MODULE 1

A STRATEGIC MANAGEMENT MODEL

INTENDED LEARNING OUTCOMES

At the end of the lesson, the students will be able to:

 Define Strategic Management

 Identify each of the components of the strategic management process and
its corresponding outcome;
 Identify the strategic management model;
 Differentiate strategic analysis from strategic decision-making, and
strategic intelligence from strategic thinking;
 Explain the meaning of strategic planning;
 Formulate sample company vision, mission statement, and company goals
and objectives; and
 Compare organization climate and organizational culture.

INTRODUCTION

The 21st century epitomizes the reality of dynamism. Today’s milieu is in 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. In an environment that is
characterized by drive, energy, 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, and business need to create its impact in any part of the world.
Thus, organizations and businesses must strategize.

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LET’S LEARN

Strategic Management Define

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 analysis consists of a systematic evaluation of variables currently

existing in the external and internal environments while 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 while strategic control is the application of an
appropriate monitoring and feedback system.

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 the strategic management 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.

Strategic Analysis Strategic Intelligence

Strategic Strategic Thinking

Decision-making

Strategy Formulation Organizational

Competitiveness

Strategy Comparative
Implementation Advantage

Strategic Control Strategic

Performance
Figure 1.1 The Strategic Management Process

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  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 can assess its 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 affected, 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 a 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 utilize its resources optimally and sustainably for
maximum performance and productivity.

 If strategy implementation is efficiently employed, organizations can achieve a

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 Management Organizational

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

Figure 1.2 A Strategic Management Model

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 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 is exhibited in the strategic intelligence acquired, strategic
thinking mode developed, organizational competitiveness, comparative advantage,
and strategic performance attained by the organization.

Strategic Planning

Oftentimes, the word strategic planning is more popular than strategic

management. Essentially, these two words are the same. In terms of purpose, both
strategic management and strategic planning have the same goals and objectives, that
is, to devise a strategic mode of preparing, addressing, and steering organizations to
where they want to go. Particularly, both undertakings endeavor to understand the
strategic position of organizations – their set goals, preferred, and strategic planning
use the same processes to attain their goals.

On the other hand, 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.
Practitioners and organizations conduct strategic planning yearly or as often as they
feel the need to do so. Secondly, strategic management generally presents all the
possible strategic approaches and techniques that organizations can avail of. It is
conducted with a view of the individuality and distinctiveness of the organization, its
current condition, specific needs, and desired outcomes. In this way, we can say that
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.

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 planning exhibits the following properties:

1. It generates the blueprint of what the organization intends to accomplish.

2. The strategic plan presents the grand scheme of the organization and outlines
all the set activities, ranging from the organizational to the departmental level. It
formalizes all plans concerning type and extent.

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 3. It is the process of developing a strategic fit between the organization’s goal
and capabilities in the context of changing opportunities.

4. It is a process that involves carefully delineated steps. As stated in the

definition, strategic planning is structured, in that it begins with reviewing the
environment. Setting goals, adopting and monitoring strategies, and
continuously redesigning them as the needs arise.

5. It is proactive, in that is it is written in the context of anticipated future realities.

Strategic planning does not make future decisions. Instead, plans are made in
anticipation of future changes and developments.

6. It is a philosophy because it evolves a dynamic way of conducting and

managing an organization. Strategic planning involves a unique a way of
thinking and doing things. It is an intellectual exercise that embraces a belief
that convinces organizations of their worth and importance. In other words,
values are integrated within the philosophy of an evolving organizational
culture.

7. It links the organizational plan with functional and operational plans. Strategic
planning speaks of two types of planning: (a) the organizational grand plan; and
(b) the departmental tactical plans.

8. It is intricately interwoven within the defined managerial functions of orgazing,

directing, staffing, and controlling. Although strategic planning is a strictly
formal and separate function of management, it is subtly intertwined in all the
other functions and responsibilities of a manager. In other words, no manager
can fully accomplish his/her responsibilities effectively if strategic planning is
disregarded or overlooked.

9. It necessitates the leadership and support of top management and, at the same
time, employee participation and commitment. 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 or forces 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 mechanisms,
and the budget for the year ahead.

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 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. The steps involved in strategic
planning are interactive, cyclic, and integrative. They include:

1. Making a situation audit to ascertain where the organization is today;

2. Stating the respective goals and objectives of the organization, the values and
value systems it espouses, its business definition, and its corresponding
strategy statements to determine where it wants to go;

3. Delineating appropriate strategies to be carried out to help direct the

organization to where it wants to go;

4. Identifying and then choosing the soundest strategy to determine the best way
for the organization to be where it wants to be and to achieve its goals;

5. Monitoring the implementation of strategies to measure performance; and

6. Conducting periodic and continuous reassessments to implement

improvements and suggested changes.

The steps in strategic planning will be tackled in detail in the next module. Initially,
an organization conducts an environmental scanning to determine where it is today.
Then, with respect to the organization’s vision, mission, goals, and objectives, as well
as its value system, apt strategies are identified to help direct the organization to
where it wants to go. There can be more than one strategy of choice. Once the
studied strategies are enumerated, the best strategy that will significantly bring about
the achievement of desired outcomes is specified for implementation. Concomitant to
the process of implementing the strategy/strategies, the monitoring systems have to
be set in place. Periodic assessments then follow to determine whether the chosen
strategies were worthwhile and effective.

Need for Strategic Planning

Why is there a need for strategic planning? As earlier stated, the reality of
dynamism, complexity, and hypercompetition characterizes today’s environment. To
survive, organizations need to plan carefully their strategic approaches. Therefore,
strategic plans have to be prepared purposefully for effective and efficient
implementation, thus, leading to the attainment of their set objectives. The benefits of
designing and putting into effect a strategic plan cannot be overemphasized.

Strengths and Limitations of Strategic Planning

Strategic planning defines and organization’s vision, mission, and set objectives. It
provides organizations the opportunity to assess the milieu and specify strategies to
achieve their goals. Strategic planning helps organizations to stay focused. It makes

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things happen. Furthermore, strategic planning helps reduce the chances of
committing mistakes, thus, increasing the organization’s efficiency. Strategic planning
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. Lastly, when cautiously, clearly, and
proactively undertaken, strategic planning provides leverage and competitive
advantage to the organization.

While strategic planning has its advantages, it also has its limitations. Although
conducted yearly or even more often, the strategic plans prepared in some instances
are good only “on paper”. Some organizations fail to follow faithfully their prepared
strategic plans. If in cases these strategic plans are 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.
Similarly, conducting strategic planning sessions may entail costs that can be
expensive to organizations.

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 essential 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.

vision

Goals Mission

Figure1.3 Relationship of the Vision-Mission-Goals of an Organization

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 An example of a vision statement is: “A World-class Polytechnic University.” This is
the vision statement of the educational institution, Zamboanga Peninsula Polytechnic
State University. The statement energizes the administrators, faculty, students, and
staff. It brings singleness in their desire and coherence in their efforts. Although
difficult and, not measurable, the organizational vision is an effective mode of binding
everyone to a company’s ultimate goal.

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.

The mission statement of the ZPPSU is as follows: “Produce globally competent

human capital and research innovation for quality lives.” Here, what the organization
does is “produce globally competent human capital”; it does this “research innovation”;
and how it does what it does “for quality lives.”

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.

Vision-Mission of the Zamboanga Peninsula

Polytechnic University

VISION : A World-class Polytechnic University

MISSION: Produce globally competent human capital and

research innovation for quality lives.

GOALS: Develop and sustain the cultures of innovation,

collaboration, responsiveness, and excellence.

CORE VALUES: Love of God and Country; Social

Responsibility; Commitment/ Dedication
to the Service; and Accountability

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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 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 with focus and direction. They neatly

converge toward the purpose of any firm, thus, streamlining all unnecessary
and redundant considerations.

2. Goals move organizations to action. Because goals have to be attained,

organizations are motivated to function and perform toward their vision.

3. Goals develop in organizations the trait of persistence. Thus, organizations

continue to persevere until they achieve their desired success.

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. Objectives may be immediate or short term.

3. They need to be prioritized into a hierarchy of objectives.

4. Objectives need to be measurable over time.

The relationship between goals and objectives can be concretely illustrated. In

Figure 1.4, organizations have overall goals referred to as the organizational goal. To
support and achieve this grand goal, objectives are enumerated. These mentioned
objectives are the goals of the respective departments or business units that will
likewise have their objectives. Because of these interrelationships, objectives need to
be consistently aligned and within the framework of the given goal.

Organizational Goal

Objective 2 Figure 1.4 Relationship between

Objective 1 Organizational Goal and
Objective 4 Objectives
Objective 3

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 Strategic objectives are, in general, externally focused. According to Peter Drucker
(2008), objectives fall into eight major classifications:

1. Market standing (e.g., the 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 effect 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 and 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 behavioural, serving as bases for the
organizations 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.

Value System

Values Interests

Dreams and Leadership and

Aspirations Management
Styles
Philosophies Ethical Practices

Expectations

Figure 1.5 Value System of an Organization

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 Strictly speaking, the values of an organization are not synonymous with 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, and 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 one 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 behaviour
exhibited by employees of an organization. It is a measure of the health of an
organization. It manifests whether its employees are happy, hard-working, 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 tends to be flexible. It precedes and somehow contributes to the
solidification of the culture of an organization.

On the other hand, organizational culture has been variously defined (Hofstede
1980a; Schein 1990). 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
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).

The conceptual aspect perceives organizational culture as a system of knowledge

and common values which can be exhibited and evaluated similarly by people even
with different backgrounds and at different levels within the organization. Thus,
organizational culture is more solid, stable, and long-term because it presents the
organization’s culture from its inception to where it is, showing how the culture of an
organization evolved through the years. Unique, the organizational culture is largely
and generally influenced by the leadership of the top management.

In summary, vision projects the image that an organization wants to attain. It is

reinforced by the mission statement that specifies how the organization intends to
actualize this vision. Thus, goals and objectives are clearly enumerated.
Furthermore, any organization has its own value system that inevitably becomes part
of its organizational culture.

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 LET’S SEE WHAT YOU HAVE LEARNED

Activities

1. How will you define strategic management?

2. What roles do organizational input play in the attainment of the success

of an organization? Identify each of these input?

3. Differentiate strategic analysis from strategic decision-making. Give

example.

4. Discuss in what ways strategic management and strategic planning are

similar. In what ways are the two different?

5. Give reasons why organizations undertake strategic planning. Do you

agree with these reasons? Explain your answers.

6. What are the disadvantages of conducting strategic planning? Will you

still advise organizations to conduct strategic planning why?

7. Define strategic planning and discuss the salient features.

8. Discuss and differentiate the two types of strategic planning.

9. Enumerate the steps in strategic planning.

10. Define organizational vision by using an example.

11. Why is the mission statement important to an organization?

12. Are organizational goals and objectives similar? In what way/s are
different?

13. What values/value system do you want an organization to demonstrate?

Explain your answer.

14. Differentiate organizational climate from organizational culture.

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World’s Greatest Strategies

Howard Schults: Starbulks Strategies

Schultz somehow knew, back in  “But when you really believe – in

yourself, in your dream – you just have
1985, that we would pay up if he turned
to do everything you possibly can to
an ordinary cup of “joe” into a Venti latte, take control and make your vision a
reality. No great achievement
He also hoped his cool coffee cafes
happens by luck.”
would change the culture, as they have
 “It’s one thing to dreams, but when the
in cities and suburbs alike. Roughly, 30
moment is right, you’ve got to be
years later, 20,000 Starbucks stores willing to leave what’s familiar and go
out to find your own sound.”
circle the globe, generating $15 billion in
annual revenues.  “Whatever your culture, your values,
your guiding principles – you have to
take steps to inculcate them in the
Now, the boy from Brooklyn is organization early in its life so that they
can guide every decision, every hire,
pushing into tea, baked goods, and
every strategic objective you set.”
digital commerce with Starbucks’ $25
 “Every step of the way, I made a point
million equity stake in Square, a mobile
to underpromise and overdeliver. In
payment start-up. Following a record the long run, that’s the only way to
ensure security in any job.”
year with the stock nearing an all-time
high, Schultz is turning his focus to  “If you want to build a great enterprise,
you have to have the courage to
Starbucks’ mission, growth initiatives, the
dream great dreams. If you dream
convergence and integration of retail and small dreams, you may succeed in
building something small.”
e-commerce, digital card, and mobile
assets around the world.  “Whatever you do, don’t play it safe.
Don’t do things the way they’ve always
been done. Don’t try to fit the system.
If you do what’s expected of you, you’ll
never accomplish more than what
others expect.”

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Strategic Guides:

1. Study the biography of Howard Schultz, CEO of Starbucks. Include his

childhood, if there is something significant, his interests, his educational
attainment, professional and career orientation, and other facts that might
have contributed to the success he is enjoying now.

2. Study the beginnings of Starbucks, the challenges it encountered through

the years, and its journey towards success.

3. From the management, result-driven, practical, and inspirational

strategies implemented by Schultz at Starbucks, which struck you as
something worth initiating? Explain your answer.

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