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Strategic management is a disciplined approach utilizing the principles and process of management to identify the corporate objective or mission of any business. It determines an appropriate target to satisfy the objective, recognize existing opportunities and constraints in the environment, and device a rational practical way by which objective can be achieved.
Strategic management is both the process and philosophy for determining and controlling the organizational relationship in its dynamic environment. As a process, it attempts to define approaches and techniques to assist management adapt to the dynamic of today, through the use of objectives and strategies. Strategic management endeavours to achieve effective and efficient programs to accomplish the organization's mission. As a philosophy, it changes how manager looks at competitors, customers, markets and even the organization itself. Its objective is to stimulate management's awareness of the strategic implication of environmental events and internal decision.
Lawrence and William (1988) defined strategic management as a stream of decisions and actions, which leads to the development of an effective strategy or strategies to help achieve corporate objectives. The strategic management process is the way in which strategists determine objectives and make strategic decisions.
Strategic management's main focus is the achievement of organizational goals taking into consideration the internal and external environmental factors.
Porter (1985) argues that the essence of formulating comprehensive strategy is relating a company to its environment. Strategic management permits the systematic management of change. It enables organization to purposefully mobilize resources towards a desired future.
Chandler (1962) also posited that any effective successful strategy is dependent on structure, thus to achieve any effective economic performance the organization needs to alter its structure.
The objective of this paper is to examine the conceptual and theoretical approach of strategic management on the performance of business organization.
The objectives of the paper are:
i. To examine the importance and relevance of strategic management in an organization.
ii. To examine the effectiveness of strategic management.
iii. To see how strategic management influence performance of the business organization.
Literature Review/ Theoretical Framework
Strategy is the determination of the basic term goals and objectives of an enterprise, and the adoption of course of action and the allocation of resources necessary for carrying out those goals Chandler (1962).
In Chandler definition of strategy he attempts to view that strategy is as much as about defining goals and objectives as it is about providing the means for achieving them.
Ansoff and McDonnell (1990) also separate goal setting (concerned with ends) from strategy (concerned with means). On the subject of strategic management they provide the following definition:
Strategic management is a systematic approach for managing strategic change, which consists of the following:
a. Positioning of the firm through strategy and capability planning.
b. Real-time strategic response through issue management.
c. Systematic management of resistance during strategic implementation.
Strategy and market positions are necessary to set directions for a firm and to outsmart competitors or at least enable it to overcome threatening environment. A good strategy when adequately implemented can ensure a topmost position for the weakest firm among other superior competitors, but without good strategies.
Strategic planning if well conceptualized and implemented with an organization should result in strategic management. Strategic management treats strategic thinking as a pervasive concept for running a business organization and regards strategic planning as an instrument around which all other control system budgeting, information, reward and organization can be integrated. Strategic planning specifically entails the allocation of resources to programmed activities in such a way as to achieve a set of business goals in a dynamic competitive environment. Glueck and Jauch (1984) posited that strategic management as a steam of decisions and actions that lead to the development od effective strategies to help achieve corporate objectives.
Mintzberg (1991) sees strategy as 5 P's - plans, ploys, patterns, position and perspective. He describes a plan as 'some sort of consciously intended course of action'. In this situation organizations are expected to decide what they want to do and how they intend to achieve it. Failure of many organizations in recent time has been attributed to poor plan.
A ploy is a sub-set of a plan, and is a strategy in the sense of a strategies (i.e. a ruse or trick designed to put a rival company off the sent by disguising the real intention of the company).
Mintzberg (1991) describes pattern as the consistent behaviour and processes that emerge from strategic thinking, due to intended or unintended actions. He sees plans and ploys as deliberate strategy use by an organization, but considers pattern as emergent strategies.
According to Mintzberg position is acceptable location for the organization in an environment. In business organization position boils down to its product market position in its chosen market. This is what Nigeria Bottling Company (NBC) has been using over other any soft drink industry. Perspective is looking inside the organization. Any of business organization with high degree of perspective approach will have management that have shared view and vision and make a positive impact on the environment where it operates.
Strategy is needed to focus effort and promote coordination of activities. Without strategy an organization becomes bunch of individuals, hence strategy is required to ensure collective actions and concentration of efforts towards achieving organizational plans and objective.
Johnson and Scholes (1993) view corporate strategy from cultural perspective, they described it as a strategy based on the experiences, assumptions and beliefs of management overtime and which may eventually permeate the whole organization.
Henceforth, strategy can help in defining an organization to both insiders and outsiders. Strategy as plan, ploy pattern, position and perspectives defines the organization by providing proper understanding of the organization to the people and a way of differentiating it from others. One needs to understand that a clearly defined strategy that will lead to enthusiasm among various stakeholders - shareholders, suppliers, creditors, customers, promoter and employees as a result promote commitment that will enhance better performance of business organization.
Strategy provides consistency and stability. It deals with irregularity in behaviour and reduces uncertainty about the operation of an organization. It resist changes thereby ensuring consistency which gives a sense of being in control to the management and relief from the anxiety created by complexity. This does not mean a static or stationary situation but rather it implies an efficient response to the environment to ensure stability and continual domination or retention of market leadership by the business organization involved. This assists the organization to focus its resources and exploit its opportunities, skill and knowledge to the fullest.
Strategy is a broad based formular for how business is going to compete (Porter 1980), that is, what its goal should be, and what policies will be needed to carryout these goals.
An organization strategic management has its ultimate objective in the development of its corporate values, managerial capabilities, organizational responsibilities and operational decision making at all hierarchical levels and across all business and functional lines of authority.
According to Child (1972) strategic decision making is seen as a crucial part of the process by which organization adapt to their environments. It is argued that those decision that actually succeed in creating or changing organizations do so via complex iterative process, which strategy theorists subsume under the concept of strategy implementation.
Importance of Strategic Planning
The importance of strategic planning in any business organization can not be overemphasized. Most of the organizations recently recognized the role of strategic planning to the long range growth and survival of their business organization. Most of the managers have observed that by specifically defining the mission of their organization they are better able to give it direction and focus its activities.
Some Nigerian Business Organizations are without formal plans or where there are formal plans they do operate without adhering to them. Some argued that the market place changes so fast for a plan to be useful. All business organizations are heading somewhere but unfortunately some do not know where they are going, then any road will lead them there. This therefore emphasizes the need for organizations to utilize strategic planning concepts.
Planning remains the key to organization success because absence of proper planning could lead to confusion and unethical practices. However, despite the importance of strategic planning many organizations still fail to plan, hence planning to fail.
In recent times, the study of strategic management is being given much attention Lambo (1986) studies bank portfolio management examining profit maximization and accommodation principle models in Nigeria commercial banks. Adeyemi (1992) who established that there is a positive correlation between strategic management and organizational performance in some Nigeria banks also carried out another study.
It is worthy of note that whatever conclusions are made, it has been empirically stated that the success or failure of strategic planning is determined by a number of components which include the environment, organization structure and strategic decision making. According to Ansoff (1979), when these three components are properly matched, the performance of any organization is optimized.
Lorange (1979) posited that the importance of strategic planning is to accomplish a sufficient process of innovation to support and enhance the planning process. He further argues that effective strategic planning does not have to be elaborate or complicated but must be logical and focused on strategic decisions to be undertaken.
Effectiveness of Strategic Management
Alli (1992) gives the characteristics of an effective strategic management as follows:
a. Clear direction and purpose
b. Objectives, goals, and strategic consistency
c. Continuous monitoring of internal and external (environment)
d. Integration of operating budget and profit plans with strategic plan
e. Continuous monitoring of progress with revision of plan and programs as appropriate
f. Creation of strategic atmosphere that foresters a team spirit
g. Commitment of necessary resources and the development of system to provide necessary management information.
Basically, there are three major perspectives of studying strategic management effectiveness in literature.
Firstly, uses of goal centered approach to assess organizational effectiveness. In this situation, individual organization seeks to analyze the extent of fulfillment of important planning objectives. Cameron and Whitton (1983), King (1987) and Steiner (1979) also support this.
Secondly, specific capabilities to develop a 'generic view' if system capabilities as stated by Lorange (1979) a generic capability required of every formal strategic planning system is the ability to encourage both creativity and control (Camillus 1975). In this perspective, creativity and control are used here not as opposite objective but as requisite properties of an effective planning system.
The third perspective traditionally examines the role and impact of corporate planning on organizational effectiveness. Although, the link may be a little bit difficult however, there are strong arguments that the ultimate test of the system's effectiveness and justification for its existence is the impact on organizational performance (Henry 1979).
For this study the researcher designed questionnaire and was administered to the First Bank of Nigeria, Plc. Ilorin Branch. The researcher administered thirty-five (35) questionnaires, which was divided into two parts. This first part contained demographic characteristics of the respondents while the second part was used to tap information on how strategic management enhances organization performance.
The researcher was able to retrieved twenty-nine (29) questionnaires from the respondents. This represents eighty-three per cent (83%) rate. The respondents for the study were randomly selected and stratified into male and female. The collected data were analysed descriptively.
Analysis and Discussion
The first part of the questionnaire which is on demographic characteristic of the respondents revealed that 72.4% of the sample were male while 27.6% of the respondents were female. This shows that majority of the respondents interviewed are male.
The ages of the respondents were between 21 to 50, although about 62.1% of the respondents fall within 31-40 age bracket. While only 13.8% were between 41-50 age group.
The study also revealed that 75.9% of the respondents were married while 24.1% were still single. About 44.8% of the respondents have spent above 11 years with the organisation. This shows that information was collected from the well-experienced personnel from the organisation, and this is an indication of the reliability of the information obtained.
Table 1: Demographic characteristics of the respondents
SEX frequency percentage
Male 21 72.4
Female 8 27.6
Total 29 100
Age frequency percentage
Under 21 - -
21-30 7 24.1
31-40 18 62.1
41-50 4 13.8
total 29 100
service frequency percentage
1-5 yrs 6 20.7
6-10yrs 13 44.8
11-15yrs 5 17.2
16-above 5 17.2
total 29 100
Education qualification frequency percentage
WASC / GCE 2 6.9
NCE/OND 1 3.4
HND/B.Sc./B.A. 16 55.2
M.Sc./MBA/MPA 10 34.5
Total 29 100
Table 2: Staff responses on the adoption of strategic management by their organisation
Source: researcher findings.
Table 3: Adoption of strategic management has enhanced the organisation performance.
Source: researcher findings.
The table 2 above shows that the responses of the respondents as regards to the adoption of strategic management in their organisation. 31.0% of the people interviewed strongly agreed while 51.7% also agreed that their organisation is fully adopted strategic management in its operation.
Although, about 10.3% of the respondents disagreed that their operation has not fully adopted strategic management in their operation.
The study also revealed that 51.7% and 37.9% of the respondents strongly agreed and agreed respectively that adoption of strategic management has enhanced the organisation performance. This shows that management recognition of strategic management has enabled it to make a sound decision, which has enhanced its successful operation in its environment.
However, 10.3% of the respondents disagreed with that position, according to them their organisation performance was due to other factors, which is outside the scope of this paper. It was also revealed from the study that strategic planning in the organiation is occassionally handled by the consultant, and also done at the top management level.
Conclusion and Summary
This paper examines the enhancement of Organisational performance through strategic management: conceptual theoretical and approach. In recent times world economy has witnessed a lot of dynamism and challenges. Therefore, there is need to take longer perspectives of operations so as to ensure that available resources are purposely harnessed for the optimal direction of the affairs of the business organizations.
An enhancement of business organization performance through strategic management will depend on management's recognition of the following functions: setting objectives, establishing policies with which to work towards objectives, assign responsibilities and provide for coordinated action, selecting and developing key personnel, helping them adjust to change, motivating and stimulating them to think creatively and measuring progress and evaluating results.
Strategic management allows an organization to make its decisions based on long-range forecast and not on the spur of the moment reaction. It also allows the establishment to make action at an early stage of new trend and consider the lead-time for effective management.
Ansoff et al (1979) studies ninety-three large firms, all of which have made acquisition between 1946 and 1965 and their financial and sales measure. They found that managers were able to predict outcomes better than non-planners.
The business organizations should adopt a competitive position, which will allow them to defend themselves against any forces in the industry environment. Harmnermesh (1993) proposed three broad generic strategies which if adopted by business organization will enable it to compete in a given business and position itself among it's competitors. These strategies are: overall cost leadership (achieve lower cost than competitors; differentiation (creating something unique and superior) and focus that is, selecting a particular buyer group or segment of the market as the basis for competition.
In order to achieve better performance, business organizations need to take bold step of adopting strategic management in their various organizations. Knowing fully well that the level and intensity of the competition between the organizations is fast increasing as the level of business organizations and individual.
In meeting the current challenges by the business organizations call for application of better and more meaningful strategic management which would transcend all categories of worker within the business organization.