rMIDTERMS CHAPTER 4 ENTREP

Strategic Management and the Entrepreneurial Process

INTRODUCTION

According to Fred David, the definition of Strategic Management is the art and science of formulating,
implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives (Strategic
Management 2011, p.6).

Strategic management is also the process of developing a game plan to guide a company as it strives to accomplish its
vision, mission, goals, and objectives and to keep it from straying off course. It gives business owners a blueprint for
matching their companies' strengths and weaknesses to the opportunities and threats in the environment.

Identifying the Competitive Advantage

The goal of developing a strategic plan is to create a competitive advantage for the company which is the
aggregation of factors that set a small business apart from its competitors and gives it a unique position in the market.
Every firm must establish a way to create a distinct image in the minds of its potential customers.

There is no business that can be anything or everything to everyone. One of the biggest mistakes many entrepreneurs
do is not being able to differentiate their companies from their competitors.

The strategic management plan should include the following features:

1. Use a relatively short planning horizon fit for small companies.

2. Be informal and not overly structured.
3. Encourage the participation of employees and external parties to discuss the improvement of the reliability and
creativity of the resulting plan.
4. Focus on the needs and wants of customers.
5. Do not begin with setting objectives ahead of time because it might interfere with the creative process of strategic
management.
6. Focus on strategic thinking, not just on planning by joining long-range goals to day-to-day operation. Strategic thinking
encourages creativity, innovation, and employee participation in the entire process.

Strategic Management Process

Strategic planning is the process of recording and providing a clear mission, vision, goal, and action plan of the
organization by assessing the business standing and where it is going. It is not just a result or product of an outcome, but
this is a continuing process. The strategic management process consists of 10 steps. The process explains the firm's
strategy and helps a manager to choose from a set of strategies that will give him a better performance.

1. Establish a clear vision and convert it into a meaningful mission statement.

2. Describe the organization's core competencies and target market, market " segmentation, and positioning of the
business to compete effectively.
3. Evaluate the firm's strength and weaknesses.
4. Examine the environment for notable opportunities and threats that can affect the business.
5. Determine the key factors for success in the business.
6. Scrutinize the competition.
1
7. Start making company goals and objectives.
8. Develop strategic options and choose the best strategies.
9. Convert strategic plans into action plans.
10. Set up and monitor accurate controls.

Step 1: Establish a clear vision and convert it into a meaningful mission statement.

A vision statement should answer the basic question: "What do we want to become in the future?" The vision statement should be
short, preferably one sentence suggested by the managers and employees who can also give input in developing the statement. The
vision statement should reveal the type of business the organization engages in. A vision is the entrepreneur's mental picture of the
result he wanted to achieve in the future.

A clear definition helps the company in several ways:

• Vision can give directions to the organization. Entrepreneurs who spell out a clear vision for the organization can get
everyone's attention to concentrate on the goal they wanted to achieve.

• Vision influence decisions. The vision affects the decision of the company whether it is a big thing or just a trivial matter.

• Vision inspires people. A clear vision excites and helps the employees to work with vigor. People would want to work in a
company that has a good vision and higher goals.

Examples of Vision Statement

 Cebu Pacific envisions stronger nations where culture and communities are connected, meaningful relationships are built,
and lives are enriched by opportunities and experiences we make possible. (https://cebupacificaircorporate.com/Pages/
mission-and-vision.asp)

 Resorts World's vision is to thrill the world every chance they get. (https://www.rwmanila.com/)

The vision of the company is derived from the entrepreneur's values. Implementing an entrepreneur's values is the nucleus around
which a company grows. The successful organization builds their businesses around a set of three to six core values which might
range from honesty, integrity to satisfying customers. A true visionary entrepreneur sees his company's primary purpose as more
than just earning money. It can be a way to give back to society by having scholarships or hiring working students.

Tips on Crafting a Vision Statementa. Conciseness (express briefly and clearly)

b. Future orientation (5-10 years in the future)

c. Use the present tense.
d. Dream big and focus on the success of the business.
e. Align it to the entrepreneur's values and goals.
f. Inspirational (passionate)

The mission statement is used by an organization to explain in simple and concise terms its purpose of existence. Establishing the
purpose of the business in writing gives the company a sense of direction. It sets the tone for the company and where it wanted to
go. A mission statement is the starting point of an organization's entire planning process.

It reveals what is the goal of the company in the future and whom it wants to serve.

Sometimes, it is also called a creed statement, a statement of beliefs, and a statement of business principles.

Elements of a Mission Statement

A mission statement is a marketing tool for the business. It should not be lengthy to be effective. Here are some of the key issues an
entrepreneur should address as he develops a sound mission statement for the company that includes the following:
2
  What are the beliefs and values of the organizations?
 Who is the company's target market?
 What are our products and services?
 What gives value to our customers?
 What is our competitive advantage in the market?
 In which markets will we choose to compete? (market segmentation)
 Who are the major stakeholders in our company and what effects do they have on it?

Components of a Mission Statement

1. Customers - Who will be the firm's customers?

2. Products or services - What are the firm's basic products or services?

3. Markets - Geographically, where does the firm compete? What is the market positioning of the company?

4. Technology - Is the firm technologically updated?

5. Survival, growth, and profitability - Is the firm committed to growth and financial soundness?

6. Philosophy - What are the basic beliefs, values, aspirations, and ethical priorities of the firm?

7. Self-concept (distinctive competence) - What is the firm's major competitive advantage?

8. Public image - Is the firm responsive to social, community, and environmental concerns?

9. Employees - Are employees a valuable asset,of the firm?

Tips on Writing a Powerful Mission Statement:

a. Simplify.

b. Get everyone involved and use it.

c. Keep it updated.

d. Make sure your mission statement reflects the values, culture, and beliefs of the organization.

e. Make sure your mission statement includes values that are worthy of your employee's best effort.

f. Make sure your mission statement reflects a concern for the future.

g. Keep the tone of the mission statement positive.

Examples of Mission Statement

Jollibee Foods Corporation

To serve great-tasting food, bringing the joy of eating to everyone. (https://www.jollibee.com.ph/our-mission-vision-

and-values/

Department of Tourism (Philippines)

3
Formulate tourism plans and programs to promote, develop and regulate the country's tourism industry as a major
socio-economic activity that generates foreign currency and local employment, and to spread the benefits of tourism to
a wider segment of the population with the support, assistance, and cooperation of both the private and public sectors.

http://www.tourism.gov.ph/files/DOT%20Mission%20and%20Vision.pdf

Step 2: Describe the organization's core competencies and target market, market segmentation, and positioning of
the business to compete effectively.

The core competencies are the resources and capabilities that comprise the strategic advantages of a business. It is a
unique set of lasting capabilities that a company develops such as quality, service, innovation, team building, flexibility,
and others. Core competencies are the defining characteristics that make a business stand out in the competition. These
core competencies become the nucleus of a company's competitive advantage usually for a longer period.

Core Values of Jollibee

 Customer Focus. We provide great taste, and superior value to all our customers.

 Speed with Excellence. We plan, decide and act quickly.

 Humility to Listen and Learn. We seek, welcome and value feedback.

 Spirit of Family and Fun. We take care of each other and bring out the best in everyone.

 Integrity.

Step 3: Evaluate the firm's strengths and weaknesses.

The strengths of the business are the positive internal factors that a company can use to accomplish its mission, goals,
and objectives such as prime location and lower prices. The weaknesses are the negative internal factors that inhibit the
accomplishment of a company's mission, goals, and objectives such as lack of capital or shortage of employees.

Knowing the strengths and weaknesses helps an entrepreneur to understand his business thoroughly. An organization's
strength should originate in the core competencies that are essential to remain competitive in each of the market
segments in which the firm competes. One effective way is preparing a balance sheet of the company's strengths and
weaknesses.

Step 4: Examine the environment for notable opportunities and threats that can affect the business.

Entrepreneurs must turn to the external environment to identify any opportunities and threats that might have a
significant impact on the business. Opportunities are positive external options that a firm can exploit to accomplish its
mission, goals, and objectives such as to diversify its products. He needs to analyze only those factors that are most
significant to the business when identifying opportunities.

There are so many threats to the business like a new competitor entering the local market, a government mandate
regulating a business activity, an economic recession, rising interest rates, technological advances, pandemic, and many
others.

The interactions of strengths and weaknesses and opportunities and threats can be the most revealing aspects of using a
SWOT analysis as part of a strategic plan. Threats are a negative external force that inhibits a company's ability to
achieve its mission, goals, and objectives.

4
Step 5: Determine the key factors for success in the business.

According to Zimmerer and Scarborough (2001), the key success factors is a relationship between a controllable variable
and a critical factor influencing the firm's ability to compete in the market.

A business is characterized by a controllable variable such as friendly employees, tighter cost control, and better quality
that can give them a higher number of market participants. Identifying and manipulating these variables is how a small
business has a better competitive advantage. In maximizing their performance on these key success factors, the
entrepreneur can gain a better market advantage over their competitors. Companies that understand these key success
factors tend to be more successful.

Entrepreneurs can use the information gathered to study their businesses, their competitors, and their environment to
come be more competitive. They must determine how well they meet these criteria for competing in the market.
Thriving businesses realize and understand these relationships better.

Step 6: Scrutinize the competition.

Competition is a challenge that entrepreneurs must face. They should be a step higher than their rivals in terms of
quality, price, and design to attract more customers. Another important challenge facing the firms is the World Wide
Web and e-commerce. Many are buying products through online deliveries and purchases especially during the
pandemic period.

Anyone can compare your prices, quality, and reviews from your competitor through the internet. To be updated, each
company should be keeping tabs on rival's movement through competitive intelligence programs.

Step 7. Start making company goals and objectives.

An entrepreneur can build a comprehensive set of strategies by establishing business goals and objectives which give
targets as a basis for evaluating a company's performance.

Goals are general guidelines that explain what you want to achieve in your business in the long run. They are usually
long-term and represent a vision for the company in the future. Goals are intended to state the general level of
accomplishment they wanted in the future.

Objectives define strategies or implementation steps to attain the identified goals. It tends to be general and sometimes
even abstract, and are more specific targets of performance. Common objectives concern profitability, productivity,
growth, efficiency, markets, financial resources, physical facilities, organizational structure, employee welfare, and social
responsibilities.

Step 8: Develop strategic options and choose the best strategies.

During this time, the entrepreneur should have a clear picture of what the business does best and what is its competitive
advantages are. Aside from the positive traits, he must understand the business's limitations and weaknesses such as
lacking of financial resources as well as those of its competitors. The next step is to evaluate strategic options and
prepare a game plan to achieve the business objectives.

Three Strategic Options.

5
  Cost Leadership. In business strategy, cost leadership is establishing a competitive advantage by having the
lowest cost of operation in the industry.

 Differentiation. A differentiation strategy is an approach providing customers with something unique, different,
and distinct from competitors in the marketplace.

 Focus. A strategy that involves targeting your products to a niche market or targeted audience. It recognizes that
not all markets are homogenous.

Step 9: Convert strategic plans into action plans.

All strategic plans must be put into action. The entrepreneur should convert those Strategic plans into operating plans
that will guide the company daily. No business can benefit from an unused strategic plan. To make the plan workable,
the managers should divide the plan into projects with a certain goal and accomplishment date, carefully defining each
one of them by the following:

a. Purpose: What is the project that needs to be accomplished?

b. Scope: Which department of the company will be involved in the project?

c. Contribution: How does the project relate to other projects and the overall strategic plan? Is it important for the
overall accomplishment of the strategic plan?

d. Resource requirements: What financial resources are needed to complete the project successfully?

e. Timing: What are the deadlines for each project to ensure completion of the plans?

Step 10: Set up and monitor accurate controls.

In the planning process, the entrepreneur already created objectives and developed a strategy for achieving those
objectives. Now, he needs a guide to compare those statistics and figures. He needs to compare actual performances
versus the projected target or objectives. Entrepreneurs need to watch out for those actual results that deviate from
plans. They must monitor it to avoid further problems.

A sound planning program requires a practical way of control the process. The plans created in the strategic planning
process become the standards in which the actual performance is measured. Everyone in an organization needs to
understand and involve themselves in the planning and control process.

Market Segmentation and Positioning

Market segmentation is a strategy of dividing a target market into smaller, more defined categories. It segments
customers and audiences into groups that share similar characteristics such as demographics, habits, needs, or location.
The key to being successful is to develop a basis for segmenting the market such as benefits sought, product usage,
brand preference, purchase pattern, and others.

Positioning is a technique that involves influencing customers' perceptions to create the desired image for a business
and its goods and services. Proper positioning can give the business a way of differentiating itself from the competition.
A smarter tactic is to rely on a natural advantage, such as a small firm's flexibility in reaching the market, a wider variety
of customer service, or special knowledge of the good or service.

6
Business Proposal

What is a Business Proposal?

An effective business proposal is a document used by a B2B or business-facing company (this may not always be
the case) where a seller aims to persuade a prospective buyer into buying their goods or services.

A business proposal outlines what your business does and what you can do for your client.

To design a business proposal that holds the client’s attention, identify their pain points. Then provide your buyer with
the right solution to alleviate those frustrations.

How to Write a Business Proposal (step by step)

Before you start creating your business proposal template, you need to know what it comprises. At a high level, your
effective business proposal should include the following:

1. Title
2. Table of contents
3. Executive summary
4. The problem statements
5. The proposed solution
6. Qualifications
7. The timeline
8. Pricing, billing, and legal
9. Terms and conditions
10. The acceptance.

Business Proposal Title

A compelling title could mean the difference between someone reading your proposal or ignoring it in favor of a
competitor’s.

What makes a good title page? Here are the essential elements to include:

Your name along with your company’s name

The name of the prospect (or their business)

The date you’re submitting the proposal

Table of contents

7
The table of contents is a fundamental part of every winning business proposal template. It makes your proposal
scannable and easy to read.

The people you will be pitching to are usually C-level executives. These are busy people who don’t have time to read

your entire proposal in one go.

Adding a table of contents to your document makes it easy for them to go through it at their own pace.

They can also skim through parts of the proposal that they deem more important.

Executive Summary

The executive summary is a staple in all kinds of annual reports, leadership development plan, project plans and even
marketing plans. It is a concise summary of the entire contents of your document. In other words, write a business
proposal outline that is easy to glance over and that highlights your value proposition.

The goals of your executive summary are:

Introduce your company to your buyer

Provide an overview of your company goals

Showcase your company’s milestones, overall vision and future plans

Include any other relevant details

The Problem Statement

The point of writing a business proposal is to solve a buyer’s problem. Your goal is to outline the problem statement as
clearly as possible. This develops a sense of urgency in your prospect. They will want to find a solution to the problem.

And you have that solution.

A well-defined problem statement does two things: It shows the prospect you have done your homework instead of
sending a generic pitch

It creates an opportunity for you to point out a problem your prospect might not be aware they had in the first place.

The Proposed Solution

The good stuff. In the proposed solution section, you show how you can alleviate your prospective buyer’s pain points.
This can fit onto the problem statement section but if you have a comprehensive solution or prefer to elaborate on the
details, a separate section is a good idea.

Spare no details regarding the solution you will provide. When you write a business proposal, explain how you plan to
deliver the solution. Include an estimated timeline of when they can expect your solution and other relevant details.

Qualifications

8
At this point, the prospect you’re pitching your solution to likes what they’re reading. But they may not trust you to
deliver on your promises. Why is this?

It’s because they don’t know you. Your job is to convince them that you can fix their problem. This section is important
because it acts as social proof.

You can highlight what your company does best and how qualified your team is when you write a business proposal for
a potential client.

The Timeline

To further demonstrate just how prepared you are, it’s important to outline the next steps you will take should your
buyer decide to work with you.

Provide a timeline of how and when you will complete all your deliverables. You can do this by designing a flow chart. Or
add a roadmap with deadlines. Pitching a long-term project? A timeline infographic would be a better fit.

Pricing, Billing and Legal

On this page, you can outline your fees, payment schedule, invoice payment terms, as well as legal aspects involved in
this deal.

The key to good pricing is to provide your buyer with options. A pricing comparison table can help with this.

You want to give your client some room to work with. Make sure you’re not scaring off your client with a high price, nor
undervaluing yourself.

Breaking up your pricing in stages is another great way to make sure your potential client knows what he’s paying for.

Terms and Conditions

Summarize everything you have promised to deliver so far. Include what you expect from your prospective buyer in
return. Add the overall project timeline from start to end, as well as payment methods and payment schedule. This way,
both of you will be clear on what is being agreed on.

This step is very important as it outlines all the legal aspects of the deal. That is why the terms and conditions section of
your proposal needs to be as clear as possible.

I recommend consulting a lawyer or your legal team when working on this section of the business proposal. If you’re a
business veteran and understand the legalities of your business, you can use the same terms and conditions across all
your proposals.

Describe the organization's core competencies and target market, market segmentation, and positioning of the business
to compete effectively.

The final step of this whole process. Your client has read your business proposal and they want to buy what you have to
offer.

Add a small section at the end of your proposal to get the necessary signatures.

This way, you and your client can sign the proposal and the partnership becomes official.
9
Be sure to also include your contact information in your business proposal template. It acts as a gentle prompt to your
client to contact you in case they have any questions.

10