STRATEGY – Combination of goals, plans, and actions that
are designed to accomplish an organization’s mission.
STRATEGIC MANAGEMENT – analysis and decisions that
are necessary to formulate and implement strategy
FOUR STEPS OF STRATEGIC FORMULATION
1. Establish Organization’s Mission and Vision
- Reason for its being and what the org aspires to
become
MISSION STATEMENT – fundamental purpose of an org,
and often descrbes what an org does, whom it serves, and
how it differs from similar orgs.
(9) Ideas commonly mentioned in mission statement
1. Product, services offered
2. Customers served
3. Self-concept
4. Survival/growth/profitable targets
5. Employees
6. Markets and regions of operation
7. Philosophy and values
8. Technology used
9. Public image
VISION STATEMENT –what an org is striving to become,
provides guidance to organizational members
(6) Hallmarks of recommended vision statements
1. Future-oriented
2. Inspiring/idealistic
3. Challenging
4. Brief
5. Clear
6. Stable
2. Analyze Strengths and Weakness
Internal characteristic of an organization:
STRENGTHS – refer to valuable or unique resources that an
organization has or any activities that it does particularly
well.
WEAKNESSES - refer to a lack specific resources or abilities
that an organization needs in order for it to do well.
Three Different Types of Internal Resources
Resources – are assets, capabilities, processes, attributes
and information that are controlled by an org and that
enable it to formulate and implement a strategy.
Physical resources – material assets, real estate, and its
inventory
Human resources – specific competencies held by an org’s
members
Intangible resources – organization’s structures and
system
Four Characteristics of Strategic Resources
Core competency – resource or ability that is
essential for the achievement of organizational
goals.
Distinctive competency – competency that an org has that
is superior compared to its competitors
Valuable resources – managers can use to neutralize
threats or to exploit opportunities to meet their
organization’s mission in light of conditions in the external
environment.
Rare resources – few orgs have
Inimitable resources – cannot be copied or develoed by
other org, or it is costly or difficult to do so.
Non-substitutable resources – cannot be easily substituted
by other resources
3. Analyze Opportunity and Threats
INDUSTRY – refers to all org that are active in the same
sector of social, political, and/or economic activity.
External environment that have potential
OPPORTUNITIES – help managers meet or exceed
organizational goals
THREATS – prevent managers from meeting organizational
goals
SWOT ANALYSIS – Examines an organization’s: Strengths,
Weaknesses, Opportunities & Threats.
THE FIVE FORCES MODEL (Michael Porter)
- Developed to compare the relative attractiveness of
different industries
1. SUPPLIER POWER – how much influence suppliers
have over an organization.
2. CUSTOMER POWER – how much influence customers
have on an org
3. SUBSTITUTES – products or services that are similar or
that meet the same needs of a customer, but come
from a different industry
4. THREAT OF NEW ENTRANTS – refers to the extent to
which conditions make it easy for other org to enter or
compete in a particular industry
Economics of scale – barrier that can prevenent small
firms from entering an industry with established large
firms
5. INTENSITY OF RIVALRY – extent or strength of
competition among the organizations in an industry.
Increases when
1. Pki aral nlng
STRATEGIC ALLIANCE – pooling their organizational
resources and know-how to share the risk and rewards for
developing their market.
4. CHOOSE AND DEVELOP THE STRATEGY
LEVELS
1. Organizations operating in a specific industry
2. Organizations operating in a variety of industry
GENERIC STRATEGIES
Business-level strategy –combination of goals, plans, and
actions that an org in a specific industry uses to accomplish
its mission
FBL approach to Generic strat
Two best known bus-lvl strat by Michael Porter
Cost leadership strat – org has lower financial cost that
rivals for similar product, so that it can capture more profit
and/or a higher market share via lower prices
Differentiation strat – org offers products or services with
unique features that cost less for it to provide than the
extra price which customers are willing to pay for the
features
Focus strat – portion of an overall market that an org is
targeting to serve
Dual strat – org combines both a cost leadership and a
differentiation strat
TBL approach to Generic strat
Cost leadership strat - org has lower financial cost that
rivals thanks to reductions in its ecological and/or social
negative externalities, thereby contributing to its financial
well-being.
Differentiation strat - org offers products or services with
socio-ecological benefits that cost less for it to provide
than the extra price which customers are willing to pay for
them.
SET approach to Generic strat
Minimizer strat – org minimizes negative socio-ecological
externalities while ensuring that it remains financially
viable.
Transformer strat – org creates positive externalities, often
by adding value to resources that were previously under-
appreciated or wasted.
Compounder strategy – org simultaneously follows both a
minimizer and a transformer strategy, thus reducing
negative externalities and enhancing positive externalities.
STRAGTEGIC MANAGEMENT FOR DIVERSIFIED
ORGANIZATION
Diversified Org – competes in more than one industry or
sector, or serves customers
Strategic business unit (SBU) – has its own mission
statement, industry, products and services, business-level
strategy, and financial statements
Corporate-level strategy – determines the combination of
industries in which a diversified org will have an SBU
1. Related Diversification – expanding an org’s activity in
industries that are related to its current activities.
Horizontal integration – org’s services or product lines
are expanded or offered in new markets
Vertical integration – occurs when org produces its
own inputs (upward integration) or sells its own
outputs (downward integration)
2. Unrelated Diversification – org grows by investing in
or establishing SBUs in an industry unrelated to its
current activities
Divestment – process of decreasing the number of
industries in which a diversified firm operates an SBU
Conglomerates – diversified org that have SBUs
unrelated industries
CONVENTIONAL PORTFOLIO MATRIX BASED ON FBL
MGT
BGC matrix – classifies each strategic business unit
according to:
a. Market share – refers to the proportional sales a
particular SBU has relative to the entire industry
b. Market growth rate – whether the size of a
particular market is increasing, decreasing, or
stable.
Star – enjoys a high market share in a rapidly
growing industry
Cash cow - enjoys a high market share in a low
growth or mature industry
Question mark – has low market share, but
operates in rapidly growing industry
Pet – low market share in a low growth industry
Synergy – performance gain that results from two
or more units working together-such as two or
more org, dept, or people
 An alternative portfolio matrix based on TBL and SET
management

Vertical dimension Sustainable development – focuses on

how effectively an industry reduces its socio-ecological
negative externalities

Horizontal dimension Restorativeness – how effectively an

industry creates positive socio-ecological externalities.

Sustainability hero – reduces or minimizes negative

externalities (high sustainable development) and enhances
positive externalities (high restorativeness)

Innocent bystandeer – has high sustainable development

but low restorativeness.

Fragile player – creates both posi and nega externalities

Lavish actors – low on both sustainability and

restorativeness

ARAL YUNG ENTREPRENEURIAL MISSION VISION PG285