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Strategic management provides the road map for the company. Lends a framework, which could ensure that decisions on the future of systematic and targeted manner.
Strategic management is also considered as a hedge against unexpected developments on the horizon of business, and a hedge against uncertainty. It lends a reference framework for making investment decisions. It helps to focus resources on critical areas of leading potential. So it helps to focus of resources on vital and critical areas of best potential. It offers a methodology that can be expected and the project in the future, and be prepared internally to face it by which the company. It helps to develop and improve the processes and systems, mechanisms and administrative position, which are indispensable for this purpose.
Strategies have been derived many of the concepts used in the construction management theory from the practical experience of managers.
To put it specifically, and strategic management is a set of actions, procedures and administrative decisions that determine the long-term organization performance that includes environmental scanning (external and internal alike), and strategy formulation and implementation of strategy, assessment and monitoring.
Levels of Strategy
According to Hannagan (2002) Strategy may be formulated at different level and that is corporate, business and functional strategy level.
Describes the general direction of the company in terms of its general position towards the growth and management of its different business and product lines
The company's strategy deals with three major issues facing the corporation as a whole, as the following
Directional strategy; the company's overall orientation towards growth, stability and reduce expenses. The two main growth strategies are to focus and diversification. This can be achieved the company's growth through acquisitions, takeover, mergers, joint ventures and strategic alliances. Transformation, divestment, and liquidation are the different types of cost-cutting strategy.
Portfolio analysis; the markets or industries in which a company competes through its products, services and business units. In portfolio analysis, senior management views its product lines and business units in the form of a series of portfolio investment and maintains the continuing analysis of a profitable return.
Parenting strategy; the way that coordinates the management of activities and resources, transfers and cultivation of the capacities between production lines and business units.
It usually occurs at business unit level or product, and it emphasizes on improving the competitive position of the company's products, or services in a particular industry or sector served by the marketing business unit. And that may fit within two categories of strategies; competitive or corporate strategies. Competitive strategy is a battle strategy against all competitors for advantage. Development of Michael Porter's three strategies called Generic strategies. And they are cost leadership, differentiation and focus. Collaborative strategy is to work with competitors one or more to get advantage against other competitors.
That is the approach taken by the functional area to achieve the goals and strategies of corporate and business unit by maximizing resource productivity. It is interested with developing nurturing a discriminative capability to provide a competitive advantage with the organization or business unit.
A hierarchy of strategy is a compilation the type's strategy by levels in the organization. Then this hierarchy of strategy is a overlapping of one strategy within another so as to complement and support each other. Functional strategies reinforce business strategies, which in turn reinforce the corporate strategy.
Model of strategic management:
Strategic management is a particular course of action was supposed to achieve the goal of companies. It is really important in the identification and establishment of the organization mission, goals and actions. Generally, owners and founders of the company take the first step in creating a strategic management process. This process is responsible for implementing a variety of tasks such as providing direction and guidance to staff, and to establish objectives and measurable period of time to achieve them, and assign duties to all employees of companies. Marketing and sales forecasts are the most important elements of a strategic plan which also includes the traditional steps to assess the achievements of each department.
Mission and goals
An organization's mission is concentrate on the ambitions and purposes or reason for the existence of the organization. Determine the mission statement is the first step to create the strategic management process, and all other actions are part of a strategic plan so the organizational goals need to be determined after the preparation of the mission.
Objectives are the final outcome of the planned activity. They state what should be done when it should be quantified if possible. So the objective is describing the results of the organization achievement in light of the needs with what the organization wants.
Environmental scanning concern to a process of collecting, scrutinizing, analyzing and providing information for strategic purposes and this process helps in the analysis of internal and external factors that affect on the organization. After the implementation of the process of analyzing the environment, management should evaluate on an ongoing basis and strive to improve it. It could be classified environment as external and internal.
The external environment consists of many variables that are outside the organization which affect on it and usually not under the control of short-term by senior management; these may be forces and public trends within the overall community environment, which consists of social cultural, economic strength, technological, political and legal.
There may be certain forces called task environment that is important in the context of organization specific which involves competitors, suppliers, and employers, association of commerce, local communities, special interest groups, creditors, customers, government and shareholders. For that the organization need a method to analysis the external environment and of the most method widely used is Porter's Five-Forces Model. And this method is based on analyzing of the threat of new entrants and competition among current players, and pressure from buyers and suppliers and the pressure of the alternatives.
The internal environment of the company consists of some variables (strengths and weaknesses) that are inside the organization and are usually not subject to the control of short-term senior management. This includes the organization structure, resources and culture. One of the ways used widely for internal analysis of companies is Value Chain analysis that divided the business into a number of related activities which assesses the strengths and weaknesse, each one of them may give value to customers.
Strategy formulation is the development of long-term plans for the efficient and powerful management of environmental opportunities and threats within strengths and weaknesses of the companies. And it involves defining the company vision, mission, identify achievable goals, setting policy guidelines and developing strategies and begins with a situational analysis. That could do through SWOT analysis.
SWOT analysis method focuses on the analysis the strengths and weaknesses in order to take advantage of the threat and to overcome this threat. The acronym of SWOT is Strength, Weakness, Opportunities and Threats. Drawing the matrix can be showing the matched by external opportunities and threats facing the company, especially with the internal strengths and weaknesses of the company's to get the result in four sets of possible strategic substitutes.
Implementation of strategy is the process by which the development of strategies and policies to work through the development of programs. This may involve changes in the overall structure, culture, and / or system administration of the organization as a whole. And strategies are implemented through a range of budgets, programs and procedures.
Strategy Evaluation and control:
Strategy evaluation and control is the final stage in strategic management through this process can be comparing the activities of companies and performance with the performance required. All strategies can be modified in the future because of internal and external factors are continually changing.
Through the strategy evaluation and control process the manager can be determine the current strategy is achieving the objectives and which the strategy could achieving the objectives of the organization.
The importance of strategy evaluation and control in review and monitor of internal and external factors that are the foundations of current strategies, measure the performance and take the corrective decisions and resolve problems.
Based on the results of performance, management determines if the current strategy may need to make adjustments and that could be in strategy formulation or implementation or both.
GENERIC COMPETITIVE STRATEGY for PORTER'S:
Porter has described the scheme of category that consists of three types of general strategies Overall cost leadership, Differentiation and Focus that are commonly used by companies to get achieve and maintain competitive advantage. And these strategic could define along two dimensions: competitive scope and competitive advantage.
Overall cost leadership:
The goal of this type of strategy is to achieve overall cost leadership by focusing on the cost of the various functional areas. And that requires facilities effective and scalable; take advantage from the experience in cost reductions, tight cost and overhead control and reduce costs in areas such as research and development, services, advertising etc. which means increasing profits by reducing the costs.
The goal of this strategy is the company seeks to achieve uniqueness of specific product or service. This can be achieved distinction in design and technology or support and brand image, features, customer service etc.
For the success of differentiation strategy, organizations need to: very good research and development, innovation and Creativity; ability to provide high quality products or services; seeing the benefits offered by differentiated offerings through effective sales and marketing.
This strategy is focusing on a particular buyer, part of the production line or geographic market that focuses on specialized service to a certain objective. Thus companies using this type of strategy are able to serve the narrow objectives of its competitors who choose to work in the market on a large scale.
ORGANIZATIONAL CAPABILITY and SWOT ANALYSIS
SWOT analysis is to assess the strengths and weaknesses relative to the company with competitors, and opportunities and threats environment, which may be a company-to-face in the future. That depends on logic and rational thinking, such as the need to develop an appropriate strategy improves the strength and opportunities of the business, reduce the weaknesses and threats at the same time.
Strengths and weaknesses are simply the internal factors, which are located in the control of the company, the opportunities and threats are external factors over which the Company has significant influence. And which can be exploited in the interest of the company to become opportunity or be used against them becomes a threat.
Strength: is the internal factor of the company and give the power to company, it is related to excellence resources, skills, technical superiority and financial resources in the organization.
Weakness: is the internal factor of the company, Usually is the inability, limitation and lack of resources, skills, manpower and technology, that refers to restrictions or obstacles, which is investigating the movement in a certain direction, and may also prevent the organization to gain competitive advantage.
Opportunities: is an external factor, which related to analysis the environment of the organization and identifies the new market to improving customer service with a set of best product substitutes that represent the opportunities for the organization.
Threat: is an external factor, is the challenge posed by this trend can not be avoided that could lead in the absence of meaningful action to erode the company's position. Down of market growth and that related to major adverse situation due to changing government policy and technological change.
Using TOWS Matrix for Generating Alternative Strategies
TOWS matrix formation of four sets of possible strategic alternatives that formed as a result of matching the company's internal factors that are strengths and weaknesses with external factors that are opportunities and threats that use to create growth strategy as well as retrenchment strategies and generate business strategies for the organization.
In the Opportunities (O) block, put list of external opportunities that affect on the company, current environment and future.
In the Threats (T) block, put the list of external threats in the current and the future that facing the company.
In the Strengths (S) block, put the list of current and future strengths in certain areas for the organization.
In the Weaknesses (W) block, put the list of current and future weakness in certain areas for the organization.
The combination of these four sets factors of strategy will be using to create a fitting strategy for the organization.
List 5-10 of internal strength
List 5-10 of internal weaknesses
List 5-10 of internal opportunities
Generate strategies that use the strengths to take advantage of opportunities
Generate strategies that take advantage of opportunities by overcoming weaknesses
List 5-10 of external Threats
Generate strategies that use the strengths to avoid threats
Generate strategies that minimize weaknesses and avoid threats
Thus TOWS matrix will be generates four set of strategies that could be used to modify on the current strategy or generate new strategy that fit with the organization objectives.
the organization strategy should be implemented through procedural implementation and strategic management consists of several different stages at the beginning analysis the strategy covers purposes and expectations of the organization and focus on internal factor analysis to showing to strengths and weaknesses and external factor analysis to showing the opportunities and threats that facing the organization that strategic analysis outcome will be using in SWOT analysis.
The implementation of the organization strategy should be evaluated and monitoring through strategic evaluation and control to follow the progress of the organization and see how appropriate the current strategy with the objectives of the organization.
Strategy plays an important role in the life of the organization where consider the actual path to achieve the objectives, Where there exist many strategies and techniques and through the strategic management is determined appropriate strategy.
Through the assignment will review the strategic management and these stages, levels of strategy, the factor affect on the organization and that divided to internal and external factor and how to generate or modify the strategy through using SWOT analysis.
A good strategy means a successful organization so should be concern in strategic management and the formulation of strategies where is the process of establishing the mission, objective of organization and choosing among alternative strategies.