Unit I
Strategic Management
Strategic management is that the systematic use of corporate resources to realize a company's goals and objectives. Strategic management requires endless assessment of processes and procedures within the organization and external factors which will affect the functioning of the corporate. The strategic management process must guide top-level programs and decisions. Companies of all sizes and industries can enjoy strategic management practices.
This article describes the advantages of strategic management, explains how it works, describes the kinds and stages of strategic management, and provides examples within the workplace.
Strategic Management Benefits
Achieving your organization's goals requires planning and patience. Strategic management helps businesses reach their goals. Strategic management implements the steps necessary to realize business goals company-wide.
What is Strategic Management?
Strategic management is that the development and implementation of key objectives and projects performed by the organization's managers on behalf of shareholders (or owners). The formulation process typically begins with an assessment of obtainable resources, an industry analysis to assess the competitive environment during which the corporate operates, and an indoor operational assessment. This overall assessment creates a technique for achieving the specified goals. The implementation of the developed strategy aims to coordinate the corporate towards its main purpose.
Strategic management offers many benefits to the businesses that use it, including:
How does Strategic Management work?
Strategic management requires setting company goals, analyzing the behavior of competitors, reviewing the interior structure of the organization, assessing the present strategy, and ensuring that the strategy is being implemented company-wide.
Strategic management is either normative or descriptive. Normative strategic management means developing a technique that precedes organizational issues. Descriptive strategic management means executing strategies as required .
Senior management is liable for implementing the strategy, but ideas, goals, or organizational challenges can come from any member of the corporate . Many companies employ strategists whose job is to think and plan strategically to enhance corporate functioning.
Types of Strategic Management
Strategic management as an idea are often approached in several ways. the subsequent is an summary of common sorts of strategic management.
SWOT Analysis
SWOT represents strengths, weaknesses, opportunities and threats. This analysis allows you to research internal and external factors. Internal factors include positive (advantages) or negative (weaknesses) factors that are present within the organization and should be changed or affected in how , while external factors are positive (external) Includes opportunity) or negative (threat) factors. you're being evaluated and aren't necessarily modified or suffering from you or your organization.
Balanced Scorecard
The Balanced Scorecard helps you discover out which aspects of your business got to be improved by dividing the performance evaluation process into four areas called legs. These legs are:
The Balanced Scorecard method can generate a timely reporting mechanism that displays all the statistics associated with your company's growth.
Strategic Management Component
Development involves assessing the environment in which the organization operates and developing a strategy for how the organization operates and competes. This is similar to the first step in the budgeting process.
2. Implementation
The implementation involves deploying your organization's resources to achieve your goals.
Framework for Strategic Management
1. Competitive Advantage
Organizations can reduce production costs or differentiate their products as an advantage over their rivals. It is also important to identify the brand and its position in the market and identify all the competitive advantages that the company has over its competitors.
2. Corporate Strategy and Portfolio Theory
Modern portfolio theory provides a framework for allocating assets to maximize expected return for a particular level of risk. Portfolio theory allows an entity to perform a cost-benefit analysis of resource deployment to see the benefits of individual resource allocation for the entire enterprise.
Developed by the Boston Consulting Group, Growth-ShareMatrix helps companies analyze the value of individual business units by plotting them around their business. The two parameters of judgment are market share (a measure of a business unit's competitiveness against other companies in the same industry) and industry growth rate (a measure of the outlook for the particular industry in which the unit operates).
3. Core Competence
Companies should strive to develop relatively good discipline expertise and eliminate or outsource remaining business activities. Being able to do this allows organizations to offer markets and consumers their own unique products, services, or perspectives.
4. Experience curve
The experience curve represents the proposition that when production doubles, value-added costs decrease at a constant rate.
General Competitive Strategy
Companies need to focus their strategies on cost leadership, focus, or differentiation. According to renowned business strategist Michael Porter, there is a risk of wasting resources if a company does not focus on a single factor. Such strategies focus on specializing in products or services by creating their own sales proposals or creating economies of scale to achieve low costs of production.
Industry Structure and Profitability
The Competitive Forces Model (Porters 5 Forces) is a framework used to assess the competitiveness of the industry.
Threat of New Entrants
In a highly competitive industry, the threat of new entrants is high. Assuming that the industry or sector is profitable, it is considered an attractive business outlook for many. Some deterrents to facilitate market entry include patents, high capital requirements, customer loyalty to established brands, and economies of scale of existing size.
Alternative Threat
If a product or experience can be easily replicated by similar alternatives, the demand for that product is said to be diminished. An industry or sector is considered competitive if consumers can find similar alternative products.
Customer Bargaining Power
In a highly competitive market, customers can enjoy high bargaining power. Sellers will no longer be able to put price pressure on them to prioritize profitability.
Supplier Bargaining Power
If multiple suppliers exist to procure raw or intermediate materials, they cannot unreasonably affect the final price.
Competitive Rivals
Competitive industries enjoy a high degree of innovation and advanced competitive marketing strategies.
Value Chain
A value chain consists of a list of processes or activities that a company performs to bring a product or service to market. The activity is divided into two functions.
1. Main activities
These include features that are directly involved in the creation of goods or services. These consist of features such as inbound and outbound logistics, operations, marketing and sales, and product service.
2. Support activities
These include features that facilitate the production of goods or services. It consists of functions such as personnel, technology, procurement, and infrastructure.
According to Porter, coordinating activities can improve an organization's operational efficiency and ultimately create a competitive advantage for the organization.
Key takeaways:
Strategy is the basis for all decisions that must be made within an organization. If the strategy is not properly selected and formulated by top management, it will have a significant impact on the effectiveness of employees in almost every department within the organization. In my last article on "What is Strategy," I tried to define and explain what a business strategy refers to and what is not considered part of the strategy. In this article, we will analyze your strategy in three different components or at the "strategy level". These three levels are enterprise-level strategy, business-level strategy, and functional-level strategy. These three levels of strategy can be combined and described in the so-called “Strategic Pyramid” (Figure 1). Corporate strategy is different from business and functional strategy. Corporate-level strategy is at the top of the pyramid, but this article starts by discussing business-level strategy.
Fig. 1 Levels of Strategy
Business-Level Strategy
Business-level strategies are familiar to most people and are "how to compete" and "how to gain a (sustainable) competitive advantage over rivals" is about the question. To answer these questions, it is important to first have a good understanding of your business and its external environment. At this level, you can use internal analysis frameworks such as value chain analysis and VRIO models, and external analysis frameworks such as Porter's Five Forces analysis and PESTEL analysis. A good strategic analysis allows top management to proceed with strategy development by using the framework as a general strategy for value areas, blue ocean strategies, and porters. After all, business-level strategies aim to gain a competitive advantage by providing real value to customers while being a unique and difficult-to-mimic player in a competitive environment.
Functional level strategy
Functional-level strategies relate to the question, "How do you support business-level strategies within functional departments such as marketing, human resources, production, and R & D?" These strategies are often aimed at improving the effectiveness of a company's operations within a department. Within these departments, workers often refer to "marketing strategies," "personnel strategies," or "R & D strategies." The goal is to align these strategies with larger business strategies as closely as possible. For example, if your business strategy is aimed at delivering products to students and young adults, the marketing department will make these people as accurate as possible through marketing campaigns by choosing the right (social) media channels must be targeted. Technically, these decisions are so functional in nature that they are not part of the strategy. As a result, it's better to call them tactics rather than strategies.
Corporate Level Strategy
However, corporate-level strategies require management to consider not only how to gain a competitive advantage in each business area in which the company operates, but also which business it should participate in in the first place. .. It's about choosing the best set of businesses and deciding how to integrate them into your entire enterprise, your portfolio. Key investment and sale decisions are typically made at this level by top management. M & A (M & A) is also an important part of corporate strategy. This level of strategy allows a company to operate in more than one business area through different business units with different business level strategies that need to be coordinated to form a consistent company-level strategy within the company. As a result, corporate strategies are often found in multinational corporations (MNEs) or conglomerates rather than small and medium-sized enterprises (SMEs).
Samsung example
Let's use Samsung as an example. Samsung is a conglomerate of multiple Strategic Business Units (SBUs) with diverse product sets. Samsung sells smart phones, cameras, TVs, microwave ovens, refrigerators, washing machines, as well as chemicals and insurance. Each product or strategic business unit requires a business strategy to succeed within its own industry. But at the corporate level, Samsung needs to decide on more fundamental questions, such as "Are you pursuing the camera business in the first place?" Or, "Should we invest more in the Smartphone business or should we focus on the TV screen business?" Both the BCG Matrix and therefore the GE McKinsey Matrix are portfolio analysis frameworks that you simply can use as a tool to know this.
Total Strategy Level
The most common level of strategy is business strategy, which exists within a strategic business unit with the goal of gaining a competitive advantage in a particular market. If your company has multiple SBUs, you need a comprehensive corporate strategy that connects all the SBUs through your enterprise structure. Here, top management must determine resource allocations, investment destinations, and sales destinations. Finally, functional strategies exist within departments such as marketing, HR, and production. Ideally, due to the operational nature of the decisions made within these departments, we should refer to tactics rather than strategies.
Strategy from Modes
Strategic management modes are the actual type of approach managers take when developing and implementing strategies. They address the question of who has a major influence in the strategic management process and how the process is carried out. Studies show that management tends to use one of three main approaches: entrepreneurship, adaptability, and planning, or a mode of strategic management. The mode you choose can affect the degree of innovation that occurs within your organization. Innovation is especially important in the context of strategic management, as organizations that are not continually embracing new ideas are likely to lag behind in competitiveness, especially when the environment is changing rapidly.
1. Entrepreneur mode
"Entrepreneurship mode is developed by a strong, visionary CEO whose strategy is primarily motivated to actively seek new opportunities, focus on growth, and quickly creates bold strategies. It's an approach "(Management, Kathryn M. Bartol & David C. Martin). A new mode of entrepreneurial search is most likely found in organizations that are young or small, have strong leaders, or are facing serious problems where boldness is the only hope. .. Not surprisingly, in entrepreneurial mode, the extent to which strategic management processes drive innovation depends heavily on the direction of top leaders. Their personality, power, and information enable them to overcome obstacles and drive change. Conversely, strong leaders are in a position to threaten innovative activities if they are so inclined.
2. Adaptive mode
"Adaptive mode is an approach to strategy development that emphasizes taking small step-by-step steps, addressing issues rather than looking for opportunities, and satisfying power groups in many organizations." (Management, Kathryn M. Bartol & David C. Martin). Adaptive mode has been established with several coalitions or power blocks that make it difficult to reach consensus on clear strategic goals and associated long-term plans, despite facing a rapidly changing environment most likely to be used by your organization's manager. For example, before London-based Grand Metropolitan PLCs buy Pillsbury, including the Burger King Chain, the chain frequently tells Pillsbury what to do with constant sales, marketing issues, inconsistent services, and more. I was suffering from an angry franchisee. Grand Metropolitan is currently working to get the chain back on track through a strategy that emphasizes "whatever it takes to create a positive and memorable experience." Specific measures include increasing the number of field personnel visiting Burger King stores, emphasizing cleanliness, and rewarding employees who are taking the lead in improving service in different ways.
In an adaptive approach, the degree of innovation facilitated by the strategic management process can depend on the manager's ability to agree on at least some key goals and basic strategies to set important directions. In addition, lower-level managers must have some flexibility in implementing basic strategies, rather than being given a very detailed plan to follow. This approach may be effective in a more stable environment or in an environment where agreements between coalitions can be easily reached. Without at least some agreement between high-level managers on key goals and directions, adaptive mode can be ineffective in moving an organization in a viable strategic direction.
3. Planning mode
Planning mode is an approach to strategy development that includes systematic and comprehensive analysis, as well as integration of various decisions and strategies "(Management, Kathryn M. Bartol & David C). Martin. In planning mode, executives often use planning specialists to assist in strategic management processes. The ultimate goal of planning mode is to understand the environment enough to affect it. Planning mode faces an environment that has sufficient resources to perform a comprehensive analysis, has an internal situation in which key goals can be agreed upon, and is stable enough to be carefully formulated and implemented most likely to be used by large organizations.
For example, Disney's plans include entry into the convention hotel business by the Dolphin Hotel operated by Sheraton Corporation and the Swan Hotel operated by The Westin Hotel Company. Together, the two hotels have 2350 guest rooms and over 200,000 square feet of convention space within Disney World. The hotel was booked well before it opened in 1990.
In planning mode, innovation can occur when the strategy articulates product and service innovation needs and helps top-level managers like Disney integrate their efforts in the direction of encouraging inns. It will be the highest innovation.
Evaluation of Strategic Management Mode
Each mode can be relatively successful as long as it matches the appropriate situation. In fact, you may be able to use different modes within the same organization. For example, top-level managers may adopt entrepreneurial mode for new businesses that are just starting out, and plan mode for strategic management of other parts of the organization.
Each of these modes of strategic management can facilitate or curb organizational innovation, depending on how the mode is used. Nevertheless, knowledge of strategic management processes is required to operate effectively in any of the three modes. As the process is carried out, the manager engages in competitive analysis once the mission and strategic goals are determined.
Key takeaways:
What is the Strategic Planning Process?
This overview of the strategic planning process follows the steps wont to create and implement a robust strategic plan.
There are some ways to form a strategic plan, even as there are several ways to form a meal, but there also are more efficient ways than others.
Before stepping into the steps, it is vital to know why you ought to make a strategic plan first.
Strategic planning may be a valuable guide for workers , organizational leadership, and stakeholders to understand where and why they're going.
Documents containing strategic plans aren't valuable. it's the knowledge in it and therefore the process wont to create it, which is shared and communicated with other members of the team. Good strategies are often reassessed continuously (for example, annually or quarterly) instead of just static documents placed within the binder.
Strategy is about choice. Knowing what to try to to and what to not do. Your strategic plan tells your people what they ought to do in order that they do not need to worry about doing the incorrect thing or attend the manager whenever they create a choice . Tell you.
Well-informed strategic planning can increase productivity, culture, empowerment, and overall effectiveness.
Now that you simply know the importance of strategic planning, let's check out the strategic planning process in four steps:
Part 1: How did you get to your current location?
Part 2: Where does one want to go? what's our vision for success?
Part 3: What gets within the way of us? What does one got to know?
Part 4: What does one got to do to urge there?
The 2-day sample strategic planning agenda analyzes the whole strategic planning process above. There also are a spread of strategic planning tools and frameworks which will be incorporated throughout the design process and business strategy development.
Complete Strategic Planning Process
Strategic Planning Step 1: Collect Input
Success and Results of Past Strategic Plans, Environmental Scans, Staff Surveys-Get 15 inquiries to Ask Your Team
PESTLE: Besides business, there are many other factors that influence the way we do business. there's just one competitor, but it also affects the political, economic, social, technical, legal and environmental environment during which a corporation or business operates.
SWOT: Throughout the strategic planning process, we also got to identify internal processes and situations (advantages and disadvantages) which will affect future destinations. There also are external factors (opportunities and threats) which will influence your business strategy.
These "inputs" are the key to a successful strategic plan. the proper information will assist you make the proper decisions, so collect and evaluate it carefully. Once you recognize where you're as a corporation and what's happening within the outside world, you'll start understanding where you're heading.
Strategic Planning Step 2: Vision
where are you going? What does victory look like?
Having a vision statement is one thing, having a really clear vision of the longer term , sort of a blueprint for a house. this is often the idea of strategic planning.
As a corporation (profit, non-profit, government, growing start-ups, etc.), what are you building and what's its rally for your people?
It is important to spend time getting agreement and coordination about this future. Otherwise, each individual will follow their own destination for fulfillment .
Another way to believe your vision is, "If success was an area , how does one know if you've reached it?"
Strategic Planning Step 3: Mission
What is your purpose? Why does one exist? What does one do, and for whom does one do it?
This is a chance to focus your energy on a specific stake. Elderly people (staff, shareholders, board of directors, customers, etc.). Who would you be if you needed to devote most of your resources to a group? this is often a difficult question as we tend to mention "everyone".
Your mission is a crucial impetus for achieving your vision. That's your way.
Strategic Planning Step 4: Values
If you want to find the biggest contributors to a successful organization, it has understood and agreed values.
The value creates a set of behaviors that everyone in your organization can trust and expect.
It's like everyone playing with the same rules that clearly specify how you succeed. Do you want your people to feel successful and fulfilling in their work? Live, eat, and breathe your values so they know how they can contribute to the success of your organization.
Strategic Planning Step 5: Competition, Risks, and Obstacles
Didn't you think it would be that easy? There are always things that get in the way of your success. Taking the time to identify the scenario, the impact of a particular failure, and what you do to mitigate these risks will reduce your chances of being surprised.
You can consider incorporating risk register or scenario planning as a framework to help manage these risks and uncertainties.
Strategic Planning Step 6: Strategic Concern, targets, Plans, and Tactics
This is where you can connect to thinking about the big picture of action items as part of your strategic planning process.
Strategic priorities are some of the areas where we will make the greatest progress towards achieving our vision.
Want to expand the target of your strategic planning? Focus on the right strategic priorities.
Once you have strategic priorities, find a way to measure their success. Think of moving from the current state of X to the future state of Y by a certain date. From X to Y by date
Then perform individual action steps that contribute to achieving that goal. If you need an idea of which strategic priorities to choose as part of your strategic plan, check out this article.
Strategic planning Step 7: Communication planning
Now, make a plan as a team and tell them about your strategic plan and how to get people to agree with it.
Recall that shelving planning isn't very useful, and that it's important to always keep strategic planning and strategic priorities in mind. This is where you do it.
Audio, video, conferencing, whatever you need to do: let people know where your organization is heading and how they can contribute to the success of their plans.
Communication goes bidirectional. If you listen as well as speak, you will get better approval. It's the difference between pushing people forward with a plan and encouraging them to attract and contribute to you.
Strategic Planning Step 8: Action Plan
Implementations are where most organizations get stuck, so a strong action plan is needed.
Now that we know where we are heading and how we measure success, we do something like move the needle to the success of our strategic plan.
Thinking about the big picture is a simple part of the strategic planning process. A little more difficult is the implementation of the actual strategic plan. Most organizations fail to implement their strategic plans-the failure rate is 71% (see slide deck above for reasons).
The strategic planning process may seem fairly simple at first, but the complexity of people and the moving parts of most businesses make planning an important and challenging art form at the same time. Combining effective long-term planning with short-term implementation is the skill of good managers and good leaders.
SME Strategy not only helps teams create strategic plans, but it also helps them implement them. For more information on the strategic planning process or our strategic planning services, contact us for consultation or learn how facilitators can help maximize your next strategic meeting.
Key takeaways:
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