Saturday, January 22, 2011

Strategic Management


Strategic Management.

Strategic management is the process of large scale, future oriented plans for interacting with the competitive environment to optimize achievement of an organization's objectives.

 According to L.L. Byars, L.L Rue, Strategic management is the process by which top management determines the long-run direction and performance of the organization by ensuring that carefully formulation effective implementation and continuous evaluation of the strategy take place.

Stoner says that, Strategic Management is the process of boarding program for defining and achieving an organizational objective, the organization response to its environment over time.

Weihrich and Kooiztz says, Strategic management is the process of determining of the purpose and the basic long term objectives of an enterprise and the adoption of courses of action and allocation of resources necessary to achieve these aims.

Strategic management is defined as the set of decisions and actions that result in the for­mulation and implementation of plans designed to achieve a company's objectives. It com­prises nine critical tasks:
I . Formulate the company's mission, including broad statements about its purpose, phi­losophy, and goals.
2. Conduct an analysis that reflects the company's internal conditions and capabilities.
3. Assess the company's external environment, including both the competitive and the general contextual factors.
4. Analyze the company's options by matching its resources with the external environment.
5. Identify the most desirable options by evaluating each option in light of the company's mission.
6. Select a set of long-term objectives and grand strategies that will achieve the most de­sirable options.
7. Develop annual objectives and short-term strategies that are compatible with the se­lected set of long-term objectives and grand strategies.
8. Implement the strategic choices by means of budgeted resource allocations in which the matching of tasks, people, structures, technologies, and reward systems is emphasized.
9. Evaluate the success of the strategic process as an input for future decision making.

The above discussion bring to the conclusion that, Strategic management is the art science and craft of  formulating, implementing and evaluating cross-functional decisions that will enable an organization to achieve its long term objectives.



The three steps of Strategic Management.

The strategic management process consists of three steps are Strategic formulation, Strategic implementation and Strategic evaluation.
Strategic Formulation: Strategic formulation includes developing a vision and mission, identifying an organization's external opportunities and threat, determining internal strengths and weakness, establishing long term objectives, generating alternative strategies and choosing particular strategies to pursue.
Strategy-formulation issues include deciding what new businesses to enter, what businesses to abandon, how to allocate resources, whether to expand operations or diversify, whether to enter international markets, whether to merge or form a joint venture, and how to avoid a hostile takeover.

Strategic implementation: Strategic implementation requires a firm to establish annual objectives, devise polices, motivate employees, and allocate resources so that formulated strategies can be executed. Strategy implementation includes developing a strategy-supportive cul­ture, creating an effective organizational structure, redirecting marketing efforts, preparing budgets, developing and utilizing information systems, and linking employee compensation to organizational performance.

Strategy implementation often is called the "action stage" of strategic manage­ment. Implementing strategy means mobilizing employees and managers to put formulated strategies into action. Often considered to be the most difficult stage in strategic management, strategy implementation requires personal discipline, com­mitment, and sacrifice. Successful strategy implementation hinges upon managers' ability to motivate employees, which is more an art and a science.

Strategic evaluation: Strategic evaluation is the final stage in strategic management. Strategic evaluation is the primary means for obtaining this information. All strategies are subject to future modification because external and internal factors are constantly changing. Fundamental strategy-evaluation activities are
a)        Define parameter to be measured.
b)       Define target value for those parameters.
c)        Perform measurements.
d)       Compare measured results to the pre-defined standard.
e)        Make necessary change.
It's extremely important to conduct a SOWT analysis to figure out the strengths, weakness, threat and opportunities of entity in question.

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