Strategic Management Goals
It can be defined as a tools used by organizations for formulating, implementing and evaluating the cross-functional decisions which will help organizations to achieve its goals and objectives. Its is a process use by organization to specify its goals, applying policies and plans to achieve these objectives, and distributing resources to implement the policies and plans to achieve the organization's goals. Therefore it can be said that Strategic Management immixes the activities of the various functional areas of a business to achieve its organizational objectives. It is one of the highest levels of managerial activity generally it is devised by the Board of directors to be carried out by Chief Executive Officer (CEO) and executive team of the organization. Strategic management includes main features of the organization and provides direction to the enterprise and is closely related to the field of Organization studies. For the leading strategy guru, Porter (1996), “strategy is about achieving competitive advantage through being different in delivering a unique value added to the customer and having a clear and enactable view of how to position yourself uniquely in your industry.” For example in the way in which Southwest Airlines positions itself in the airline industry and IKEA in furniture retailing, in the way that Marks & Spencer used to. To perform a successful strategy requires that it fit among a company's activities that they complement each other and that they deliver value to the firm and its customers. The three companies which is mentioned above illustrate that industries are mobile and that success is not guaranteed. Two of the company came to prominence by taking on industry as officeholders and developing new value propositions. The third lost this position as it was extremely successful. Analyst disagrees on how this may be done. John Kay (2000) argues that strategy is no longer about planning or visioning because it might misled if it thought that it can be predicted or if can go worse if we think that we can control the future. Strategic management is all about using careful analysis to understand and influence a company's position in the market place. Another leading Strategy guru, Gary Hamel (2000) argues that the best strategy is geared towards radical change and creating a new vision of the future in which you are a leader rather than a follower of trends set by others. According to him
Winning strategy = foresight + vision.
Strategic management is an on going process that appraises the business and the industries, in which it is involved, assesses its competitors and sets goals and strategies to meet all existing and potential competitors, and then reassesses each strategy annually or regularly to check how its has been working and whether it has succeeded in meeting company's objective or there is a need to replace it by new strategy to meet changed circumstances such as new technology, new competitors, a new economic environment, or a new social, financial, or political environment. (www.wikipedia.org)
Elements of Strategic Management:-
Strategic Management is a combination of four elements which are as: situation analysis, strategy formulation, strategy implementation and strategy evaluation. These elements are used while developing a new strategic management plan. Existing business which has already developed a strategic management plan will check these steps again as the need arises in order to make necessary changes and improvements.
Situation Analysis:-
Situation analysis is the first step in the strategic management process. The situation analysis gives information essential to create a company mission statement. Situation analysis involves scanning and assessing the organizational context, the external environment and the organizational environment. (Coulter, 2005, p.6) This analysis can performed using various techniques from which observation and communication are two very effective methods.
To start with this process organization must need to observe it internal environment which includes employees must act together or towards other employees, employees interacting with management, manager interaction with other managers and management interacting with shareholders. In addition they can discuss, interview and surveys which can be used to analyze the internal environment.
Organizations also need to analyze the external environment which includes customers, suppliers, creditors, and competitors. Various questions can be asked which can help to analyze the external environment of the organization such as What is the relationship between the company and its customers? What is the relationship between the company and its suppliers? Does the company have a good relationship with its creditors? Is the company actively trying to increase the value of the business for its shareholders? Who is the competition? What advantages do competitors have over the company?
Strategic formulation:-
Strategy formulation involves designing and developing the company strategy. It helps in determining company strengths which helps in the formation of strategies. In formulation current objectives and strategies are modified in such a way that is it helps organization to be more successful and this includes trying to create sustainable competitive advantages. Strategy formulation is the repetition of an action where the key players assess, decide, act, and review how they are doing. The decisions are fundamental to the success of a business. The process prepares key people to take responsibility for the chosen route. Strategy formulation is where leaders determine how to create the benefits for customers, how flexible to be, how to measure progress and how to recognize when the strategy cannot be sustained. By D. Bradlee (2002)
Strategy Implementation:-
Strategy implementation involves applying strategies in the practice which includes developing steps, methods, and procedures to put in effect of the strategy. Its also include deciding which strategies should be implemented first. The strategies are needed to be prioritized depending on the seriousness of underlying issues. The company should first focus on the worst problem and then can move onto the other problems once those have been addressed. The advancement of implementing the various strategies should be considered as the strategies are formulated. (Coulter, 2005, p.8) The company should consider how the strategies can be put into the effect at the same time of their being created. For e.g. in developing the human resources strategy involving employee training for it certain things must me considered such how the training will be delivered, when the training will take place, and how the cost of the training will be covered.
Strategy Evaluation:-
Process of Strategy Evaluation is used to formulate or adjust strategy into the changing circumstances. Strategy evaluation plays a vital role in the process of guiding an enterprise unconcerned with performed by an individual or being performed as a part of an organizational review procedure. For much executive strategy evolution is just a process of evaluating how well business has performed or performing, has it Grown? Is profit normal or better? If the answers to these questions are positive than it is assumed that is sound. But still it is not to be fully relied on reason for it is that it misses the whole point of strategy such as critical factors which determines the quality of long term results are many times not directly observable or simply measurable or simply measured and by that time strategic opportunities or threats do directly affects the operating results which may be too late to make an effective response. Thus strategy evaluation is considered as an attempt to look beyond the evident facts regarding the short term health of a business and estimate instead those are more essential factors and trends that governs success in the chosen field of endeavor. (www.clintburdett.com)
The Strategy hierarchy:-
In most of the large corporations there are distinct levels of strategy. Strategic management is applied at the highest level meaning that it is the widest way of applying strategy to all the parts of the firm. It guides organization to its corporate beliefs, corporate goals, and corporate missions. Under this wide strategy there are frequent functional or business unit strategies.
Functional Strategies includes strategies such as marketing strategies, new product development strategies, human resource strategies, financial strategies, legal strategies, supply chain strategies and information technology management strategies. The special important is given to short term and medium term plans and is circumscribed to the area of each department's functional responsibility. Every functional department puts an effort to do its part in meeting overall objectives of the corporation and thus to certain their strategies are formed from wider or broader corporate strategies.
Many companies feel that the functional structure of organization is not an effective way to organize activities so they redesign it according to the processes or strategic business units called as Strategic Business Unit. A strategic business unit is a partially independent unit within an organization. It is usually cause for its own budgeting, new product decisions, hiring decisions, and setting of price. An SBU is subjected as an internal profit centre by corporate headquarters. Each SBU is responsible creating its own business strategies, strategies that must be within the boarder of corporate strategy.
The most down level of strategy is operational strategy. It has very limited scope in focusing and its deals with deals with day to day operational activities for instants scheduling criteria. It must work within a budget but it does have authority to adjust or create that budget. Operational level strategies are altered by business level strategies which in turn are changed by corporate level strategies. www.wikipedia.org
Corporate Strategy then refers to the dominant strategy of the diversified firm. Such a corporate strategy answers the questions of “in which business should we compete?” and “how does being in one business add to the competitive advantage of another portfolio firm as well as the competitive advantage of the corporation as a whole?” By T. Drucker
Ram Charan, aligning with a popular marketing tagline, believes that strategic planning must not dominate action. "Just do it!” while not quite what he meant, is a phrase that nevertheless comes to mind when combating analysis paralysis. www.wikipedia.org
The advantages and Disadvantages of Strategic Management:-
The advantages of Strategic Management:-
Discharges Board Responsibility
The reason that most of the organization puts for having a strategic management process I that it discharges the responsibility of the Board of Directors.
Key Decision Often Drive Strategic Thinking:-
The main reason that most company's state for having a strategic management processes it that they have reached a significant decision point in their business. This decision point may be due to the succession issues, rapid growth or due to capitalizing upon a key business opportunity in the past.
Forces an Objective Assessment:-
Strategic management helps board and senior management to think about the future of the organization by providing a branch of knowledge to actually take a step back from the day-to-day business. Without this knowledge, the organization can be entirely consumed with working through the next issue or problem without consideration of the larger picture.
Provides a Framework For Decision-Making Strategy provides a model within which all staff can make day-to-day operational decisions and understand that those decisions are all moving the organization in a single direction. It is not possible or appropriate for the board of directors to know all the decisions which the executive director will have to make, nor is it possible or practical for the executive director to know all the decisions the staff will make. Strategy provides a vision of the future, confirms the purpose and values of an organization, sets objectives, clarifies threats and opportunities, determines methods to increase strengths, and lessen weaknesses at a minimum. As such, it sets a framework and clear boundaries within which decisions can be made. The cumulative addition effect of these decisions can have a substantial impact on the success of the organization. It provides a framework within which the executive director and staff can make decisions which helps them in better focus their efforts on those things that will best support the organization's success.
Supports Understanding & Buy-In It allows the board and staff participation in the strategic discussion which enables them understand the direction in a better way such as reason for choosing that direction and the associated benefits. For some people simply knowing is enough; for many people, to gain their full support requires them to understand.
Enables Measurement of Progress A strategic management process influences an organization to set objectives and measures of success. To set measures of success organization is first required to determine the critical factor to its ongoing success and then drive the establishment of objectives and keeps these critical measures in front of the board and senior management.
Provides an Organizational Perspective Addressing operational not often looks at the whole organization and the interrelatedness of its varying components. But strategic management takes an organizational perspective and looks at all the components and the interrelationship between those components in order to develop a strategy that is most desirable possible under a restriction expressed for the whole organization and not a single component.
The Disadvantages of Strategic Management
The Future Doesn't Unfold As Anticipated
One of the major criticisms of strategic management is that it requires the organization to anticipate the future environment in order to develop plans, where the fact is predicting the future is not an easy undertaking. The belief being that if the future cannot be unfolded as anticipated then it may invalidate the strategy taken. Recent research conducted in the private sector has demonstrated that organizations that use planning process achieve better performance than those organizations who don't plan unregarded of whether they actually achieved their intended objective. In addition, there are a variety of approaches to strategic planning that are not as dependent upon the prediction of the future.
It Can Be Expensive There is no doubt that in the not-for-profit sector there are many organizations that cannot afford to hire an external consultant to help them develop their strategy. Today there are many volunteers that can help smaller organizations and also funding agencies that will support the cost of hiring external consultants in developing a strategy. Regardless, it is important to ensure that the implementation of a strategic management process is consistent with the needs of the organization, and that appropriate controls are implemented to allow the cost/benefit discussion to be undertaken, prior to the implementation of a strategic management process. Long Term Benefit vs. Immediate Results Strategic management processes are designed to provide an organization with long-term benefits. If in the strategic management process it's been look to address an immediate crisis within an organization, it cannot be done. It always makes sense to address the immediate crises prior to allocating resources time, money, people, opportunity, and cost to the strategic management process. Impedes Flexibility
When strategic management process is undertaken, it will result in the organization saying "no" to some of the opportunities that may be available. This inability to choose all of the opportunities presented to an organization is sometimes frustrating. In addition, some organizations develop a strategic management process that become too formal. Processes that become this "established" lack innovation and creativity and can hide the ability of the organization to develop creative strategies. A third way that flexibility can be impeded is through a well accomplished alignment and integration of the strategy within the organization. An organization that is well adjusted with its strategy has addressed its structure, board, staffing, and performance and reward systems. This alignment ensures that the whole organization is pulling in the right direction, but can inhibit the organization's adaptability. Again, there are a variety of newer approaches to strategy development used in the private sector which haven't been widely accepted in the not-for-profit sector yet that build strategy and address the issues of organizational adaptability.
Conclusion:-
The strategic management process is a continuous process. "As performance results or outcomes are realized - at any level of the organization - organizational members assess the implications and adjust the strategies as needed" (Coulter, 2005, p. 9). In addition, as the company grows and changes, so will the various strategies. Existing strategies will change and new strategies will be developed. This is all part of the continuous process of improving the business in an effort to succeed and reach company goals.
Bibliography
www.clintburdett.com
Coulter, M. (2005). Strategic Management in Action. (3rd ed.). Upper Saddle River, NJ: Pearson Prentice Hall.
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