Strategic Management ➢ It combines a set of activities to stake

Chapter 1 out a unique position.

Understanding Strategy
➢ It requires long-term commitments that
are not easily reversible.
Basic Concepts of Strategy

Strategy - an action that managers take to What Strategy is Not

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”.

▪ Strategy describes the goal-directed actions

a firm intends to take in its quest to gain and
sustain competitive advantage.

▪ The firm that possesses competitive

advantage provides superior value to Strategy vs Objective
customers at a competitive price. Strategy
▪ Profitability and market share are the
➢ Overarching approach taken to meet or
consequences of superior value creation
exceed goals
➢ Actions taken must relate to the original
set by management
Objective

➢ A measurable action taken to execute

the strategy agreed on by management
and the rest of the organization
Strategy is the quest to gain and sustain ➢ Follows SMART formula
competitive advantage.

➢ It is the managers’ theories about how

to gain and sustain competitive
advantage.
➢ It is about being different from your
rivals.
➢ It is about creating value while
containing cost.
➢ It is deciding what to do, and what not
to do.
 ● Is the ongoing planning, monitoring,
analysis and assessment of all
necessities an organization needs to
Key difference meet its goals and objectives.
Purpose: to use and create new and different
opportunities

strategic plan is a company’s game plan.

BENEFITS OF STRATEGIC MANAGEMENT

✓ Competitive Advantage
-Anything that a firm does especially well
The Different Views/Approaches of Strategy compared to rival firms.

1. Classical Administrator
✓ Achieving Goals
- Helps keep goals achievable by using a clear
2. Design planner
and dynamic process for
3. Role Player
formulating steps and implementation.
4. Competitive Positioner
5. Visionary Transformer ✓ Sustainable Growth
6. Self-Organizer - Lead to more efficient organizational
7. Turnaround Strategist performance, which leads to manageable
growth.
✓ Cohesive Organization
Choosing the RIGHT Approach - Necessitates communication and goal
implementation company-wide.
❑ Gathering the right information;
❑ Developing market awareness;
✓ Increased Managerial Awareness
- Strategic management means looking
❑ Deciding what action needs to be taken;
toward the company’s future.
❑ Assessing risk;
❑ Thinking critically;
❑ Taking into account of unexpected
Basic Strategic Management Concepts
Mission Statement
Chapter 2 ● A mission statement identifies the
THE NATURE OF STRATEGIC MANAGEMENT scope of a firm’s operations in product
and market terms
Strategic Management Vision Statement
● Strategic management is both an art ● Answers the question
and science of formulating, ● “ what do we want to become”
implementing, and evaluating, cross-
functional decisions that facilitate an
● Where it wants to be in the future
Values
organization to accomplish its
objectives. ● that will guide its action
Process
● requires a commitment to strategic
planning
Strategic Planning
● includes the planning of strategic
decisions, activities, and resource
allocation needed to achieve those
goals.
Strategy Translation Process
Strategic Management can be:
Prescriptive Strategic Management
- means developing strategies in advance of
an organizational issue.
Descriptive Strategic Management
- means putting strategies into practice when
needed.

Types of Strategic Management

● SWOT ANALYSIS THE FOUR PERSPECTIVES AND
- Comprehensive evaluation of all strengths, PERFORMANCE MEASURES
weaknesses, opportunities, and threats of a. The Financial Perspectives
the strategy you compose.
● Establishes long and short-term financial
performance objectives
● Concerned with the global financial
consequences
● Has three strategic themes:
-revenue growth
- cost reduction
- asset utilization
b. Customer Perspectives
● Source of the revenue component for
● Balanced Scorecard the financial objectives
- is a strategic management system that ● Defines and selects the customers and
translate the vision and strategy of an market segment in which the company
organization into operational objectives and chooses to compete
measures. c. Process Perspectives
● Entails the identification of the
processes needed to achieve the
customer and financial objectives.
● Process Value Chain is made up of three
processes:
 ▪ Innovation process ● How do we accomplish our goals? What
▪ Operations process are our values?
▪ Post-sales process
d. Learning and Growth (infrastructure) VISION, MISSION, VALUES
Perspectives VISION STATEMENT
● The source of the capabilities that A vision statement provides the direction and
enable the accomplishment of the other describes what the founder wants the
three perspectives. organization to achieve in the future; it’s more
about the “what” of a business. It is different
● It has 4 major objectives:
from a mission statement, which describes the
- increase employee capabilities
purpose of an organization and more about
-increase motivation
the “how” of a business.
-empowerment and alignment
Example:
-increase information systems
capabilities
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
incentives
✓ Gain’s people emotional commitment to IMPORTANCE OF A VISION STATEMENT
the strategy 1. A vision statement should answer the
✓ Be open to strategic ideas whenever they basic question, “What do we want to
originate become?”
✓ Keep the strategy flexible ❑ A clear vision provides the foundation
for developing a comprehensive mission
statement.
Chapter 3
2. Many organizations have both a vision and a
THE STRATEGIC MANAGEMENT PROCESS
mission statement, but the vision statement
should be established first and foremost.
Strategic Management Process
❑ The vision statement should be short,
- describes its methods by which
preferably one sentence, and as many
managers conceived of and implement a
managers as possible should have input
strategy that can lead to a sustainable
into developing the statement.
competitive advantage.
- Managers ask the following questions:
MISSION STATEMENT
● What do we want to accomplish
● Distinguishes one firm from another
ultimately? What is our vision?
● Declares the firm’s reason for being
● What are we about? What is our ● Reveal what an organization wants to be
mission?
and whom it wants to serve
 ● Essential for effectively establishing (3) develop the measurable goals and
objectives and formulating strategies objectives by which to gauge the success of the
● Also referred to as: organization’s strategy.
➢ Creed statement
➢ Statement of purpose Key Roles of Vision and Mission
➢ Statement of philosophy
➢ Statement of business principles Living the Ethical Values
Example: • Organizational Values are the ethical
standards and norms that govern the
behavior of individuals within a firm or
organization and within society.

MISSION STATEMENT COMPONENTS

❖ Customers: Who are the firm’s
customers?
❖ Products or services: What are the
• Strong ethical values have two
firm’s major products or services?
important functions:
❖ Markets: Geographically, where does the
❖ They form a solid foundation on
firm compete?
which a firm can build its mission
❖ Technology: Is the firm technologically
and long-term success.
current?
❖ They serve as the guardrails put in
❖ Concern for survival, growth, and
place so the company can stay on
profitability: Is the firm committed to
track when pursuing its quest for
growth and financial soundness?
competitive advantage.
❖ Philosophy: What are the basic
STEPS IN THE STRATEGIC
beliefs, values, aspirations, and ethical
MANAGEMENT PROCESS
priorities of the firm?
❖ Self-concept: What is the firm’s
distinctive competence or major
competitive advantage?
❖ Concern for public image: Is the
firm responsive to social,
community, and environmental
concerns?
❖ Concern for employees: Are employees a What is strategy formulation?
valuable asset of the firm? • includes developing a vision and mission
• identifying an organization's external
ROLES PLAYED BY MISSION AND VISION opportunities and threats,
Mission and vision statements play three • determining internal strengths and
critical roles: weaknesses,
(1) communicate the purpose of the • establishing long-term objectives,
organization to stakeholders, • creating alternative strategies, and
(2) inform strategy development, and • choosing particular strategies to pursue.
 • Intuition is particularly useful for
Strategy Formulation making decisions in situations of great
• Deciding what new businesses to enter uncertainty or little precedeent
• What businesses to abandon
• How to allocate resources Adapting to Change
• Whether to expand operations or • The second largest bookstore chain in
diversify the United States, Borders Group,
• Whether to enter international markets declared bankruptcy in 2011 as the firm
• Whether to merge or form a joint had not adapted well to changes in
venture book retailing from traditional
• How to avoid a hostile takeover bookstore shopping to customers
buying online, preferring digital books
Strategy Implementation to hard copies.
• requires a firm to establish annual • Borders was on the brink of financial
objectives, devise policies, motivate collapse before being acquired in July
employees, and allocate resources so 2011 by Direct Brands
that formulated strategies can be
implemented KEY TERMS IN STRATEGIC MANAGEMENT
• developing a strategy-supportive Competitive Advantage
culture, - anything that a firm does especially well
• creating an effective organizational compared to rival firms.
structure, Strategists
• redirecting marketing efforts, - Help an organization gather, analyze, and
• preparing budgets, organize information
• developing and utilizing information Vision Statement
systems, and - “what do we want to become?”
• relating employee reward to External Opportunities and Threats
organizational performance. - are factors which could harm or benefit the
• Often called the action stage organization in the future
Internal Strengths and Weaknesses
Strategy Evaluation -Controllable activities that are performed
Three fundamental strategy-evaluation especially well or poorly.
activities are:
1) Reviewing external and internal factors Long-term Objectives
that are the bases for current strategies - essential for organizational success
2) Measuring performance
3) Taking corrective actions Annual Objectives
- are short term milestones that organizations
Integrating Intuition and Analysis must achieve to reach long term objectives.
• Most organizations can benefit gtom
strategic management, which is based Policies
upon integrating intution and analysis in -annual objectives will be achieved.
decision making
Levels of Strategies
❑ Corporate Strategy
❑ Business Strategy CHAPTER 4
❑ Functional strategy The External Assessment
❑ Operational Strategy
INTRODUCTION
Benefits of Strategic Management ➢ This chapter examines the tools and
➢ Nonfinancial Benefits concepts needed to conduct an external
• Enhanced awareness of threats strategic management audit (sometimes
• Improved understanding of competitors’ called environmental scanning or industry
strategies analysis).
• Increased employee productivity ➢ An external audit focuses on identifying and
• Reduced resistance to change evaluating trends and events beyond the
• Clearer understanding of performance- control of a single firm.
reward relationship ➢ An external audits reveals key opportunities
• Enhanced problem-prevention capabilities 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

WHY SOME FIRMS DO NO STRATEGIC ❑ The purpose of an external audit is to
PLANNING develop a finite list of opportunities that
Lack of knowledge of strategic planning could benefit a firm and threats that should
be avoided.
Poor reward structures ❑ As the term finite suggests, the external
Fire fighting audit is not aimed at developing an
exhaustive list of every possible factor that
Waste of time could influence the business.
Too expensive ❑ It is aimed at identifying key variables that
offer actionable responses.
Laziness ❑ Firms should be able to respond to the
Content with success factors by formulating strategies that take
advantage of external opportunities or
Fear of failure that minimize the impact of potential
Overconfidence threats.

Prior bad experience KEY EXTERNAL FORCES

Self-interest 1. ECONOMIC FORCES
2. POLITICAL, GOVERNMENTAL, AND
Fear of the unknown LEGAL FORCES
Honest difference of opinion 3. TECHNOLOGICAL FORCES
4. SOCIAL, CULTURAL, DEMOGRAPHIC,
Suspicion AND NATURAL ENVIRONMENT FORCES
5. COMPETITVE FORCES

The PESTEL model

Political (p)
• The political environment dscribes the ❑ An economic variable of significant
processes and actions of government importance in strategic planning is Gross
bodies that can influence the decision Domestic Product (GDP), especially across
and behavior of firms. countries. Trends in the dollar’s value have
Economic (e) significant and unequal effects on
• The economic factor in the external companies in different countries and in
environment are largely different locations.
macroeconomic, affecting economy-
wide phenomena. • For example, the pharmaceutical,
Sociocultural (s) tourism, entertainment, motor vehicle,
• Sociocultural factors capture a society’s aerospace, and forest products
cultures, norms, and values. industries benefit greatly when the
• Demographic trends are also important dollar falls against the yen and euro.
sociocultural forces. • Agricultural and petroleum industries
Technological (t) are hurt by the dollar’s rise against the
• Technological factors capture the currencies of Mexico, Brazil, Venezuela,
application of knowedge to creatre new and Australia.
processes and products. • When the value of dollar falls, tourism-
Ecological factors (e) oriented firms enefits because
• Ecological factors concern broad Americans do not travel abroad as much
environmental issues such as the natural when the value of the dollar is low;
environment, global warming, and rather, foreigners visit and vacation
sustainable economic growth more in the United States.
• Three diemsions- economic, social, and
ecological- make up the triple bottom SOCIAL, CULTURAL, DEMOGRAPHIC, AND
line. NATURAL ENVIRONMENT FORCES
• Using triple bottom line approach, ➢ Social, cultural, demographic, and
managers audit their company’s environmental changes have a major
fulfillment of its social and ecological impact on virtually all products, services,
obligations to stakeholders. markets, and customers.
Legal factors (l) Small
• The legal environment captures the Small, large, for-profit, and non-profit
official outcomes of the political organizations in all industries are being
processes as manifested in laws, staggered and challenged by the
mandates regulations, and court opportunities and threats arising from
decisions. changes in social, cultural, demographic,
and environmental variables.
ECONOMIC FORCES
• Five macroeconomic factors KEY SOCIAL, CULTURAL, DEMOGRAPHIC, AND
➢ Growth rates NATURAL ENVIRONMENT VARIABLES
➢ Interest rates ✓ Number of marriages
➢ Levels of employment ✓ Number of divorces
➢ Price stability (inflation and deflation) ✓ Number of births
➢ Currency exchange rates
POLITICAL, GOVERNMENTAL, AND LEGAL ➢ A CIO and CTO work together to
FORCES ensure that information needed to
• Federal, state, local, and foreign formulate, implement, and evaluate
governments are major regulators, strategies is available where and when
deregulators, subsidizers, employers, it is needed.
and customers of organizations. ➢ These individuals are responsible for
Political, governmental, and legal developing, maintaining, and updating
factors, therefore, can represent key a company's information database.
opportunities and threats for both small
and large organizations. TECHNOLOGICAL FORCES
➢ Revolutionary technological changes
• For industries and firms that depend and discoveries are having a dramatic
heavily on government contracts or impact on organizations.
subsidies, political forecasts can be the ➢ The Internet has changed the nature of
most important part of an external audit. opportunities and threats by altering the
Changes in patents, laws, antitrust life cycles of products, increasing the
legislation, tax rates, and lobbying speed of distribution, creating new
activities can affect firms significantly. products and services.
➢ To effectively capitalize on e-commerce,
• The increasing global interdependence a number of organizations are
among economies, markets, establishing two new positions in their
governments, and organizations makes it firms: Chief Information Officer (CIO)
imperative that firms consider the and Chief Technology Officer (CTO)
possible impact of political variables on
the formulation and implementation of EXAMPLES OF THE IMPACT OF WIRELESS
competitive strategies. TECHNOLOGY
1. Airlines – Many airlines now offer
SOME POLITICAL, GOVERNMENTAL, AND wireless technology in flight.
LEGAL VARIABLES 2. Automotive – Vehicles are becoming
❑ Governmental regulations or wireless.
deregulations 3. Banking – Visa sends text message alerts
❑ Changes in Tax Laws after unusual transactions.
❑ Specil tariffs 4. Education – Many secondary ( and even
❑ Changes in patent laws college) students may use smart phones
❑ Number of patents for math because research shows this to
❑ Environmental protection laws be greatly helpful.
❑ Legislations on equal 5. Health Care – Patients use mobile
employment devices to monitor their own health,
❑ Lobbying activities such as calories consumed.
❑ Political conditions in foreign 6. Politics – President Obama won the
countries election partly by mobilizing Facebook
➢ This trend reflects the growing and Myspace users, revolutionizing
importance of information technology political campaigns. Obama announced
(IT) in strategic management his vice presidential selection of Joe
Biden by a text message.
 7. Publishing – e-books are increasingly • Developed by Michael Porter
available. • Poster’s model aims to enable managers
not only to understand their industry
COMPETITIVE FORCES AND FIRM’S environment but also to shape their
STRATEGY: firm’s strategy.
the five forces model • As a rule of thumb, the stronger the five
❖ Collecting and evaluating information forces, the lower the industry’s
on competitors is essential for successful potential-making the industry less
strategy formulation. attractive to competitors.
❖ Identifying major competitors is not • The weaker the five forces, the greater
always easy because many firms have the industry’s profit potential- making
divisions that compete in different the industry more attractive
industries.
❖ Many mulyidivisional firms do not 1. Threat of entry
provide sales and profit information on • Entry barriers are obstacles that
a divisional basis for competitive determine how easily a firm can enter an
reasons. industry.
• Threats of entry is High when:
The nature of competition - Customer switching costs are low
❖ Competitiveness is closely linked with - Capital requirements are low
customer focus.
- Incumbents do not posses: Proprietary
❖ A business must be competitive because
technology and established brand
this enables it to undrtake activities
equity
central to its strategy.
• New entrants expect that incumbent will
They include:
➢ Developing customer loyalty not or cannot retaliate.
➢ Increasing sales to existing customers
➢ Enhancing the strength and value of its 2. Power of Suppliers
brand • Powerful suppliers can raise the cost of
➢ Developing new product and product production by demanding higher prices
extensions or delivering lower-quality products.
➢ Increasing market effectiveness • Supplier power is enhanced when the
supplied product is unique and
Chapter 5 differentiated.
FIVE FORCES AFFECTING COMPETITION IN
AN INDUSTRY 3. Power of Buyers
• The bargaining power of buyers
concerns the pressure buyers can put on
the margins of producers in the industry.
• Backward integration occurs when a
buyer moves upstream in the industry
value chain, into the seller’s business.
• Power of buyers is HIGH when:
- There are a few large buyers.
 - Each buyer purchases large quantities
relative to the size of a single seller. EXTERNAL FACTOR EVALUATION (EFE)
- The industry’s products are standardized MATRIX
or undifferentiated commodities. External Factor Evaluation (EFE) Matrix is a
- Buyer’s face little or no switching costs. strategy tool used to examine company’s
- Buyer’s can credibly threaten to external environment and to identify the
backward-integrate into the industry. available opportunities and threats.
1. Key External Factors
4. Threat of Substitutes When using the EFE matrix we identify the key
• The threat of substitutes is the data that external opportunities and threats that are
products or services available from affecting or might affect a company. By
outside the given industry will come analyzing the external environment with the
close to meeting the needs of current tools like PESTLE analysis, Porter’s Five Forces
customers. or Profile Matrix, the key external factors can
• Threat of substitute is hugh WHEN: be identified. The general rule is to identify as
- The substitute offers an attractive price- many key external and internal factors as
performance trade-off. possible.
- The buyer’s cost of switching to the 2. Weights
substitute is low. Each key factor should be assigned a weight
ranging from 0.0 (low importance) to 1.0 (high
5. Rivalry among existing competitors importance). The number indicates how
• The rivalry among existing competitors important the factor is if a company wants to
is HIGH when: succeed in an industry. If there were no weights
- There are many competitors in the assigned, all the factors would be equally
industry. important, which is an impossible scenario in
- The competitors are roughly of equal the real world. The sum of all the weights must
size. equal 1.0. Separate factors should not be given
- Industry growth is slow, zero, or even too much emphasis (assigning a weight of 0.30
negative. or more) because the success in an industry is
- Exit barriers are high. rarely determined by one or few factors.
- Products and services are direct 3. Ratings
substitutes. The ratings in external matrix refer to how
effectively company’s current strategy
THE STRATEGIC ROLE OF COMPONENTS: responds to the opportunities and threats. The
ADDING A SIXTH FORCE numbers range from 4 to 1, where 4 means a
❑ A complement is a product, service or superior response, 3 – above average response,
competency that adds value to the 2 – average response and 1 – poor response.
original product offering when the two Ratings, as well as weights, are assigned
are used in tandem. subjectively to each factor. In our example, we
❑ A compny is a complementor to your can see that the company’s response to the
company if customers value your opportunities is rather poor, because only one
product orservice offering more when opportunity has received a rating of 3, while
they are able to combine it with the the rest have received the rating of 1. The
other company’s product or service. company is better prepared to meet the
threats, especially the first threat.
4. Weighted Score No enterprise is equally strong or weak in all
The score is the result of weight multiplied by areas. Example: LG Electronics is known for
rating. Each key factor must receive a score. excellent appliance production and product
Total weighted score is simply the sum of all design; Procter & Gamble is known for superb
individual weighted scores. The firm can receive marketing
the same total score from 1 to 4 in both
matrices. The total score of 2.5 is an average
score. In external evaluation a low total score Figure 1: Creating a Strategic Fit to
indicates that company’s strategies aren’t well Leverage a Firm’s Internal Strenghts to
designed to meet the opportunities and defend exploit external opportunities
against threats. In internal evaluation a low
score indicates that the company is weak
against its competitors.

COMPETITIVE PROFILE MATRIX (CPM)

Competitive profile matrix is an essential
strategic management tool to compare the
firm with the major players of the industry.
Competitive profile matrix show the clear
picture to the firm about their strong points ASSESSMENT OF THE FIRMS RESOURCES
and weak points relative to their competitors. Resources – are assets such as cash, buildings,
or intellectual property that a company can
The benefits to using Competitive Profile draw on when crafting and executing a
Matrix (CPM) for rivals analysis are: strategy.
➢ The same factors are used to compare
the firms. This makes the comparison Resources can either be:
more accurate Tangible Resources
➢ The analysis displays the information on Intangible Resources
a matrix, which makes it easy to
compare the companies visually Capabilities – are the organizational and
➢ The results of the matrix facilitate managerial skills necessary to orchestrate a
decision-making. Companies can easily diverse set of resources and to deploy them
decide which areas they should strategically.
strengthen, protect or what strategies
they should pursue Activities – enable firms to add value by
CHAPTER 6 transforming inputs into goods or services.
The Internal Assessment
Core Competencies – are unique strengths,
Nature of an Internal Audit embedded deep within a firm, that allow a firm
Basis for objectives and strategies to differentiate its products and sources from
Internal strengths/weaknesses those of its rivals, creating a higher value for
External opportunities/threats the customer or offering products and services
Clear statement of mission of comparable value at lower cost.
All organizations have strengths and
weaknesses in the functional areas of business. KEY INTERNAL FORCES
➢ For different types of organizations such 2. Human resources - include all employees,
as hospitals, universities, and government training, experience, intelligence, skills,
agencies, the functional business areas knowledge, abilities
differ. 3. Organizational resources - include firm
➢ Functional areas of a university can structures, planning processes, information
include athletic programs, placement system, patents, trademark, copyrights,
services, fundraising, academic research,
databases, etc
counseling and intramural programs.
DISTINCTIVE COMPETENCIES
➢ A firm’s strengths that cannot be easily
➢Empirical Indicators – three
matched or imitated by competitors.
characteristics of resources enable a firm
➢ Building competitive advantages involves
taking advantage of distinctive to implement strategies that improve its
competencies efficiency and effectiveness and lead to
➢ Strategies are designed to improve on a sustainable competitive advantage
firm’s weaknesses, turning them into • Rare
strengths---- and maybe even into • Hard to imitate
distinctive competencies • Not easily substitutable

The more a resources(s) is rare, non-imitable,

THE PROCESS OF PERFORMING AN
INTERNAL AUDIT and non- substitutable, the stronger a firm’s
➢ Closely parallels the process of competitive advantage will be and the longer
performing an external audit will it last.
information from:
• Management
• Marketing DOMESTIC versus FOREIGN CULTURES
• Finance/accounting In Japan – business relations operate within
• Production/operations the context of “Wa”, which stresses social
• Research & Development harmony and group cohesion.
• Management Information Systems
communication maybe the most important In China – business behavior revolves around
word in management “guanxi”-or personal relations.

Resource Based View (RBV) In Korea – “inhwa” – or harmony based on

➢Approach to Competitive Advantage respect of hierarchical relationships, including
- Internal resources are more obedience to authority.
important than external factors in
achieving and sustaining competitive
advantage
✓ Three All Encompassing Categories
1. Physical resources –include all plant &
equipment, location, technology, raw
materials, machines
 5. DISTRIBUTION – includes warehousing,
distribution channels, distribution
coverage, retail site locations, sales
territories, inventory levels and locations,
transportation carriers, wholesaling, and
retailing.
6. MARKETING RESEARCH – is the
systematic gathering, recording, and
analyzing of data about problems
relating to the marketing of goods and
services.
7. OPPORTUNITY ANALYSIS – involves
MARKETING
assessing the costs, benefits, and risks
Customer Needs/Wants for Products/Services
associated with marketing decisions.
1. Defining
THREE STEPS IN COST/BENEFIT ANALYSIS:
2. Anticipating
1. Compute the total costs associated with
3. Creating
a decision
4. Fulfilling
2. Estimate the total benefits from the
Marketing functions
decision
1. CUSTOMER ANALYSIS – the
3. Compare the total costs with the total
examination and evaluation of consumer
benefits
needs, desires and wants—involves
administering surveys, analyzing
consumer information, evaluating
market positioning strategies,
developing customer profiles and
determining optimal market
segmentation strategies.
2. SELLING- includes many marketing
strategies such as advertising, sales
promotion, publicity, personal selling,
sales force management, customer
relations and dealer relations.
3. PRODUCT AND SERVICE PLANNING –
activities such as test marketing; product Five Types of Financial Ratios:
and brand positioning; devising 1. Liquidity Ratios – measures a firm’s
warranties; packaging, determining ability to meet maturing short-term
product options, product features, obligations.
product styles and product quality, 2. Leverage ratios – measure the extent to
deleting old products; and providing for which a firm has been financed by debt.
customer service. 3. Activity Ratios –measure how effectively
4. PRICING – Five major stakeholders a firm is using its resources.
affect pricing decisions: consumers, 4. Profitability ratios – measure
governments, suppliers, distributors, and management’s overall effectiveness as
competitors.
 shown by returns generated on sales all activities undertaken to develop and
and investments. market a product or services yields value.
5. Growth ratios – measures the firm’s ➢ VCA refers to a process whereby a firm
ability to maintain its economic position determines the costs associated with
in the growth of the economy and organizational activities from purchasing
industry 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.

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.

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