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Strategic Management – Introduction
According to Wikipedia (http://wikipedia.com) “Strategic management is the formulation and implementation of the major goals and initiatives taken by a company‘s top management on behalf of owners, based on consideration of resources and an assessment of the internal and external environments in which the organization competes.”
According to Investopedia (http://investopedia.com) “Strategic management is the management of an organization’s resources to achieve its goals and objectives. Strategic management involves setting objectives, analyzing the competitive environment, analyzing the internal organization, evaluating strategies and ensuring that management rolls out the strategies across the organization. At its heart, strategic management involves identifying how the organization stacks up compared to its competitors and recognizing opportunities and threats facing an organization, whether they come from within the organization or from competitors.
The process of strategic management entails −
- Specifically pointing out the firm’s mission, vision, and objectives
- Developing the policies and plans to achieve the set objectives
- Allocating the resources for implementing these policies and plans
Keeping an Eye on Expenses and Goals
A balanced record of plans and policies in relation with operational moves are used to evaluate the business’s overall performance. Starting from the executive level, the basic starting point is stakeholder interest, needs and expectations (i.e., financiers, customers, owners, etc.)
The following image is an example of a strategy map applicable to a public-sector organization. It shows how various goals are linked with one another and provides the trajectories to achieve these goals.
Common Approaches to Strategy
Richard P. Rumelt
Rumelt’s definition of strategy includes the following steps −
- Diagnosis − What problem needs to be addressed? How do the vision, mission and objectives of a firm imply its actions?
- Guiding Policy − What according to the firm’s approach will be the framework to solve the problems?
- Action Plans − How would the operations look like (in detail)? How can the processes be enacted to be in sync with the policy guidelines and to address the issues available in the diagnosis?
In 1980, Michael Porter provided the following four key elements that needs to be considered while forming a competitive strategy. The elements are −
- SWOT, especially the strengths and weaknesses of the firm
- Ethical points or personal values of key executives (i.e., management or the board)
- The industry’s opportunities and threats
- Broader societal and stakeholder expectations
Mintzberg hypothesized five basic approaches, popularly known as 5Ps that can help in developing a robust business strategies.
- Strategy as plan − Strategy is a directed course of action to reach the intended set of goals; these are similar to the various strategic planning concept.
- Strategy as pattern − Strategy here emerges from a consistent pattern of past organizational behavior. A strategy is realized over time rather than being planned or intended.
- Strategy as position − This includes locating the brands, products, or the companies within the market and industry depending on the conceptual framework of the firm’s consumers or other stakeholders.
- Strategy as ploy − This is a specific manoeuvre and manipulation intended to outwit a competitor.
- Strategy as perspective − This kind of strategy is based on the “theory of the business” or it may be a natural extension of the given mindset or ideological attributes of the organization.