Strategic Management |14 Best Methods | DataTrained

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Introduction

Strategic Management is an ongoing process of planning, tracking, analysis and assessment of all requirements of an organisation to meet its Goals. It is based on an organisation’s understanding of its objectives. The vision of the company, where it wants to stand in future and its values to guide its actions. This process requires dedication and commitment to set both long-term and short-term goals. Changes in the business environment requires the organisation to constantly assess the strategies in order to achieve its objectives.

The Strategic Management Process helps the organisations to track their current situation, create a blueprint of their strategies then deploy them and analyse whether the implemented strategy is effective or not. However, Strategic Management is thought to have both financial and non-financial benefits. 

What is Strategic Management?

what is strategic management

Strategic Management uses the resources of an organisation to achieve its objective and goals. Strategic Management involves analysing the organisation internally, setting up objectives, Analysing the competitive environment, evaluating strategies and making sure the strategies are rolled out across the organisation.

Understanding Strategic Management

Strategic Management can be further divided into different schools of thought. A perspective approach outlines the planning of strategies, on the other hand descriptive approach outlines practice of these strategies towards achieving goals. The schools are basically differentiated on the basis of how the strategies were developed either through analytic process or through general principles. 

Other factors that derive goals of an organisation are employees’ competencies and skills, structure of an organisation and its business culture. Upper management, being responsible for developing strategies, is mostly sparked by lower-level employees and managers. However, achieving goals of the organisation cannot solely rely on CEO, it is the devotion by all the employees.

Strategic Management – Process and Steps

Process of Strategy Management

Strategic Management is that tool of an organisation that uses an iterative process through proper evaluation and analysis of organisation’s strategies to gain a competitive edge and achieve goals of the organisation. 

Steps

Setting Goals

Setting Goals is the most important step since it lays the foundation of the strategic management journey. In this first step the organisation and goals of the organisation are clearly listed. The processes of achieving the goal are identified, long term and short-term goals are pre-defined, working staff is hired as per requirement. However, unclear goals are the main reason for failure for any organisation.

Analysis

After the goal for the organisation is set, gathering data is the next step. This data is required for the sustainable growth and achieving goals of the organisation. Data is collected and examined by SWOT analysis.

Strategy Formulation

After a deep analysis of potential external and internal factors, the organisation steps forward towards the strategy formulation stage. In this first stage is to acquire the resources required, then prioritizing the issues currently faced by the organisation and in the final stage by combining all the data the strategy is formulated.

Implementation 

Immediately after formulation, the employees are clearly updated with their responsibilities and roles. 

Strategy Evaluation

Evaluation of strategies are done to ensure whether the desired results are achieved or not. However, corrective actions are taken during deviation. All the steps constantly interact among themselves to achieve the best of the results.

Advantages of Strategic Management Process

Benefits of using Strategic Management Process are:

Makes and organisation agile

If the process is followed accurately the organisation can see the changes in the behavior of the consumer, see the new market trends and hence, adjusting the organisation’s objective, goals and strategy.

Time Benefit

In a way to plan and process the strategy efficiently, it is important to analyse them. If the strategies are planned properly then it saves enough time just to analyse and test the current working strategy for it to be a successful business strategy.

Grow in market Position

Growing in the market is the ultimate goal for strategic management which proves to be the advantage in a competitive market. However, when implemented successfully, it strengthens and improves the overall position in the market.

Holistic Growth

Target growth for organisations in finance and revenue depicts the holistic growth of the organisation. However, using the above steps can help an organisation to achieve its objectives and set goals in future. 

Strategic Management – Framework

Competitive Advantage 

Keeping a track on market positioning not only of the organisation but also of its brand in particular to pinpoint the competitive advantages that the company has over other competitors.

Corporate Strategy and Portfolio Theory

The concept of modern portfolio strategy gives a framework to maximize the expected return. Portfolio Theory gives access to corporations 
For analysis on deployment of resources in a cost- benefit relation. This gives an overall view on the merit of resource placement individually to the company.
The Growth share matrix, helps the corporations to analyse the business units individually by taking business 

Core Competence

An organisation can provide an unparalleled and unique product and services by developing expertise in the field of relative excellence and by outsourcing or eliminating other remaining business activities. This will help provide services perspective to the consumers and market.

Experience Curve

The curve expresses that whenever the produced output is doubled, there is a consistent decline in the value-added costs.

Generic competitive Strategies

Companies should focus on either cost differentiation or cost leadership, while working on the strategy formulation. Such a strategy focuses on specializing in services or products by generating economies of scale or by building a unique selling proposition. This will help the organisation to achieve the low costs of production.

Models of Strategic Management

Strategic Management involves planning, making decisions and implementing those decisions by taking actions, that helps organisations achieving the objectives of the company. Therefore, it integrates various other functional areas such as finance, marketing, accounting, management, production, information system and human resources in systemic and formal manner in order to provide superior performance to the organisation. However, there are in total 14 models of Strategic Management defined as under:

SWOT Analysis

SWOT analysis

 What is SWOT Analysis?

  • S- Strengths It is that characteristic of a business that gives it advantage over its prime competitors
  • W- Weakness Those characteristics that makes it disadvantageous over its competitors
  • O- Opportunities Those elements that allow the company to implement strategies and formulate in such a way as to increase its profitability. 
  • T- Threats Those elements that might endanger the profitability and integrity of the business. 

With this framework the internal weaknesses and strengths can be assessed. This is useful to explore the opportunities that the competitors have to exploit the business and to confronts all the threats that opponent has to offer.

Value Chain 

It is the list of activities or processes that an organisation performs to launch a product or service in the market. There are two types of activities:

#1. Primary Activity

These activities are directly linked to the creation of Goods or services. The functions of primary activity are outbound and inbound logistics, marketing and sales, servicing the product and operations. 

#2. Support Activities

These activities directly facilitate the services and production of goods. The functions of support activities are technology, human resources, Infrastructure and procurement.

Balanced Scorecard

Dr. Robert Kaplan and David Norton, in 1990 created a model-Balanced scorecard. This scorecard basically works on following 3 parameters

1. Objective: 

High organisational aims

2. Measures: 

Supports to achieve the objective

3. Initiatives:

Action program to complete the objective

Strategy Map

 Strategy map acts as a visual tool design that communicates a strategic plan and achieves high-level organisational goals. The strategy map offers following benefits:

  • Helps in identifying key goals of the company
  • Helps to see the effect of your objectives on others
  • Better Understanding of elements and whether the strategy needs to be worked upon
  • While completing the measures and the task, every employee gets a clear goal to achieve
  • Strategy map provides simple, easy and a representation that can be easily referred to in future
  • It unifies all the goals into one single strategy 

PEST model

  • P-Political
  • E-Economic
  • S-Sociocultural
  • T-Technological

Just like SWOT analysis, these aspects of the model are used to analyse the environment of the business and define the disadvantages if any. However, PEST model is often used with SWOT model’s external factors.

Gap Planning

 Strategic Planning defines the vision of an organisation for the future and to identify companies’ goals and objectives. Gap planning Also known as “The Strategic-Planning Gap”, “Need-Gap Analysis” or “Need Assessment”. Gap planning is basically applied to know the status of the organisation, what are the expectations and how to minimize the gap in between and internal shortages. 

The planning procedure for this model is all about how the gap can be closed. how “change agenda” or “shift chart” are the parameters of gap planning considering the void between the present status and the expected status of the company. 

Red -Blue Ocean strategy

This model got its base from a book named “Blue-Ocean Strategy” by Renee Mau Borgne and W. Chan Kim in 2004. The concept behind this strategy is to advance “uncontested market space” (or blue ocean) instead of common market space. It is either developed (red Ocean) or saturated. However, if the organisation manages to build this strategy, the Red-Blue Ocean strategy can enhance the value for its employees, buyers and business. 

Porter’s Five forces model

Introduced by Michael Porter in 1979, the 5 forces of model are:

  1. Entry of the product into the market
  2. Product and services substituted by other organisations
  3. Bargaining by customers
  4. Bargaining by suppliers
  5. Competitive Rivalry with other existing firms

Thompson and Strickland’s model

With few drawbacks of Porter’s model, Thompson and Strickland came up with a 7-factor model. These seven factors are:

  1. Economic dominance of the industries
  2. Competitive forces strength and competitive pressure
  3. Driving forces
  4. Position of Rival companies in the market
  5. Competitors strategy
  6. Key success factors 
  7. Profitability prospects and Industry’s overall attractiveness

VRIO Framework

VRIO Framework

  • V-Value: Ability to neutralize a threat or to exploit a particular opportunity using a particular resource
  • R-Rarity: Competition in the market
  • I- Imitability: ability of the product or service to be imitated easily in the market
  • O-Organization: To plan a well organised strategy to save the exploitation of the product, services or resources. 

This framework of strategic foundation relates to the vision statement instead of overall strategy. 

Andrew’s Model

This strategic model was formulated by Kenneth Andrews, in 1965 and known as Andrew’s model. This model basically ignores the strategic evaluation, although giving the full leverage to choose the strategy, it ignores the implementation and control.  

Glueck’s Model

This model was formulated by William F. Glueck, signifies decision making procedure. The elements defined in this model are:

  1. Strategic Management elements
  2. Choice
  3. Analysis and Diagnosis
  4. Implementation
  5. Evaluation

The Schendel and Hofer Model

This model was formulated by Dan Schendel and Charles Hofer by combining Control and planning functions. The steps to achieve this strategic management model are:

  1. Identifying Goals
  2. Study of environment
  3. Strategy Design
  4. Strategy evaluation
  5. Strategy Implementation
  6. Control of strategy

According to this model’s formulation there are 3 subprocesses:

  1. Analysis of Environment
  2. Analysis of Resources
  3. Analysis of Value

Korey’s Model

This model was identified by Jerzy Korey-Krzeczowski. This model is an integrated strategic management model sublimed into three phases:

  1. Preliminary Phase
  2. Strategic phase or planning phase
  3. Strategic management phase

Role and Importance of strategic management

Strategic management uses the resources of an organisation to achieve its objective and goals. Strategic management involves analysing the organisation internally, setting up objectives, Analysing the competitive environment, evaluating strategies and making sure the strategies are rolled out across the organisation. However, the role and importance of strategic management are:

  1. It helps achieve goals
  2. Gives a competitive advantage
  3. Synchronises workforce, processes and strategies
  4. Improves organisational performance
  5. Allows the usage of past strategies for future decisions as reference

Conclusion

Strategic management identifies the goals, and processes into how an organisation can take decisions to secure its performance in the market as well as in the future market. Strategic management also helps the top officials and employees to take past failure references and devise a strategic action plan. Using strategic management also helps in evaluating potential threats to not only the organisation but also, to the product or services provided by the Organisation. It also identifies the opportunities and decoding the possibilities for operational improvement in totality.

Strategic management necessitates to learn about the competitor strategies to generate the best results for the organisation. However, apart from preparing the organisations for the market competition, strategic management also helps in identifying the opportunities that may arise from time to time. Therefore, through a steady approach of formulation and implementation of perspective strategy, the organisations can overcome any obstacle and hence grow efficiently. 

Frequently Asked Questions

1. What are the 5 stages of strategic management process?

The stages of strategic management are as follows:

  1. Goal setting: Creating a Road map or setting up goals to achieve the vision of your organisation.
  2. Analysis: This deals with scanning and analysis of the environment, including internal factors like, structure, location and talent along with external factors like market forces and competition. Methods used successfully for analysis are solicit feedback, learning about your customers, research and competitive environment, considering your resources and SWOT analysis.
  3. Strategy Formulation As the name suggests formulation or designing your strategic plan in accordance with the vision and mission statements of the organisation.
  4. Strategy Implementation: Implementation by securing resources that are needed, evaluating the budget and approvals required for the execution.
  5. Strategy Evaluation: By continuously reviewing the strategic plan including the practicality of the circumstances and tracking of progress made by the company so far.

 

2. What is the role of strategic management?

Strategic management uses the resources of an organisation to achieve its objective and goals. Strategic management involves analysing the organisation internally, setting up objectives, Analysing the competitive environment, evaluating strategies and making sure the strategies are rolled out across the organisation. However, the role and importance of strategic management are:

  1. It helps achieve goals
  2. Gives a competitive advantage
  3. Synchronises workforce, processes and strategies
  4. Improves organisational performance
  5. Allows the usage of past strategies for future decisions as reference

3. What are the 7 stages of the strategic planning process?

Seven elements of strategic planning process are:

  1. Environmental scan
  2. Internal Analysis
  3. Strategic Direction
  4. Develop Goals and Objective
  5. Stating Metrics, setting up timelines and tracking Progress
  6. Writing and publishing of strategic plan
  7. Implementation

4. What are the characteristics of strategic management?

Characteristics of Strategic Management process are:

  1. Makes and organisation agile: If the process is followed accurately the organisation can see the changes in the behaviour of the consumer, see the new market trends and hence, adjusting the organisation’s objective, goals and strategy.
  2. Time Benefit: In a way to plan and process the strategy efficiently, it is important to analyse them. If the strategies are planned properly then it saves enough time just to analyse and test the current working strategy for it to be a successful business strategy.
  3. Grow in market Position: Growing in the market is the ultimate goal for strategic management which proves to be the advantage in a competitive market. However, when implemented successfully, it strengthens and improves the overall position in the market.
  4. Holistic Growth: Target growth for organisations in finance and revenue depicts the holistic growth of the organisation. However, using the above 5 steps can help an organisation to achieve its objectives and set goals in future. 

5. What is a strategic management process?

Strategic management is that tool of an organisation that uses an iterative process through proper evaluation and analysis of organisation’s strategies to gain a competitive edge and achieve goals of the organisation. It has following steps:

Setting Goals

Setting goals is the most important step since it lays the foundation of the strategic management journey. In this first step the organisation and goals of the organisation are clearly listed. The processes of achieving the goal are identified, long term and short-term goals are pre-defined, working staff is hired as per requirement. 

Analysis

After the goal for the organisation is set, gathering data is the next step. This data is required for the sustainable growth and achieving goals of the organisation. Data is collected and examined by SWOT analysis.

Strategy Formulation

After a deep analysis of potential external and internal factors, the organisation steps forward towards the strategy formulation stage. In this first stage is to acquire the resources required, then prioritizing the issues currently faced by the organisation and in the final stage by combining all the data the strategy is formulated.

Implementation 

Immediately after formulation, the employees are clearly updated with their responsibilities and roles.

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