MOTIVATORS

AND DRIVERS
OF STRATEGIC
MANAGEMENT
2.1 WHY THE NEED FOR STRATEGIC
MANAGEMENT
 Strategic management or strategizing per se may not be that critical or
important
 Many of the business organizations operated as independent business
entities
 Single business concern has grown so big or has multiplied in number that it
is now getting to be difficult to manage.
 It acknowledge that the profit motive and the nature of competition have
been dominant factors that motivated and driven business organizations.
2.2 The Dynamic Nature of the Market
and the Business
 The business and the market are not static but dynamic in nature
 “One thing constant in this world is change itself”
 Business managers need to live and accept that to be competitive, one
has to live with a constantly changing environment and get the best out of
it.
CIRCUMSTANCES AND REALITIES:

A. The ever changing market conditions – supply and demand situtations

B. The changing taste of the market – the taste and preferences of the
buyers/consumers change over time
C. Sociopolitical Changes – political changes
D. The impact of global developments vis-à-vis the local markets –
increasing of role of technology particularly the Internet
E. The changes in the conduct of businesses – change the conduct of
business when it comes to operating hours
2.3 THE TRIGGERING EVENTS

Triggering Events- refer to situations or scenarios that may have caused or resulted to
the actions or initiatives of the top management of the firm to consider certain
strategic options to make the firm competitive or to achieve certain strategic
objectives.
Two Forms of Triggering Events:
1. Internal Triggering Events- are those situations and scenarios intervening or
disturbing the business organization and one that the company can exercise
certain level of control.
2. External Triggering Events- are those factors external to the firm or matters where
the business organization itself may not want to happen.
Internal Triggering Events
a) New CEO/President. New leadership in any business organization generally results
to some changes.
b) Performance gap. A performance gap exists when performance does not meet
expectations.
c) Change in ownership. A change in ownership either by way of acquisition, sellout,
merger or changes in majority of ownership of stockholdings among publicly listed
firms.
d) Management team shake up. An incumbent President or CEO may opt to form a
new management team.
e) Corporate reorganization/restructuring. Requires new schemes or strategies to
achieve new vision-mission statement.
f) New products or services. Result to another kind or at least an enhanced strategy
given the new kind of product or services offered.
External Triggering Events
a) The overall economic environment;
b) Government- its leadership policies and regulatory functions;
c) Sociopolitical environment;
d) The legal environment;
e) The technological environment;
f) The global/regional environment;
g) Market factors (demand and supply situation);
h) The religious environment
i) Occurrence of calamities and other phenomena
Strategic Inflection Point as another factor considered as triggering event by Andy
Groove and cited by Wheelen and Hunger.
2.4 THEORY OF THE FIRM
The so-called theory of the firm also referred as the types of market structures
described are as follows:
a) Monopoly. It is a market structure characterized by the existence of a single
seller of a product which dominates the market.
b) Oligopoly. This type of market has more than one producer or seller of a
product, which may be either homogeneous or differentiated.
c) Monopolistic competition. It exists when many sellers offer similar products that
are not perfect substitutes for one another.
d) Perfect competition. It is a market structure characterized by many producers or
sellers and a homogeneous product.
2.5 Technology Developments and
Innovations
 Technology
Is an agent of change spurring the traditional definition of time and space.

 Emerging technologies rapidly becoming a common place, the need to

keep pace is a constant challenge and opportunity for managers and
strategists.
 Rapid developments and innovations and technologies have given so much impact
upon the level of business competition anywhere in the world.

 Other than playing a key role in producing product substitutes or better quality and
cheaper product of the same kind, the promise of efficiency in production systems, higher
productivity as well as consistency in quality or produce that new technologies offer in the
market is a major consideration among establishments to be technology conscious.

 Nowadays, technology has become a major component of what it takes to be

competitive both in product quality and market price.
 Brick-and-Mortar Era
The era where there is an 8 hour conduct of business.

 Click and Mortar Era

Era whose mode of doing business transcends beyond traditional business hours
with business transaction happening round-the-world and round-the-clock or on a
borderless scenario and on a real-time basis.
2.6 The Product Life Cycle

 The Product or Service Life Cycle also known as Market or Industry Life
Cycle
There is no such product, service, industry, or market that continuous to grow
for life or over infinite period, and will never come to its maturity, peak and
decline stage.

 S-curve
Is a living proof that just like humans, there is beginning and end for everything
and the same is true for every product or service in this world.
2.7 EXPERIENCE CURVE

 The theory of experience curve suggests that as the business organizations

stay much longer in the business or thr industry, the business organization
accumulates a body of knowledge and experience that enables the firms
to do its business better.
 It also referred to as the learning curve.
2.8 ECONOMIES OF SCALE

 Theory of economies or Diseconomies of scale appears similar to the

experience curve.

 It postulates that there is a decline in the per unit cost of production (or
activity) as the volume of production (or services rendered) is increased.
2.9 Best Operating Level

 There is an OPTIMUM LEVEL of operating machines or using resources that

can result to the lowest possible cost of production of a product or service.

 The motivation and drive to produce the good or service to lowest possible
level.
2.10 Building Competitive Strategies

THEORY BEHIND THE PRODUCT LINE CYCLE

 that unless nothing is being done about the product or service and given
the ever-changing market conditions, competitiveness of the product will
be eventually eroded - and hence it must be continually built up.
2.11 Other relevant theories influencing
Strategic Management
 While developing business policies and strategies is biased towards knowing
the current and future factors that will influence industry operations, it is also
known that strategist do consider proven theories including those that are
empirical in nature.

 Empirical studies on the other are bulit on qualitative and quantitative

underpinnings and logical assumptions.
Pitts and Lei(2000)
 Among the theories that have found their way as basis for strategic
management purposes as are organizational adaptation and economics
theories as well as learning theories hereunder briefly discussed:
A. Evolution and revolution theories - In its most basic from as espoused by
Charles Darwin, this theory suggested that environmental change forces each
species into incremental, but continuous, mutation or transformation.
B. Industrial organization theory - This theory emphasizes the influence of
industry environment upon the firm.
C. Chamberlin's economic theories - Theories of economist Edward Chamberlin
are anchored on the context of evolutionary environmental change and he
specifically espoused that a single firm could clearly distinguish itself from its
competitors.
D. Contingency theory - The basic premise of this theory is that higher financial
returns are associated with those firms that most closely develop a beneficial fit
with their environment.
E. Resource-based theory - This theory accords more weight to the firm's choice to
be proactive capitalizing on the firm's inique resources to comprise the key
variables that allow it to develop and sustain a competitive strategic advantage.
F. Institution Theory - It holds that organizations can adapt to changing conditions
by imitating other successful organizations.
G. Organization learning theory - It holds that organizations adjust defensively to a
changing environment and use knowledge offensively to improve the fit between
the organization and its environment.
H. Transaction cost economics - It proposes that vertical integration is more
efficient than contracting goods and services in the marketplace when the
transaction cost of buying goods in the open market becomes too great.
2.12 Geopolitical Development and
the Globalize Market
 Globalized trade scenario is that having removed or at least reduced a lot
of trade barriers and imports restrictions, there is now a free or open flow of
goods and services across nations.
2.13 Challenges and Opportunities of
e-Commerce/e-Business
 The biggest threat and impact of e-Commerce/e-Business in the
competition aspect of the business is its capability to conduct business
operation anytime of the day.
 Feature to do shopping by simply doing a mouse work has revolutionized
import and export business transactions. The electronic ordering system as
well as on online payment scheme that comes with e-Commerce/e-
Business has buying and selling convenient for both the seller and the
buyer.