Strategic Management

STRATEGIC MANAGEMENT

Every firm competing in an industry has a competitive strategy which may be clear and precise or embedded and understood by default. These strategies are either developed through a planning process or they are developed depending on the changing external and internal factors. Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its structure of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations. In other words, strategy is about the direction in which the business is trying to get in the long term. A strategy should help in finding the potential markets in which the business competes and its corresponding activities. It should help in analyzing the resources needed to compete, example : skills, assets , finance , technical know-how etc. Strategies should help in Analyzing the external environmental factors that affects the ability of the business to compete. Finally it should help in analyzing the values and expectations of the stakeholders who have the power in and out of the business.

The organization's strategy must be formulated in such a way that it has a unique distinctiveness which is clearly specified. This distinctiveness must place the organization in the potential market with a strong base . The strategy developed will be successful when it fits into the company's activities and they should balance each other and they should supply the right benefits to the firm and its customers. The ultimate concept is to position the firm in a way that will ensure its survival in the long term among the competitive environment.

The various elements of strategies are strategic planning, strategic thinking and strategic management. Strategic planning is a management tool. It serves one of the main purpose as a management tool i.e., to help an organization do perform better and to ensure that the members of the organization are working towards the same goal , to evaluate and adjust accordingly the organization's direction in response to a changing environment.

In other words, strategic planning is a systematic attempt to yield elementary decisions and actions that outlines and guides the various features of the organization and its functions with an insight on the future. The plan is then a set of decisions about what to do, why to do it, and how to do it. Strategic planning implies that some organizational decisions and actions are more important than others. It also implies that much of the strategy lies in making the tough decisions about what is most critical to achieving organizational triumph. Another important point to be noted about strategic planning is , it helps to anticipate the future and make the decisions in the present. Therefore, the plans made in the past may well be changed by those that have been made in the present. The strategic planning can be complicated and challenging, but it is defined by the above outlined ideas.

This is followed by the strategic thinking. This concept has a strategy hierarchy as follows -Goals, Policies and Programmes. A well formulated strategy should be able to balance and incorporate the major aim of the organization along with the goals policies and the programmes into a consistent unit. This finally leads to the strategic management. Strategic management is about taking management verdicts. It involves the basic management functions of analyzing, making the right choice and implementing the choice.

The various aspects of strategic management are strategic analysis , strategic choice and strategic implementation. Strategic analysis is the analysis of the position of the firm and the various external and internal factors that might have an effect on it. This is done with the help of various tools such as SWOT analysis, PEST analysis , five forces analysis , market segmentation etc. Under strategic choice, the stakeholders expectations are analysed and the strategy options are looked upon and evaluated and then the strategic choice is selected. Strategy Implementation is often the difficult part. After a strategy has been analysed and selected, it has to be translates into organisational action. The three aspects are mutually dependent

as shown in the diagram below.



There are two approaches to strategy .They are rational and dynamic .The rational approach is the traditional approach which was earlier followed by the military .This approach follows the planning theme ,which is considered as the most important component of management .In a rational approach the organization chooses its goal and identifies strategies that enable it to fulfil its goals and to allocate the resources accordingly .This planning process is done by the heads of the organisations for example the senior manager. This is a top down approach to strategy , where the main planning of goals and allocation of resources are done by the heads and the top level management. While deciding the strategic approach , the planning department needs to make a decision, about which approach is to be followed. After analyzing the current situation and market trends if the plan to continue with the current approach it is a rational approach to strategy where no changes are made. In a rational approach , the past is taken as a guiding factor for the future. Here the external environmental factor are analyzed continuously in a systematic way. Some organizations are biased towards this approach. There are these other organizations which tend to predict the future and make plans, this is called scenario planning which is another rational approach. For example taking the case of strategic planning at Royal Dutch /Shell, they were biased towards strategic planning. They used the scenario planning method, where the "what if" analysis was used by all the managers at all levels of the organization . This was due to their rational approach to the expected dynamic changes.

The formal or rational approach is otherwise called as the fit model of strategy planning. This is so because this approach manages to produce a fit between the internal and external aspects of the organisation and the industry respectively .another feature