Strategic Management is defined as the art and science of formulating, implementing, and
evaluating cross-functional decisions that enable an organization to achieve its objectives.
The Strategic Management process consists of three stages:
Strategy Formulation includes developing a vision and mission, identifying an organization’s
external opportunities and threats, determining internal strengths and weaknesses, establishing
long-term objectives, generating alternative strategies, and choosing particular strategies to
pursue.
Strategy Implementation often called the action stage. It requires a firm to establish annual
objectives, devise policies, motivate employees, and allocate resources so that formulated
strategies can be executed.
Strategy Evolution is reviewing external and internal factors that are the bases for current
strategies, measuring performance, and taking corrective actions.
What are strategy formulation try to answer?
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Deciding what new businesses to enter,
What businesses to abandon,
How to allocate resources,
Whether to expand operations or diversify,
Whether to enter international markets,
Whether to merge or form a joint venture,
How to avoid a hostile takeover.
These are three important questions to answer in developing a strategic plan:
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Where are we now?
Where do we want to go?
How are we going to get there?
What are the five (05) non-financial benefits of Strategic Management?
There are 05 benefits stated by Greenley:
1. It provides an objective view of management problems,
2. It represents a framework for improved coordination and control of activities,
3. It allows more effective allocation of time and resources to identified opportunities,
4. It allows fewer resources and less time to be devoted to correcting erroneous or ad hoc
decisions,
5. It encourages a favorable attitude toward change,
Key Terms in Strategic Management:
1. Competitive advantage is anything that a firm does especially well compared to rival
firms.
2. Strategists is the individuals who are most responsible for the success or failure of an
organization.
3. Vision statement
answers the question “What do we want to become?” It often
considered the first step in strategic planning
4. Mission statements enduring statements of purpose that distinguish one business from
other similar firms. It identifies the scope of a firm’s operations in product and market
terms. It addresses the basic question that faces all strategists: “What is our business?”
5. External opportunities and external threats refer to economic, social, cultural,
demographic, environmental, political, legal, governmental, technological,
and
competitive trends and events that could significantly benefit or harm an organization in
the future.
6. Internal strengths and internal weaknesses are an organization’s controllable activities
that are performed especially well or poorly and are determined relative to competitors.
7. Objectives are specific results that an organization seeks to achieve in pursuing its basic
mission. Long-term means more than one year. They should be challenging, measurable,
consistent, reasonable, and clear.
8. Strategies are the means by which long-term objectives will be achieved. They may
include geographic expansion, diversification, acquisition, product development, market
penetration, retrenchment, divestiture, liquidation, and joint ventures.
9. Annual objectives are short-term milestones that organizations must achieve to reach
long-term objectives. They should be measurable, quantitative, challenging, realistic,
consistent, and prioritized. They should be established at the corporate, divisional, and
functional levels in a large organization.
10. Policies are the means by which annual objectives will be achieved. They include
guidelines, rules, and procedures established to support efforts to achieve stated
objectives. Policies are guides to decision making and address repetitive or recurring
situations.
Explain five (05) reason why some company do no strategic planning?
Some firms do not engage in strategic planning, and some firms do strategic planning but receive
no support from managers and employees. Five reasons for no strategic planning are as follows:
1.
Poor reward structures: When an organization assumes success, it often fails to reward
success. When failure occurs, then the firm may punish.
2.
Firefighting: An organization can be so deeply embroiled in resolving crises and
firefighting that it reserves no time for planning.
3.
Waste of time: Some firms see planning as a waste of time because no marketable
product is produced. Time spent on planning is an investment.
4.
Content with success: Particularly if a firm is successful, individuals may feel there is no
need to plan because things are fine as they stand. But success today does not guarantee
success tomorrow.
5.
Fear of failure: By not taking action, there is little risk of failure unless a problem is
urgent and pressing. Whenever something worthwhile is attempted, there is some risk of
failure.
Explain some of the weakness of Strategic Planning?
Strategic planning often fails for a variety of reasons such as:
1. Failure of merging organizations to understand either or both complementary
competencies and synergies as well as areas that is not complementary and synergistic.
2. Failure to understand the culture of the organization.
3. Failure to adequately execute the strategic plans.
4. Failure to function as a team at the executive level or other levels.
5. Failure to develop values and culture to support the plans.
6. Failure to expeditiously do what is needed to be done.
7. Failure to trust and support each other at the various levels of the organization
8. Failure to prevent ethical and legal problems.