STRATEGIC MANAGEMENT

DEFINITION The term strategic management is used to refer to the entire scope of

strategic-decision making activity in an organization. Strategic management as a concept has evolved over time and will continue to evolve. As result there are a variety of meanings and interpretations depending on the author and sources.

For example, some scholars and practitioners the term strategic planning connote the total strategic management activities. Moreover, sometimes managers use the terms strategic management, strategic planning, and long-range planning interchangeable.

Strategic management is the process of managing the pursuit of organizational mission while managing the relationship of the organization to its environment (James M. Higgins).

Strategic management is defined as the set of decisions and actions resulting in the formulation and implementation of strategies designed to achieve the objectives of the organization (John A. Pearce II and Richard B. Robinson, Jr.).

Strategic management is the process of examining both present and future environments, formulating the organization's objectives, and making, implementing, and controlling decisions focused on achieving these objectives in the present and future environments (Garry D. Smith, Danny R. Arnold, Bobby G. Bizzell).

Strategic management is a continuous process that involves attempts to match or fit the organization with its changing environment in the most advantageous way possible (Lester A. Digman).

ELEMENTS Strategic management, as minimum, includes strategic planning and

strategic control. Strategic planning describes the periodic activities undertaken by organizations to cope with changes in their external environments (Lester A. Digman) It involves formulating and evaluating alternative strategies, selecting a strategy, and developing detailed plans for putting the strategy into practice.

Strategic planning consists of formulating strategies from which overall plans for implementing the strategy are developed.

Strategic control consists of ensuring that the chosen strategy is being implemented properly and that it is producing the desired results.

KEY TERMS-VISION&MISSION

Vision: Defines the desired or intended future state of an organization or enterprise in terms of its fundamental objective and/or strategic direction. Vision is a long term view, sometimes describing how the organization would like the world in which it operates to be. For example a charity working with the poor might have a vision statement which read "A world without poverty"

Mission: Defines the fundamental purpose of an organization or an enterprise, succinctly describing why it exists and what it does to achieve its Vision.

It is sometimes used to set out a 'picture' of the organization in the future. A mission statement provides details of what is done and answers the question: "What do we do?" For example, the charity might provide "job training for the homeless and unemployed"

A Mission statement tells you the fundamental purpose of the organization. It defines the customer and the critical processes. It informs you of the desired level of performance.

A Vision statement outlines what the organization wants to be, or how it wants the world in which it operates to be. It concentrates on the future. It is a source of inspiration. It provides clear decision-making criteria.

Features of an effective vision statement include: Clarity and lack of ambiguity Vivid and clear picture Description of a bright future Memorable and engaging wording Realistic aspirations Alignment with organizational values and culture

STRATEGY Strategies are the means by which long-term objectives will be achieved.

"A strategy is a unified, comprehensive, and integrated plan that relates the strategic advantages of the firm to the challenges of the environment. It is designed to ensure that the basic objectives of the enterprise are achieved through proper execution by the organization" (William F. Glueck, and Lawrence R. Jauch). The role of strategy is to identify the general approaches that the organization utilize to achieve its organizational objectives. Therefore, the choice of strategy is so central to the study and understanding of strategic management

STRATEGIST The final key term to be highlighted here is "strategists".

Strategists are the individuals who are involved in the strategic management process. Several levels of management may be involved in strategic decision making. However, the people responsible for major strategic decisions are the board of director, president, the chief executive officer, the chief operating officer, and the division managers

STAGES OF STRATEGIC MANAGEMENT

The strategic management process represents a logical, systematic, and objective approach for determining an enterprise's future direction.

However, a clear separation is needed between the managerial process by which an organization formulates, evaluates, implements, and controls the relationships between its objectives, its strategies, and its environment.

Researchers usually distinguish three stages in the process of strategic management: strategy formulation, strategy implementation, and evaluation and control.

Strategy Formulation

Strategy formulation is the process of establishing the organization's mission, objectives, and choosing among alternative strategies. Sometimes strategy formulation is called "strategic planning."

Strategy Implementation

Strategy implementation is the action stage of strategic management. It refers to decisions that are made to install new strategy or reinforce

existing strategy. The basic strategy - implementation activities are establishing annual

objectives, devising policies, and allocated resources. Strategy implementation also includes the making of decisions with

regard to matching strategy and organizational structure; developing budgets, and motivational systems

Strategy Evaluation And Control

The final stage in strategic management is strategy evaluation and control.

All strategies are subject to future modification because internal and external factors are constantly changing.

In the strategy evaluation and control process managers determine whether the chosen strategy is achieving the organization's objectives.

The fundamental strategy evaluation and control activities are: reviewing internal and external factors that are the bases for current strategies, measuring performance, and taking corrective actions.

MODELS Strategic management is a broader term that includes not only the stages already identified

but also the earlier steps of determining the mission and objectives of an organization within the context of its external environment. The basic steps of the strategic management can be examined through the use of strategic management model.

The strategic management model identifies concepts of strategy and the elements necessary for development of a strategy enabling the organization to satisfy its mission. Historically, a number of frameworks and models have been advanced which propose different normative approaches to strategy determination. However, a review of the major strategic management models indicates that they all include the following elements:

Performing an environmental analysis. Establishing organizational direction. Formulating organizational strategy. Implementing organizational strategy. Evaluating and controlling strategy. Strategic management is a continuous and dynamic process. Therefore, it should be

understood that each element interacts with the other elements and that this interaction often happens simultaneously.

The major models differ primarily in the degree of explicitness, detail, and complexity. These differences derive from the differences in backgrounds and experiences of the authors. Some of these models are briefly presented below.

ExternalAudit

Chapter 3

InternalAudit

Chapter 4

Long-TermObjectives

Chapter 5

Generate,Evaluate,

SelectStrategies

Chapter 6

ImplementStrategies:

Mgmt Issues

Chapter 7

ImplementStrategies:Marketing,Fin/Acct,R&D, CISChapter 8

Measure &Evaluate

Performance

Chapter 9

Vision &

Mission

Chapter 2

Comprehensive strategic management model

SWOT ANALYSIS A scan of the internal and external environment is an

important part of the strategic planning process. Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T). Such an analysis of the strategic environment is referred to as a SWOT analysis.

The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates. As such, it is instrumental in strategy formulation and selection. The following diagram shows how a SWOT analysis fits into an environmental scan:

Strengths

A firm's strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage. Examples of such strengths include:

patents strong brand names good reputation among customers cost advantages from proprietary know-how exclusive access to high grade natural resources favorable access to distribution networks

Weaknesses The absence of certain strengths may be viewed as a weakness. For

example, each of the following may be considered weaknesses: lack of patent protection a weak brand name poor reputation among customers high cost structure lack of access to the best natural resources lack of access to key distribution channels In some cases, a weakness may be the flip side of a strength. Take the

case in which a firm has a large amount of manufacturing capacity. While this capacity may be considered a strength that competitors do not share, it also may be a considered a weakness if the large investment in manufacturing capacity prevents the firm from reacting quickly to changes in the strategic environment.

Opportunities The external environmental analysis may reveal certain new

opportunities for profit and growth. Some examples of such opportunities include:

an unfulfilled customer need arrival of new technologies loosening of regulations removal of international trade barriers

Threats Changes in the external environmental also may present

threats to the firm. Some examples of such threats include: shifts in consumer tastes away from the firm's products emergence of substitute products new regulations increased trade barriers

SWOT Matrix A firm should not necessarily pursue the more lucrative opportunities.

Rather, it may have a better chance at developing a competitive advantage by identifying a fit between the firm's strengths and upcoming opportunities.

In some cases, the firm can overcome a weakness in order to prepare itself to pursue a compelling opportunity.

To develop strategies that take into account the SWOT profile, a matrix of these factors can be constructed. The SWOT matrix (also known as a TOWS Matrix)

S-O strategies pursue opportunities that are a good fit to the company's strengths.

W-O strategies overcome weaknesses to pursue opportunities.

S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats.

W-T strategies establish a defensive plan to prevent the firm's weaknesses from making it highly susceptible to external threats.

Benefits of Strategic Management

Financial Benefits

• Improvement in sales• Improvement in profitability• Productivity improvement

Benefits of Strategic Management

Non-Financial Benefits

• Improved understanding of competitors strategies• Enhanced awareness of threats• Reduced resistance to change• Enhanced problem-prevention capabilities

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