strategic analysis and decision making a strategic management model

1. STRATEGIC ANALYSIS AND DECISION MAKING:
A STRATEGIC MANAGEMENT MODEL
Strategic analysis and decision making are
crucial components of strategic management.
A strategic management model involves
several key steps that organizations typically
follow to formulate, implement, and evaluate
their strategies.

2. Mission and Vision Development:
• Mission Statement: Define the
organization's purpose, values, and
core principles.
• Vision Statement: Envision the
future state the organization aims
to achieve.

3. External Analysis:
• PESTEL Analysis: Assess external factors including
political, economic, social, technological,
environmental, and legal influences.
PESTEL Analysis
PESTEL analysis is a strategic management tool that helps
organizations understand and analyze the macro-
environmental factors that can impact their business
environment. The acronym "PESTEL" stands for Political,
Economic, Social, Technological, Environmental, and Legal
factors. Here's an overview of each component:

4. Political Factors:
• This involves analyzing the influence of
government policies, stability, and political
institutions on the business.
• Examples include government stability, tax
policies, trade tariffs, labor laws, and
political stability.

5. Economic Factors:
• This focuses on the economic conditions
and trends that can impact the business
environment.
• Examples include inflation rates, exchange
rates, economic growth, interest rates, and
unemployment rates.

6. Social Factors:
• This entails examining the societal and
cultural factors that can affect the
business.
• Examples include demographics,
cultural attitudes, lifestyle changes,
social values, and consumer behavior.

7. Technological Factors:
• This involves assessing the impact of
technology on the industry and business
operations.
• Examples include innovations, automation,
research and development, technological
infrastructure, and the rate of technological
change.

8. Environmental Factors:
• This considers the influence of
environmental factors and sustainability on
the business.
• Examples include climate change,
environmental regulations, sustainability
practices, and the company's impact on the
environment.

9. Legal Factors:
• This involves analyzing the legal framework
and regulations that affect the business.
• Examples include labor laws, health and
safety regulations, intellectual property
laws, and industry-specific regulations.

10. Key Points:
• PESTEL analysis helps organizations identify and
understand external factors that may impact their
operations.
• It provides a comprehensive view of the external
environment and helps in strategic planning.
• The analysis can be used to anticipate changes, identify
opportunities, and mitigate potential threats.
• PESTEL is often used in conjunction with other strategic
analysis tools to form a holistic understanding of the
business environment.

11. By systematically analyzing these factors,
organizations can make informed
decisions, adapt to changes, and develop
strategies that align with the external
environment.

12. • Industry Analysis: Evaluate the
competitive forces and dynamics
within the industry using
frameworks like Porter's Five Forces.

13. Porter's Five Forces
Porter's Five Forces is a framework developed
by Michael E. Porter that helps analyze the
competitive forces within an industry. It
provides a structured approach to
understanding the competitive dynamics and
attractiveness of an industry. Here are the five
forces in Porter's model:

14. 1. Threat of New Entrants:
• Definition: This force assesses the degree to
which new companies can enter the industry
and compete with existing businesses.
• Factors to Consider:
• Barriers to entry (e.g., capital requirements,
economies of scale, brand loyalty)
• Access to distribution channels
• Government regulations

15. 2. Bargaining Power of Buyers:
• Definition: This force examines the power that
buyers (customers) have over the industry,
particularly in terms of negotiating prices and
obtaining favorable terms.
• Factors to Consider:
• Volume of purchases
• Standardization of products
• Availability of alternatives
• Switching costs for buyers

16. 3. Bargaining Power of Suppliers:
• Definition: This force evaluates the influence
that suppliers have on the industry, including
their ability to control prices, terms, and the
availability of inputs.
• Factors to Consider:
• Concentration of suppliers
• Uniqueness of inputs
• Availability of substitute inputs
• Supplier's brand strength

17. 4. Threat of Substitute Products or Services:b
• Definition: This force examines the potential
impact of alternative products or services that
could replace or fulfill the same function as
those offered by businesses in the industry.
• Factors to Consider:
• Availability of substitutes
• Price-performance trade-off of substitutes
• Switching costs for buyers

18. Intensity of Competitive Rivalry:
• Definition: This force assesses the level of
competition among existing firms in the
industry and its impact on profitability.
• Factors to Consider:
• Number of competitors
• Rate of industry growth
• Differentiation among competitors
• Exit barriers

19. Key Insights:
• A high level of competition, strong buyer power, and the
presence of substitutes can reduce industry attractiveness.
• Barriers to entry, supplier power, and the absence of close
substitutes can enhance industry attractiveness.
• The goal is to identify the sources of competitive pressure
and formulate strategies to mitigate or leverage them.
By analyzing these five forces, businesses can develop a
strategic understanding of their industry's competitive
dynamics and formulate effective strategies to position
themselves advantageously.

20. Internal Analysis:
• SWOT Analysis: Identify the organization's
strengths, weaknesses, opportunities, and
threats.
• Resource and Capability Assessment:
Evaluate internal resources, competencies,
and capabilities.

21. SWOT Analysis: Identify the organization's strengths,
weaknesses, opportunities, and threats.
SWOT Analysis is a strategic planning tool used to
assess the internal and external factors affecting the
performance and competitiveness of an organization.
Internal analysis, one of the components of SWOT,
focuses specifically on evaluating the internal
strengths and weaknesses of the organization.

22. Here's how internal analysis works within the context of SWOT:
Strengths (S): Strengths are the internal attributes and
resources that give an organization a competitive advantage
in its industry or market. These can include:
• Strong brand reputation and recognition
• Unique products or services
• Skilled and talented workforce
• Efficient internal processes and operations
• Superior technology or proprietary innovations
• Financial stability and resources
• Strong distribution channels or market presence

23. Weaknesses (W): Weaknesses represent the internal
factors that may hinder the organization's ability to
achieve its objectives or compete effectively in the
market. These can include:
• Lack of brand recognition or reputation
• Inferior product quality or performance
• Inadequate resources or funding
• Outdated technology or infrastructure
• Poorly trained or unmotivated workforce
• Inefficient internal processes or systems
• Limited market reach or distribution channels

24. Internal analysis involves identifying and assessing
these strengths and weaknesses through various
methods such as internal audits, performance
evaluations, employee feedback, and benchmarking
against industry standards. Understanding these
internal factors is essential for developing strategies
that leverage strengths and address weaknesses to
improve overall organizational performance.

25. The insights gained from internal analysis are
then used to inform strategic decision-making
processes, resource allocation, and the
development of action plans to capitalize on
strengths and mitigate weaknesses. Internal
analysis is often conducted in conjunction with
external analysis (opportunities and threats) to
provide a comprehensive understanding of the
organization's strategic position and competitive
landscape.

26. • Resource and Capability Assessment: Evaluate
internal resources, competencies, and capabilities.
Here's how Resource and Capability Assessment
works within the context of Internal Analysis:
1. 1. Internal Resources: These are the tangible and
intangible assets that the organization possesses.
They include financial resources, physical assets,
human capital, intellectual property, brand reputation,
and organizational culture. Assessing internal
resources involves identifying what the organization
has at its disposal to achieve its objectives.

27. 2. Competencies:
Competencies refer to the specific skills,
knowledge, and capabilities that enable the
organization to perform certain tasks or
activities better than its competitors. This can
include technical expertise, industry experience,
innovation capabilities, customer service
excellence, and operational efficiency.

28. 3. Capabilities:
Capabilities are the combination of resources and
competencies that enable the organization to deliver
value to its stakeholders and achieve its strategic
goals. They represent the organization's capacity to
effectively utilize its resources and competencies to
create competitive advantages in the marketplace.

29. During Resource and Capability Assessment,
organizations typically engage in several activities:
• Inventory of Resources: Identify and catalog all
the resources available within the organization,
including both tangible and intangible assets.
• Skills and Competency Assessment: Evaluate the
skills, knowledge, and expertise of the workforce
to determine areas of strength and areas needing
improvement.

30. • Core Competency Identification: Identify the core
competencies that differentiate the organization from its
competitors and contribute significantly to its competitive
advantage.
• Resource-Based View (RBV) Analysis: Apply the Resource-
Based View framework to assess how the organization's
unique resources and capabilities contribute to its sustainable
competitive advantage.
• SWOT Analysis Integration: Integrate the findings from
Resource and Capability Assessment into the broader SWOT
analysis to understand how internal strengths and weaknesses
align with external opportunities and threats.

31. By conducting Resource and Capability Assessment,
organizations gain insights into their internal
strengths and weaknesses, which can inform strategic
decision-making, resource allocation, and the
development of competitive strategies. This analysis
helps organizations leverage their core competencies
and address areas of weakness to enhance overall
performance and achieve strategic objectives.

32. 4. Strategy Formulation:
• Strategy Development: Based on the
analysis, formulate strategies that align with
the organization's mission and leverage its
strengths.
• Business-Level Strategies: Choose strategies
for competing in specific markets or
industries.

33. 5. Strategy Implementation:
• Action Plans: Develop detailed plans to execute
the chosen strategies.
• Organizational Structure: Align the
organizational structure, processes, and systems
with the chosen strategies.
• Resource Allocation: Allocate resources
effectively to support strategy implementation.

34. 6. Strategic Control:
• Performance Measurement: Establish key
performance indicators (KPIs) to monitor
progress.
• Feedback and Adjustment: Regularly review
performance against targets and adjust
strategies if necessary.

35. 7. Strategic Evaluation:
• Benchmarking: Compare the organization's
performance with industry benchmarks and
competitors.
• Strategic Review: Periodically assess the
relevance and effectiveness of existing
strategies.

36. 8. Decision Making:
• Top Management Decisions: Involve top
leadership in critical decisions related to strategy
formulation and implementation.
• Data-Driven Decision Making: Use data and
analytics to inform strategic decisions.

37. 9. Adaptation and Innovation:
• Continuous Improvement: Encourage a culture
of continuous improvement to adapt to
changing circumstances.
• Innovation: Foster innovation to stay
competitive and explore new opportunities.

38. 10. Communication:
• Internal and External Communication:
Communicate the strategy and its progress to
internal and external stakeholders.
• Stakeholder Engagement: Engage key
stakeholders in the strategic process.

39. 11. Learning and Development:
• Organizational Learning: Encourage learning from
both successes and failures.
• Employee Development: Invest in employee
development to build necessary skills.

40. This model provides a structured approach for
organizations to analyze their internal and
external environments, formulate effective
strategies, implement them, and continually
adapt to changes. It emphasizes the
importance of strategic control, evaluation, and
learning to enhance overall strategic
management effectiveness.

41. KINDS OF STRATEGIC
MANAGEMENT
Strategic management involves the formulation and
implementation of strategies to achieve an
organization's objectives. There are several kinds or
approaches to strategic management, each offering a
unique perspective on how to navigate the
complexities of business strategy. Here are some key
kinds of strategic management:

42. 1.Classical Strategic Management:
• Focus: Long-term planning and stability.
• Characteristics: Emphasizes formal strategic
planning, hierarchical decision-making, and a
systematic approach to strategy development.

43. An example of a company in the Philippines
that has traditionally followed a classical
strategic management approach is Ayala
Corporation. Ayala Corporation is one of the
oldest and largest conglomerates in the
Philippines, with diversified business interests
spanning real estate, financial services,
telecommunications, water infrastructure, and
more.

44. 2. Environmental Strategic
Management:
Focus: External factors and adaptation to the
environment.
Characteristics: Recognizes the importance of
external factors, including economic, social, and
technological changes. Adaptation to the external
environment is a central theme.

45. An example of a company in the Philippines
that demonstrates Environmental Strategic
Management is Energy Development
Corporation (EDC). EDC is one of the
largest geothermal energy producers in the
world and operates geothermal, wind, and
solar assets in the Philippines.

46. 3. Resource-Based View (RBV):
• Focus: Internal resources and capabilities.
• Characteristics: Emphasizes leveraging
unique organizational resources and
capabilities as a source of competitive
advantage. The organization's internal
strengths are critical for success.

47. An example of a company in the
Philippines that exemplifies the
Resource-Based View (RBV) strategic
management approach is Jollibee
Foods Corporation.

48. 4. SWOT Analysis:
• Focus: Internal strengths and weaknesses,
external opportunities and threats.
• Characteristics: Involves analyzing the
internal strengths and weaknesses of an
organization along with external
opportunities and threats to inform
strategic decisions.

49. 5. Competitive Strategy:
• Focus: Competitive advantage and industry
dynamics.
• Characteristics: Developed by Michael
Porter, this approach focuses on gaining a
competitive advantage within an industry.
It includes cost leadership, differentiation,
and focus strategies.

50. 6. Mintzberg's 10 Schools of Thought:
• Focus: Multiple perspectives on strategy.
• Characteristics: Henry Mintzberg proposed
ten schools of thought, including design,
planning, positioning, entrepreneurial,
cognitive, learning, power, cultural,
environmental, and configuration schools.

51. 7. Blue Ocean Strategy:
• Focus: Creating uncontested market space.
• Characteristics: Developed by W. Chan Kim
and Renée Mauborgne, this strategy
involves creating new markets (blue oceans)
rather than competing in existing markets
(red oceans).

52. 8. Emergent Strategy:
• Focus: Flexibility and adaptability.
• Characteristics: Recognizes that strategies
may emerge over time in response to
changing circumstances. It emphasizes
flexibility and adaptability in decision-
making.

53. 9. Scenario Planning:
• Focus: Multiple plausible futures.
• Characteristics: Involves creating multiple
scenarios of the future to anticipate and
prepare for different possible outcomes.

54. 10. Collaborative Strategy:
• Focus: Cooperation and alliances.
• Characteristics: Emphasizes collaboration
and partnerships with other organizations
to achieve mutual goals.