Strategic Management

Strategic management is a set of managerial decisions and actions that help determine the long-term
performance of an organization. It includes environmental scanning (both external and internal), strategy
formulation (strategic or long-range planning), strategy implementation, and evaluation and control.
Strategic Management Process
1. Situation Analysis is the monitoring, evaluating, and disseminating of information from the
external and internal environments to key people within the corporation. Its purpose is to identify
strategic factorsthose external and internal elements that will assist in the analysis in deciding
the strategic decisions of the corporation.
2. Strategy formulation is the process of investigation, analysis, and decision making that provides
the company with the criteria for attaining a competitive advantage. It includes defining the
competitive advantages of the business (Strategy), crafting the corporate mission, specifying
achievable objectives, and setting policy guidelines.
3. Strategy implementation is a process by which strategies and policies are put into action
through the development of programs, budgets, and procedures.
4. Strategy evaluation is a process in which corporate activities and performance results are
monitored so that actual performance can be compared with desired performance.
What Makes a Decision Strategic
Strategic decisions deal with the long-term future of an entire organization and have three
characteristics:
1. Rare: Strategic decisions are unusual and typically have no precedent to follow.
2. Consequential: Strategic decisions commit substantial resources and demand a great deal of
commitment from people at all levels.
3. Directive: Strategic decisions set precedents for lesser decisions and future actions throughout an
organization.
BENEFITS OF STRATEGIC MANAGEMENT
Research reveals that organizations that engage in strategic management generally outperform those that
do not. Besides helping firms avoid financial demise, strategic management offers other tangible benefits,
such as an enhanced awareness of external threats, an improved understanding of competitors' strategies,
increased employee productivity, reduced resistance to change, and a clearer understanding of
performance-reward relationships. Clearer sense of strategic vision for the firm. Sharper focus on what is
strategically important. Improved understanding of a rapidly changing environment.
Types of strategy
1. Corporate strategy describes a companys overall direction in terms of its general attitude toward
growth and the management of its various businesses and product lines. Corporate strategies
typically fit within the three main categories of stability, growth, and retrenchment.
2. Business strategy usually occurs at the business unit or product level, and it emphasizes
improvement of the competitive position of a corporations products or services in the specific
industry or market segment served by that business unit.
3. Functional strategy focuses on supporting the corporate and business strategies. It is concerned
with developing and nurturing a distinctive competence to provide a company or business unit with
a competitive advantage.
Role of Board in Strategic Management
Monitor: By acting through its committees, a board can keep abreast of developments inside and outside
the corporation, bringing to managements attention developments it might have overlooked. A board
should at the minimum carry out this task.
Evaluate and influence: A board can examine managements proposals, decisions, and actions; agree or
disagree with them; give advice and offer suggestions; and outline alternatives. More active boards
perform this task in addition to monitoring.
Initiate and determine: A board can delineate a corporations mission and specify strategic options to
its management. Only the most active boards take on this task in addition to the two previous ones.
Globalization, Innovation, and Sustainability: Challenges to Strategic Management
The organization must place an international focus on product design, development, and QA to ensure its
broad relevance while also localizing marketing to tailor its appeal to individual markets. Managers are
tasked with localizing products and services effectively in a way that minimizes the adverse cultural and
environmental effects caused by this rapid global expansion to maintain an ethical operation.
Impact of Globalization
The worldwide availability of the Internet and supply chain logistical improvements, such as containerized
shipping, mean that companies can now locate anywhere and work with multiple partners to serve any
market. For companies seeking a low-cost approach, the internationalization of business has been a new
avenue for competitive advantage. Nike and Reebok manufacture their athletic shoes in various countries
throughout Asia for sale on every continent. Many other companies in North America and Western Europe
are outsourcing their manufacturing, software development, or customer service to companies in China,
Eastern Europe, or India. These associations have led to the increasing harmonization of standards so that
products can more easily be sold and moved across national boundaries.
Impact of Innovation
Innovation, as the term is used in business, is meant to describe new products, services, methods and
organizational approaches that allow the business to achieve extraordinary returns. Innovation is the
machine that generates business opportunities in the market; however, it is the implementation of
potential innovations that truly drives businesses to be remarkable.
Impact of Sustainability
Sustainability refers to the use of business practices to reduce a companys impact upon the natural,
physical environment. The company has to be able to thrive despite changes in the industry, society, and
the physical environment. The company that pursues a sustainable approach to business has a
responsibility to its employees, its customers, and the community in which it operates.
ORGANIZATIONAL ADAPTATION
1. Population Ecology suggests that once an organization is successfully established in a particular
environmental niche, it is unable to adapt to changing conditions.
2. Institution theory proposes that organizations can and do adapt to changing conditions by
imitating other successful organizations.
3. Strategic choice perspective propose that not only do organizations adapt to a changing
environment, but they also have the opportunity and power to reshape their environment. Its
argument that adaptation is a dynamic process fits with the view of organizational learning theory.
This perspective expands the strategic choice perspective to include people at all levels becoming
involved in providing input into strategic decisions.
4. Organizational Learning Theory says that an organization adjusts defensively to a changing
environment and uses knowledge offensively to improve the fit between itself and its environment.
Learning organization an organization skilled at creating, acquiring, and transferring knowledge and at
modifying its behavior to reflect new knowledge and insights.
Learning organizations are skilled at four main activities:
Solving problems systematically
Experimenting with new approaches
Learning from their own experiences and past history as well as from the experiences of others
Transferring knowledge quickly and efficiently throughout the organization
Strategic management is essential for learning organizations to avoid stagnation through continuous selfexamination and experimentation. People at all levels, not just top management, participate in strategic
managementhelping to scan the environment for critical information, suggesting changes to strategies
and programs to take advantage of environmental shifts, and working with others to continuously improve
work methods, procedures, and evaluation techniques. For example, Motorola developed an action learning
format in which people from marketing, product development, and manufacturing meet to argue and reach
agreement about the needs of the market, the best new product, and the schedules of each group
producing it. This action learning approach overcame the problems that arose previously when the three
departments met and formally agreed on plans but continued with their work as if nothing had
happened.55 Research indicates that involving more people in the strategy process results in people not
only viewing the process more positively, but also acting in ways that make the process more effective.

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Strategic management is a set of managerial decisions and actions that help determine the long-term

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