Strategic management Free Essay Example
The most important idea in the field of management in a company is the concept of strategy. Strategy is the one that gives a core direction to where the company is going. This concept is usually the concern of presidents and general managers of organizations. This idea requires an overall analysis or picture of the firm and integrating each special units and functions into a cohesive whole. The system of managing this concept in the firm is called strategic management.
Strategic Management is the process of formulating an organization’s objectives, policies and plans. The organization will allocate resources to implement the policies and plans to achieve the organization’s objectives. It is the most important level of all managerial functions usually performed by an organization’s President, General Manager, or Chief Executive Officer. Strategic management provides overall direction to the enterprise. To achieve the core objectives, an organization’s strategy must take its resources and environmental circumstances into consideration.
The process involves matching the company’s strategic advantages to the business environment the organization faces. One objective of an overall corporate strategy is to put the organization into a position to carry out its mission effectively and efficiently. An excellent strategy should integrate an organization’s goals,policies,and action sequences into a unified whole, and must be based on business realities.Business enterprises can fail despite ‘excellent’ strategy because the world changes in a way they failed to understand. Strategy must be matched with the firm’s vision, purpose and likely future trends.
It is a combination of strategy formulation and strategy implementation, and strategy must be closely aligned with purpose.STRATEGY FORMULATIONStrategy formulation is involve in the analysis of internal and external factors. In terms of the external factors, the following environmental variables would be subject to evaluation by organizations: a) economic variables, b) political and legal factors, c) socio-cultural factors, d) technological factors, e) demographic factors, and f) global factors.Concurrent with this assessment, objectives are set. This involves crafting vision statements (long term view of a possible future), mission statements (the role that the organization gives itself in society), overall corporate objectives (both financial and strategic), strategic business unit objectives (both financial and strategic), and tactical objectives.
These objectives should, in the light of the situation analysis, suggest a strategic plan. The plan provides the details of how to achieve these objectives. This three-step strategy formulation process is sometimes referred to as determining where you are now, determining where you want to go, and then determining how to get there. These three questions are the essence of strategic planning. Strategy implementation would usually be involved in the allocation of sufficient resources. It is also concerned with establishing a chain of command or some alternative structure such as cross functional teams assigning responsibility of specific tasks or processes to specific individuals or groups It also involves managing the process.
This includes monitoring results, comparing to benchmarks and best practices, evaluating the efficacy and efficiency of the process, controlling for variances, and making adjustments to the process as necessary. When implementing specific programs, this involves acquiring the requisite resources, developing the process, training, process testing, documentation, and integration with (and/or conversion from) legacy processes.Strategy is dynamic. It involves a complex pattern of actions and reactions. It is partially planned and partially unplanned.Strategy is both planned and emergent, dynamic, and interactive.
Some people feel that there are critical points at which a strategy must take a new direction in order to be in step with a changing business environment. These critical points of change are called strategic inflection points. Strategy operates on several time horizons. Short term strategy involves planning and managing for the present. Long term strategies involve preparing for and anticipating the future.
Abell (1978, pp. 21-28) suggested that understanding this dual nature of strategic management is the least understood part of the process. He claims that balancing the temporal aspects of strategic planning requires the use of dual strategies simultaneously.Many companies feel that a functional organizational structure is not an efficient way to organize activities so they have reengineered according to processes or strategic business units (called SBUs). A strategic business unit is a semi-autonomous unit within an organization.
It is usually responsible for its own budgeting, new product decisions, hiring decisions, and price setting. An SBU is treated as an internal profit center by corporate headquarters. Each SBU is responsible for developing its business strategies, strategies that must be in tune with broader corporate strategies.The “lowest” level of strategy is operational strategy. It is very narrow in focus and deals with day-to-day operational activities such as scheduling criteria. It must operate within a budget but is not at liberty to adjust or create that budget.
Operational level strategy was encouraged by Drucker (1954) in his theory of management by objectives (MBO). Operational level strategies are informed by business level strategies which, in turn, are informed by corporate level strategies. Business strategy, which refers to the aggregated operational strategies of single business firm or that of an SBU in a diversified corporation refers to the way in which a firm competes in its chosen arenas.Corporate strategy, then refers to the overarching strategy of the diversified firm. Such corporate strategy answers the questions of “in which businesses should we compete?” and “how does being in one business add to the competitive advantage of another portfolio firm, as well as the competitive advantage of the corporation as a whole?” Since the turn of the millennium, there has been a tendency in some firms to revert to a simpler strategic structure. This is being driven by information technology.
It is felt that knowledge management systems should be used to share information and create common goals. Strategic divisions are thought to hamper this process. Most recently, this notion of strategy has been captured under the concept of dynamic strategy. This work builds on that of Christensen (1997)that portraits firm strategy, both business and corporate, as necessarily embracing ongoing strategic change, and the seamless integration of strategy formulation and implementation. Such change and implementation are usually built into the strategy through the staging and pacing facets.SIGNIFICANT DEVELOPMENTSStrategic management as a discipline originated in the 1950s and 60s.
Although there were numerous early contributors to the literature, the most influential pioneers were Alfred Chandler, Philip Selznick, Igor Ansoff, and Peter Drucker.Alfred Chandler (1962) recognized the importance of coordinating the various aspects of management under one all-encompassing strategy. Prior to this time the various functions of management were separate with little overall coordination or strategy. Interactions between functions or between departments were typically handled by a boundary position, that is, there were one or two managers that relayed information back and forth between two departments. Chandler also stressed the importance of taking a future looking long term perspective.
In his 1962 groundbreaking 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.”Philip Zelznick (1957) introduced 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 wherein the firm are assessed in the light of the opportunities and threats from the business environment. Igor Ansoff (1965) built on Chandler’s work by adding a range of strategic concepts and inventing a whole new vocabulary. He developed a strategy grid that compared market penetration strategies, product development strategies, market development strategies and horizontal and vertical integration and diversification strategies.
He felt that management could use these strategies to systematically prepare for future opportunities and challenges. In his 1965 classic Corporate Strategy, he developed the “gap analysis” still used today in which we must understand the gap between where we are currently and where we would like to be, then develop what he called “gap reducing actions”. Peter Drucker (1965) was a prolific strategy theorist, author of dozens of management books, with a career spanning five decades. His contributions to strategic management were many but two are most important. Firstly, he stressed the importance of objectives. An organization without clear objectives is like a ship without a rudder.
As early as 1954 he was developing a theory of management based on objectives.[]This evolved into his theory called MBO. According to Drucker, the procedure of setting objectives and monitoring your progress towards them should permeate the entire organization, top to bottom. His other seminal contribution was in predicting the importance of what today we would call intellectual capital. He predicted the rise of what he called the “knowledge worker” and explained the consequences of this for management.
He said that knowledge work is non-hierarchical. Work would be carried out in teams with the person most knowledgeable in the task at hand being the temporary leader.E. Chaffee (1985) summarized what he thought were the main elements of strategic management theory by the 1970s:[]· Strategic management involves adapting the organization to its business environment.· Strategic management is fluid and complex.
Change creates novel combinations of circumstances requiring unstructured non-repetitive responses.· Strategic management affects the entire organization by providing direction.;Page # 10Strategic management is partially planned and partially unplanned and it is done at several levels: overall corporate strategy, and individual business strategies. It also involves both conceptual and analytical thought processes.CONCLUSIONStrategic Management is one of the most signicant concept and process for the development of organizations. Its emergence had improved the practice of management and it had become a powerful tool for Chief Executive Officers of firms as well as its management team.
It is very popular today because indeed it had changed the scenario of organizations and it had been responsible for the development of new managers which are responsible today in formulating effective strategic plans.If we examine the curriculum of business schools today, the business policy or strategic management course is a must. The reason is very clear: students in business and management must aborb the concept of strategy in order to prepare in becoming the general managers of the future. Thus, strategic thinking must be inculcated in the minds of business students as well as professional managers which are the brains and foundations of the organizations of today as well as in the future.
