Strategy Management

Introduction

The strategic management concerns those organizational actions and decisions, in which managers analyze the present business environment, craft strategies, implement them into action, and modify strategies according to needs. Strategy implementation refers to executing the various activities of an organization into action. In other words, strategic management is a continuous process, which controls and evaluates the business performance in which the firm is involved. It evaluates company’s rivals, establishes goals and sets strategies to encounter challenges from potential and existing rivals. The managers reevaluate each strategy quarterly or annually to determine its outcome and affect. If desired results are not produced, they replace the current strategies with improved ones because social, demographic, political and economic factors continue to impact environment of the organizations in which they operate. 

Thus, strategic management is a philosophy that includes formulating, implementing and managing organizations’ strategies by considering and employing the company’s resources for achieving a competitive advantage. The two schools of thought offer a different perspective on this process. The Design School of thought theorizes that an organization should consider its weaknesses first and strengths later and match them accordingly with the needs of the competitive environment. The analysis of the internal environment is used to identify its weaknesses and strengths while the external environment identifies its opportunities and threats. The Design School further stresses that if the company examines its external and internal environment, the appropriate strategy can be chosen and implemented by crafting different strategies. However, according to the Learning School, a rational approach to creating a strategy fails to consider the occurrence of strategy in reality.

The current paper examines the role of strategic management in crafting the strategies for creating objectives, mission and goals and how organizations proceed in attaining them. Besides, the paper explores the role of managers in formulating and implementing decisions regarding future direction of an organization, as well as highlights contemporary strategic issues that create challenges in the achievement of a competitive advantage.

The Aims, Concepts and Role of Strategic Management and Strategic Formulation Process in Organizations

Basic Concepts of Strategic Management

This section offers some basic concepts of strategic management, which involve the definition, the processes, the challenges, and advantages. The strategic management is a process of forming actions and decisions that constitute different strategies, which are implemented to achieve organizational goals and objectives. The managers can transform decisions that become ultimate strategies by considering internal and external factors of the organization, as well as the current situation on the market. Strategic management is a philosophy of managing an organization in a manner that realizes the complicatedness of its situation while struggling to achieve competitive advantage (Fred 2011).

“In the nonexistence of a strategy, the organization is like a vessel without a steering, lost in a whirlpool and circles. It has no direction to go and will sink ultimately”, say Joel Ross & Michael Kami (Fred, 2011).

All organizations are involved in various activities by creating goods and services for marketing, distribution to its customers or beneficiaries. The willingness of the buyers to accept, receive, utilize, or pay for products can change over time. The transformation in consumer behavior occurs because of people’s desires and the availability of superior products from the rival companies at lower prices (Abell & Oxbrow, 2002). Under these conditions, organizations employ different strategies by adjusting to changes in the market environment. The adaptation involves modifying the company’s operations by evaluating the features of offered products and services, the way of creation, for example, the technology used for production, and the customers to whom the firm caters. This approach or philosophy for satisfying the needs of clients is the basic concept of strategic management (Coulter, 2005).

The concept of strategic management can be explained in various ways. Hungers and Wheelen’s  (2006) findings state that strategic management refers to a set of managerial actions and decisions, which determines and decides the long-range performance of the organization. The process involves internal and external environmental analysis, crafting strategies, for example, long-run strategic policies, implementation of strategy, evaluation and control. They emphasize that the analysis and assessment of external threats and opportunities directly relate to the company’s weaknesses and strengths (Hunger & Wheelen 2006). The concept of strategic managed is based on three prime interrelated processes such as strategic analysis, formulating and implementing a strategy.

In the other way, Peng (2007) argues that strategic management is a continuous process, which assesses and controls the business in which the organization is involved. Besides, it evaluates rivals’ performance and sets strategies and objectives to encounter threats from all potential competitors. Strategic decisions for executing an action can produce long-range ramifications and broader implications, thus managers should be committed to the decisions that could produce results over a certain period of time. Once the organization chooses a strategic action and implements a strategy, the effect would be slow on its competitive image but due its course advantages stemming out from the specific strategy would begin pouring in. The well thought decisions enable the organizations becoming popular in markets for their products and services while the hasty decisions could adversely damage the previous progress (Peng, 2007).

In today’s globalized market, companies expect changes due to market fluctuations and decide for radical changes by reengineering their business processes to achieve strategically better position in the market. In actual fact, the strategic management does not encourage such practices and decisions taken in haste. Irrespectively of the size and structure, organizations should implement well-planned strategies to compete and survive in the market and put all efforts and resources to optimize growth for the future (Aaker, 2001).

Role of Strategic Management

The quest for economic success has encouraged organizations to compete vigorously in the market-place with diversified strategies. In this process, some companies flourish effortless, whereas others diminish from the market despite their continuous struggle. The reason of success or failure has been long examined by scholars and they concluded that the companies need to understand the role of strategic management if they want to succeed in the market (Barney & Hesterly, 2006).

Defining Company Identity

Successful organizations realize what they intend to achieve with the capabilities they possess. The first role of strategic management is to identify the strength of the organization in respect of the exclusive products and services it plans to introduce in the market and also the particular strategy it wants to implement in a competitive environment. This process usually involves crafting a mission statement and a concise message of organization’s big picture offering reason for existence, such as the role of healthcare sector in a society is to make people healthier and free from sickness and diseases (Johnson & Scholes, 2002).

Formulating Overall Strategy

The second role of strategic management is crafting a compact organizational strategy. It includes mission statement that establishes the platform for policies, actions, and decisions. The strategic management projects an overall understanding of the feasible actions that are essential to translate organization’s objectives into reality. The company may select to produce a variety of goods or services on the basis of its capabilities; the prevailing competition, market demand and opportunities offered by consumers’ wants and needs. The managers review the market situation and gather information about rivals activities, limitations, opportunities and threats before developing a comprehensive strategy (Grant, 2003).

Designing Actionable Goals for Implementation of a Strategy

Once the outlay of strategy is designed, the role of strategic managers is to design a set of actionable and quantifiable goals and convey these objectives to the workforce for implementation. “To grow considerably during the next year” is not an actionable and quantifiable goal, but "To grow 25 percent during the next year by introducing three new services to market" conveys a message to workers of exactly what the company wants to achieve and with what actions it intends to attain it. If the firm fails to achieve the outlined strategic objectives, strategic management's role is to assess the result and decide whether the goals need thorough revision or whether the organization needs modified strategy to approach the market in a different way (Hitt, Ireland & Hoskisson, 2001).

Strategic Segmentation for Achievement of Goals

Strategic management plays a responsible role in collecting the information about the market situation of organization’s products and services and accordingly develops various marketing strategies for satisfying different segments of potential buyers. Most of the businesses are aware of consumers’ demand of products and services before targeting a market. For example, a company that manufactures battery electric cars will target potential buyers who are environmentally cautious and want to reduce their gasoline and petrol expenses. Strategic marketing enables understanding of the gradation of target markets and marketers apply them in marketing and product development (Watson, 2003).

Aims of Strategic Management

The organization’s prime aim is to create competitive advantage in the marketplace. The second goal is to offer value to its stakeholders and customers. Both of the aims are interrelated in a broader context. Since the value is established if the organization sustains a competitive position over its rivals, it is essential that a formalized and definitive process, which fits within the concept of strategic management, is implemented in the core of the process. The successful organizations do not depend upon forecast and changes in the market environment because it is not an appropriate approach to attain an advantage in the organization’s market domain. Thus, creating a competitive position, and maintaining it over a long period requires formal processes of formulating and implementing a strategy by exploring and utilizing company’s resources in the best possible way. The third aim of strategic management is to evaluate its market position through benchmarking, which enables to create a strategic perspective and offer value to the business. This objective is achieved by offering superior quality products and services and continually enhancing the quality accordingly to needs and wants of consumers (Johnson, Scholes & Whittington, 2005).         

Contemporary Strategic Issues Evidenced in Debates, Judgments, and Conclusions

The organizational activities continue to create strategic issues and affect the growth of the business. Under these circumstances, the implementation of strategic management has helped many companies in accomplishing targeted results. While goals are the “final outcome”, the strategy is the tool of acquiring them. The organizations consider all relevant aspects of the market environment when designing a strategy and create a comprehensive action plan for attaining the short-term and long-term outcomes (Lukaszewski, 2001).

The strategy is a blueprint and a road-map of all the significant entrepreneurial activities and functional area actions, which are to be implemented in pursuing mission and goals by positioning the business for sustained success. Some researchers have argued that strategy is the company’s statement, which refers to what resources can be utilized to achieve maximum benefits and which opportunities can be explored to minimize threats in order to produce a desired outcome (Fitzroy & Hulbert, 2005). This statement raises a debate among academic circles concerning such strategic issues as:

1. How the organization should react to changing market conditions, what should be done regarding shifting of consumer needs and wants and how to cope with emerging market trends. Which new opportunities can be pursued, how to encounter competitive activities and other external threats, and how the organization can strengthen its business activities by doing something different, than the others.
2. How the organization can allocate resources to its various divisions, business units, and functional departments by applying decisions that control human and financial capital in the selected strategic policy. The underlying fact is that strategy-supportive directions for resource allocation need to exist for exhibiting better performance (Gavetti & Rivkin, 2005).
3. How the organization can compete in its respective industries and marketplace in which it participates. How to form decisions to develop the consumer appeal, position of the company against competitors, differentiate its products with product differentiation strategy. Besides, which policy it adopts to meet competitive threats, which are always essential to survival and the attainment of a competitive advantage.
4. Within each area of business processes, which approaches and actions the organization should consider in the operational and functional areas to establish a unified strategic effort throughout its business units. Undoubtedly, different operational and functional strategies need to be merged rather than allowed to go off independently. These strategies help in the sustainment of long-range competitive advantage (Eisenhardt & Martin, 2000).

The issues of strategy thus move up and down the organizational hierarchy because the top management always wrestles with several issues of a strategy. The top management not only designs a strategy for the company as a whole but also formulates different strategies for each line of business unit (Bronn, 2001). There are several strategies applied at the functional level such as marketing, distribution, manufacturing, promotion and financial strategies while strategies at the operating level are designed to implement the functional strategy in a broader context (Pitts & Lei, 2006).                   

Usually, those managers, who would be fully involved to make a particular strategy successful, as well as possess an ability to create a unified action plan for the organization as a whole, formulate and implement the strategies. The details of a strategy reflect judgments regarding long-range direction of the company, need for new initiatives such as a diversification, aggressiveness, withdrawal of unattractive policies, and activities aimed at moving the company towards sustained success (Harrison, 2003).

Specific managerial issues concerning the strategy formation are the following:

• Searching innovative methods with which the company can improve its current activities;
• Exploring new opportunities for the company to pursue;
• Developing resources to enhance the organization’s competitive strength and improve its market position to encounter threats of competitive forces;
• Identifying different channels to build and sustain a competitive advantage in the market;
• Devising plans how to cope with threatening external environment;
• Encouraging talented workers throughout the company to suggest innovative proposals and rewarding those according to their capabilities.
• Shifting resources away from those areas, which produce low and diminishing outcomes and directing towards those that can generate high and increasing outcomes;
• Deciding time-bound action plan regarding how, when and where to diversify;
• Selecting which businesses need discontinuation and withdrawal from the market, and planning their replacement with new and improved products and services.

Judgment and analysis are the most crucial principles of strategic management. The right selection of a strategy for one particular company might not be a right choice for another organization; though both of them are in same business. The reason is that situations vary from company to company, as well as their vision in formulating the policies. Strongly placed companies have the ability to do things, which weakly positioned organizations cannot do, thus, weak companies need to adopt different strategic approach than that of a strongly positioned company. A strategy should be effective and capable to produce results, considering the size, volume, resources and structure of the organization and need not be imitated and matched with large organizations (Harrison & John, 2004).

The managerial process of formulating strategy always demands critical study of situational analysis to arrive at a judgment, with the objective to attain “goodness of best fitted” between the strategy and relevant features of the firm’s internal and external situation. Indeed, with the values, contributions and foresightedness of talented managers, the organization is able to develop customized solutions, which fits well into the organizational framework (Holsapple 2004).

Conclusion

Establishing business strategic objectives, crafting, implementing and executing a strategy, and assessing outcome depict the basic elements in the management of an organization’s strategy, but the whole process is not clearly defined and neatly implemented in actual practice. It has been observed that managers usually do not go through the process in sequential manner. Besides, it is difficult to determine the distinction between such components in actual practice as forming a strategic mission and converting it into establishing objectives, setting of objectives by considering the resources available for formation of a strategy and how it can be achieved. Moreover, deciding a strategy always raises discussion and debates regarding its direction and implications for the organization and, in many cases, an effective strategy is abandoned because of non-agreement and doubts over the success of a strategy.

Second, the tasks required in strategic management process should not be segregated from other responsibilities, which fall within managers’ range of activities. The managers should formulate and implement strategies in the midst of their managerial activities, which are fragmented with meeting deadlines, appointments, and resolving unexpected problems. It is not justified to construe the task of managing strategy as the primary job of managers; although strategy formulation is their most significant function that critically concerns to success or failure of the organization. Further, managers often complain that planning and crafting of a strategy consume much of their time, as well as distracts from other activities. In fact, the involvement that strategy management demands from the manager’s time is irregular. New strategic issues, and improved ideas regarding strategy do not surface according to planned timetable and they have to be resolved whenever they appear. Finally, crafting and implementing a strategy must be viewed as continuous process in organizational activities.