Steps of Strategic Management

Steps of Strategic Management

Strategic management is a process of strategy formulation, implementation, and control. It always aims at achieving organizational objectives. It has a certain model comprising a process from development of vision and mission statement to strategy evaluation and control.

The strategic management process is dynamic and continuous. A change in any one of the major components in the model can necessitate a change in any or all of the other components. For instance, a shift in the economy could represent a major opportunity and require a change in long-term objectives and strategies; a failure to accomplish annual objectives could require a change in policy; or a major competitor’s change in strategy could require a change in the firm’s mission.

Therefore, strategy formulation, implementation, and evaluation activities should be performed on a continual basis, not just at the end of the year or semi-annually. The strategic management process never really ends. -David

There are three steps of strategic management.

Strategic Planning

This is the first step of strategic management. It involves the development of vision and mission statements, environment analysis, the establishment of long-term objectives, and generating, evaluating, and selecting the strategies.

Development of Vision and Mission Statements

In the first step of the strategic management model/process, organizational vision and mission are developed.

Vision is the picture of the desired future state of an organization. It is a nicely worded one-sentence statement. It specifies the direction that a company intends to follow in developing and strengthening its business. A clear vision provides the foundation for developing a comprehensive mission statement. Many organizations have both a vision and a mission statement, but the vision statement should be established first and foremost.

An enduring statement of purpose that distinguishes one organization from other similar enterprises, the mission statement is a declaration of an organization’s reason for being. A mission statement defines the business in terms of the customers, employees, suppliers and the community. It reflects every facet of the business: the range and nature of the products the business offers, pricing, quality, service, marketplace position, growth potential, use of technology, and the relationships with the customers, employees, suppliers, competitors and the community. It also helps clarify the scope and objectives of the business. It also reflects the business’ special niche.

External Environment Analysis

In the second stage of strategic management, external environment of the firm is analyzed. The external environment comprises the factors which are external to a firm. The external environment of a firm is composed of operating and remote environment. The operating environment consists of stakeholders as customers, shareholders, suppliers, media, government, pressure groups, and financial institutions. Similarly, the remote or general environment includes political, economic, socio-cultural, technological, legal, and global forces.

External environment is analyzed to assess the likely opportunity or threat. An opportunity is a condition in the general environment that if exploited effectively, helps a company achieve strategic competitiveness. On contrary, a threat may hinder a company’s efforts to achieve strategic competitiveness.

Hence, firms must be aware of and fully understand the different segments of the external environment to deal with uncertainty and achieve strategic competitiveness.

Internal Environment Analysis

Internal environment consists of the conditions and resources which are internal to an organization. It is also called the firm or resource environment. Internal environment is controllable to a firm in the long run. It determines the relative strengths and weaknesses of the firm.

Strengths are the positive internal characteristics that the organization can exploit to achieve its strategic goals. Weaknesses are internal characteristics that might inhibit or restrict the organization’s performance. Understanding how to leverage the firm’s internal components is a key issue for decision-makers. A sound internal environment helps create a competitive advantage that leads a business towards goal achievement.

Establish Long-term Objectives

The expected outcomes of an organization are known as objectives. They convert the strategic vision into specific performance targets. Objectives show the managerial commitment towards performance achievement. In the process of strategic management, long-term objectives should be formulated after environment analysis. They are related to strengthening market power, competitiveness, and future business prospects. Determination of long-term objective is an integral part of strategic management.

Generate, Evaluate and Select Strategies

After proper analysis of the environment and establishment of long-term objectives, strategic alternatives are generated at different levels.

Corporate-level strategies

Strategies provide overall direction to the organization. They attempt to obtain synergy among numerous product lines and business units.

Business level strategies

Strategies are formulated for different strategic business units. They indicate how a firm competes successfully in an individual product market.

Functional level strategies

It attempt to enhance the operational capability of an organization in production, marketing, human resource, finance, and research and development. They support the business-level strategy.

The strategic alternatives are evaluated on ground of suitability, acceptability and feasibility.

Suitability

It is concerned with the environmental fit of the strategic options. It requires a broad assessment of the extent to which new strategies would fit with future trend and change in the environment, exploit the strategic capability of an organization and meet the expectations of the stakeholders.

Acceptability

It is concerned with expected performance outcome.17 The acceptability of the possible strategic options can be assessed in three broad ways: return, risk, and stakeholders’ expectation.

Feasibility

It is concerned with availability of resource and competencies to deliver a strategic option. Feasibility assessment examines whether the strategic option can be implemented successfully or not. Thus, it determines an option’s workability in practice.

After evaluation of strategic alternatives, the best alternative is selected.

Strategy Implementation

This is the most crucial stage of strategic management model. The overall essence of strategic management lies in the implementation of strategy. In this stage, the strategies are translated into action i.e. they are executed. The essential elements of strategy implementation are given below.

1. Structure design:

Clear organizational structure is very important for the successful implementation of strategy. Organizational structure establishes authority, responsibility, accountability, flow of command and span of control. Structure is very crucial for the implementation of a given strategy.

2. Resource planning:

Implementation of a particular strategy demands the commitment of resources over a long period of time. Hence, resource planning is essential in strategy implementation. Resources involve human and other resources such as capital, technology, and information. There must be a good fit between the resources and environmental opportunities. Resource planning also includes the allocation of resources to different businesses and units.

3. Management system:

The management system is very important for the effective implementation of strategy. It involves formation of efficient management team, effective human resource management, information management, and leadership development. Management system is developed in such a way that the changes are managed and barriers to change are gradually controlled or removed.

Strategy Evaluation and Control

Under this stage of strategic management model, organizational performances or activities are monitored to ensure that the direction of strategy implementation is in the right way. The assumptions about the internal and external environment in which the current strategy is based are reviewed and the actual performance is measured. Eventually, corrective actions are taken if necessary. It is an on-going process. Necessary adjustments or changes are made in the strategy if required. Strategy evaluation and control ensure the adjustments between strategic plan and strategy implementation.

FAQs

Please Visit other Related Posts if you require: CLICK HERE!