CHAPTER 5

CRAFTING A STRATEGY THE QUEST FOR COMPETITIVE ADVANTAGE

At the end of the chapter, the learner should be able to:

Objectives:
1. discuss the value of establishing long-term objectives,
2. 2 identify the 16 types of business strategies;
3. identify numerous examples of organizations pursuing different types of
strategies,
4. discuss guidelines when particular strategies are most appropriate to
pursue;
5. describe strategic management in nonprofit governmental, and small
organizations;
6. discuss the Balanced Scorecard;
7. compare and contrast financial with strategic objectives;
8. discuss the levels of strategies in large versus small firms;
9. explain the First Mover Advantages concept;
10. discuss the recent trends in outsourcing; and
11. discuss strategies for competing in turbulent, high velocity markets.

In the tourism and hospitality industry, the success or failure of our businesses and
destinations depends on service. This chapter focuses on the primary options a company has in
a particular in crafting a strategy to compete successfully in a particular industry and secure an
attractive market position. The strategy-making challenge is to stitch together a winning
strategy, one that fits industry and competitive conditions, capitalizes on the company's
resources and competitive capabilities, builds a sustainable competitive advantage, and boosts
company performance.
Next on a company's menu of strategic choices are the various strategic actions it can
take to complement its choice of a basic competitive strategy:

FOOD TOURISM INDUSTRY CLUSTER

1. What use to make of strategic alliances and collaborative partnerships?
2. What use to make of mergers and acquisitions.
3. Whether to integrate backward or forward into more stages of the industry value.
4. Whether to outsource certain value chain activities or perform them in-house.
5. Whether and when to employ offensive and defensive moves.
6. What Web site strategy to employ.

A. Basic Competitive Strategy Options

 Overall low-cost provider strategy-striving to achieve lower overall costs than rivals
appealing to a broad spectrum of customers, usually by underpricing rivals
 Broad differentiation strategy-seeking to differentiate the company's product offering
from rivals in ways that will appeal to a broad spectrum of buyers.
 Best-cost provider strategy giving customers more value for the money by incorporating
good to vice attributes at a lower cost than rivals, the target is to have the lowest (best)
costs and prices compared to rivals offering products services with comparable
attributes
 A focused for market niche) strategy based on low costs-concentrating on a narrow
buyer segment and outcompeting rivals by having lower costs than rivals and thus being
able to serve niche members at a lower price.
  A focused for market niche) strategy based on differentiation-concentrating on a narrow
buyer segment and outcompeting rivals by offering niche members customized attributes
that meet their taste and requirements better than rivals product/services.

B. Complementary Strategic Options

1. Collaborative strategies: strategic alliances and partnerships
2. 2 Merger and acquisition strategies Vertical Integration
3. Strategies operating across more stages of the industry value chain
4. Outsourcing strategies
5. Offensive strategies-improving market position and building competitive advantage
6. Defensive strategies-protecting market position and competitive advantage
7. Web site strategies which one to employ

C. Choosing appropriate functional area strategies to support the above strategic

choices
D. Timing a company's strategic moves in the marketplace
1. First-mover?
2. Fast-follower?
3. Late-mover?
A company competing in a particular industry or marketplace has a varied menu of
strategy options for seeking and securing a competitive advantage. Once a company has
decided which of the five basic competitive strategies to employ in its quest for competitive
advantage, then it must decide whether to supplement its choice of a basic competitive strategy
approach with strategic actions relating to the complementary strategic options.
Once all the higher-level strategic choices have been made, company managers can
turn to the task of crafting functional and operating-level strategies to flesh out the details of the
company's overall business and competitive strategy.
The timing of strategic moves also has relevance in the quest for competitive advantage.
Because of the competitive importance that is sometimes associated with when a strategic
move made, company managers are obligated to carefully consider the advantages or
disadvantages that attach to being a first mover versus a fast-follower versus a wait-and-see
late-mover. At the end of the day, though the proper objective of a fast-mover is that of being
the first competitor to put together the precise combination of features, customer value, and
sound revenue/cost/profit economics that puts it ahead of the pack in capturing an attractive
market opportunity. Sometimes a company that first unlocks a profitable market opportunity a
the first-mover and sometimes it is not; but the company that comes up with the key is surely
the smart mover.
A strategy's success is determine not only by the firm's initial competitive actions, but al
ell it anticipates competitors responses to them and by how well the firm responds to its
competitors

Some important definitions:

Firms operating in the same market with similar products targeting similar customer are
competitors.
Competitive rivalry is the ongoing set of competitive actions and competitive responses
occurring between rivals as they compete against each other for an advantageous market
position.
Competitive behaviour r the set the firm takes to build or end its competitive advantages and to
improve its market position
Firms competing against each other several product/geographic markets are in multimarket
competition.
All competitive behavior that is, the total set of actions and responses taken by all firms
competing within a market is called competitive dynamics.
Firms must learn to compete differently if they are to achieve strategic competitiveness

To provide an idea of what this means, new ways of competing may include the
following:
 Bringing new goods and services to market more quickly.
 The use of new technologies (e-g.. Amazon.com).
 Diversifying the product line (e.g., Barnes and Noble into music as a catalyst for
growth).
 Shifting product/service emphasis (e.g., a company's focus on accessory sales)
 Consolidation (e.g.. the merger of Hewlett Packard and Compaq).
 Combining online selling with physical stores (eg.. Sears's acquisition of Lands'
End).
The focus of this chapter is on competitive dynamics, the series of competitive actions
and competitive responses among firms competing within a particular industry This refers to the
total set of actions and responses taken by all of the firms competing in a given market.
Expanding geographic scope contributes to the increasing intensity in competitive rivalry
among firms That is, firms trying to predict competitive rivalry should anticipate that they will
meet a larger number of increasingly diverse competitors in the future; thus, competitive rivalry.

I. LONG-TERM OBJECTIVES
Long-term objectives represent the results expected from pursuing certain strategies.
Strategies represent the actions to be taken to accomplish long-term objectives. The timeframe
for objectives and strategies should be consistent.

A. The Nature of Long-Term Objectives

1. Objectives should be quantitative, measurable, realistic, understandable, challenging,
hierarchical obtainable, and congruent among organizational units. Each objective also should
be associated with a timeline.
a. Objectives are commonly stated in terms such as growth in assets, growth in
sales, profitability, market share, degree and nature of diversification, and so on.
b. Long-term objectives are needed at the corporate, divisional, and functional
levels in organization. They are an important measure of managerial
performance.
B. Financial objectives
1. Financial objectives include ones associated with growth in revenues, growth in
earnings, higher Financial versus Strategic Objectives dividends, larger profit margins, greater
return on investment, higher earnings per share, a rising stock price, improved cash flow, etc.
2. Strategic objectives includes ones such as larger market share, quicker on ne delivery
than rivals, quicker design-to-market times than rivals, lower costs than rivals higher product
quality than rivals, wider geographic coverage than rivals, etc.
3. Oftentimes there is a tradeoff between financial and strategic objectives mud that
crucial have the made Ultimately, the best way to sustain competitive advantage over the long
run is to relentlessly pursue objectives that strengthen a firm`s business over position over
rivals.
C. Not Managing by Objectives
1. Strategists should avoid the following alternative`s ways of ‘’ not managing by
objectives’’.
a. Managing by extrapolation
b. Managing by crisis
c. Managing by subjective
d. Managing by hope.
II. THE BALANCED SCORECARD

1. The balanced scorecard is a strategy evaluation and control technique that derives its
name from perceived need of from to "balance" financial measures, which are oftentimes
used exclusively strategy evaluation and control with non-financial measures such as
product quality and out
2. A balanced scorecard for a firm is simply a fisting of all key objectives to work towards
along with an associated time dimension of when each objective is to be accomplished,
as well as a primary responsibility or contact person, department, or division for each
objective.

III. TYPES OF STRATEGIES

A. A Comprehensive Strategic Model provides a conceptual basis for applying

strategic management
1. Alternative strategies that an enterprise could pursue can be categorized into
11 integration, backward integration, horizontal integration, market penetration,
market development, product development, related diversification, unrelated
diversification, retrenchment, dive liquidation. Each alternative strategy has
countless variations. For example, market penetration include adding
salespersons, increasing advertising expenditures, couponing, and using
similar a to increase market share in a given geographic area.
2. Many, if not most, organizations simultaneously pursue a combination of two or
more strategies combination strategy can be exceptionally risky if carried too
far.

B. Levels of Strategies

1. Levels of strategies for large and small companies can be illustrated as follow:
a. In large firms, there are four levels of strategies corporate, divisional,
functional, and operation
c. In small firms, there are three levels: company, functional, and operational.

IV. INTEGRATION STRATEGIES

Forward, backward, and horizontal integration are sometimes referred to as vertical

integration strategies which allow a firm to gain control over distributors, suppliers,
and/or competitors.

A .Forward Integration

1. Forward integration involves gaining ownership or increased control over

distributors or retails
2. Franchising is an effective means of implementing forward integration.
There is a growing b franchisees to buy out their part of the business
from their franchiser
3. Six guidelines when forward integration may be an especially effective
strategy
a. When an organization's present distributors are especially expensive or unreliable, or
incapable of meeting the firm's distribution needs.
b. When the availability of quality distributors is so limited as to offer a competitive
advantage to those firms that integrate forward.
c. When an organization competes in an industry that is growing and expected to
continue to grow markedly
d. When an organization has both the capital and human resources needed to manage
the new business
e. When the advantages of stable production are particularly high
f. When present distributors have high profit margins.

B.Backward Integration
 1. Backward integration is a strategy of seeking ownership or increased control of a firm's
suppliers This strategy can be especially appropriate when a firm's current suppliers are
unreliable, too costly. or cannot meet the firm's needs.
2. Some industries in the United States (such as automotive and aluminium industries are
reducing the historic pursuit of backward integration. Instead of owning their suppliers,
companies negotiate with several outside suppliers.

a. De-integration makes sense in industries that have global sources of supply \

b. Global competition is also spurring firms to reduce their number of suppliers
and to demand higher levels of service and quality from those they keep.

3. There are seven guidelines for when backward integration may be especially effective.
a. When an organization's present suppliers are especially expensive, or
unreliable, or meeting the firm's needs for parts, components, assemblies, or
raw materials.
b. When the number of suppliers is small and the number of competitors is large
c. When an organization competes in an industry that is growing rapidly.
d. When an organization has both capital and human resources to manage the
new business of supplying its own raw materials.
e. When the advantages of stable prices are particularly important.
f. When present supplies have high profit margins.
g. When an organization needs to quickly acquire a needed resource.

C. Horizontal Integration

1. Horizontal integration refers to a strategy of seeking ownership of or increased

control over a firm's competitors. One of the most significant trends in strategic
management today is the increased use of horizontal integration as a growth
strategy. Mergers, acquisitions, and takeovers among competitors allow for
increased economies of scale and enhanced transfer of resources and
competencies
2. There are five guidelines for when horizontal integration may be an especially
effective strategy
a. When an organization can gain monopolistic characteristics.
b. When an organization competes in a growing industry.
c. When increased economies of scale provide major competitive
advantages.
d. When an organization has both the capital and human talent needed to
successfully manage an expanded organization.
e. When competitors are faltering due to lack of managerial expertise or a
need for particular resources that an organization possesses.
V. INTENSIVE STRATEGIES
Market penetration, market development, and product development are sometimes
referred to as intensive strategies because they require intensive efforts if a firm's competitive
position with existing products is to improve.

A. Market Penetration
1. A market penetration strategy seeks to increase market share for present products or
services in pre
2. Market penetration includes increasing the number of salespersons, advertising publicity
efforts or offering extensive sales promotion items markets.
3. Five guidelines for when market penetration is especially effective
a. When current markets are not saturated
b. When usage rate of current customer could be increased.
c. When market shares of major competitors have been declining while total
industry sales have been increasing
d. When the correlation between dollar sales and dollar marketing expenditures
historically has be high
 e. When increased economies of scale provide major advantages
B. Market Development
1. Market development involves introducing present products or services into new geographic
area
2. For example, Ford Motor introduced eight new vehicles in India between 2011 and 2015 to
capital on increasing demand in the fast-expanding car market.
3. Six guidelines when market development may be an effective strategy:
a. When new channels of distribution are available that are reliable, inexpensive, and of good
quality.
b. When an organization is very successful at what it does
c. When new untapped or unsaturated markets exist.
d. When an organization has the needed capital and human resources
e. When an organization has excess production capacity.
f. When an organization`s basic industry rapidly is becoming global in scope.

C. Product Development

1. Product development is a strategy that seeks increased sales by improving or modifying

present products or services, Product development usually entails large research and
development expenditures.
2. Five guidelines for when to use product development:
a. When an organization has successful products that are in the maturity stage of
the product life cycle
b. When an organization competes in an industry that is characterized by rapid
technological
c. When major competitors offer better-quality products at comparable prices.
d. When an organization competes in a high-growth industry.
e. When an organization has especially strong research and development
capabilities.

VI. DIVERSIFICATION STRATEGIES

The two general types of diversification strategies are related and unrelated.
1. Businesses are said be related when their value chains possess competitively valuable
cross-bus strategic fits.
2. Businesses are said to be unrelated when their value chains are so dissimilar that no
competitively valuable cross-business relationships exist.
3. Most companies favor related diversification strategies to capitalize on synergies as a
a. Transferring competitively valuable expertise.
b. Combining the related activities of separate businesses into a single operation to
achieve lower costs
c. Exploiting common use of a well-known brand name
d. Collaborating across businesses to create valuable resource strengths and
capacities.
4. The greatest risk of being in a single industry is having all of the firm's eggs in one basket.
However, diversification must do more than simply spend business risk across different
industries. It makes sense only when it adds to shareholder value.
A. Related Diversification
1. Six guidelines for when related diversification may be effective are identified below:
a. When an organization competes in a no-growth or slow growth industry.
b. When adding new, but related products would enhance sales of current products.
c. When an organization has a strong management team,
d. When new, but related products could be offered at competitive prices

B. Unrelated Diversification
1. An unrelated diversification strategy favors capitalizing upon a portfolio of businesses that are
capable of delivering excellent financial performance in their respective industries.
2. Ten guidelines for when unrelated diversification may be effective are identified below:
a. When revenues derived from an organization's current products or services would increase
significantly by adding the new, unrelated products.
b. When an organization competes in a highly competitive and/or no-growth industry.
c. When an organization's present channels of distribution can be used to market the new to
current customers.
d. When the new products have countercyclical sales patterns compared to an organization's
products present products.
e. When an organization's basic industry is experiencing declining annual sales and profits.
When an organization has the capital and managerial talent needed to compete.
g. When an organization has the opportunity to purchase an unrelated business that is an
attractive investment.
h. When financial synergy exists between the acquired and acquiring firms.
i. When existing markets for an organization's present products are saturated.
j. When antitrust action could be charged against an organization that historically has
concentrated on a single industry.

VII DEFENSIVE STRATEGIES

A. Retrenchment
1. Retrenchment occurs when an organization regroups through cost and asset reduction to
reverse declining sales and profits.
2. Sometimes called a turnaround or reorganizational strategy, retrenchment is designed to
fortify an marginal organization's basic distinctive competence.
3. Retrenchment can entail selling off land and buildings, pruning product lines, closing
businesses, closing obsolete factories, automating processes, reducing the number of
employees, and instituting expense control systems.
4. In some cases, bankruptcy can be an effective retrenchment strategy.
5. Historically, there were 106 public U.S companies which filed bankruptcy in 2010, less than
half the 211 that filed the prior year.

6. Five guidelines identify when retrenchment may be an especially effective strategy to pursue:
a. When an organisation has a clearly distinctive competence but has failed to meet objectives
b. When an organization is one of the weaker competitors in a given industry.
c. When an organization is plagued by inefficiency, low profitability, poor employee morals,
d. When an organization has failed to capitalize on external opportunities, minimize external
pressure from stockholders to improve performance. take advantage of internal strengths and
overcome internal weaknesses over time.
e. When an organization has grown so large so quickly that major internal reorganization is
needed.

B. Divestiture
1. Selling a division or part of an organization is called divestiture.
2. Divestiture can be used to rid an organization of businesses that are unprofitable, that require
to ma capital for further strategic acquisitions or investments. capital, or that do not fit well with
the firm's other activities.
3. Divestiture has become a very popular strategy as firms try to focus on their core strengths,
les firms have divested their unwanted or poorly performing divisions, but the glob their level of
diversification.
4. Historically recession has witnessed firms simply closing such operations. 3 Six guidelines for
when to use divestiture:
a. When an organization has pursued a retrenchment strategy and it failed to accomplish nicode
improvement.
b. When a division needs more resources to be competitive than the company can provide
c. When a division is responsible for an organization's overall poor performance.
d. When a division is a misfit with the rest of an organization.
e. When a large amount of cash is needed quickly and cannot be obtained.
f. When government antitrust action threatens an organization.

C. Liquidation
1. Selling all of a company's assets, in parts, for their tangible worth is called liquidation.
Liquidation recognition of defeat and consequently can be an emotionally difficult strategy.
2. Three guidelines of when to use liquidation:
a. When an organization has pursued both a retrenchment and a divestiture strategy and
neither has been successful.
b. When an organization's only alternative is bankruptcy.
c. When the stockholders of a firm can minimize their losses by selling assets.

VIII. MICHAEL PORTER'S FIVE GENERIC STRATEGIES

A. According to Porter, strategies allow organizations to gain competitive advantage from three
different bases cost leadership, differentiation, and focus.
1. Cost leadership emphasizes producing standardized products at a very low per unit cost for
consumer who are price-sensitive. There are two types of cost leadership strategies
a. Type 1 is a low-cost strategy that offers products to a wide range of consumers at the lowest
price available on the market
b. Type 2 is a best-value strategy that offers products to a wide range of customers at the best
price-value available on the market.
2. Type 3 is differentiations, a strategy aimed at producing products and services considered
unique b industry-wide and directed at consumers who are relatively price-insensitive.
3. Focus means producing products and services that fulfil the needs of small range.
There are two alternative types of focus strategies
a. Type 4 is a low-cost focus strategy that offers products or services to a small range (niche) off
customers at the lowest price available on the market
b. Type 5 is a best-value focus strategy that offers products to a small range of customers at the
best price-value available on the market. This is sometimes called focused differentiation
4. Porter's five strategies imply different organizational arrangements, control procedures, and
incentive systems

B. Cost Leadership Strategies (Type 1 and 2)

1. A primary reason for pursuing forward, backward, and horizontal integration strategies is to
gain low cost or best-value cost leadership benefits.
2. Striving to be the low-cost producer in an industry can be especially effective when the
market is composed of many price-sensitive buyers, when there are few ways to achieve
product differentiation, when buyers do not care much about differences from brand to brand, or
when there are a large number of buyers with significant bargaining power.
3. The basic idea behind a cost leadership strategy is to underprice competitors or offer a better
value and thereby gain market share and sales, driving some competitors out of the market
entirely.
4. To successfully employ a cost leadership strategy, firms must ensure that total costs across
the value chain are lower than that of the competition. This can be accomplished by:
a. Performing value chain activities more efficiently than competition.
b. Eliminating some cost-producing activities in the value chain.
5. Type 1 or Type 2 cost leadership strategy can be especially effective under the following
a. When price competition among rival sellers is especially vigorous.
b. When the products of rival sellers are essentially identical.
c. When there are few ways to achieve product differentiation.
d. When most buyers use the product in the same ways.
e. When buyers incur low costs in switching purchases from one seller to another
f. When buyers are large and have significant power.
g. When industry newcomers use introductory low prices.

C. Differentiation
1. Differentiation strategies offer different degrees of differentiation. Successful differiation.com
mean greater product flexibility, greater compatibility, lower costs, improved service less
maintenance, greater convenience, or more features.
2. A differentiation strategy should only be pursued after careful study of buyers' needs and
preferences.
3. Common organizational requirements for a successful differentiation strategy includes strong
coordination among R & D and marketing functions and substantial amenities to attract
scientists and creative people.
4. The most effective differentiation bases are those that are hand or expensive for rivals to
duplicate.
5. A Type 3 differentiation strategy can be especially effective under condition.
D. Focus Strategies (Type 4 and 5)
1. Focus strategies are most effective when consumers have distinctive preferences of or
requirements.
2. Risks of pursuing a focus strategy include the possibility that numerous competitors will
recognize the successful focus strategy and copy it or that consumer preferences will drift
toward the p des desired by the market as a whole
E. Strategies for Competing in Turbulent, High-Velocity Markets
1. Some industries change so fast that they are called turbulent, high-velocity markets.
Examples includes telecommunications, medical, biotechnology, pharmaceuticals, and
computer hardware and virtually all Internet-based industries
2. High-velocity has become the rule rather than the exception, even in such industries as toys,
plate banking, defense, publishing, and communication.

3. Meeting the challenge of high-velocity change presents the firm with a choice of whether to
anticipate, or lead the market in terms of its own strategies

IX. MEANS FOR ACHIEVING STRATEGIES

A. Cooperation Among Competitors
1. For collaboration between competitors to succeed, both firms must contribute something dis
but a major risk is that unintended transfers of important skills or technology may occur.
2. Information not covered in the formal agreement often gets traded in day-to-day interactions,
and give away too much information to rivals.
3. Although the idea of joining forces is not easily accepted by Americans, multinational firms
are becoming more globally cooperative, and increasing numbers of domestic firms are joining
forces with competitive foreign firms to reap mutual benefit

B. Joint Venture Partnering

1. Joint venture is a popular strategy that occurs when two or more companies form a temporary
partnership or consortium for the purpose of capitalizing on some opportunity
2. Other types of cooperative arrangements include R&D partnerships, cross-distribution
agreements, cross-licensing agreements, cross-manufacturing agreements, and joint-bidding
consortia
3. Joint ventures and cooperative arrangements are being used increasingly because they allow
companies to improve communications and networking, to globalize operations, and to minimize
risk.
4. A major reason why firms are using partnering a means to achieve strategies is globalization.
Technology also is a major reason behind the need to form strategic alliances, with the Internet
linking widely dispersed partners.
5. Joint ventures among once rival fins are commonly being sued to pursue strategies ranging
from retrenchment to market development. Although joint ventures are less risky for companies
than mergers, many alliances fail A few common problems that cause joint ventures to fail are
as follows:
a. Managers who must collaborate regularly are not involved in the venture.
b. The venture may benefit partnering companies but not the customers.
c. Both partners may not support the venture equally.
d. The venture competes with more with one of the partners
7. Joint ventures are especially effective when:
a. A privately owned organization forms one with a public organization.
b. A domestic organization works with a foreign company.
c. The distinct competencies of the firm's complement each other especially well.
d. Some project is potentially profitable but requires overwhelming resources and risks.
e. Two or more smaller firms have trouble competing with a larger firm.
f. There is a need to introduce a new technology quickly.

C. Merger/Acquisition

Mergers and acquisitions are two commonly used ways to pursue strategies.
1. A merger occurs when two organizations of about equal size unite to form one enterprise.
2. An acquisition occurs when a large organization purchases (acquires) a smaller firm or vice
versa.
3. When a merger or acquisition is not desired by both parties, it can be called a takeover or
hostile takeover. In contrast, an acquisition that is desired by both it is termed a friendly merger.
4. With hundreds of company's flush with excess cash, the year 2010 saw a 13 percent
increase u mergers and acquisitions in the United States.
5. White knight is a term that refers to a firm that agrees to acquire another firm when that other
firms is facing a hostile takeover by some company.
6. Not all mergers are effective and successful.
7. A leveraged buyout (LBO) occurs when a corporation's shareholders are bought out (hence
buyout): by the company's management and other private investors using borrowed funds
(hence leveraged).

X. STRATEGIC MANAGEMENT IN NON-PROFIT AND GOVERNMENTAL ORGANIZATIONS

Nonprofit organizations are just like for-profit companies except for two major differences:

A. Religious Facilities
1. The number of religious facilities having to close their doors is surging as many borrowed too
much and built too big during boom times.
B. Educational Institutions
1. Educational institutions are using strategic-management techniques and concepts more
frequently.
2. Online college degrees are becoming common and represent a threat traditional colleges and
universities
3. Mary American colleges and universities have now established campuses outside the United
States.
C. Medical Organizations
1. The US hospital industry is experiencing declining margin, excess capacity, bureaucratic,
overburdening, poor strategies, soaring costs, federal support, and high admiration turnover
2. Hospitals originally intended to be warehouses for people dying of tuberculosis, smallpox,
cancer, pneumonia, and infectious diseases are creating new strategies today as advance in
the diagnosis and treatment of chronic diseases are undercutting that earlier mission cancer,
3. A successful hospital strategy for the future will require renewal and deepened collaboration
with physicians, who are central to hospitals' well-being, and a reallocation of resources from
acute to with chronic care in home and community settings
4. Current strategies being pursued by many hospitals include creating home health services,
establishing nursing homes, and forming rehabilitation centers.
D. Governmental Agencies and Departments
1. In the US, federal, state, county, and municipal agencies and departments, such as police
departments, chambers of commerce, forestry associations, and health departments are
responsible for formulating implementing and evaluating strategies that use taxpayers dollars in
the most cost-effective way to provide services and programs.
2. Strategic-management concepts are increasingly being used to enable governmental
organizations to be more effective and efficient
3. Strategists in governmental organizations operate with less strategic autonomy in their
counterparts in private firms.
XI. STRATEGIC MANAGEMENT IN SMALL FIRMS
A. Rationale
1. As hundreds of thousands of people have been laid off from work in the last two years, many
of these individuals have started small businesses.
2. The strategic management process is just as vital for small companies as it is for large firms.
Numerous magazine and journal articles have focused on applying strategic management
concepts to small businesses.

The authors came across a news item published at the Philippine Daily Inquirer on
February 1, 2019 and about "Decoding Henry Sy's top growth strategies." The writer, Josiah Go
said any discussion of marketing and entrepreneurship in the Philippines is not complete without
talking about SM and its founder, Henry Sy Sr. Following is his analysis.
The legendary king of retail, banking, and stock market valuation, Sy who passed away
on January 19, 2019, was a strategist worth emulating.
1. What drove him to start a new mall category when he was already operating
department stores?
2. How did he mitigate the risk of a new category at the time when the interest rate was
so high and
3. What drove this rags-to-riches man to surpass everyone and be the richest man in the
Philippines with his last net worth at $19billion (as of January 20, 2019), as estimated by
Forbes), outranking even the political stability was low? old rich of the Philippines?

There are five ways to grow and expand, as can be seen in the strategies of the late Sy.
1. Product (from the core to the peripheries-He started a small shoe store in 1946 at the age of
21. carried more types of shoes in Carriedo Ouiapo From shoes, he expanded to the thousands
of other non-shoe items serving his core ‘’mass" customers leading to the creation of the bigger
SM Department Store in 1972. From department stores (now rebranded as the SM Store), he
went to The SM Department expanded per makes applying the same retail principles of
managing hundreds of thousands of Wes under different retail and product categories serving
the main customers, moving from the core peripheries
2. Geography (from Manila to the provinces, to other countries) aggressively in the 1980s
(Cubao, Harrison Plaza eventually opening in all key provincial cities. He also expanded abroad
by opening several malls in China
3. Business model from a focused company to a conglomerate) diversification and synergy
became the business model of the SM Groups His retail group not only operated SM's own
stores bus expanded, acquiring either distribution rights or forging joint ventures with major
foreign brands like Uniqlo, Forever 21, Ace Hardware, and Watson. Building malls led to
property development (SMDC), complemented by a separate banking unit (BDO) where both
shoppers and tenants can benefit hospitality (hotels, SMX) and education (Asia Pacific College,
National U).
4. Market (From the masses to the rich to corporate clients)-high-end malls were soon
established cater to the richest clients. Corporate markets were likewise tapped by sister
companies like BDO.
5. Channel (from retail to omnichannel) omnichannel means denoting or relating to a type of
retail that integrates the different methods of shopping available to consumers (e.g., online, in a
physical store, or by phone). From operating large malls, including SM North EDSA (in 1985),
Megamall (in 1991), MOA (in 2006), and SM Seaside Cebu (in 2015), the SM group also
expanded 10 e-commerce to capitalize on the growing customer preference to transact online
instead of going to the malls or department stores.
From these growth strategies emerged a cluster of competitive advantages that have
made the SM group hard to beat. It has access to low-cost funds by virtue of being listed on the
Philippine Stock Exchange, for example, and its distribution reach and clout which developed
over decades have enabled SM group to command a higher profit margin.
One would Sy simply had a lot of common sense, but an analysis of his companies as
well as the timing of his decisions leads one to conclude that he allocated appropriate resources
and hired the right people who had the discipline of execution to help him create the future.
Examples include the launch of SM North EDSA as the country's first large mall, and the
decision for BDO to operate on weekends, making it the first to do so.
The Chinese character for danger has two words, pronounced as WEI (opportunity) and
CHI (crisis). Henry Sy clearly saw more opportunities in crisis. Josiah Go is chair and chief
innovation strategist of Mansmith and Fielders Inc. when this article was published. He can be
reached at www.josiahgo.com
Strategic Management in Tourism and Hospitality w/ Total Quality Management

Name: Year & Section:

Date:

ACTIVITY 5
CRAFTING A STRATEGY THE QUEST FOR COMPETITIVE ADVANTAGE

1. Explain the difference between joint ventures and partnerships as a means for achieving
various strategies.
2. Explain how strategic management differs in governmental organizations as compared se
educational institutions
3. Explain why you believe some analysts consider Michael Porter's generic strategies to be to
and too vague
4. List four important reasons why many mergers and acquisitions fail
5. Should non-profit organizations post their strategic plan on their website? What about
corporation Why?