Strategic Management

By Ismael Tabije

Strategic management is the process of specifying an organization's objectives, developing policies and plans to achieve these objectives, and allocating resources so as to implement the plans. It is the highest level of managerial activity. It is not a task, but a rather a set of managerial skills that ought to be exerted throughout the organization, in a wide array of functions.

An organization's strategy must be appropriate for its resources, environmental circumstances, and core objectives. The process involves matching the company's strategic advantages to the business environment the organization faces. One objective of an overall corporate strategy is to put the organization into a position to carry out its mission effectively and efficiently.

A good corporate strategy should integrate an organization's goals, policies, and tactics into a cohesive whole, and must be based on business realities. Business enterprises can fail despite 'excellent' strategy because the world changes in a way they failed to understand. Strategy must connect with vision, purpose and likely future trends.

Strategic management can be seen as a combination of strategy formulation and strategy implementation, but strategy must be closely aligned with purpose.

Strategy formulation involves doing a situation analysis: both internal and external, both micro-environmental and macro-environmental; setting objectives--crafting vision statements (long term view of a possible future), mission statements (the role that the organization gives itself in society), overall corporate objectives (both financial and strategic), strategic business unit objectives (both financial and strategic), and tactical objectives; and planning. This three-step strategy formulation process is sometimes described as determining where you are now, determining where you want to go, and then determining how to get there. These are the essence of strategic planning.

Strategy implementation involves allocation of sufficient resources (financial, personnel, time, technology support); establishing a chain of command or some alternative structure (such as cross functional teams); assigning responsibility of specific tasks or processes to specific individuals or groups; managing the process--monitoring results, comparing to benchmarks and best practices, evaluating the efficacy and efficiency of the process, controlling for variances, and making adjustments to the process as necessary. When implementing specific programs, this involves acquiring the requisite resources, developing the process, training, process testing, documentation, and integration with legacy processes.

Strategy formulation and implementation is an on-going, never-ending, integrated process requiring continuous reassessment and reformation. Strategic management is dynamic. It involves a complex pattern of actions and reactions. It is partially planned and partially unplanned. Strategy is both planned and emergent, dynamic, and interactive.

For strategic management to be a success, organizations must not fail to follow the plan. They should be guided by the set of objectives that they have formulated, envisioning a prosperous business. They should strive to understand customers more thoroughly. Over-estimation of resource competence and under-estimation of time requirements should be avoided. Employee and senior management commitment should be obtained through keeping communication channels open and healthy. Most crucially, the management should acquire the ability to predict environmental reaction and manage change.

Copyright 2007 Ismael D. Tabije

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Strategic Management Process - The Definition Stage

By William McGee

When the going gets tough, the tough get, well, strategic! Let's face it, that is not the normal reaction of businesses that are performing at a sub-par level. The normal reaction is to begin slashing costs. However, while cost improvements without sacrificing quality are always welcome, they are rarely the answer to putting businesses on a pathway to sustained growth and profitability. For that, businesses need to think and manage more strategically. More specifically, they need a strategic management process.

An effective strategic management process can be defined as having four major stages:

  • Definition Stage, which culminates in the selection of a market strategy.

  • Translation Stage, which deals with business philosophy.

  • Building Stage, the focus of which is designing performance measurement systems.

  • Operating Stage, which creates a continuous improvement environment.

The purpose of this brief article is to review a few of the most important elements of the first stage, or the Definition Stage, of a strategic management process. While all stages of the process are important, the first stage is perhaps the most exciting, because within it, businesses define their market strategies. That provides visible evidence that the companies are at least beginning to think strategically.

Market Strategy

Many companies believe that, once they have defined their market strategy, their strategic process is completed. Of course, nothing could be further from the truth. However, there is no doubt that having an effective market strategy is critically important to success. So, what makes a market strategy effective? There are two attributes that must be in place.

Perhaps the most important attribute is differentiation. A company's market strategy must clearly differentiate them from competition. The emphasis here is on "clearly". It will clearly and uniquely identify a company in the views of all stakeholders, such as customers, suppliers, employees, and shareholders.

Secondly, an effective market strategy must build on a company's core strengths. New strengths can be built or acquired, but it may take quite some time before those new strengths are believable in the marketplace. An effective market strategy will underscore the strengths that are already perceived and accepted by stakeholders. In essence, a company's market strategy and its core strengths become strongly linked, both externally and internally, with each supporting and strengthening the other.

Natural Customer Base

An effective market strategy must appeal strongly to a customer base that is large enough to support a company's financial objectives. There are cases where it appeals strongly to an entire broad-based market. However, those cases are rare indeed. More likely, a company will need to do a segmentation analysis of the market to identify the segment, or segments, of customers that will embrace the company's market strategy and become the company's natural customer base. The segmentation analysis should be deep enough to identify all the various segments of the market, along with the demographic attributes associated with each segment.

Buying Factors

Buying factors can be thought of as "triggers" in the selling and buying process, that either encourage customers to buy or discourage customers from buying. Many companies never really address buying factors. That is a mistake. It takes a lot of hard work to craft an effective market strategy and to identify a natural base of customers that will embrace that market strategy. That hard work can be wasted if companies do not understand the factors that can cause customers to make positive, or negative, buying decisions. Many times, buying factors can be obvious extensions of companies' market strategies and natural customer bases. However, it is important that companies recognize and understand those buying factors and adjust their approaches in the marketplace based on them.

While cost reductions can relieve stress on companies that are performing at a sub-par level, strategic management is the answer to them achieving long-term growth and profitability. Defining an effective market strategy, along with a natural customer base and buying factors, is the first step on the pathway to better sustained performance.

McGee Partners LLC is a professional services firm located in Avon, Connecticut. The firm consults with clients in several industries, including financial services, consumer products, and television broadcasting. The firm offers professional services in the areas of business management, financial management, and business improvements. More information about McGee Partners can be found on their website at William M. (Bill) McGee is a Managing Partner with the firm.

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