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History of strategic manage planning began in the military. The aim was for military and businesses strategy to gain a competitive advantage. The fundamental difference between military and business strategy is that business strategy is formulated, implemented and evaluated with the assumption of competition. Military strategy is assumption of conflict. They both have to adapt to change and constantly to have success (Earle, 1984).
Strategic management has an on going process that evaluates and controls the business and industries in which a company is involved. Strategic management main focus is on the integrating management, marketing, finance, accounting and production operations. A balanced score card is often used to evaluate the overall performance of the business and its progress toward organizational success (Earle, 1984). There was a recognized importance of coordinating the various aspects of management under one encompassing strategy. Various functions of management were separate between departments and handled by boundary position (Earle, 1984). The strategic management consists of three stages, strategy formulation, strategy implementation, and strategy evaluation. A strategy formulation issue includes deciding what new businesses to enter, what businesses to abandon and how to allocate resources. Strategy formulation also has a deciding factor for a business to enter the international market. Strategy formulation decisions commit an organization to specific products, markets, and resources over extended period of time. Strategy implementation requires a firm to establish annual objectives, devise policies, motivate employees and allocate resources so that formulated strategies can be executed. Strategy implementation requires personal discipline, commitment and sacrifice (Earle, 1984). Strategy evaluation is the final stage in strategic management. There are three strategy evaluations fundamental activities that consist of reviewing external and internal factors that are the bases for current strategies, measuring performance and taking corrective actions (David, 1989). Strategy formulation, implementation and evaluation activities occur at three hierarchical levels. Most small businesses do not have divisions or strategic business units. They have only the corporate and functional levels. Strategic management is thinking through the overall mission of the business. Strategist must know the mission statement and the vision of the organization (David, 1989). The mission statement is the declaration of the organization of why the organizations exist. The mission statement is essential for effectively establishing the objective for formulating strategies. A good mission statement will indicate the relative attention that an organization will devote to the stakeholders. The vision statement should be short and answer the question of what the organization want to become (David, 1989). Strategic management technique goes from the bottom – up, top- down. The bottom-down approach employees submit proposals to the mangers who in turn funnel the best ideas up the organization. The proposals are assessed using financial criteria such as returns on investments or cost benefits analysis. The top-down approach the CEO with the assistance of strategic planning team decides on the overall direction the company should take. Some organizations are experimenting with collaborative strategic planning techniques that recognize the emergent nature of strategic decisions (Drucker, 1989). The strategic management process can be described as an objective, logical systematic approach for making major decisions in an organization. Intuition is useful for making decisions in situations of great uncertainty or little precedent. It is also helpful when highly interrelated variable exist or when it is necessary to choose from several alternatives. Strategist helps an organization gather, analyze and organize information. They track industry and competitive trends, develop forecasting models and scenario analyses, identify business treats and develops creative actions plan.
Strategic Management In The Public Sector
The public sector organizations are faced with the greatest challenges in decades. The pressure is on many organizations to change the mission and practices of the organization is made up of rule making bodies, such as legislature or a board appointed by public official. Constraints limits the flexibility and autonomy, goals are often vague and in dispute, the leader’s authority is limited, political interference and scrutiny by outsiders can be expected as a strategy is formed, broad accountability is required, and performance expectations continually shift.
Strategic Management in The Private Sector
There are many federal, state, and local agencies with countless variations and nuances in how they operate. To avoid blurring key distinctions, special cases, such as public agencies that rely solely on fees, are not considered in this research. Instead, the research concentrates on the general purpose government agency that typifies what Bozeman calls “tax-supported.
There are some benefits and pitfalls of strategic management. Strategic management allows an organization to be more proactive than reactive in shaping their future. It influence activities and exert control over its own destiny. Strategists of low performing organizations are often preoccupied with solving internal problems and meeting paperwork deadlines. They underestimate the competitors’ strengths and overestimate their organizations strengths. The worst thing strategist do is developing strategic plans themselves and then present them to the operating managers to execute. The financial benefits could be a rise in sales, improvement in profitability, and improvement in productivity. The research studies indicate that the process rather than the decision or document is more important contribution of strategic management. Opportunity that process provides to empower individual is a great benefit of strategic management. The financial benefit indicates organizations using strategic management concepts are more profitable and successful than those that do not (David, 1986). The non benefits of strategic management are known as pitfalls. Strategic planning is an involved, intricate and complex process that takes an organization into uncharted territory. Jumping from missions’ formulation to strategy development without sufficient time to determine the critical success is a pitfall and Management rejecting the formal planning mechanism and making intuitive decisions that may conflict with the formal plan. Top management believing that it can create a plan by delegating the planning function to a planner, the planner may facilitate the planning process, management take ownership. And also the failure to involve key employees in all phases of planning process and development is a pitfall. Some reason why strategic plans fail especially when management has failed to understand the customer, when management has the inability to predict environment reactions and the over estimation of resources competence, can the staff, equipment and procession handle the new strategy. Many theories of strategic management tend to undergo only brief periods of popularity. When an organization assumes success, they often fail to reward success. When the failure occurs then the firm may be punished (David, 1989). What is the significance of the external audit assessment process? First of all an audit is a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between the assertions and established criteria and communicating the results to the organization (David,1989). External analysis is the phase of the promotional planning process that focuses on factors such as the characteristics of an organizations customers market segments, positioning strategies, competitors and marketing environment. External opportunities and external threats refer to economic, social, cultural, demographic, are changing and creating a different type of consumer. This situation consequently changes to a need for a different type of product. Many organizations may face the severe external threat of online sales capturing increasing market share in their industry. Some organizations conduct external audits to develop a finite list of opportunities that can benefit the organization. By identifying key variables an organization could offer actionable responses. The increasing complexity of businesses today is evidenced by more countries developing the capacity to compete aggressively in world markets. Before an organization can perform an external audit it must gather economic, social, cultural, political, governmental legal trends. Once the information is gathered it should be assimilated and evaluated. The list of factors should be listed on flip charts. The managers must rank the factors identified for the most important opportunity or threat to the least opportunity or threat (Steiner, 1979).
There is an increasing global interdependence for economies, markets governments and organizations that makes it imperative for organizations to implement competitive strategies. Mass communication, technology is creating consumptions in diverse cultures world wide. An important part of an external audit is identifying a rival organization and determining their strengths, weakness, capabilities and opportunity threats. Rivalry among competing organizations is usually the most powerful of the five competitive forces. Globalization is a process of worldwide integration of strategy formulation, implementation and evaluation activities. A global strategy seeks to meet the needs of customers worldwide with the highest value at the lowest cost. China continues to be the world’s fastest growing economy as its gross domestic product. China’s economy is booming and thousands of foreign organizations have set up manufacturing bases in China. Differentiation is the only way to maintain economic or market superiority over the competitors. The organization must own the thing that differentiates it from the competitors. Without the ownership and protection any product or scale advantage can be compromised or lost (Porter, 1980) Internal assessment factors can be determined in a number of ways computing ratios, measuring performance and comparing to past periods and industry averages. The strengths and weaknesses are determined to the relative competitors’ relative deficiency or superiority important information. Internal strengths and internal weaknesses are the organization controllable activities that are assessed for performance especially well or poorly. Organizations strive to pursue strategies that capitalize on internal strengths and eliminate internal weaknesses. The process for performing an internal audit is a mirrors that of an external audit. Managers and employees throughout the organization must to be involved to determine the organization strengths and weaknesses. Performing an internal audit requires gathering assimilating and evaluating information about the organization. A task force of mangers should determine the most important strengths and weaknesses that should influence the future of the organization. Internal strengths and weaknesses should be associated with the organization culture are sometimes overlooked because of the inner functional nature of the phenomenon. The strategist must understand the organization culture system. Managers must obtain a better knowledge of historical, culture, religious force that motivate and drive people in other countries. In Japan organizations operate within the context of which stress group harmony and social cohesion. China business behavior revolves around personal relations. Korea businesses revolve around harmony based on the respect of hierarchical relationship including obedience and authority. Organizational culture affects the decisions that must be evaluated during an internal strategic management audit (Porter, 1980). There should not be an organization that has unlimited resource. No organization should be able to take on an unlimited amount of debt or issues of stock to raise capital. Strategic decisions have to be made to eliminate some courses of action to allocate organizational resources. Many organizations could only afford to pursue only a few corporate level strategies at a given time. Strategies are the means by which long-term objectives will be achieved. Diversification, acquisition, product development and market penetration are what some large organizations focus on as strategies. Strategies are potential actions that require top management decisions and a large amount of the organizations resources. Planning is the essential bridge between the present and the future that increases the likelihood of achieving desired results. Planning helps the organization achieve maximum effects from a given effort. Planning enables the organization to achieve and detail how to achieve desired objectives. Most organizations have no choice but to continue to develop new and improved products because of changing consumer needs. The answer to where an organization is going can be determined by where they have been (David, 1986). Strategy implementation is allocation and management of sufficient resources. When implementing programs involves acquiring resources developing the process, training, process testing and integration legacy process. Strategy implementations have many problems arising such as human relations and employee communication. Strategy implementation directly affects the plant manger, division managers, project managers and personnel managers. Strategy implementation allows an organization to examine the expected results of various actions approaches. Organization financial ratios provide valuable insight into the feasibility of various strategy implantation approaches. There are six steps in a financial analysis. The first step is to project an income statement before the balance sheet. The second step would be to use the percentage of sales method to project cost of good sold. Third step would be to calculate the project net income. The fourth step would be to subtract fro the net income any dividends to be paid for the year. Fifth step would be to project the balance sheet items with retained earning and then forecast stockholders equity, long term liabilities, current liabilities, total assets, fixed asses and current assets. And the last step would be to list comments on the projected statement. The financial budget should not be thought of as limiting the expenditures but rather as a method for obtaining the most productive and profitable use of an organization resource. Feasibility is a resources required to implement the strategy of cash flow analysis, forecasting, break even analysis and resource deployment. Acceptability is the expectation of identifying stakeholder, shareholders, employees and customers. The expected performance outcome can be returned risk reactions. Shareholders would expect the increase of their wealth, employees would expect improvement in their careers and customer would expect better value for money. The best implemented strategies become obsolete as an organization external and internal environment change (Mintzberg, 1987). Some organizations evaluate the execution of strategies. The strategy evaluation is vital to an organization well being. Timely evaluations can alert management to problems or potential problems before they become critical to the organization. Strategy evaluation is important because organizations face dynamic environment because key external and internal factors often change quickly and dramatically. Strategy evaluation activities should be performed on a continuing basis. It should be continuous because periodic basis will allow benchmark s of progress to be established and more effectively monitored. In strategy evaluation formulation and strategy implementation the people make the difference. Evaluating strategies should be measured and easily verifiable. Problems can result from ineffectiveness or inefficiency. Quantitative criteria commonly used to evaluate strategies are financial ratios, which strategist used to make three critical comparisons. The comparisons are the organization performance, performance compared to the competitors and comparing to the industry. The last stage to evaluate strategy activity is taking corrective actions that require making changes to competitively reposition the organizations future. The strategy evaluation helps an organization to have the ability to adapt successfully to changing circumstances (Agnew, Brown, 1982). Strategy evaluation must meet several basic requirements to be effective, they must be economical, should be meaningful, should provide timely information, the information have the approximate information that is timely and more desirable. The time dimension of control must coincide with the time span of the event being measured. It must provide a true picture of what is happening. The process should not dominate decisions that foster mutual understanding, trust, and common sense. Strategy evaluation systems often confuse people and accomplishments (Agnew, Brown, 1984).Each organization should have a contingency plan. A contingency plan is an alternate plan that can be put into effect if certain key events do occur as expected (Agnew, Brown, 1984).
Ethics and Social Responsibility
History has proven the greater the trust and confidence of people in the ethics of an institution the greater its economic strength. Organizations unethical include misleading advertising or labeling causing environmental harm. Organizations had lack of equal opportunities for women and minorities, overpricing, hostile take over, organizations moving overseas (Agnew, Brown. 1984) Management of diversified organizations required new techniques and new ways of thinking. Strategic management deals with size, growth, and portfolio of theory. Organizational strategy must be iterative. It involves going back and forth between questions about objectives implementing planning and resources. Strategic management is on going process of containing knowledge. Very repetitive learning cycle for progression towards a clearly define destination. Several factors can affect both the making of goals and prioritizing them. The organizational environment or stability of an organization might affect which direction a leader is trying to go. The life cycle or stage of the organization will affect goals depending on whether the agency is new, well established, or in a transition of needed change. The leader’s level of responsibility will affect what type of decisions the leader is making, how much they have to work with, and access to resources. The type of responsibilities vary greatly among leaders, some are in charge of personnel while others are in charge of operations or equipment, so their decision might only affect what they have control of. A leader’s personality can make a big difference in the decisions made and how their made, because likes and dislikes, biases, and strengths and weaknesses affects how one feels about certain things. Lastly, a leader’s time in office may affect their, motivation, comfort level, and experience with decision making especially in crises (Van Wart, 2005). In reading Van Wart’s Dynamics of Leadership in Public Service chapter one explains that we as American people have an expectation as to what our leaders should be doing for us. This person is one that does more and talks less (p.14). The book also stresses how important observable behaviors and actions are in choosing a leader. (Van Wart, 2005) This is where goals and priorities come to play. Having a goal allows you to narrow down your focus and come up with specific ways to achieve it. When someone makes a decision and speaks on a goal, the powerful subconscious mind begins to work and begins playing with ideas and developing strategies to obtain the goal. In leadership when you set yourself a goal both your conscious mind and the minds around you start working on it and begin to develop an action plan. You will find you begin asking yourself and those around you questions about what needs to be done to enable the fulfillment of the goal. Many in leadership roles may delegate other to come up with well thought out ideas and solutions to problems that could potentially be an issue in achieving your goal.
Reference Agnew, Neil & Brown, John (1984) Corporate Agility Business Horizons, 25, no.2
David, Fred (1989). Strategic Management Columbus, Merrill Publishing Company
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Earle, Ellen (1985) Elements of Strategic Management Henderson, Bruce (1979) Henderson On Corporate Strategy (Boston: Abt. Books 1979) : 6
Mintzberg, Henry (1987) Crafting Strategy Harvard Business Review, (July/ August 1987)
Porter, Michael E. (1980) . Competitive Strategy: Techniques for Analyzing Industries and Competitors, New York, Free Press Riemann
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Van Wart, M. (2005). Dynamic of Leadership in Public Service, Theory and Practice. Leadership Formulation and the Prioritization of Goals. 14(2), 65-91. Armonk, NY: M.E. Sharpe
Vogel, David (2004). Integrating Social Responsibility and Marketing Strategy: An Introduction. California Management Review 47, no 1(Fall, 2004): 6
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