CBME 2 – STRATEGIC MANAGEMENT STRATEGY VS OBJECTIVE: KEY DIFFERENCES

CHAPTER – 1 UNDERSTANDING STRATEGY

Strategy is an action that managers take to attain one

or more of the organization’s goals. Strategy can also be
defined as “A general direction set for the company and
its various components to achieve a desired state in the
future. Strategy results from the detailed strategic
planning process”.
THE DIFFERENT VIEWS/APPROACHES OF STRATEGY
▪ Strategy describes the goal-directed actions a firm
• Competitive Positioner
intends to take in its quest to gain and sustain
competitive advantage. • Visionary Transformer
▪ The firm that possesses competitive advantage • Self-Organizer
provides superior value to customers at a competitive • Classical Administrator
price. • Design Planner
▪ Profitability and market share are the consequences of • Role Player
superior value creation. • Turnaround Strategist
In developing strategy, it was essential to systematically Choosing the right approach involves:
anticipate future environmental challenges to an
❑ Gathering the right information;
organization, and draw up appropriate strategic plans
❑ Developing market awareness;
for responding to these challenges. —Igor Ansoff
(Father of Strategic Management) ❑ Deciding what action needs to be taken;
❑ Assessing risk;
BASIC CONCEPTS OF STRATEGY ❑ Thinking critically;
Strategy is the quest to gain and sustain competitive ❑ Taking into account of unexpected.
advantage. “Strategy is choosing what not to do.”-Michael Porter

➢ It is the managers’ theories about how to gain and CHAPTER 2 – THE NATURE OF STRATEGIC
sustain competitive advantage. MANAGEMENT
➢ It is about being different from your rivals. Strategic management is both an art and science of
➢ It is about creating value while containing cost. formulating, implementing, and evaluating, cross-
➢ It is deciding what to do, and what not to do. functional decisions that facilitate an organization to
➢ It combines a set of activities to stake out a unique accomplish its objectives.
position.
- Is the ongoing planning, monitoring, analysis and
➢ It requires long-term commitments that are not assessment of all necessities an organization needs to
easily reversible. meet its goals and objectives.
STRATEGY vs OBJECTIVE
Purpose: To use and create new and different
STRATEGY
opportunities for future.
✓ overarching approach taken to meet or exceed goal strategic plan is a company’s game plan
✓ actions taken must relate to the original goal set by
management BENEFITS OF STRATEGIC MANAGEMENT
OBJECTIVE ✓ Competitive Advantage – Anything that a firm does
➢ a measurable action taken to execute the strategy especially well compared to rival firms.
agreed on by management and the rest of the ✓ Achieving Goals – Helps keep goals achievable by
organization using a clear and dynamic process for formulating steps
and implementation.
➢ follows the paradigm of the SMART formula ✓ Sustainable Growth – Lead to more efficient
organizational performance, which leads to manageable
growth.
✓ Cohesive Organization – Necessitates communication
and goal implementation company-wide.
✓ Increased Managerial Awareness – Strategic
management means looking toward the company’s
future.
Basic Strategic Management Concepts

Mission Statement - identifies the scope of a firm’s

operations in product and market terms.
Vision Statement – Answers the question “what do we
want to become” - Where it wants to be in the future
Values – that will guide its action
Process – requires a commitment to strategic planning
Strategic Planning – Includes the planning of strategic ❑ Innovation process
decisions, activities and resource allocation needed to ❑ Operations process
achieve those goals. ❑ Post-sales process
Strategic Management can be: d. Learning and Growth (infrastructure) Perspectives
Prescriptive Strategic Management – means ● The source of the capabilities that enable the
developing strategies in advance of an organizational accomplishment of the other three
issue. perspectives.
Descriptive Strategic Management – means putting ● It has three major objectives:
strategies into practice when needed - increase employee capabilities
Types of Strategic Management -increase motivation
-empowerment and alignment
● SWOT ANALYSIS – Is a comprehensive evaluation of -increase information systems capabilities
all the strengths, weaknesses, opportunities, and
threats of the strategy you compose. Basic Principles that can Help Strategic Management to
be Successful
✓ Creating a unique strategic position for the
proposition
✓ Consider the availability or potential availability of
resources
✓ Understand the importance of Values and
● Balanced Scorecard – Is a strategic management incentives
system that translate the vision and strategy of an ✓ Gain’s people emotional commitment to the
organization into operational objectives and measures. strategy
✓ Be open to strategic ideas whenever they
originate
✓ Keep the strategy flexible

CHAPTER 3 – THE STRATEGIC MANAGEMENT PROCESS

Strategic Management Process – describes its methods
by which managers conceived of and implement a
strategy that can lead to a sustainable
competitive advantage.

Managers ask the following questions:

• What do we want to accomplish
ultimately? What is our vision?
• What are we about? What is our mission?
• How do we accomplish our goals? What are our
values?
VISION
THE FOUR PERSPECTIVES AND PERFORMANCE A vision statement provides the direction and describes
MEASURES what the founder wants the organization to achieve in
the future; it’s more about the “what” of a business. It
a. The Financial Perspectives is different from a mission statement, which describes
the purpose of an organization and more about the
● Establishes long and short-term financial performance “how” of a business.
objectives
● Concerned with the global financial consequences
Importance of a Vision Statement
● Has three strategic themes:
1. A vision statement should answer the basic question,
-revenue growth
“What do we want to become?”
- cost reduction
• A clear vision provides the foundation for
- asset utilization developing a comprehensive mission
b. Customer Perspectives statement.
● Source of the revenue component for the 2. Many organizations have both a vision and a mission
statement, but the vision
financial objectives
statement should be established first and foremost.
● Defines and selects the customers and market
• The vision statement should be short,
segment in which the company chooses to preferably one sentence, and as many
compete managers as possible should have input into
c. Process Perspectives developing the statement.
● Entails the identification of the processes MISSION STATEMENT
needed to achieve the customer and financial • Distinguishes one firm from another
objectives. • Declares the firm’s reason for being
Process Value Chain is made up of three processes: • Reveal what an organization wants to be
and whom it wants to serve
 • Essential for effectively establishing objectives STEPS IN THE STRATEGIC MANAGEMENT PROCESS
and formulating strategies
• Also referred to as:
1. Creed statement
2. Statement of purpose
3. Statement of philosophy
4. Statement of business principles

Mission Statement Components

• Customers: Who are the firm’s customers?
What is strategy formulation?
• Products or services: What are the firm’s major
products or services? • includes developing a vision and mission
• Markets: Geographically, where does the firm • identifying an organization's
compete? external opportunities and threats,
• Technology: Is the firm technologically current? • determining internal strengths and weaknesses,
• Concern for survival, growth, and profitability: Is • establishing long-term objectives,
the firm committed to growth and financial • creating alternative strategies, and
soundness? • choosing particular strategies to pursue.
• Philosophy: What are the basic
beliefs, values, aspirations, and ethical priorities
of the firm? Strategy Formulation
• Self-concept: What is the firm’s distinctive • Deciding what new businesses to enter
competence or major competitive advantage? • What businesses to abandon
• Concern for public image: Is the firm resp • How to allocate resources
onsive to social, community, and • Whether to expand operations or diversif
environmental concerns? • Whether to enter international markets
• Concern for employees: Are employees a • Whether to merge or form a joint venture
valuable asset of the firm?
• How to avoid a hostile takeover
ROLES PLAYED BY MISSION AND VISION Strategy Implementation
Mission and vision statements play three critical roles: • requires a firm to establish annual objectives,
(1) communicate the purpose of the organization devise policies, motivate employees,
to stakeholders, and allocate resources so that formulated
(2) inform strategy development, and strategies can be implemented
(3) develop the measurable goals and objectives • developing a strategy-supportive culture,
by which to gauge the success of the • creating an effective organizational structure,
organization’s strategy.
• redirecting marketing efforts,
• preparing budgets,
Key Roles of Vision and Mission
• developing and utilizing
information systems, and
• relating employee reward to
organizational performance.
• Often called the action stage

Strategy Evaluation
Three fundamental strategy-evaluation activities are:
Living the Ethical Values 1) Reviewing external and internal factors that
• Organizational Values are the ethical standards are the bases for current strategies
and norms that govern the behavior of 2) Measuring performance
individuals within a firm or organization and 3) Taking corrective actions
within society. Integrating Intuition and Analysis
• Strong ethical values have two important • Most organizations can benefit gtom strategic
functions: management, which is based upon integrating i
➢ They form a solid foundation on which a ntution and analysis in decision making
firm can build its mission and long-term • Intuition is particularly useful for making decisio
success. ns in situations of great uncertainty or little prec
➢ They serve as the guardrails put in place edeent
so the company can stay on track when
pursuing its quest for competitive Adapting to Change
advantage. • The second largest bookstore chain in the
United States, Borders Group, declared
bankruptcy in 2011 as the firm had not adapted
well to changes in book retailing from
traditional bookstore shopping to customers
buying online, preferring digital books to hard
copies.
 • Borders was on the brink of financial collapse  Overconfidence
before being acquired in July 2011 by Direct  Prior bad experience
Brands  Self-interest
 Fear of the unknown
KEY TERMS IN STRATEGIC MANAGEMENT  Honest difference of opinion
Competitive Advantage – anything that a firm does  Suspicion
especially well compared to rival firms.
Strategists – help an organization gather, analyze, and CHAPTER 4-5 – THE EXTERNAL ASSESSMENT
organize information
Vision Statement – “what do we want to become?” ➢ An external audit focuses on identifying and
Mission Statement – “What is our business?”. evaluating trends and events beyond the
External Opportunities and Threats – are factors which control of a single firm.
could harm or benefit the organization in the future ➢ An external audit reveals key opportunities and
threats confronting an organization so that
managers can formulate strategies to take
advantage of the opportunities and avoid or
reduce the impact of threats.

NATURE OF EXTERNAL AUDITS

➢ The purpose of an external audit is to develop a

finite list of opportunities that could benefit a
Internal Strengths and Weaknesses – Controllable firm and threats that should be avoided.
activities that are performed especially well or poorly. ➢ As the term finite suggests, the external audit is
Long-term Objectives – essential for organizational not aimed at developing an exhaustive list of
success every possible factor that could influence the
Strategies – are the means by which long term business
objectives will be achieved. ➢ It is aimed at identifying key variables that offer
Annual Objectives - are short term milestones that actionable responses.
organizations must achieve to reach long term ➢ Firms should be able to respond to the factors
objectives. by formulating strategies that take advantage of
Policies - are the means by which annual objectives will external opportunities or that minimize the
be achieved. impact of potential threats.

Levels of Strategies KEY EXTERNAL FORCES

• Corporate Strategy
• Business Strategy 1. ECONOMIC FORCES
• Functional strategy 2. SOCIAL, CULTURAL, DEMOGRAPHIC, AND
• Operational Strategy NATURAL ENVIRONMENT FORCES
3. POLITICAL, GOVERNMENTAL, AND LEGAL
Benefits of Strategic Management FORCES
➢ Nonfinancial Benefits 4. TECHNOLOGICAL FORCES
• Enhanced awareness of threats 5. COMPETITIVE FORCES
• Improved understanding of competitors’
strategies The pestel model
• Increased employee productivity Political (p) -The political environment describes the
• Reduced resistance to change processes and actions of government bodies that can
• Clearer understanding of performance-reward influence the decision and behavior of firms.
relationship
• Enhanced problem-prevention capabilities Economic (e) The economic factor in the external
environment are largely macroeconomic, affecting
economy wide phenomena.

Sociocultural (s) Sociocultural factors capture a

society’s cultures, norms, and values. Demographic
trends are also important sociocultural forces.

Technological (t) Technological factors capture the

application of knowledge to create new processes and
products.
WHY SOME FIRMS DO NO STRATEGIC PLANNING
 Lack of knowledge of strategic planning
Ecological factors (e) Ecological factors concern broad
 Poor reward structures
environmental issues such as the natural environment,
 Fire fighting
global warming, and sustainable economic growth.
 Waste of time
Three dimensions - economic, social, and ecological-
 Too expensive make up the triple bottom line. Using triple bottom line
 Laziness approach, managers audit their company’s fulfillment of
 Content with success its social and ecological obligations to stakeholders.
 Fear of failure
Legal factors (l) The legal environment captures the • Changes in patents, laws, antitrust legislation,
official outcomes of the political processes as tax rates, and lobbying activities can affect firms
manifested in laws, mandates regulations, and court significantly.
decisions.
• The increasing global interdependence among
economies, markets, governments, and
ECONOMIC FORCES
organizations makes it imperative that firms
Five macroeconomic factors
consider the possible impact of political
➢ Growth rates
variables on the formulation and
➢ Interest rates
implementation of competitive strategies.
➢ Levels of employment
SOME POLITICAL, GOVERNMENTAL, AND LEGAL
➢ Price stability (inflation and deflation)
VARIABLES
➢ Currency exchange rate
• GOVERNMENTAL REGULATIONS OR
❑An economic variable of significant importance in
DEREGULATIONS
strategic planning is Gross Domestic Product (GDP),
• CHANGES IN TAX LAWS
especially across countries.
• SPECIAL TARIFFS
Trends in the dollar’s value have significant and unequal
• NUMBER OF PATENTS
effects on companies in different countries and in
• CHANGES IN PATENT LAWS
different locations
• ENVIRONMENTAL PROTECTION LAWS
• For example, the pharmaceutical, tourism,
• LEGISLATIONS ON EQUAL EMPLOYMENT
entertainment, motor vehicle, aerospace, and
forest products industries benefit greatly when • POLITICAL CONDITIONS IN FOREIGN
the dollar falls against the yen and euro. COUNTRIES
• Agricultural and petroleum industries are hurt • LOBBYING ACTIVITIES
by the dollar’s rise against the currencies of ➢ This trend reflects the growing importance of
Mexico, Brazil, Venezuela, and Australia. information technology (IT) in strategic management.
• When the value of dollar falls, tourism-oriented ➢ A CIO and CTO work together to ensure that
firms benefits because Americans do not travel information needed to formulate, implement, and
abroad as much when the value of the dollar is evaluate strategies is available where and when it is
low; rather, foreigners visit and vacation more needed.
in the United States. ➢ These individuals are responsible for developing,
SOCIAL, CULTURAL, DEMOGRAPHIC, AND NATURAL maintaining, and updating a company's information
ENVIRONMENT FORCES database.
➢ Social, cultural, demographic, and TECHNOLOGICAL FORCES
environmental changes have a major impact on ➢ Revolutionary technological changes and discoveries
virtually all products, services, markets, and are having a dramatic impact on organizations.
customers. ➢ The Internet has changed the nature of opportunities
➢ Small, large, for-profit, and non-profit and threats by altering the life cycles of products,
organizations in all industries are being increasing the speed of distribution, creating new
staggered and challenged by the opportunities products and services.
and threats arising from changes in social, ➢ To effectively capitalize on e-commerce, a number of
cultural, demographic, and environmental organizations are establishing two new positions in their
variables. firms: Chief Information Officer (CIO) and Chief
KEY SOCIAL, CULTURAL, DEMOGRAPHIC, AND Technology Officer (CTO).
NATURAL ENVIRONMENT VARIABLES EXAMPLES OF THE IMPACT OF WIRELESS TECHNOLOGY
✓Number of marriages 1. Airlines – Many airlines now offer wireless technology
✓Number of divorces in flight.
✓Number of births 2. Automotive – Vehicles are becoming wireless.
POLITICAL, GOVERNMENTAL, AND LEGAL FORCES 3. Banking – Visa sends text message alerts after
• Federal, state, local, and foreign governments unusual transactions.
are major regulators, deregulators, subsidizers, 4. Education – Many secondary (and even college)
employers, and customers of organizations. students may use smart phones for math because
• Political, governmental, and legal factors, research shows this to be greatly helpful.
therefore, can represent key opportunities and 5. Health Care – Patients use mobile devices to monitor
threats for both small and large organizations. their own health, such as calories consumed.
• For industries and firms that depend heavily on 6. Politics – President Obama won the election partly by
government contracts or subsidies, political mobilizing Facebook and Myspace users, revolutionizing
forecasts can be the most important part of an political campaigns. Obama announced his vice
external audit. presidential selection of Joe Biden by a text message.
7. Publishing – e-books are increasingly available.
COMPETITIVE FORCES AND FIRM’S STRATEGY: THE demanding higher prices or delivering lower-quality
FIVE FORCES MODEL products.
❖Collecting and evaluating information on competitors o Supplier power is enhanced when the supplied
is essential for successful strategy formulation. product is unique and differentiated.
❖Identifying major competitors is not always easy THE POWER OF BUYERS
because many firms have divisions that compete in o The bargaining power of buyers concerns the pressure
different industries. buyers can put on the margins of producers in the
❖Many multidivisional firms do not provide sales and industry.
profit information on a divisional basis for competitive o Backward integration occurs when a buyer moves
reasons. upstream in the industry value chain, into the seller’s
THE NATURE OF COMPETITION business.
o Power of buyers is HIGH when:
❖Competitiveness is closely linked with customer focus.
- There are a few large buyers.
❖A business must be competitive because this enables
- Each buyer purchases large quantities relative to the
it to undertake activities central to its strategy.
size of a single seller.
They include:
- The industry’s products are standardized or
➢Developing customer loyalty
undifferentiated commodities.
➢Increasing sales to existing customers - Buyer’s face little or no switching costs.
➢Enhancing the strength and value of its brand - Buyer’s can credibly threaten to backward-integrate
➢Developing new product and product extensions into the industry.
➢Increasing market effectiveness THREATS OF SUBSTITUTES
o The threat of substitutes is the data that products or
services available from outside the given industry will
come close to meeting the needs of current customers.
o Threat of substitute is huge WHEN:
- The substitute offers an attractive price-performance
trade-off.
- The buyer’s cost of switching to the substitute is low.
RIVALRY AMONG EXISTING COMPETITORS
o The rivalry among existing competitors is HIGH when:
- There are many competitors in the industry.
- The competitors are roughly of equal size.
- Industry growth is slow, zero, or even negative.
FIVE FORCES AFFECTING COMPETITION IN AN INDUSTRY - Exit barriers are high.
1. Threat of entry - Products and services are direct substitutes.
2. Power of suppliers The strategic role of components: Adding a sixth force
3. Power of buyers ❑ A complement is a product, service or competency
4. Threats of substitutes that adds value to the original product offering
5. Rivalry among existing competitors when the two are used in tandem.
▪ Developed by Michael Porter ❑ A company is a complementor to your company if
▪ Poster’s model aims to enable managers not only to customers value your product or service offering
understand their industry environment but also to more when they are able to combine it with the
shape their firm’s strategy. other company’s product or service.
▪ As a rule of thumb, the stronger the five forces, the External Factor Evaluation (EFE) Matrix is a strategy
lower the industry’s potential-making the industry less tool used to examine company’s external environment
attractive to competitors. and to identify the available opportunities and threats.
▪ The weaker the five forces, the greater the industry’s 1. Key External Factors – When using the EFE matrix we
profit potential making the industry more attractive. identify the key external opportunities and threats that
THREAT OF ENTRY are affecting or might affect a company. By analyzing
o Entry barriers are obstacles that determine how the external environment with the tools like PESTLE
easily a firm can enter an industry. analysis, Porter’s Five Forces or Profile Matrix, the key
o Threats of entry is High when: external factors can be identified. The general rule is to
- Customer switching costs are low identify as many key external and internal factors as
- Capital requirements are low possible.
-Incumbents do not posses: Proprietary technology and 2. Weights – Each key factor should be assigned a
established brand equity weight ranging from 0.0 (low importance) to 1.0 (high
o New entrants expect that incumbent will not or importance). The number indicates how important the
cannot retaliate. factor is if a company wants to succeed in an industry. If
THE POWER OF SUPPLIERS there were no weights assigned, all the factors would be
o Powerful suppliers can raise the cost of production by equally important, which is an impossible scenario in
the real world. The sum of all the weights must equal
1.0. Separate factors should not be given too much
emphasis (assigning a weight of 0.30 or more) because
the success in an industry is rarely determined by
one or few factors.
3. Ratings – The ratings in external matrix refer to how
effectively company’s current strategy responds to the
opportunities and threats. The numbers range from 4 to
1, where 4 means a superior response, 3 –above
average response, 2 – average response and 1 – poor ASSESSMENT OF THE FIRMS RESOURCES
response. Ratings, as well as weights, are assigned Resources – are assets such as cash, buildings, or
subjectively to each factor. In our example, we can see intellectual property that a company can draw on when
that the company’s response to the opportunities is crafting and executing a strategy.
rather poor, because only one opportunity has received Resources can either be:
a rating of 3, while the rest have received the rating of • Tangible Resources
1. The company is better prepared to meet the threats, • Intangible Resources
especially the first threat. Capabilities – are the organizational and managerial
4. Weighted Score – The score is the result of weight skills necessary to orchestrate a diverse set of resources
multiplied by rating. Each key factor must receive a and to deploy them strategically.
score. Total weighted score is simply the sum of all Activities – enable firms to add value by transforming
individual weighted scores. The firm can receive the inputs into goods or services.
same total score from 1 to 4 in both matrices. The total Core Competencies – are unique strengths, embedded
score of 2.5 is an average score. In external evaluation a deep within a firm, that allow a firm to differentiate its
low total score indicates that company’s strategies products and sources from those of its rivals, creating
aren’t well designed to meet the opportunities and a higher value for the customer or offering products
defend against threats. In internal evaluation a low and services of comparable value at lower cost.
score indicates that the company is weak against its KEY INTERNAL FORCES
competitors. ➢ For different types of organizations such as hospitals,
Competitive profile matrix is an essential strategic universities, and government agencies, the functional
management tool to compare the firm with the major business areas differ.
players of the industry. Competitive profile matrix show ➢ Functional areas of a university can include athletic
the clear picture to the firm about their strong points programs, placement services, fundraising, academic
and weak points relative to their competitors. research, counseling and intramural programs.
The benefits to using Competitive Profile Matrix (CPM) DISTINCTIVE COMPETENCIES
for rivals analysis are: ➢ A firm’s strengths that cannot be easily matched or
➢ The same factors are used to compare the firms. This imitated by competitors.
makes the comparison more accurate ➢ Building competitive advantages involves taking
➢ The analysis displays the information on a matrix, advantage of distinctive competencies
which makes it easy to compare the companies visually ➢ Strategies are designed to improve on a firm’s
➢ The results of the matrix facilitate decision-making. weaknesses, turning them into strengths---- and maybe
Companies can easily decide which areas they should even into distinctive competencies.
strengthen, protect or what strategies they should THE PROCESS OF PERFORMING AN INTERNAL AUDIT
pursue. ➢ Closely parallels the process of performing an
external audit
CHAPTER 6-7 THE INTERNAL ASSESSMENT •Information from:
NATURE OF AN INTERNAL AUDIT
• Management
Basis for Objectives & Strategies
• Marketing
◼ Internal strengths/weaknesses
• Finance/accounting
◼ External opportunities/threats
• Production/operations
◼ Clear statement of mission
• Research & Development
All organizations have strengths and weaknesses in the
• Management Information Systems
functional areas of business. No enterprise is equally
Communication maybe the most important word in
strong or weak in all areas. Example: LG Electronics is
management.
known for excellent appliance production and product
Resource Based View (RBV)
design;Procter & Gamble is known for superb marketing
➢ Empirical Indicators – three characteristics of
resources enable a firm to implement strategies that
improve its efficiency and effectiveness and lead to
sustainable competitive advantage
▪ Rare
▪ Hard to imitate MARKETING RESEARCH – is the systematic gathering,
▪ Not easily substitutable recording, and analyzing of data about problems
The more a resources(s) is rare, non-imitable, and non relating to the marketing of goods and services.
substitutable, the stronger a firm’s competitive OPPORTUNITY ANALYSIS – involves assessing the costs,
advantage will be and the longer will it last. benefits, and risks associated with marketing decisions.
DOMESTIC VERSUS FOREIGN CULTURES THREE STEPS IN COST/BENEFIT ANALYSIS:
In Japan – business relations operate within the context 1. Compute the total costs associated with a decision
of “Wa”, which stresses social harmony and group 2. Estimate the total benefits from the decision
cohesion. 3. Compare the total costs with the total benefits
In China – business behavior revolves around “guanxi”- FINANCE ACCOUNTING
or personal relations. ➢ Often considered the single best measure of a firms
In Korea – “inhwa” – or harmony based on respect of competitive position and overall attractiveness to
hierarchical relationships, including obedience to investors
authority. 1. Investment decision (Capital budgeting)
MANAGEMENT 2. Financing decision
3. Dividend decision
Financial Ratio analysis is most widely used ,method for
determining an organization’s strengths and
weaknesses in the investment, financing and dividend
areas.
Five Types of Financial Ratios:
1. Liquidity Ratios – measures a firm’s ability to meet
MARKETING maturing short-term obligations.
Customer Needs/Wants for Products/Services 2. Leverage ratios – measure the extent to which a firm
1. Defining has been financed by debt.
2. Anticipating 3. Activity Ratios –measure how effectively a firm is
3. Creating using its resources.
4. Fulfilling 4. Profitability ratios – measure management’s overall
Marketing Functions effectiveness as shown by returns generated on sales
1. Customer analysis and investments.
2. Selling products/services 5. Growth ratios – measures the firm’s ability to
3. Product & service planning maintain its economic position in the growth of the
4. Pricing economy and industry.
5. Distribution PRODUCTION/OPERATIONS
6. Marketing research ➢ Consists of all those activities that transforms inputs
7. Opportunity analysis into goods and services.
CUSTOMER ANALYSIS – the examination and evaluation • PROCESS
of consumer needs, desires and wants—involves • CAPACITY
administering surveys, analyzing consumer information, • INVENTORY
evaluating market positioning strategies, developing • WORKFORCE
customer profiles and determining optimal market • QUALITY
segmentation strategies.
SELLING- includes many marketing strategies such as
advertising, sales promotion, publicity, personal selling,
sales force management, customer relations and dealer
relations.
PRODUCT AND SERVICE PLANNING – activities such as
test marketing; product and brand positioning; devising
warranties; packaging, determining product options,
product features, product styles and product quality,
deleting old products; and providing for customer
service.
PRICING – Five major stakeholders affect pricing RESEARCH & DEVELOPMENT
decisions: consumers, governments, suppliers, • Development of new products before
distributors, and competitors. competitors
DISTRIBUTION – includes warehousing, distribution • Improving product quality
channels, distribution coverage, retail site locations, • Improving manufacturing processes to reduce
sales territories, inventory levels and locations, costs
transportation carriers, wholesaling, and retailing.
Organizations invest in R&D because they believe that
such an investment will lead to a superior product or
service and will give them a competitive advantage.
MANAGEMENT INFORMATION SYSTEMS
• Information Systems
• Chief Information Officer/ Chief Technology
Officer
• Security
• User-friendly
• E-commerce
CIO typically looks inward, aiming to improve processes
within the company, while the CTO looks outward, using
technology to improve or innovate products that serve
the customers.
VALUE CHAIN ANALYSIS (VCA)
➢ According to Porter, the business of a firm can be
described as a value chain, in which total revenues
minus total costs of all activities undertaken to develop
and market a product or services yields value.
➢ VCA refers to a process whereby a firm determines
the costs associated with organizational activities from
purchasing raw materials to manufacturing products to
marketing those products.
➢ VCA aims to identify where low-cost advantages or
disadvantages exists anywhere along the value chain
from raw material to customer service activities.
BENCHMARKING
➢ Is 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.
➢ Determines “best practices” among competing firms
for the purpose of duplicating or improving.
INTERNAL FACTOR EVALUATION (IFE) MATRIX
➢ This strategy formulation tool summarizes and
evaluates the major strengths and weaknesses in the
functional areas of a business, and it also provides a
basis for identifying and evaluating relationships among
those areas.

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