Download x. strategic management

X. STRATEGIC MANAGEMENT
The aim of strategic management is to build a competitive edge and to maintain it in the longterm period. Its origin can be found in the area of military and public administration. The term
„strategy“ has its origin in ancient Greece. It was formulated for the first time in the period of
democratic reforms of Kleisthenos 508 - 7 B.C.).
Pericles (450 B.C.), the outstanding top representative of the Athens state, described in the
fifth century before Christ managerial skills of a military strategist (management, leadership,
power, manner of speech etc.).
Alexander of Macedonia (born:356 B.C. in Pelle, †10th June 323 B.C. in Babel) considered
strategy as anability to use strengths to overcome opposition as well as to create a system of
general supremacy.
a) CONTENT AND
MANAGEMENT
GOALS
OF
CONTEMPORARY
STRATEGIC
Strategic management of a business or the enterprise represents a system-managed process,
the basis of which is (especially in a long-term view) to continuously, flexibly and in a
compact manner respond to changes of both internal and external environments with the
purpose of maintaining balance between them and of satisfying enterprising, customer and
social needs.
The basic factors of a competitive edge creation, in the traditional concept of competitive
edge, are:
-
the lowest possible work costs;
-
access to financial resources and to raw materials;
-
protected / regulated markets.
b) STRATEGIC MANAGEMENT SPECIFIC FEATURES
Strategic management has the following specific features of:
-
complexity;
-
management strategy;
-
seriousness of decision;
-
mostly long-term implementation;
-
high number of objectives;
- demanding economically and from the point of view of management.
c) STRATEGIC MANAGEMENT PRINCIPAL TASKS
- determination of the long - term focus of the company or the local government unit
and of accepting decisions leading to achievement of the company objectives;
- planning, allocating, organizing and management of company resources;
- planning focused on solving the relationship between the company and its
environment;
- harmony of all components of organization system of the company in the interest of
achieving objectives.
This orientation is significant predominantly due to the fact that the company or the local
government unit is threatened by many dangers both from outside and inside, but its
management either do not see these dangers or they think that the problem will be solved by
itself in the course of time.
Some theoreticians indicate the so called„silent effective killers“:
- vague strategy;
- conflict of priorities;
- ineffective top management;
- unsuitable style of management;
- bad communication ;
-unsatisfactory coordination of functions;
- lack of management skills;
-insufficient motivation of employees.
d)PRINCIPAL TERMS
VISION
Vision of the company or the local government unit demonstrates the notion of the future.
Corporate vision defines direction of the company's activity in the long term period and
formulates its notion of the future, focus and main objectives of the company for at least five
years, probably more.
The vision forecasts main directions of development, extention of provided services and
production, relations to customers, market position of the company etc. in the next five or
more years. Corporate vision is thus focused on the future and expresses orientation of the
company. It should clearly answer the question, what are and will be unique qualities of the
company.
The vision pursues three main objectives:
- to clarify a general direction of the company (municipality, region) development;
- to motivate people to go in this direction;
- to coordinate effectively the activity of the whole work team.
Objectives of the company are aims that should be achieved by a targeted activity.
Specific actions that are organized to accomplish these objectives are called strategies.
MISSION
Mission includes information about both the current and prospective orientation of the
company in a medium - term horizon. It has to be communicated both to the public and to the
company's employees, how the company will be satisfying customers by its products and how
it will be, by means of its services and profits from its business activity, fulfilling the needs of
everyone, who is closely connected to its business activity.
Four conditions that an effectively formulated mission must comply with are:
-
market orientation;
-
feasibility;
-
motivation;
-
specification.
Mission defines boundaries of the company's activity and usually includes the following
structure:
-
a brief history of the company;
-
current priorities of the management
and owners;
-
response to factors from the external environment,
-
corporate resources;
-
the purpose of the company's existence with regard to abilities of the company.
e) MAIN QUESTIONS CONNECTED WITH MISSION FORMULATION
Are there economic objectives defined in the company?
What differentiates the company from others, what is its competitive advantage?
Relationship to the public: Does the company take into consideration interests of the society?
Relationship to employees: Are employees considered a valuable resource of the company?
f) MISSION PUBLICITY
Mission needs to be published for the public. The purpose of declaring the mission is to
communicate broadly formulated basic rules worked out by the organization for internal use
to everyone who makes strategic decisions in the company. Declaration of the mission should
leave a sufficient space for people to apply their own initiatives. If the declaration does not
inspire people or worse, if the management itself does not observe the declaration, it will say
to the employees that the mission remains only some remote concept on paper.
To implement actions included into the mission, it is necessary to arrange optimally human
resources management and processes in the corporate organization structure and finally, to
plan both time and content of its implementation in strategic, tactic and operative plans.
g) ESSENCE OF INNOVATIONS
Innovation represents a process of the creative idea transformation into a useful product,
service or work method. The pressure on the innovating activity of the company as well as the
public sector is caused mostly by its external enterprising environment. If the organization is
able to respond well to changes in its environment via its innovating activity, it is necessary to
adapt continuously its internal structure to those changes.
That is why one of strategic objectives is to build an effective continuous process of change
management - mainly of the structure, technology and people in their company.
For the company or the local government unit to be innovative, it is necessary to be a flexible
organization. In other words there is the linkage between the inovation and the organization
flexibility. Enterprising also requires creativity. Here is the another linkage. Creativity is
characterized as an ability to combine ideas or to connect them in a unique way for the
purpose of taking advantageof opportunities.
Summarizing, enterprising means that the enterpreneur or the local government unit is
executing duties independently, under one's own name, at one's own liability, for the
purposeof obtaining a profit. They have to be highly sensitive to the development of the
enterprising environment which consists of a wide range of conditions for enterprising,
especially in the area of legislature, institutional infrastructure and functioning of markets.
The enterprising environment is defined as an aggregate of substantial factors nfluencing
both individual entrepreneurs and the local government units. It includes factors affecting
continuous activity conducted by those subjects under their own name and at their own
liability for the purpose of increase in value of the business potential.
The enterprising environment is classified into the internal and external enterprising ones.
Internal enterprising environment is created by all internal factors, which affect the
fulfillment of the vision, objectives and strategies of the company. Analysis of factors of
internal environment helps the company to:
- realize its strengths and weaknesses;
- find specific advantages that enable the company to differentiate itself from its competition.
The internal environment of the company can be classified according to function areas.
External enterprising environment is created by all external factors that are affecting creation
and the implementation of vision, objectives and strategies of the company.
Structuralization of external environment:
1. According to the following components of the environment:
a) political and legal;
b) economic;
c) social, cultural and demographic;
d) technological;
e) ecological.
2. According to the extent of influence:
a) international;
b) national;
c) regional;
d) branch.
3. According to the controllability of factors:
a) uncontrollable;
b) controllable.
4. According to the relationship to the company:
a) opportunities;
b) threat.
The decisive role is played by the analysis of conditions of the current external environment,
that is characterized by:
- continuous changes,
- forms of a basis upon which it is possible
to decide about the public sector´s future.
f) QUESTIONS AND ANSWERS - IMPLEMENTATION INTO PUBLIC SECTOR
1.Who plays significant roles in the creation of an enterprising environment?
ANSWER:
The enterprising environment is consisting of:government bodies, institutions and agencies
established or supported by the state, also courts, bodies of local governments, educational
facilites of all types, research and development facilities, banks, insurance companies, leasing
companies, entrepreneurial self-governments (chambers, associations, clubs) and consulting
and intermediary organizations and the like, but also market subjects – real and potential
competitors and real and potential cooperative partners.
2.What are characteristic features of the current enterprising environment of the Czech
Republic?
ANSWER
The most characteristic features of the current enterprising environment of the Czech
Republic are:
- high extent of the economy openness;
- harmonization of the majority of national regulations with the legislative of the
European Union;
- decreasing extent of income tax while preserving relatively high taxation of work;
- tax payments for health and social insurance;
- creation of structures for drawing finances from European funds and growing
experience in this area;
- inflow of foreign investments generating demand for subsuppliers;
- improving offer of industrial zones on green fields;
- insufficient infrastructure of transfer of research development results into
commercial use.
3. For which activities EU structural funds are focused on?
ANSWER
The European Union structural funds are focused predominantly on:
- building of infrastructure for research, development and innovations ;
- education of citizens including entrepreneurs;
- development of clusters ;
- support of entry into foreign markets;
- development of information and consulting
services, including consulting services for
preparation of projects presented to operative programs.
g) STRATEGIC MANAGEMENT PRINCIPAL MODELS
We can come across many concepts of the strategic management model worked out by many
authors. These are:
Wheelen's model of strategic management.
Thompson and Strickland model.
Model according to Johnson and Scholes.
Diman's integrated model.
Robbins model.
In practice, models of strategic management need to be complemented by analysis and
management of risk.
WHEELEN´S MODEL OF STRATEGIC MANAGEMENT
The four basic phases of strategic management according to T. J. Wheelen and D. J. Hunger
are:
Analyses of the environment.
Strategy formulation.
Implementation of the strategy.
Evaluation and control.
THOMPSON AND STRICKLAND MODEL
This model of strategic management already introduces feedback into the process. Its main
aspects are:
Evaluation of results.
Analysis of the situation.
Initiatinon of correction measures.
Definition of object of enterprising and
formulation of mission of the company.
Establishment of objectives.
Evaluation and choice of strategy.
Introduction and realization of the strategy.
Revision as needed.
Improvement/ change as needed.
MODEL ACCORDING TO JOHNSON AND SCHOLES
This model proceeds from three consecutive processes:
- strategic analysis;
- formulation and creation of strategy
and
- implementation of strategy.
Management can follow this model for example in situations, when an opportunity presents
itself to the company or the local government unit.