The Strategic Management Process

The Strategic Management Process
Strategic Planning
A strategic plan is the company’s plan for how it will match its internal strengths and weaknesses
with external opportunities and threats in order to maintain a competitive advantage. The essence
of strategic planning is to ask, Where are we now as a business, where do we want to be, and
how should we get there?
STEP 1: Define the Current Business
The logical place to start is by defining ones current business. Specifically, what products do we
sell, where do we sell them, and how our products do or services differ from our competitors. For
example, Rolex and Casio both sell watches. However, Rolex sells a limited line of expensive
watches. Casio sells a variety of relatively inexpensive but innovative specialty watches with
features like compasses and altimeters.
STEP 2: Perform External and Internal Audits
The next step is to ask, are we heading in the right direction? No one is immune to competitive
pressures. Managers need to audit both the firm’s environment, and the firm’s strengths and
STEP 3: Formulate a New Direction
The question now is, based on the environmental scan and SWOT analysis, what should our new
business be, in terms of what products we will sell, where we will sell them, and how our
products or services will differ from competitors products? Managers sometimes formulate a
vision statement to summarize how they see the essence of their business down the road. The
vision statement is a general statement of the firms intended direction; it shows, in broad terms,
what we want to become.
Step 4: Translate the Mission into Strategic Goals Next,
Translate the mission into strategic objectives. The company and its managers need strategic
goals. At Ford, for example, what exactly did making "Quality Job One" mean for each
department in terms of how they would boost quality? The answer is that its managers had to
meet strict goals such as "no more than 1 initial defect per 10,000 cars".
Step 5: Formulate Strategies to Achieve the Strategic Goals
Next, the manager chooses strategies courses of action that will enable the company to achieve
its strategic goals. For example, what strategies could Ford pursue to hit its goal of no more than
1 initial defect per 10,000 cars? Perhaps open two new high-tech plants, reduce the number of
car lines to better focus on just a few, and put in place new more rigorous employee selection,
training, and performance appraisal procedures.
Step 6: Implement the Strategies
Strategy execution means translating the strategies into action. The company’s managers do this by
actually hiring (or firing) people, building (or closing) plants, and adding (or eliminating) products and
product lines.
Step 7: Evaluate Performance
Things don’t always turn out as planned. For example, Ford bought Jaguar and Land Rover as a
way to reduce reliance on lower-profit cars. With auto competition brutal, Ford announced in
2009 it was selling Jaguar and Land Rover (to Tata, a company in India).Ford wants to focus its
scarce resources on modernizing and turning around its North American operations. Like all
companies, Ford continually needs to assess its strategic decisions.
Types of Strategies
Managers formulate three strategies.
1. Corporate-wide strategic planning,
2. Business unit (or competitive) strategic planning, and
3. Functional (or departmental) strategic planning
Corporate Strategy
The corporate strategy question is, how many and what kind of businesses should we be in? A
company’s corporate-level strategy identifies the portfolio of businesses that, in total, comprise
the company and how these businesses relate to each other.
Competitive Strategy
On what basis will each of our businesses compete? Each of these businesses needs its own
business-level/competitive strategy. A competitive strategy identifies how to build and
strengthen the business long-term competitive position in the marketplace.
Managers endeavor to achieve competitive advantages for each of their businesses. We can
define competitive advantages any factors that allow a company to differentiate its product or
service from those of its competitors to increase market share. Managers use several standard
competitive strategies to achieve competitive advantage.
Functional Strategy
Finally, what do our competitive choices (such as maintaining the lowest costs) mean for each of
the departments that actually must do the work? Each individual business consists of
departments such as manufacturing, sales, and human resource management. Functional
strategies identify the broad guidelines that each department will follow in order to help the
business accomplish its competitive goals. Each department’s functional strategy should make
sense in terms of the business/ competitive strategy.
Human Resource Strategies and Policies
Managers call the specific human resource management policies and practices they use to
support their strategic aims human resource strategies. The Shanghai Portman’s human resource
strategy aimed to produce the service-oriented employee behaviors the hotel needed to improve
significantly the hotels level of service. Its HR policies included installing the Ritz-Carlton
Company’s human resource system, having top management personally interview each
candidate, and selecting only employees who cared for and respected others.
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