CHAPTER 1 :

BASIC CONCEPTS OF
MANAGEMENT

STRATEGIC

Lopez, Louise Jean

Gallano, Ma.Claire
Rodriguez, Renel

LEARNING OBJECTIVES :
Understand the benefits of strategic management
Explain how globalization and environmental
sustainability influence strategic management
Understand the basic model of strategic management
and its components
Identify some common triggering events that act as
stimuli for strategic change
Understand strategic decision-making modes
Use the strategic audit as a method of analyzing
corporate functions and activities

STUDY OF STRATEGIC MANAGEMENT

Strategic Management
a set of managerial decisions and actions
that determines the long-run performance
of a corporation

Includes :

Internal and external environment scanning

Strategy formulation
Strategy implementation
Evaluation and control

BASIC MODEL OF STRATEGIC MANAGEMENT

Environmental scanning

the monitoring, evaluating and disseminating of information

from the external and internal environments to key people
within the organization
SWOT analysis

BASIC MODEL OF STRATEGIC MANAGEMENT

Strategy formulation

process of investigation, analysis and decision making that

provides the company with the criteria for attaining a
competitive advantage
includes defining the competitive advantages of the business
(Strategy), crafting the corporate mission, specifying
achievable objectives and setting policy guidelines.

BASIC MODEL OF STRATEGIC MANAGEMENT

Strategy implementation

a process by which strategies and policies are put into action

through the development of programs, budgets and
procedures

BASIC MODEL OF STRATEGIC MANAGEMENT

Evaluation and control

a process in which corporate activities and performance

results are monitored so that actual performance can be
compared with desired performance

STRATEGIC MANAGEMENT MODEL

BENEFITS OF STRATEGIC MANAGEMENT

The attainment of an appropriate match, or fit,
between an organizations environment and its strategy,
structure and processes has positive effects on the
organizations performance.
Strategic planning becomes increasingly important as
the environment becomes more unstable.
Clearer sense of strategic vision for the firm
Sharper focus on what is strategically important
Improved understanding of a rapidly changing
environment

IMPACT OF GLOBALIZATION

Globalization
the integrated internationalization of markets and
corporations
has changed the way modern corporations do business

IMPACT OF INNOVATION

Innovation
describes new products, services, methods and
organizational approaches that allow the business to
achieve extraordinary returns

Innovation is the implementation of potential

innovations that truly drives businesses to be
remarkable.

IMPACT OF SUSTAINABILITY

Sustainability
refers to the use of business practices to
manage the triple bottom line.

The triple bottom line involves:

1.
the management of traditional profit/loss;
2.
the management of the companys social
responsibility; and
3.
the management of its environmental responsibility.

THEORIES OF ORGANIZATIONAL ADAPTATION

Population ecology
once an organization is successfully established in a particular
environmental niche, it is unable to adapt to changing
conditions
Institution theory
organizations can and do adapt to changing conditions by
imitating other successful organizations
Strategic choice perspective
not only do organizations adapt to a changing environment, but
they also have the opportunity and power to reshape their
environment
Organizational learning theory
an organization adjusts defensively to a changing environment
and uses knowledge offensively to improve the fit between
itself and its environment

BASIC MODEL OF STRATEGIC MANAGEMENT

Mission

Vision

the purpose or reason for the organizations existence

describes what the organization would like to become

Objectives

the end results of planned activity

BASIC MODEL OF STRATEGIC MANAGEMENT

Strategy
forms a comprehensive master approach that states how the
corporation will achieve its mission and objectives
maximizes competitive advantage and minimizes competitive
disadvantage
corporate, business, functional

BASIC MODEL OF STRATEGIC MANAGEMENT

Policy

Strategy implementation

a broad guideline for decision making that links the

formulation of a strategy with its implementation
a process by which strategies and policies are put into action
through the development of programs, budgets and
procedures

Evaluation and control

a process in which corporate activities and performance

results are monitored so that actual performance can be
compared with desired performance

BASIC MODEL OF STRATEGIC MANAGEMENT

Performance
the end result of organizational activities
includes the actual outcomes of the strategic management
process

Feedback/Learning process

revise or correct decisions based on performance

STRATEGIC DECISION MAKING

Strategic decisions

deal with the long-term future of an entire organization and

have three characteristics:

Rare
Consequential
Directive

STRATEGIC DECISION MAKING

Rare

Consequential

Strategic decisions are unusual and typically

have no precedent to follow.
Strategic decisions commit substantial
resources and demand a great deal of
commitment from people at all levels.

Directive

Strategic decisions set precedents for lesser

decisions and future actions throughout an
organization

INITIATION OF STRATEGY
Triggering Events:- A triggering event is something that acts
as stimulus of change of strategy. Some triggering events
are: New CEO : New CEO cuts through the veil of
complacency and forces people to question very reason
for companies existence.
External intervention : The bank may refuse to approve
the loan. A customer complain about a serious product
defect.
Threat of change in ownership.
Performance gap.

STRATEGIC DECISION MAKING

The distinguished characteristic of SM is its emphasis on
strategic decision making.
As organizations grow and become complex, hence
decision making becomes more difficult.
What makes a decision strategic?
- Strategic decision deals with long run future
of the entire organization and have three
characteristics:

It must be rare
Consequential
Directive

MINTZBERGZ MODEL OF STRATEGIC DECISION MAKING

Entrepreneurial mode:- Strategy is made by one powerful

individual.
Adaptive mode:- sometimes referred to as mudding through
(reactive solution to existing problem) rather than proactive
approach to new opportunities.
Planning mode:- it involves systematic gathering of
appropriate information for situation analysis, generation of
number of alternatives and selecting most appropriate one.
Logical incrementalism:- Proposed by Quinn, top
management has a clear idea of corporations mission and
objectives. It chooses to use an interactive process for
probing future, experiment and learn from incremental
commitment.

CHAPTER 2:
CORPORATE GOVERNANCE

Rivera, Bea G.
Patulot, Jeremy Z.

CORPORATE GOVERNANCE

Is the system of rules, practices and processes

by which a company is directed and controlled.

Good Board Practice

Control Environment
Transparent Disclosure
Well Defined Shareholder
Board Commitment

Accountability

Transparency

Regulatory
Framework

ELEMENTS OF CORPORATE
GOVERNANCE

Business Ethics & Social

Responsibility

Administrative Structu

A board of Directors is a group of individuals that are elected

as, or elected to act as, representatives of the stockholders to
establish corporate management related policies and to make
decisions on major company issues.

The Board of Directors consists of 13 members,

including:

3 independent directors;
3 executive directors with 1 CEO;
7 non-executive directors

 THE ROLE & RESPONSIBILITIES OF THE BOARD OF

DIRECTORS IN CORPORATE GOVERNANCE

A Corporation is a mechanism established to

allow dfferent parties to contribute capital,
expertise, and labor for their mutual benefit.

o
The Board of directors has an obligations to
approve all decisions that might affect the long-run
performance of the corporation.

ROLES OF BOARD DIRECTORS:

Establish vision, mission and values

Set strategy and structure

Exercise accountability to shareholders and

be responsible to relevant stakeholders

Responsibilities of board directors:

1. Setting corporate strategy, overall direction,
mission, vision.
2. Hiring and Firing the CEO and top management.

3. Controlling, Monitoring, or supervising to management.

4. Reviewing and approving the use of resources.
5. Caring for shareholders interests.

Composition of the Board of Directors

The authority and responsibilities of the
Board of directors are described in the
internal rules of the board of directors.

SARBANES-OXLEY ACT

The Sarbanes-Oxley Act of 2002 (SOX) is an act passed by U.S.

Congress in 2002 to protect investors from the possibility of
fraudulent accounting activities by corporations
The SOX Act mandated strict reforms to improve financial
disclosures from corporations and prevent accounting fraud

5
IMPACT OF SOX ON CORPORATE GOVERNANCE IN U.S.

This act was designed to protect shareholders from the

excesses and failed oversight at Enron, Tyco, WorldCom, etc.
among other prominent firms
Several key elements of SOX were designed to formalized
greater board independence and over-sight

TRENDS IN CORPORATE GOVERNANCE

Boards are getting more involved not only in reviewing and
evaluating company strategy but also in shaping it.
Institutional investors, such as pension funds, mutual funds
and insurance companies, improve corporate performance
Shareholders are demanding that directors and top managers
own more than token amounts of stock in the corporation
Women and minorities are being increasingly represented on
boards

EXECUTIVE LEADERSHIP AND STRATEGIC VISION

Executive Leadership is the directing of activities toward the

accomplishment of corporate objectives.
Strategic Vision is a description of what the company is capable
of becoming

The importance of executive leadership is illustrated by Steve

Reinemund, past-CEO of PepsiCo:

A leaders job is to define overall

direction and motivate others to get
there