina C. c2015. Strategic Management Made Simple, 2015 Ed. Manila:
Rex Book Store.