Steps in strategic management process
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The strategic management process is more than just a set of rules to follow. It is a philosophical approach to business. Upper management must think strategically first, then apply that thought to a process. The strategic management process is best implemented when everyone within the firm understands the strategy. Strategic management is a continuous process that appraises the business and industries in which the organization is involved; appraises its competitors; and fixes goals to meet all the present and future competitor’s and then reassesses each strategy. The four stages of the process are environmental scanning, strategy formation, strategy implementation and strategy monitoring. The first step in forming an strategic management is environmental scanning where the specific organization need to identify their current mission ,goals and strategies. The purpose of goal-setting is to clarify the vision for your business. This stage consists of identifying three key facets: First, define both short- and long-term objectives. Second, identify the process of how to accomplish your objective. Finally, customize the process for your staff, give each person a task with which he can succeed. Keep in mind during this process your goals to be detailed, realistic and match the values of your vision.
Typically, the final step in this stage is to write a mission statement that succinctly communicates your goals to both your shareholders and your staff.Then, comes the SWOT analysis where S represents strength , W represents weakness, O represents opportunity and T represents threat . SWOT analysis is divided into 2 analysis which is internal analysis and external analysis . Analysis is a key stage because the information gained in this stage will shape the next two stages. In this stage, gather as much information and data relevant to accomplishing your vision. The focus of the analysis should be on understanding the needs of the firm as a sustainable entity, its strategic direction and identifying initiatives that will help your business grow. Examine any external or internal issues that can affect your goals and objectives. Make sure to identify both the strengths and weaknesses of your organization as well as any threats and opportunities that may arise along the path. Now we move to the internal analysis, which provides important information about an organization’s specific resources and capabilities.
An organization’s resources are its assets financial, physical, human, and intangible that it uses to develop, manufacture, and deliver products to its customers. On the other hand, its capabilities are its skills and abilities in doing the work activities needed in its business.The major value-creating capabilities of the organization are known as its core competencies.12 Both resources and core competencies determine the organization’s competitive weapons.After completing an internal analysis, managers should be able to identify organizational strengths and weaknesses. Any activities the organization does well or any unique resources that it has are called strengths.
Weaknesses are activities the organization doesn’t do well or resources it needs but doesn’t possess. Managers do an external analysis so they know, for instance, what the competition is doing, what pending legislation might affect the organization, or what the labor supply is like in locations where it operates. In an external analysis, managers should examine the economic demographic, political/legal, sociocultural, technological, and global components to see the trends and changes.Once they’ve analyzed the environment, managers need to pinpoint opportunities that the organization can exploit and threats that it must counteract or buffer against. Opportunities are positive trends in the external environment threats are negative trends. After completing the SWOT analysis, managers are ready should be to know their appropriate strategies.
The next step in forming a strategy is to review the information gleaned from completing the analysis. Determine what resources the business currently has that can help reach the defined goals and objectives. Identify any areas of which the firm must seek external resources. The issues facing the company should be prioritized by their importance to your success. Once prioritized, begin formulating the strategy. Because business and economic situations are fluid, it is critical in this stage to develop alternative approaches that target each step of the plan. Here, you will develop an organizational vision and a mission statement that describes the future of your organization – where it wants to be, its essential values, and what it wants do. After you have defined the organization’s vision and mission, you can begin to formulate a detailed strategy to achieve them. After defining
the organization’s vision and mission, you can develop a set of objectives that will lead you to the overall strategic goal or vision. For an example, an objective may be to increase market share year-over-year by at least five percent.
Think of achieved objectives as building blocks in constructing your goal or vision.Next ,would be strategy , means is a comprehensive master plan stating HOW the corporation will achieve its mission and objectives .There are three types of strategies which are corporate , business and functional .Corporate level strategy is a corporation’s overall direction and the management of its businesses. At this level, executives at top parent companies choose which products to sell, which market to enter and whether to acquire a competitor or merge with it. They select between integration, intensive, diversification and defensive strategies.An example of corporate-level strategy will be on February 2011 announcement an alliance between Microsoft and Nokia Corp. The alliance involve Nokia will produce phones running Windows Phone 7, a recognition that Nokia’s investment in its own operating system has failed. The alliance gives Microsoft access to the world’s largest phone maker and its huge mindshare—in many developing nations a mobile phone is known as a Nokia. The deal with Microsoft gives both Nokia and Microsoft a route to the future in the smart-phone market.The next level of strategy will be the business level strategy which emphasizes improving the competitive position of a corporation’s products or services in a specific industry or market segment.
This type of strategy is used when strategic business units (SBU), divisions or small and medium enterprises select strategies for only one product that is sold in only one market. The example of business level strategy is well illustrated by Royal Enfield firms. They sell their Bullet motorcycle (one product) in United Kingdom and India (different markets) but focus on different market segments and sell at very different prices (different strategies). Firms may select between Porter’s 3 generic strategies: cost leadership, differentiation and focus strategies.Functional level strategy is basically concerned with developing a distinctive competence to provide a company or business unit with a competitive advantage. Functional strategy include IT strategy, marketing strategy, IT strategy, human resources strategy, and operations. Typically, documents portraying functional strategy will list estimates and plans for operating expenses, headcount, and continuous improvement. As implied by the graphic, functional-level strategy is the foundation that supports both corporate-level strategy and business strategy. Many strategic initiatives are simply the implementation of functional strategies, but often a strategic initiative straddles numerous functions and businesse .An example of functional-level strategy will be in 2008, Swiss Life Group, a Zurich-based insurance company (ranked #373 on the Fortune Global 500 list) announced a change in its Information Technology functional strategy priorities.
The implications of this was a decision to considerably scale back the number of IT projects in order to reduce costs through re-prioritization. This was successful as shown in this November 2010 announcement. The last step in forming strategy formulation is policies. Policies are broad guidelines for making decisions. Once strategies are formulated, they must be implemented. No matter how effectively an organization has planned its strategies, performance will suffer if the strategies aren’t implemented properly. At this stage managerial skills are more important than using analysis. Communication in strategy implementation is essential as new strategies must get support all over organization for effective implementation. The process of putting strategies and policies into action through the development of programs , budgets and procedures. Programs briefly is about statements of activities or steps needed to accomplish a single-use plan whereas budgets are basically about statements of a corporation’s programs in dollar terms .The last process in strategy implementation would be procedures which is systems of sequential steps or techniques that describe in detail how to perform particular tasks or jobs.
In a nutshell , the final step in strategic management process is evaluation and control. Evaluation and control is the process of monitoring corporate activities and performance results so that actual performance can be compared with desired performance.Implementation must be monitored to be successful. Due to constantly changing external and internal conditions managers must continuously review both environments as new strengths, weaknesses, opportunities and threats may arise. If new circumstances affect the company, managers must take corrective actions as soon as possible. In the strategy evaluation and control process managers determine whether the chosen strategy is achieving the organization’s objectives. The fundamental strategy evaluation and control activities are: reviewing internal and external factors that are the bases for current strategies, measuring performance, and taking corrective actions.