Download Strategic Management Process

Chapter 1 :
Introduction to
Strategic Management
The evolution of strategic
management as an
area of study
• In 1950s the Gordan Howell report, recommended that
business education be made broader in nature and include
a capstone couse in an area called ‘BUSINESS POLICY’
• Business policy emphazied the development of skill in
identifying, analyzing and solving real world problems in a
wide range of substantive business areas.
• This course cane to include consideration of the total
organization and its enviornment. E.g. Social
responsibilities and ethics, politics, legislative and
economic factors.
• Broader emphazies prompted the leaders to change the
course name to ‘STRATEGIC MANAGEMENT’.
Nature of Strategic Management
Definition of Strategic Management
• Strategic Management is defined as
a continuous, iterative process
aimed at keeping an organization as
a whole appropriately matched to
its environment.
EXPLANATION
• Definition suggests that Strategic management is a continuous process,
means it never stops within an organization.
• The term ‘iterative’ in the definiton of strategic management indicates that
the process of strategic management starts with the first step, ends with the
last step and then begins again with the first step. It consists of a series of
steps that are repeated in cyclical fashion.
• The last part of the definition states that the purpose of strategic
managment is to ensure that an organization as a whole is appropriately
matched to its environment – that is, to its operational surroundings.
Organizational environments are constantly changing and organizations must
be modified accordingly to ensure that organizational goals can be attained.
Operation of the Strategic
Mangement Process
• In the past, the strategic management process was heavily
handled by Planning departments within organizations.
• The strategic managment process of today tends, especially
in smaller organizations, to be dominated by the chief
executive officer (CEO) of the company. The CEO is
considered responsible for the success of the process.
• The CEO who is successful in this area generally designs a
strategic managment process that involves members from
many different organizational area and levels. E.g. Board of
directors, corporate management and divison managment,
along with the CEO.
Benefits of Strategic Management
• Organization can gain many benefits from a properly
designed process, the most important benefit is the
tendency of such organizations to increase their levels of
profits.
• A significant number of recent investigations suggest that an
efficient and effective strategic management system can
increase profitability.
• Other advantages can also be gained like strategic
management can boost the commitment of organization
members to the attainment of long term organizational
goals.
• This increased commitment comes about when organization
members participate in setting organizational goals as well as
setting strategies to reach goals.
Strategic Management Process
Steps involved in Strategic Management
1.
Performing an environmental analysis.
2.
Establishing organizational direction.
3.
Formulating organizational strategy.
4.
Implemeting organizational strategy.
5.
Exerting strategic control.
EXPLANATION
Step 1: Environmental Analysis:
Environmental analysis is the process of monitoring the organization’s
environment to identify both present and future threats and opportunities.
Step 2: Establishing Organizational Direction:
There are two indicators of the direction in which an organization is moving
i.e. Organizational mission and organizational objectives. Mission is the
purpose for which, or reason why, an organizational exists. Objectives are the
targets the organization has chosen.
EXPLANATION
Step 3: Strategy Formulation:
Strategy is defined as a course of action aimed at ensuring that the
organization will achieve its objectives. Strategy formulation, then, is the
process of designing and selecting strategies that lead to the attainment of
organizational objectives.
Step 4: Implementing Organizational Strategy:
This step involves putting into action the logically developed strategies that
emerged from the previous steps of the strategic management process.
Without the effective implementation of strategy, organizations are unable
to get benefits of performing organizational analysis, establishing
organizational direction, and formulating organizational strategy.
EXPLANATION
Step 5: Strategic Control:
Strategic control is a special type of organizational control that focuses on
monitoring and evaluting the strategic management process in order to
improve it and ensure that it is functioning properly.
Special Issues in Strategic
Management
Strategic Management and International
Operations:
Businesses have tended to become increasingly
involved in international business activities. So managers
should determine how best to ‘factor’ international issues
into the strategic management process, they must be fully
aware of those international variables that might affect their
organizations.
Strategic Management and Social Responsibility:
Social responsibility is the managerial obligation to take action
That protects and promotes organizational interests along with
the welfare of society as a whole. Recognition that such an
obligation exists necessarily has an impact on the strategic
management process.
Foundations for Strategic
Management
Operational Foundations:
The operations functions is performed by those people within a
business who are responsible for producing the goods or services
that the organization offers for public consumption.
Financial Foundations:
Financial analysis is the process of evaluating assets, liabilities,
and equity and making decisions on the bassis of this evaluation.
Marketing Foundations:
Marketing has recently has been defined as the process of
planning and executing conception, pricing, promotion, and
distribution of ideas, goods and services to create exchange that
satisfy individual and organizational objectives.
Approach to Analyzing Strategic
Problems and Cases
•
Case analysis is the most common way of teaching
strategic management. Cases are descriptions of actual
strategic management problems that students must
analyze in order to suggest solutions.
•
The major steps of case analysis method are problem
definition, formulation of alternative solutions to the
problems, evaluation of developed alternatives, and
selection and implementation of the chosen alternative.
Worksheets are used for this.
THANK YOU