Strategic Management

Lesson 2- Strategic Process

Mr. Renerson T. Cerin
 Strategic management process

• The strategic management process is a systematic and

comprehensive approach used by organizations to
define and achieve their long-term goals. It involves
analyzing the internal and external environment,
formulating strategies, implementing those strategies,
and evaluating the results. The strategic management
process typically consists of the following key steps:
Step 1. Identify the Environmental Analysis

• This step involves assessing the internal and external

factors that may affect the organization's performance.
• Internal factors include strengths, weaknesses,
resources, and capabilities
• external factors encompass market trends, competition,
technological advancements, and regulatory changes.
 Step 2: Formulation of Vision and
Mission
• Organizations establish their VISION, which outlines
the desired future state
• a MISSION, which defines the organization's purpose
and reason for existence. These statements provide
direction and serve as guiding principles for strategic
decision-making.
Step 3. Setting Objectives in a Strategic Plan

• Clear and measurable objectives are established

to translate the organization's vision and mission
into specific outcomes. Objectives should be
aligned with the overall strategy and provide a
framework for evaluating progress.
 Step 4: Strategy Formulation
• This step involves developing strategies to achieve the objectives set in
the previous step.
• Strategies may include market positioning, product development, cost
leadership, diversification, mergers and acquisitions, or strategic alliances.
• The formulation process requires analyzing alternatives, assessing risks,
and selecting the most appropriate strategies.
 Terms and Definition
• Cost Leadership
• This is a strategy primarily for achieving low cost leadership among
industry competitors. Cost leadership can be achieved through low cost
supply contracts, overhead expense control, economics of scale, and
comprehensive cost-cutting efforts, among others.
• Example: While 16” desk fans ordinarily retail fro P 1,000.00, a local
appliance brand is able to market the same at 635.00 through mass
production.
 Terms and Definition

• MARKET POSITIONING -refers to the process of

establishing a product, brand, or company in the minds
of target consumers relative to competing offerings in
the market. It involves creating a distinct image and
identity for a product or brand, which helps
differentiate it from competitors and influences how
consumers perceive and perceive its value.
 Effective market positioning helps
companies to:
• Differentiate themselves
• Target the right audience
• Communicate value
• Build brand loyalty
 Terms and Definition

• PRODUCT DEVELOPMENT -refers to the

process of creating and introducing new products
or making significant improvements to existing
ones to meet the needs and desires of customers
or to capitalize on emerging market
opportunities.
 Product Development Process Typically
Involves Several Stages
• Idea generation- ideas for new products or product improvements are
brainstormed and explored.
• Idea screening- the generated ideas are evaluated and filtered based on
criteria such as market potential, technical feasibility, alignment with
company goals, and financial viability.
• Concept development and testing- ideas are further developed into
tangible product concepts or prototypes.
 Product Development Process Typically
Involves Several Stages
• Business analysis - this includes estimating costs, pricing, sales
projections, and potential profitability.
• Product development and engineering - the actual product development
and engineering work begins
• Market testing - the product is often tested in specific markets or with a
limited audience to gauge its acceptance, identify any issues, and make
final adjustments.
 Product Development Process Typically
Involves Several Stages
• Commercialization - This phase involves coordinating various
departments, such as manufacturing, marketing, sales, and distribution, to
bring the product to market effectively.
• Post-launch evaluation - after the product is launched, continuous
evaluation and feedback are essential to monitor its performance, address
any potential issues, and plan for future improvements or iterations.
 Terms and Definition

• Diversification - refers to the strategy of entering

new markets or creating new products/services
that are different from a company's existing
offerings.
 Two main types of diversification:
• a. Related Diversification: This involves entering industries or markets
that are related to the company's current business. For example, a
computer manufacturer diversifying into the software industry.
• b. Unrelated Diversification (Conglomerate Diversification): This
entails entering industries or markets that are entirely unrelated to the
company's existing business. For instance, a food company diversifying
into the automotive industry.
 Terms and Definition

• MERGER -occurs when two or more companies

combine to form a single entity, usually with shared
ownership and control. It is a strategic move that
enables companies to pool their resources, expand
their market share, and achieve synergies that they
may not have accomplished as separate entities.
 Mergers can be categorized into two main
types
• a. Horizontal Merger: This involves the combination of two companies
operating in the same industry and at the same stage of the production
process. The aim is to increase market share and competitiveness.
• b. Vertical Merger: This occurs when companies from different stages of
the production or distribution chain merge. For example, a manufacturing
company merging with a supplier or a distributor.
 Terms and Definition

• Acquisitions, also known as takeovers, happen when

one company purchases a controlling stake in another
company, resulting in the acquired company becoming
a subsidiary of the acquiring company. Unlike a merger,
where two companies combine to form a new entity, in
an acquisition, one company remains dominant.
 Acquisitions can be categorized into two
main types
• a. Friendly Acquisition: This occurs when the acquisition is agreed upon
and supported by the management and board of the target company.
• b. Hostile Acquisition: Also known as a takeover bid, this happens when
the acquiring company seeks to purchase the target company despite
resistance from the target's management and board.
 Step 5: Strategy Implementation:

• Implementation involves allocating resources,

organizing teams, setting up processes, and
establishing performance measures.
• It requires clear communication, coordination,
and alignment across the organization.
 Step 6: Evaluation and Control

• Continuous monitoring and evaluation are essential to

assess the effectiveness of implemented strategies and
make necessary adjustments. Key performance indicators
(KPIs) and other metrics are used to measure progress
and ensure that objectives are being achieved. Feedback
loops and control mechanisms help identify deviations
and enable corrective actions.
 Step 7: Strategic Renewal

• Strategic renewal involves periodically

reviewing and revising the strategic
direction, objectives, and strategies to
stay relevant and competitive in
dynamic environments.
End of lesson