STRATEGIC MANAGEMENT

A Strategy can be defined as a step-by-step plan to achieve a goal.

Strategic Management:
Strategic management is an on-going process of formulating strategies for the organization
that bring profit to the organization and create harmony between organization and its
environment. It lists the strengths that the organization already possess for the achievement of
its objectives; weaknesses that hinder in goals accomplishment; opportunities and markets
that can be exploited in favour; and threats that are present in external and internal
environment: this is in short called as SWOT analysis.
Strategic management provides overall direction to the enterprise and is closely related to the
field of Organization Studies. In short, it entails specifying the organizations objectives,
developing policies and plans designed to achieve these objectives, and then allocating
resources to implement the plans. Academics and practicing managers have developed
numerous models and frameworks to assist in strategic decision making and in understanding
infinitely complex macro-economic environments. Strategic management is not static in
nature; the models often include a feedback loop to monitor execution and inform the next
round of planning.
While making decisions about the strategy the organization analyses what are
thedistinctive competencies the company already possesses. Distinctive competency can be a
valuable asset for the company. Distinctive competencies make the process of strategy
formulation much more directional and successful.
The strategic management discipline originated in the 1950s and 1960s. Among the numerous
early contributors, the most influential were Alfred Chandler, Philip Selznick, and Peter
Drucker.
Alfred Chandler recognized the importance of coordinating management activity under an
all-encompassing strategy. Interactions between functions were typically handled by
managers who relayed information back and forth between departments. Chandler stressed
the importance of taking a long term perspective when looking to the future. In his 1962
ground breaking work Strategy and Structure, Chandler showed that a long-term coordinated
strategy was necessary to give a company structure, direction and focus. He says it concisely,
structure follows strategy.
In 1957, Philip Selznick formalized the idea of matching the organization's internal factors
with external environmental circumstances. This core idea was developed into what we now
call SWOT analysis by Learned, Kenneth R. Andrews. Strengths and weaknesses of the firm
are assessed in light of the opportunities and threats in the business environment.
Peter Drucker was a prolific strategy theorist, author of dozens of management books, with a
career spanning five decades. He stressed the value of managing by targeting well-defined
objectives. This evolved into his theory of management by objectives (MBO). According to
Drucker, the procedure of setting objectives and monitoring progress towards them should
permeate the entire organization.

Importance of Strategic Management in Organizations:

A well-formulated strategy can bring various benefits to the organization in present as well as
in future.
1.

Strategic management takes into account the future and anticipates for it.

2.

A strategy is made on rational and logical manner, thus its efficiency and its success
are ensured.

3.

Strategic management reduces frustration because it has been planned in such a way
that it follows a procedure.

4.

It brings growth in the organization because it seeks opportunities.

5.

With strategic management organizations can avoid helter &skelter and they can work
directionally.

6.

Strategic management also adds to the reputation of the organization because of

consistency that results from organizations success.

7.

Often companies draw to a close because of lack of proper strategy to run it. With
strategic management companies can foresee the events in future and thats why they
can remain stable in the market.

8.

Strategic management looks at the threats present in the external environment and
thus companies can either work to get rid of them or else neutralizes the threats in such a
way that they become an opportunity for their success.

9.

Strategic management focuses on proactive approach which enables organization to

grasp every opportunity that is available in the market.

ELEMENTS OF STRATEGIC MANAGEMENT

The strategic management process is made up of four elements: situation analysis, strategy
formulation, strategy implementation, and strategy evaluation. These elements are steps that
are performed, in order, when developing a new strategic management plan.
Situation Analysis
Situation analysis is the first step in the strategic management process. The situation analysis
provides the information necessary to create a company mission statement. Situation analysis

involves "scanning and evaluating the organizational context, the external environment, and
the organizational environment" (Coulter, 2005). This analysis can be performed using
several techniques. Observation and communication are two very effective methods.
To begin this process, organizations should observe the internal company environment. This
includes employee interaction with other employees, employee interaction with management,
manager interaction with other managers, and management interaction with shareholders. In
addition, discussions, interviews, and surveys can be used to analyze the internal
environment.
Organizations also need to analyze the external environment. This would include customers,
suppliers, creditors, and competitors. Several questions can be asked which may help analyze
the external environment. What is the relationship between the company and its customers?
What is the relationship between the company and its suppliers? Does the company have a
good rapport with its creditors? Is the company actively trying to increase the value of the
business for its shareholders? Who is the competition? What advantages do competitors have
over the company?
Strategy Formulation
Strategy formulation involves designing and developing the company strategies. Determining
company strengths aids in the formulation of strategies. Strategy formulation is generally
broken down into three organizational levels: operational, competitive, and corporate.
Operational strategies are short-term and are associated with the various operational
departments of the company, such as human resources, finance, marketing, and production
(Coulter, 2005). These strategies are department specific. For example, human resource
strategies would be concerned with the act of hiring and training employees with the goal of
increasing human capital.
Competitive strategies are those associated with methods of competing in a certain business
or industry. Knowledge of competitors is required in order to formulate a competitive
strategy. The company must learn who its competitors are and how they operate, as well as
identify the strengths and weaknesses of the competition. With this information, the company
can develop a strategy to gain a competitive advantage over these competitors.
Corporate strategies are long-term and are associated with "deciding the optimal mix of
businesses and the overall direction of the organization" (Coulter, 2005). Operating as a sole
business or operating as a business with several divisions are both part of the corporate
strategy.

Strategy Implementation
Strategy implementation involves putting the strategy into practice. This includes developing
steps, methods, and procedures to execute the strategy. It also includes determining which
strategies should be implemented first. The strategies should be prioritized based on the
seriousness of underlying issues. The company should first focus on the worst problems, then
move onto the other problems once those have been addressed.
"The approaches to implementing the various strategies should be considered as the strategies
are formulated" (Coulter, 2005). The company should consider how the strategies will be put
into effect at the same time that they are being created. For example, while developing the
human resources strategy involving employee training, things that must be considered include
how the training will be delivered, when the training will take place, and how the cost of
training will be covered.
Strategy Evaluation
Strategy evaluation involves "examining how the strategy has been implemented as well as
the outcomes of the strategy" (Coulter, 2005). This includes determining whether deadlines
have been met, whether the implementation steps and processes are working correctly, and
whether the expected results have been achieved. If it is determined that deadlines are not
being met, processes are not working, or results are not in line with the actual goal, then the
strategy can and should be modified or reformulated.
Both management and employees are involved in strategy evaluation, because each is able to
view the implemented strategy from different perspectives. An employee may recognize a
problem in a specific implementation step that management would not be able to identify.
The strategy evaluation should include challenging metrics and timetables that are
achievable. If it is impossible to achieve the metrics and timetables, then the expectations are
unrealistic and the strategy is certain to fail.
Conclusion
The strategic management process is a continuous process. "As performance results or
outcomes are realized - at any level of the organization - organizational members assess the
implications and adjust the strategies as needed" (Coulter, 2005). In addition, as the company
grows and changes, so will the various strategies. Existing strategies will change and new
strategies will be developed. This is all part of the continuous process of improving the
business in an effort to succeed and reach company goals.