An analysis of Strategic management

An analysis of Strategic management Initially strategic management was of most use to large corporations operating in multiple industries. Increasing risk of error, costly mistakes and even economic ruin are causing todays professional managers in all organizations to take strategic management seriously in order to keep their company competitive in an increasing volatile environment. (Frery 2006) Different authors have described strategic management as followed: The strategic management is used to present to strategic formulation, implementation and evaluation with strategic planning referring only the strategy formulation (Pearce Robinson 2000) the intention of the strategic management is to develop and produce new and different opportunities for future. As Mr. Potter refers that Strategy is the direction of an organization over the long term which achieves advantage in a changing environment through its configuration of resources and competences with the fulfilling stakeholder expectations. This in turn led to organizational development activities as reorganizing, new definitions of roles, jobs and etc. (Potter 1996) And also it can be carried in the strategic management is that set of managerial decision and action that determines the long run performance of a corporation. It includes environment scanning (both external and internal).strategic formulation (strategic or long range planning), strategic implementation and evaluation and control. As this definition implies, strategic management focuses on integrating management, marketing, finance, and production / operations, research and development and computer information system to achieve organizational success. (Hoskisson, Hitt Wan 1999) The study of strategic management therefore emphasizes the monitoring and evaluating of external opportunities and threats in light of a corporations strengths and weaknesses. Strategic management as a field of study incorporates the integrative concerns of business policy with a heavier environmental and strategic emphasis. Therefore strategic management has tended to replace business policy as the preferred name of the field. (Hoskisson, Hitt Wan 1999) The strategic management is a core area for an organization in order to explore the problems which result in success or failure. Strategic management has been defined as that set of decisions and actions which lead to the development of an effective strategy or strategies to help achieve corporate objectives. (Luffman, Lea, Sanderson and Kenny 1996) Basic stages of strategic management: The strategic management process consists of four basic stages. Environmental scanning, strategic formulation, strategic implementation, and evaluation and control. Environmental scanning:- Before an organization can begin strategy formulation, it must scan the environment to identify possible opportunities and threats and as well the strength and weaknesses. Environmental scanning is the monitoring, evaluating and disseminating of information from the internal and the external environments to key people within the organization. A organization use this method to avoid strategic surprise and to ensure its long term health. Research has found a positive relationship between environmental scanning and profit (Thomas, Clark Gioia 1993) Strategic formulation:- This is the expansion of the long range plans for the effective management of environmental opportunities and threats as well as the organization strength and weakness. It consist of defining the corporate mission, identify achievable objective, rising strategies the setting policies. Strategy formulation issue include deciding what new business to enter, what businesses to abandon, how to allocate resources, whether to expand operations or identify, whether to enter international markets, whether to merge or form a joint venture and how to avoid a hostile. Because every organizations have limited resources itself. So strategists ought to decide which alternative strategy will be benefit for the firm most. Top managers have the best perception of understanding effect of strategy formulation and they are the persons who have the authority to commit the resources necessary for implementation. (Hitt Michael 2006.) Strategic implementation:- Strategic implementation is the most difficult stage in strategic management. This process requires a firm to establish annual objectives, devise policies, motivate employees and allocate resources for the implementation of the formulated strategies. This is the process that converts the strategies and policies in to the action through the development of programs. Strategy implementation includes developing a strategy-supportive culture, creating an effective organizational structure, redirecting marketing efforts, plan the budgets, developing and utilizing information system and linking employee payment to organization performance. (Hitt Michael 2006.) Evaluation and control:- Strategic evaluation is the final stage in the strategic management. The purpose of this process is to evaluate the actual performance of an organization to do the comparison with the desire result. Because the strategic management processes were inappropriately used, operational managers must know about it. So that they can correct the employee activity. Evaluating and controlling is the major element of the strategic management to identify the weaknesses in previous executed strategic planes and thus stimulated the entire process to begin again. And all strategies are the subject to future modification because external and internal factors are continuously changing. Followings are the three fundamental strategy evaluation activities Reviewing external and internal factors that are the bases for current strategies. Measuring performance. Talking corrective action. (Hitt Michael 2006.) The phases of the strategic management: A firm generally evolves through the following four basic phases of strategic management Basic financial planning (phase. 1):- The project is based on the analysis very little proposed with the most information from the organization. The sales typically offer the small amount of environmental protection, information. Such simple operational planning is only pretending, strategic management, and it is quite time consuming. The time horizon is usually one year. (Gluck, Kaufman Welleck 1982) Forecast based planning (phase.2):- In addition to internal information, managers gather available data from environment to extrapolate the current trend of five years and future. This phase also time consuming. The process gets very political as managers compete for larger share and funds. The time horizon is usually three to five years. (Gluck, Kaufman Welleck 1982) Externally oriented planning (phase.3):- Top level management controls the planning process by the introduction of strategic planning. The company tries to increase its responsiveness to changing markets and competition through strategic thinking. Top management typically develops five-year plan with the help of consultants but input from lower levels. (Gluck, Kaufman Welleck 1982) Strategic management (phase.4):- The employees at many levels from various departments and works groups develop and integrate a serious of strategic plans aimed at achieving the companys primary objectives. The complicated annual five years plan is replaced with the help of all levels of the organization throughout the year. (Gluck, Kaufman Welleck 1982) Levels of strategic management: Strategy exists at a number of levels in an organization. They are, Corporate level strategy:- This is concerned about the overall scope of an organization and how value will be added to the different units of an organization. Corporate strategy tropically fit with the three main categories of stability, expansion and reduction of expenditure. (Ansoff 2002) According to Michael potter, a firm must formulate a business strategy that incorporates cost leadership, differentiation or focus in order to achieve a sustainable competitive advantage and long term success in its chosen areas or industries. (Potter 1993). Alternatively, according to Kim and Mauborgne, an organization can achieve high growth and profits by creating a blue ocean strategy that breaks the previous value cost trade off by simultaneously pursuing both differentiation and low cost. (Kim Mauborgne 2007) Eg:- Nicholas piramal follower a corporative growth strategy in order to have more share formulation drugs In corporate strategy, Johnson, Scholes and Whittington present models in which strategic option are evaluated against three key success criteria, Suitability (would it work?) Feasibility (can it be made to work) Acceptability (will they work it) (Johnson, Scholes Whittington 2008) Business level strategy:- The second level is business level strategy which is about how various businesses included in the business strategy and compete in their particular markets. Because of this reason business strategy is called as competitive strategy. This typically concerns issues such as pricing strategy, innovation or differentiation instance by better quality. So where ever corporate level strategy involves decision about the overall organization as a whole, strategic decision related to particular strategic business unit within the overall organization. (Johnson, Scholes Whittington 2008) According to Potters statement The business strategy must be maintained continually, in line with changes in the business and its environment. It should be formally reviewed at least annually as part of the business planning round; it provides the context for progress reporting on strategic themes. (Potter 1993). The business strategy must always show progress against plans to date, to enable planners to determine the current business environment and the impact that specific change programs and projects will have on the organization as a whole. There must be accurate, timely information about: Major investments to date, the corporate risk register, For each major investment, the risks associated with it. (Potter 1996) Operational strategy:- The third level of strategy is at the operating end of an organization. This is an approach taken by the functional areas to achieve the corporate objectives and strategies by maximizing the resources productivity.