Strategic Management is an essential tool employed by the senior management or leadership of a firm. It is an ongoing and complex process and hence, a dynamic one, where a firm’s management and leadership should be
prepared to constantly adapt to competition and markets, reorganizing and retooling their organizations over time to meet set goals and objectives.
Strategic Management is critical to ensuring any firm’s long term survival. It would analyze and evaluate the present and intended status of an organization; formulating varying strategies at differing organizational levels to meet those survival needs.
This essay would highlight the various key areas and concepts, which comprise Strategic Management, defining what it is and how it can be used by an organization to ensure its future success.
Strategic Management
Strategy can be understood to be a science and an art, whereby one would attempt to execute well prepared and calculated plans, in an effort to accomplish given executive goals. This may be done through the use of various tactics, procedures, plans, decisions and measures. In addition, these strategies would serve to provide the organization with a desired competitive advantage.
Management, on the other hand, may be defined as the process of effectively achieving organizational goals through Planning, Organizing, Leading and Controlling.
Combining these two components together, one understands Strategic Management to mean, an ongoing and complex process of formulating an organization’s mid to long term goals and implementing the necessary strategies through management in order to realize them. Simply put, it’s the charting and directing of the future for an organization, ensuring its longevity and profitability within the aggressive business environment.
Strategic Management would also been seen as the process of Crafting, Implementing and Execution of an organization’s strategies. This process would comprise five simple stages:
• The Development of a Vision and Mission.
• The Setting of Goals and Objectives.
• The Crafting Of Strategies.
• The Implementation and Execution of Planned Strategies.
• The Evaluation of Implemented Strategies.
Vision and Mission Development
Development of a Mission should be important to any organization. Mission statements would define an organization’s key values, beliefs, identity and purpose. It would reflect upon and answer such questions as – what business do we want to be in, what customer needs are to be satisfied and what capabilities are to be developed.
The Vision for an organization is a description of its desired future and operational state. The Vision would take into consideration future opportunities and changing conditions, essentially becoming a roadmap by which strategic decisions are crafted.
For example, Eastman Kodak’s Vision is, “To become the world’s best in chemical and electronic imaging”; and Avis Rent-a-car’s Mission, “Our Business is renting cars. Our mission is total customer satisfaction.”
Setting Goals & Objectives
The setting of Goals and Objectives transform the Mission and Vision into performance targets and serve to ensure commitment to the desired results. This in turn, can be used to create benchmarks by which the monitoring and tracking of performance and progress can be conducted. These goals should be quantifiable in nature.
In defining goals and objectives, the following Criteria should be considered;
• Specific – where they are clearly and precisely expressed.
• Measurable – where tangible and assessable outcomes are produced.
• Agreed Upon – where those responsible for achieving the goals, have.
• Realistic – where they should be attainable.
• Timely – where they possess definitive start and completion dates.
Crafting Strategy
There are several questions which management should ask, necessary for the crafting of strategies. These questions include, how are we to succeed in the future? Are we going to delve into new and diversified markets? How are we to achieve a greater market share? And what values are we to build and develop upon.
The strategies crafted at this point would guide the organizations on how these questions are to be answered, and as such, how the Mission and Vision are to be accomplished and pursued.
There are essentially many types of Strategy, though only two will be highlighted. Firstly, a Planned Strategy, where management would prepare prospective game plans. Those plans chart the way forward, and the execution of actions necessary for constructing and maintaining a competitive advantage, ultimately attaining the successful business position.
However, with time this Planned Strategy must react and respond to emerging business opportunities and conditions, therefore management would add new strategies and remove old ones. This is an Adaptive or Emergent Strategy.
Examples of such conditions would include new competitive developments, technological advancements, developments, mergers and acquisitions within the industry, consumer trends and also prevailing economic and future conditions.
Also, strategies are crafted at differing levels within the organization. In aiding with crafting, a situational analysis would be conducted. This is commonly known as a SWOT analysis, which looks at and evaluate the factors which would affect the organization’s competitive advantage and performance. Such as,
• The organization’s internal characteristic Strengths and Weaknesses, which serve to aid or retard internal organizational success.
• The business environment’s lucrative opportunity and imminent Threats, which serve to provide prospects for external organizational success or only serve to prevent it.
The levels at which the Strategies are crafted would be the Corporate, Business and Functional.
Corporate Level Strategies look at the organization in a holistic manner; and would include such actions as new business acquisitions, portfolio diversification, the synergy of business elements into one competitive force and ensuring priorities which promote the most successful business position.
An example would be Cisco Systems, which purchased 71 companies between 1993 and 2000 to bolster its core competencies, and make it a foremost seller of IT products and solutions.
Business Level Strategies look at the organization on a per unit basis. These strategies would define the competitive edge of the organization, unite its functions and also address any internal problems.
Wal-Mart launched years ago an e-commerce site, where customers would make online purchases; and in so doing, further capitalized on its market share. Several of its competitors have also tried to keep up, launching similar services.
Functional Level Strategies look at the functional departments within the organization and how they can be used to support and reinforce the Business Level Strategy.
In 2005, the Dell Corporation sought to have a Dell computer in every home and business in America. To date, Dell has offered quality and affordable home and business computing solutions through very aggressive marketing, production, product development and customer support. This action has brought the company very close to the realization of its vision.
The Implementation and Execution of Strategy
This is the most complex and driven part of the Strategic Management Process. The Implementation stage of the process covers how management would put into action its organizational tools and resources, in a timely, efficient and effective manner, in order to achieve its goals and objectives. It can be shown to be done through the following.
Leadership is the most critical area of Implementation. It would involve the influencing of others to agree upon and accomplish goals; generally through persuasion, motivation, a sense of involvement and purpose, understanding and culture-changing.
Structure may be defined as follows… “Organization structure is defined as (1) the set of formal tasks assigned to individuals and departments, (2) formal reporting relationships, including lines of authority, decision responsibility, hierarchal levels, spans of managers’ control and (3), design of systems to ensure effective coordination of employees across departments.” 1
Human Resources would cover all employees, their relative development, environments, conditioning, training, and employment status.
Information and Control Systems would include information technology systems, information systems, policies and procedures, budgets, incentives and pay packages – all things necessary for ensuring success of other factors.
Evaluation of Strategy
Over time, management would have to monitor and evaluate the performance and progress of the organization, ensuring that it’s meeting its targeted goals. As mentioned previously, business and internal environments change with time, and management must ensure that its targets are being met effectively and on time.
It may be found that the emergence and evaluation of new and existing conditions, strategies will have to be altered, redefined and improved upon to ensure Visions and Missions are held true. Organizations would need to make policy and budgetary changes, revise or modernize work processes and ethics, as well as improve financial reward systems and working conditions, hence, taking some remedial or corrective action. This would ensure that the organization stays on track for success.
Conclusion
Previous reading has shown that Strategic Management is indeed critical to an organization’s success, affecting every level and aspect of the organization. It is a cycle of events that take place over the lifetime of the organization, where CEO’s and Directors make long term decisions about their organizations; leaving the job of ensuring that the organization achieves its given goals and objectives to management. Ultimately, this would ensure the organization’s profitability to shareholders and investors, viability in given markets and survivability in the future and most importantly a sustained competitive advantage.
References
1. Daft, R L (2003) “Management” – Sixth Edition. Ohio, USA: Thomson Learning – South Western (p) 313.
Online Resources
1. Wikipedia.com – The Free Online Encyclopedia. https://en.wikipedia.org/wiki/Strategic_management (23rd October, 2005)
References
1. Daft, R L (2003) “Management” – Sixth Edition. Ohio, USA: Thomson Learning – South Western.
2. Daft, R L (2004) “Organization Theory And Design” – Eight Edition. Ohio, USA: Thomson Learning – South Western.
3. De Kluyver, C (2000) “Strategic Thinking – An Executive Perspective”: Prentice Hall
4. Hannagan, T (2005) “Management Concepts & Practices” – Fourth Edition: Prentice Hall
5. Thompson And Strickland (1999) “Strategic Management: Concepts And Cases” – Eleventh Edition: Mc Graw-Hill