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Strategic management is the art and science of formulating, implementing and evaluating cross-functional decisions that will enable an organization to achieve its objectives. It is The process of specifying the organization's objectives, developing policies and plans to achieve these objectives, and allocating resources to implement the policies and plans to achieve the organization's objectives.
Strategic management, therefore, combines the activities of the various functional areas of a business to achieve organizational objectives. It is the highest level of managerial activity, usually formulated by the Board of directors and performed by the organization's Chief Executive Officer (CEO) and executive team. Strategic management provides overall direction to the enterprise and is closely related to the field of Organization Studies.
A company's strategy consists of the combination of competitive moves and business approaches that managers employ to please customers, compete successfully and achieve organizational objectives. We may define 'strategy' as a long range blueprint of an organization's desired image, direction and destination what it wants to be, what it wants to do and where it wants to go. Following other definitions are also important to understand the term:
Igor H. Ansoff :
''The common thread among the organization's activities and product-markets that defines the essential nature of business that the organization was or planned to be in future''.
William F. Glueck
''A unified, comprehensive and integrated plan designed to assure that the basic objectives of the enterprise are achieved''.
Scope and Nature of Strategic Management
To fix mission of the unit: There is certain objectives, behind establishment of the each company. To achieve such objectives, long term as well short-term purposes and goals are fixed.
To make favourable internal environment: In internal environment of business, financial resources, production tools and production capacity, selling capacity, manpower, physical facilities etc. are included. In case if such environmental resources are not proper, to meet with objectives of the unit, efforts should be made to make it convenient.
Analysis and evaluation of External environment: In external environment, policy of competitors, product of competitors, trend of customers, new research, education, technology, government policy, fashion, taxes etc. many such matters are involved. An evaluation to be made in relation to, external environmental factors affecting currently and in future, by making its analysis e. g. government's export import policy and tax policy, how it's affecting the business, considering the trend of customers in changing fashion, into account, marketing management should be arranged.
(4) SWOT analysis to be made: After making study of internal as well external environment, SWOT analysis should be done. In which, company's strength, weakness, opportunities and threats are taken into account. Such each factor are related to the company's objectives and proper strategy is made, to avoid obstructive matters among this e. g. Company has enough export orientation, but its labor are not working regularly. This is the company's weakness. If proper steps are taken, company has enough potential for increase in export business. But, if no timely proper steps are taken, then there is risk of product to be out of fashion and wastage of product.
(5) Selection of new alternatives to achieve mission: For achievement of misÂ¬sion of the company, proper selection of an alternative should be made out of many alternatives found out for benefit of achievement of mission. At this stage, best alternative is selected, keeping company's capacity, weaknesses, risks, and business opportunities into consideration, e. g. For mission of preparing motorcar running by solar energy, first of all preference should be given, for preparing small machines or vehicles run by solar energy, after getting success on it, mission of preparing "solar motor-car" can be achieved.
(6) To develop grand strategy: In relation to company's business alternatives ascertained, it is necessary to clarify long-term objectives of the company. For success of such objective, a goal strategy is prepared, e. g. for production of small machines and vehicles, run by solar energy, a location to be selected, to erect plant, to keep research department, proÂ¬duction to be done on experimental basis and thereafter commercial production to be made.
(7) To fix short-term annual targets: For success of company's top mission, a short-term targets are required to be ascertained. Generally, they are of half-year or annual duration. For this a time schedule and budget is prepared. During annual period, a time table is prepared that, production of which product, when and how much would be made e. g. when production of machineries or vehicles is to be made, it is necessary to fix targets, that during how much period, how many and what vehicles would be manufactured.
(8) To raise resources and facilities: To achieve targets as per time schedule, it is necessary to raise required resources and facilities. In relation to increase in production, it is required to increase employees and their facilities. At this stage, proper distribution of financial as well non-financial resources is to be made after ascertaining their availability, necessary changes in administration to be made, to encourage employees in relation to achieve targets etc. such matters are taken into account.
(9) Evaluation and control on activities: It is necessary to evaluate regularly that, short-term targets, within decided period, for success of entire strategy, are achieved, at what rate. If activities are not progressing towards direction of decided goals, steps, viz. training to related employees, guidance, leadership and encouragement should be taken. By comparing results with original targets, activities can be made more effective by controlling steps, if results are not favorable, e. g. as controlling steps, necessary changes in technology, providing training, making contracts with traders, changes in policy, procedure and methods may be made.
Importance of Strategic Management Strategic management provides the framework for all the major business decisions of an enterprise such as decisions on businesses, products and markets, manufacturing facilities, investments and organizational structure. In a successful corporation, strategic planning works as the pathfinder to various business opportunities; simultaneously, it also serves as a corporate defence mechanism, helping the firm avoid costly mistakes in product market choices or investments. Strategic management has the ultimate burden of providing a business organization with certain core competencies and competitive advantages in its fight for survival and growth. It is not just a matter of projecting the future. It is not just a forecasting job; it is concerned with ensuring a good future for the firm. It seeks to prepare the corporation to face the future and even shape the future in its favour. Its ultimate burden is influencing the environmental forces in its favour, working into the environs and shaping it, instead of getting carried away by its turbulence or uncertainties. It is environmental uncertainty that makes strategy and strategic conduct essential in a business. The more intense the environmental uncertainty, more critical is the need for strategic management.
Quite naturally, considerable thought, expertise and effort goes into the process of strategic management. The success of the efforts and activities of the enterprise depends heavily on the quality of strategic management, i.e. the vision, insight, experience, quality of judgment and the perfection of methods and measures.
Strategic planning and implementation have become a must for all organizations for their survival and growth in the present turbulent business environment. 'Survival of fittest 'as propagated by Darwin is the only principle of survival for organization, where 'fittest' are not the 'largest' or 'strongest' organization but those who can change and adapt successfully to the changes in business environment. Just like the extinction of the dinosaurous who ruled the earth one time but failed to survive in change condition of earth natural environment many organizational giants have also followed the path of extinction failing to manage drastic changes in the business environment. Also business follows the war principle of 'win or lose', and not necessarily win-win situation arises in business world. Hence the organization has to build its competitive advantage over the competitors in the business warfare in order to win. This can be done only following strategic analysis, formulation and implementation.
THE TASK OF STRATEGIC MANAGEMENT
The strategy-making/strategy-implementing process consists of five interrelated managerial tasks. These are
â™¦ Setting vision and mission: Forming a strategic vision of where the organization is headed, so as to provide long-term direction, delineate what kind of enterprise the company is trying to become and infuse the organization with a sense of purposeful action.
â™¦ Setting objectives: Converting the strategic vision into specific performance outcomes for the company to achieve.
â™¦ Crafting a strategy to achieve the desired outcomes.
â™¦ Implementing and executing the chosen strategy efficiently and effectively.
â™¦ Evaluating performance and initiating corrective adjustments in vision, long-term direction, objectives, strategy, or execution in light of actual experience, changing conditions, new ideas, and new opportunities.