strategic management

INTRODUCTION Management at present face many challenges in

running their business. The challenges are both from internal and external environment.

There are conflicting claims from employees , managers , owners etc. The economic conditions , social changes , political parties all influence decision making process of an organization.

In order to face all such situations , executives have to design strategic management processes and help the firm in achieving pre – determined business goals.

Strategic management helps in anticipating environment changes and preparing the business to meet unexpected situations.

STRATEGIC MANAGEMENT Strategic management involves those decisions and actions

resulting in formulation and implementation of strategies designed to achieve the objectives of an organization.

It is a stream of decisions and actions which leads to the development of an effective strategy to help achieve corporate objectives.

Strategic management is concerned with planning and decision making. It is more concerned with general management rather than functional management.

The effect in strategic management is to see that management is able to face changing environment effectively for the benefit of the business

DEFINITIONS According to A.Sharplin , “ Strategic management

is the formation and implementation of plans and carrying out of activities relating to the matters which are of vital , pervasive , or continuing importance to the total organization.”

According to Lawrence & William , “ Strategic management is a stream of decisions and actions which leads to the development of an effective strategy or strategies to help achieve corporate objectives. The strategic management process is the way in which strategists determine objectives and make strategic decisions.

DIFFERENCE BETWEEN

STRATEGIC MANAGEMENT

OPERATIONAL MANAGEMENT

Strategic management is mainly concerned with top management.

Strategic management formulates policies for the whole organization.

The policies framed by strategic management are generally on long term basis.

Strategic management can take strategic decisions such as adding product , expansion program etc.

Important decisions are taken so there is a need of proper analysis of situation and foresight in planning strategies.

Operational management is concerned with functional management.

Operative management is done by functional or departmental heads.

The policies framed by operative management are to face current situations.

These types of decisions are not taken by operative management.

Operative management deals with normal situations and hence less tension at this level.

DIMENSIONS OF STRATEGIC DECISIONS

Strategic management process involves decision – making at every stage whether formulation or implementation of strategy.

Strategic decisions have the following dimensions : Top level management. Allocation of large resources. Long term impact. Future oriented. Multifunctional consequences. Impact of external environment.

Approaches to strategic management

Formal structured approach

Entrepreneurial

approach

Intuitive anticipatory approach

Incremental approach

Adaptive approach

FORMAL STRUCTURED APPROACH

It is one method of planning the things in a formal way. The thrust of every management is to achieve the organizational goals. It will necessitate clear cut planning & proper implementation.

Strategic planning is assigned to experienced persons who have full knowledge of various aspects needed for it.

The formal approach of strategic management follows three stages :

Diagnostic Direction Implementation.

ENTREPRENEURIAL APPROACH

Every entrepreneur will aim to earn as much profits as possible. For this purpose he will try to exploit every possible opportunity available.

The entrepreneur tries to make assumptions for the future and then take strategic decisions in the best interest of the company.

This is a self interest and self oriented approach. This approach is commonly adopted by individual entrepreneur or small scale concerns , it may not be adopted by corporate sector.

Intuitive approach is individual based. The promoter of a business anticipates future

opportunities and possibilities and take decisions on such forecasts.

It is the promoters experience, judgment, and anticipations which are the basis of strategic planning.

This approach is feasible only at the initial periods of the company than in its future plans of development at a later stage.

INTUITIVE ANTICIPATORY APPROACH

INCREMENTAL APPROACH

This approach has a limited role for strategic decision making.

Mostly decisions are based on consensus and whatever strategic decisions are taken these are of remedial nature. This approach is popularly known as Muddling Through Approach as it involves in making few alternatives at a time.

This approach is generally adopted by public companies which are supposed to work under social and political pressures.

ADAPTIVE APPROACHThe strategies adopted by a company should be

flexible. These should be adjustable as per the changing business environment.

Under uncertain environment , adaptive approach is most suitable.

In this approach strategic decisions are taken on the basis of changing environment and its likely impact at a given time.

When the situation is uncertain , fluid and changing then contingency planning should be used instead of sticking to long term plans.

CRITICAL AREAS IN STRATEGIC MANAGEMENT

John A. Pierce & Richard B. Robinson has given 9 critical areas which involves attention in strategic management. These are as follows :

1. Determining the mission of company.

2. Developing a company profile.

3. Assessment of company’s external environment.

4. Analysis of possible options.

5. Identifying the desired options.

6. Choice of long term objectives.

7. Development of annual objectives.

8. Implementing strategic choice decisions.

9. Review and evaluation of strategic process.

NEED FOR STRATEGIC MANAGEMENT

Strategic management is needed to improve the overall performance of a firm. It is needed to face the challenges under which the present business is run.

Strategic management is essential for the following reasons :

To face changing environment.To motivate employees.To improve decision making.

ADVANTAGES OF STRATEGIC MANAGEMENT

The advantages of strategic management are as follows :

Participative decision making. Better decision making. Better employee motivation. Better communication. Resistance to change reduced. Increased profitability.

COMPONENTS OF STRATEGIC MANAGEMENT

Businesses use different processes to formulate and direct their strategic management activities. Some big undertakings involves a sophisticated planning process which small concerns may have less formal planners. Every firm has to follow a system which leads to strategic planning.

A commonly used process for strategic management is described as follows :

Company mission. Company profiles. External environment. Strategic Analysis & Choice. Long term objectives. Grand Strategy. Functional Strategies. Policies. Control & Evaluation.

Process of strategic

management

Assessment of present strategy

Identification of the problem

Formulating a strategy

Selecting alternative and

evaluation

The role of CEO is very important in formulating , implementing and evaluation of strategies.

CEO is the top man , next to the board of Directors. He is designated differently in different companies.

The CEO is identified with & ultimately accountable for a strategy’s success. In big concerns CEO spends 80 % of his time in developing & guiding strategies.

His role is both symbolic and sustentative in strategy implementation. The CEO is a symbol of new strategy.

His actions and perceived seriousness about the implementation of a strategy will influence the behavior of subordinate managers.

He is an important source of clarification & guidance during the implementation of strategy.

A successful implementation of a strategy is directly related to the unique characteristics, orientation & actions of the CEO.

ROLE OF CEO