This guide defines basic activities and key terms in strategic management. The first section of this guide provides the definition of strategic management. Second section will explain to you the stages of strategic management. The third and fourth section of this guide will explain the importance of integrating analytical and intuition, and the importance of adapting to change. So, lets move on to the first section.
What is Strategic Management?
Strategic management can be defined as the art and science of formulating, implementing and evaluating cross functional decisions that enable an organization to achieve its objectives. As this definition implies, strategic management focuses on integrating management, marketing, finance or accounting, operation, research and development, and computer information system to achieve organizational success.
Stages of Strategic Management:
Strategic management process consists of three stages: strategy formulation, strategy implementation, and strategy evaluation.
Strategy Formulation:
Strategy formulation includes developing a business mission, identifying an organization's external opportunities and threats, determining internal strength and weakness, establishing long term objectives, generating alternatives strategies, and choosing particular strategies to pursue (strategies that will benefit the firm most).
Mission statements are enduring statements of purpose that distinguish one business with other similar business. A mission statement identifies the scope of a firm's operation in product and market terms.
External opportunities and threats refer to economic, social, cultural, political, technological and competitive trend and events that could significantly benefit or harm organization in the future.
Internal strengths and weakness refer to any controllable activities within an organization that are performed especially well or poorly.
Long term objectives can be defined as specific results that an organization seeks to achieve in pursuing its basic mission.
Annual objectives are milestones that organizations must achieve to reach long term objectives.
Strategy formulation decisions commit an organization to specific products, markets, resources, and technologies over an extended period of time. Strategies determine long term competitive advantages.
Strategy Implementation:
Strategy implementation means mobilizing employees and manager to put formulated strategies into action. 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 includes developing a strategy supportive culture, creating an effective organizational structure, redirecting marketing efforts, preparing budgets, developing and utilizing information systems, and linking employee compensation to organizational performance. Strategy Evaluation:
Strategy evaluation is the final stages in strategic management. There are three fundamental strategy evaluation activities:
Reviewing external and internal factors that are the bases for current strategies.
Measuring performance.
Taking corrective actions.
Strategy formulation, implementation and evaluation activities occur at three hierarchical levels in a large organization: corporate, divisional or strategic business unit, and functional. By fostering communication and interaction among managers and employees across hierarchical levels, strategic managements help a firm function as a competitive team.
Integrating Intuition and Analysis:
The strategic management process can be described as an objective, logical, systematic approach for making major decisions in an organization. Intuition is essential to making good strategic decisions. Intuition is particularly useful in making decision in situations of great uncertainty or little precedent. Some managers and owner of business profess to have extraordinary abilities for using intuition alone in devising brilliant strategies.
Although some organization may survive and prosper because they have intuitive geniuses managing them, most are not so fortunate. Most organization can benefit from strategic management, which is based upon integrating intuition and analysis in decision making. Analytical thinking and intuitive thinking complement each other.
Adapting to Change:
The strategic management process is based on the belief that organization should continuously monitor internal and external factors so that timely change can be made as needed. To survive, all organization must be capable of astutely identifying and adapting to change. The strategic management process aimed at allowing organization to effectively adapt to change over the long run.
