Research Paper
on Strategic Management
Introduction
The organizational configuration of companies or corporations in today’s
environments is quite complex. The large companies have the shareholders who
periodically elect a board of directors who collectively manage the company's
affairs and reach decisions by a majority vote but also have the right to
delegate any of their powers, or even the whole management of the company's
business, to one or more people selected by them. Under this system it is common
to appoint a chief executive and the subordinate executives who mange the
corporate affairs and also assist the board of directors who authorize them to
enter into all transactions needed for carrying on the company's business,
subject only to the general supervision of the board and to its approval of
particularly important measures, such as issuing shares or bonds or borrowing.
The corporate structures are further sub organized according to the requirement
of the business.
Most of the corporate organizations are required to have under law, the board of
directors elected periodically by the shareholders to appoint certain executive
officers, such as the president, vice president, treasurer, and secretary. These
generally have no management powers and accomplish the administrative functions
that are the concern of its secretary, but the president and in his absence the
vice president have by law or by delegation from the board of directors the same
full powers of day-to-day management.
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The most complex management structures are of those organizations that are
provided for public companies under law. The management of private companies
under these systems is restricted to one or more managers who have the
equivalent powers as of a chief executive. In the case of certain public
companies, however, a two-tier structure is essential in which the lower tier
consists of a supervisory committee whose members are elected periodically by
the shareholders and the employees of the company in the proportion of
two-thirds shareholder representatives and one-third employee representatives.
The upper tier consists of a management board comprising one or more persons
appointed by the supervisory committee. The corporate affairs of the company
including the strategic management are looked after by the management board,
subject to the supervision of the supervisory committee, to which it must report
periodically and which can at any time require information or explanations. The
supervisory committee is forbidden to undertake the management of the company
itself, but the company's constitution may require its approval for particular
transactions, such as borrowing or the establishment of branches overseas, and
by law it is the supervisory committee that fixes the remuneration of the
managers and has power to dismiss them. The management structure for such public
companies offers two alternatives. Unless the company's constitution otherwise
provides, the shareholders periodically elect a board of directors which is
vested with the widest powers to act on behalf of the company but which is also
required to elect a president from its members who undertakes on his own
responsibility the general management of the company, so that in fact the board
of directors' functions are reduced to supervising him.
In such organizations the strategic management is quite complicated issue. The
corporate planning and execution is dependent on highly professional team
members who analyze the general environments and produce a plan, which is viable
and is implemented in such a way that corporate aims are achieved.
Importance Of The Corporate Strategic Management
The strategic management of an organization primarily deals with creating
management's strategic vision for existing situation of the company that
represents the game plan for taking the company into a striking business place
and structuring a sustainable competitive advantage. Actual strategy of the
organization generally turns out to be both more and less than the planned
strategy as new strategy features are added and others are deleted in response
to newly rising conditions. Corporate approach deals with the way a diversified
company is determined to establish business positions amongst various industries
and the measures employed to develop the businesses of the company. Business
strategy combines the actions and the methods planned to adopt by management to
create successful environments in some specific line of business. The essential
business strategy is shaping the business and building it into a stronger
long-term competitive position. A business strategy therefore can only be
prevailing if it produces a considerable and protracted competitive advantage
and it will be weak if the consequences are in form of competitive disadvantage.
The well-established corporate management is based on the superior internal
foundation vigor’s and competitive potentials that is a significant technique to
compete the competitors. Determined strategic management concerns the plan of
action for running a main functional activity or process within the research and
development, production, marketing, customer service, distribution, finance,
human resources, and so on. The business needs a lot of efficient strategies to
produce results out of the major activities. Effective strategy management
encompasses the planned course of actions to manage vanguard organizational
components within a trade in order to take them in a strategically significant
direction to achieve the desired results in the field of materials purchasing,
inventory control, maintenance, distribution, advertising drives. Leading
managers are central ingredients of strategy development team of an organization
since several of these have significant performance targets and need to have
calculated action plans to achieve them.
Aims and strategies that are integrated from top-to-bottom of the organizational
ladder always appear from designed measures. The strategic management also
combines all of the competitive moves and business approaches that are employed
to satisfy the customers, compete successfully, and achieve organizational
objectives. The business model is viewed in terms of the revenue-cost-profit
economics of its strategy that exhibits the feasibility of the venture in
totality. Outstanding implementation of an exceptional strategy is the best test
of executive’s brilliance and the most dependable guidelines to find out the
level of organizational success.
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The strategic management is the managerial course of action for making a
strategic visualization, setting objectives, developing a set of policies,
putting it into practice and accomplishing the same. In addition to this, the
initiating of all such actions with the aim to have corrective adjustments in
the visualization, goals, approaches, and implementation are also to be made
whenever deemed appropriate. The strategic management is thus the tool to make
sure the success of the vision, which is a guideline of a company's future. The
strategic management assists in providing essentials about technology and
customer focus attitude in the business. A successful management helps attain
the geographic and product markets that is otherwise quite difficult to be
pursued. The capabilities a business concern plans to develop also become
attainable through the strategic management.
The mission statement is to be classically concentrated on its current business
scope generally explaining the present capabilities of the organization,
customer focus activities and business composition. Where as the objectives are
to be established as performance targets of the organization with the purpose to
have the results and outcomes it needs to accomplish. The goals set work as
benchmark for following the organization’s performance and progress. The
objectives have bearing over the results that reinforce an organization's
general business place and competitive strengths. Objectives relate to the
concerned performance targets, the management establishes for the organization
to be achieved. A strategy to be managed has to be the collection of the
competitive efforts and business approaches that is employ to deal with
customers, contend productively, and accomplish organizational intentions
therefore it has to be both proactive and adaptive. Company strategies can be
well managed when they are partially visible and partly concealed to observation
of the others. Strategy management is aimed at making the business necessarily a
market-driven and customer-driven industrial activity. The vital characteristics
of the strategic management include the aptitude for take advantage of the
emerging market opportunities, developing customer needs, a preconception for
improvement and ingenuity, an desire for cautiously taking risk, and a strong
sense of awareness of the market analysis to grow and strengthen the business.
The demonstration of external and internal progress dictates that a change of
strategy is also needed and adopting such measures that make strategy an ongoing
practice, not a one-time affair. A strategic plan therefore has to be based on
the facts and should consists of organization's mission and future direction,
near-term and long-term performance targets, and strategy. In case the external
and internal environments change of an organization, are fast and quick, the
more regularly its short and long term strategic plans have to be modified and
updated. The one time or yearly changes may not be sufficient as in today’s
world strategy life phases are growing smaller, not extended.
Strategic management execution takes into account the managerial implements of
putting a recently selected strategy into position. Strategy execution deals
with the management actions of supervising the ongoing tracking down of
strategy, making it functional with the intentions of improving the proficiency
with which it is implemented, and demonstrating quantifiable growth in reaching
the targeted results. Strategy management is also vital as its execution is
primarily an act oriented, making it possible to happen the tasks, which are
associated with developing competencies and capabilities. This is done through
planning, budgeting, policymaking, motivating, culture building, and leadership.
It is very essential to understand the fact that vision, objectives, strategy,
and approach to implementation are never absolute. Evaluating performance,
appraising changes in the adjacent environments, and making modifications are
usual and obligatory parts of the strategic management process. This process is
a closely bind procedure with the limits between the conceptual tasks every part
of the organization’s management has a strategy making and strategy-implementing
role. It is not justified to view strategic management as solely the domain of
senior executives. Broad participation in a company's strategy making exercises
is usually a strong benefit. Corporate organizations more commonly rely upon
middle and lower-level management to identify new business opportunities,
develop strategic plans to pursue them, and create new businesses.
The Strategic Management Process: An Overview
Strategic Management Principles
The corporate strategy of an organization can be judged through its strategic
plans and the principles of the management applied while finalizing the
strategy. The vital role of the board of directors in the strategic management
process is to critically evaluate and eventually endorse strategic action plans.
It also evaluates the strategic leadership skills of the senior management and
others in order to be successful. Some of the principles of the strategic
management can be: -
Taking Advantage of the Opportunities
A company's strategy should be tailored to fit industry and competitive
conditions. A well-conceived strategy aims at capturing a company's best growth
opportunities and defending against external threats to its well-being and
future performance.
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Defining Mission
The successful strategy creation commences with a visualization of the total
shape of the company as to where the organization stands at present and what all
is needed to progress. The vision about the organization enables the management
at the higher level to formulate the mission of the organization. One of the
functions of a mission statement is to provide the organization its unique
individuality, business weight, and course for progress that usually locates it
separate from other correspondingly positioned companies. The business of any
organization is defined by those needs, which the organization try’s to satisfy
the targeted customer and by the technologies and competencies it employs and
the activities it executes. Excellent mission statements are highly exclusive to
the organization for which they are developed. Technology, competencies, and
activities are vital while defining a company's business because they indicate
the boundaries on which the organization operates. Diversified companies have
wide-ranging missions and business definitions than small business enterprises.
The industrial challenge in formulating a strategic vision is to assume
imaginatively about how to organize the company for the future.
Forming A Strategic Vision
This is a careful exercise in any private enterprise and not a series of
fantasies about the company's future. Several successful organizations require
transforming direction not in order to survive but in order to keep up their
success. A well- expressive strategic vision creates fervor for the management.
The best-worded vision statements clearly and crisply elucidate the course of
action in which an organization is leading.
Strategic Objectives
Every developing organization must have both strategic objectives and common
short-term objectives. Strategic objectives have to be competitor-focused, often
aiming at overcoming a competitor believed to be the best in the industries.
Objectives both long term and short term represent a managerial obligation
towards attaining definite performance targets within exact time frame. Building
a stronger long-term competitive place benefits the shareholders of the
organizations and is more enduring than improving short-term productivity. A
company, which exhibits strategic intention when it insistently chases a
determined strategic objective, concentrates its competitive actions and
energies on attaining the objective. The performance goals of an organization
should need organizational growth. The setting of the goals desires to be a
process through which information travels from top towards bottom in order to
direct lower level management and organizational setups toward results that
support the attainment of overall business and company intentions and goals.
Types Of Strategic Management Techniques
There are many techniques through which the strategic management can be
effectively utilized in the process of strategic management analysis. Some of
these techniques are; -
• The BCG Growth-Share Matrix
• Competitor Analysis
• PEST Analysis
• SWOT Analysis
The BCG Growth-Share Matrix
Bruce Henderson of the Boston Consulting Group in the early 1970's designed a
model termed as BCG Growth-Share Matrix. It is established on the study that
business units of a company can be categorized into four parts depending on
combinations of market growth and market share related to the main competitor.
The growth share matrix shows in form of a drawing the location of the business
organization.
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The four categories in which an organization can be placed are:
• Dogs. Dogs have little market share and a low growth rate and consequently
neither produces nor uses a huge sum of cash. Nevertheless, dogs are cash
catches because of the money occupied in a business that has little potential.
Such businesses are considered to be very expensive and drastic changes are
needed for these organizations. With new vision and strategy these can come up
well.
• Problem Childs. Some organizations are Question marks, which grow swiftly and
consume large amounts of cash, but for the reason that they have low market
shares they do not produce much cash. The result is large net cash expenditure.
A question mark is what is also [problem child] and has the prospective to
achieve market share and become a star, and eventually a cash cow when the
market growth gets sluggish. Question marks organizations are needed to analyze
very cautiously to conclude whether they merit the investment necessary to grow
them in market share.
• Stars. Star organizations are those, which produce big cash because of their
strong virtual market share. These organizations at the same time consume big
amounts of cash because of their high growth rate. If a star can uphold its
large market share, it will be turned in to a cash cow organization when the
market growth rate declines. The range of an expanded organization always is a
star that will develop into the cash cows and ensure future cash making.
• Cash cows. These organizations are leaders in an established market, cash cows
display a return on assets that is larger than the market growth rate, and as a
result produce more cash than they use. Such business organizations should be
extracted with the profits and investment of as little cash as possible be made.
Cash cows present the cash necessary to convert the question marks organizations
into market leaders, to cover the administrative expenses of the corporation, to
finance research and development, to check the corporate liability, and to pay
bonus to shareholders. Since the cash cows produce a comparatively constant cash
flow, its worth can be determined with logical exactness by calculating the
current worth of its money flow by means of an economical cash stream analysis.
BCG Growth-Share Matrix
Source: Strategic Management
(netmba.com)
The growth-share matrix was used extensively, but has since lost much of its
reputation as Market growth rate is only one aspect in industry attractiveness,
and market share is only one factor in competitive advantage. The growth-share
matrix should be used in combination with other forms of analysis as it
overlooks many other factors in these two important determinants of
profitability. The structures presuppose that each business organization is
self-governing. Some of the business organization that is a "dog" may be serving
other business organizations to achieve a competitive advantage. The matrixes
depend a great deal upon the extensiveness of the market. A business
organization may control its small position, but has very low market share in
the general industry. In such a case, the description of the market can make the
difference between a dog and a cash cow organization. Whereas its significance
has much diminished, the BCG matrix still can serve as a simple instrument for
screening a corporation's business range at a glance, and may serve as a
starting point for arguing resource share among strategic business organizations
[Strategic Management > BCG Matrix]
Competitor Analysis
While preparing strategy for the organization, the analysis of the strategies of
competitors has to be carried out. In highly uneven product industries, the
progress of any single competitor may be less significant; but in intensive
industries environments the analysis of the opponents becomes vital as an
ingredient of strategic planning. Competitor analysis primarily achieves two
results. Firstly obtains information about key competitors. Secondly the
information is utilized to foresee the competitor activities. The objective of
the of competitor analysis is essentially to comprehend the competitors with
which to struggle, strategies and planned actions of the opponents, probable
reactions by the competitor and finally how to manipulate behavior of the
opponents to the firm's own benefit. Insufficient knowledge about competitor is
generally not enough in competitor analysis. To a certain extent, competitors
should be evaluated methodically, using organized contestant intelligence
collection to accumulate a large range of information so that well conversant
strategy conclusions and relevant decisions can be made.
Michael Porter who presented a structure for analyzing competitors. This outline
model is based on some key aspects of a competitor. These include Competitor's
objectives Competitor's assumptions, Competitor’s strategy and Competitor's
capabilities Objectives and assumptions are what drive the competitor, and
strategy and capabilities are what the competitor is doing or is capable of
doing. [Michael E. Porter]. A competitor analysis commonly includes the more
vital competitors as well as possible competitors such as those firms that might
enter the industry, by extending their present strategy. The main sources of
information about a competitor's strategy is what a competitor is saying about
its strategy in the annual shareholder reports, interviews with analysts
statements by managers and press releases. The self-described strategy often
differs from what the competitor actually is doing, that is evident in where its
cash flow is directed. These practical activities include, hiring activity, R &
D projects, principal investments promotional campaigns strategic partnerships,
mergers and acquisitions.
Competitor's Objectives and Assumptions
The competitor’s objectives make possible a better forecast of the competitor's
response to various competitive move. Such as, a competitor that is paying
attention on attainment of short-term monetary objective might not be keen to
expend much money in response to a competitive environment. Instead, such a
competitor may indicate it center of attention on the products. Conversely, a
company that has no short-term profitability objectives might be enthusiastic to
contribute in price competition in which neither firm earns a profit. Competitor
objectives may be financial or other types including growth rate, market share,
and technology leadership. Goals may be related with each hierarchical level of
strategy i.e. corporate, business organization or functional level.
Organizational structure of the competitor provides evidence as to which tasks
of the organization are believed to be the more significant. Some features of
the competitor act as sign of its objectives. Such features include risk
acceptance, management incentive, and the competence of executives, composition
of the board of directors, legal limitations, and any added corporate level
objectives that may persuade the rival business organization.
The assumptions of the competitor’s about their organization and their industry
help to describe the possible action that they will think. Such assumptions are
not always precise and if erroneous may be taken as opportunities. A
competitor's assumptions may be established on a number of aspects, including
beliefs about its competitive place, past understanding with a product, local
factors and industry trends.
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Competitor's Capabilities
The information of the competitor's assumptions, objectives, and current
strategy is extremely helpful, however, its resources and capabilities help to
conclude about its ability to respond efficiently. The competitor's capabilities
can be evaluated according to its strengths and weaknesses in various practical
regions. The analysis can be used to appraise the competitor's condition to
augment its capabilities in specific areas. For example a financial analysis can
be done to disclose its maintainable growth rate. Since the competitive
environment is energetic, the competitor's capability to respond rapidly to
transformation is to be estimated. Some organizations have serious impetus and
may prolong for many years in the same direction before a change. Similarly some
organizations are able to activate and settle in very quickly. Causes that make
an organization slow include low funds, large investments in fixed assets, and
an organizational structure that impede rapid action. (Strategic Management)
PEST Analysis
The analysis of the external macro environments that affects all firms is vital
in strategic management process. P.E.S.T. is a short form for the Political,
Economic, Social, and Technological features of the external macro-environment.
The external factors usually are not in the firm’s control and at times are
presented as threats. But the changes in the external environment also form new
opportunities. Numerous of the macro-environmental factors are country specific
to the areas and a PEST analysis will be carried out for all countries of
attention. Some of the factors that might be considered in a PEST analysis
include: -
• Political Factors. The factors, which assist the organization to develop a
strategic corporate strategy, include, Political constancy in the country,
threat of military incursion, legal structure for agreement implementation,
detailed business rules & tariffs and preferential trade associates. Anti
reliance regulations, Pricing system taxation, wage structures, working hour’s
instructions, obligatory employee benefits and Industrial safety regulations are
also considered when analysis of the organization is made.
• Economic Factors The analysis of the economic features of the country where
the operations are being made is very essential. The economics factors required
to be analyzed include, form of economic system in countries of operation,
government interference in the market, proportional advantages of host country,
exchange rates & stability of currency. The competence of financial markets,
infrastructure quality, proficiency level of employees and labor costs are also
to be considered while analyzing the economics. The economic growth rate,
optional income, unemployment rate, price rises rate and interest rates play
vital role in strategic analysis of a corporate plan.
• Social and Technical Analysis While analysis of a corporate plan is made the
analysis of the social aspects are also important. The factors to be analyzed
commonly include, demography of the country, class configuration existing, level
of education, culture, industrial courage, attitudes and leisure interests.
While considering the technical aspects, the current technical growth,
technology’s effects on product and effects on cost configuration are
considered. Also the effects on value chain configuration and rate of technical
flow are analyzed. The amount of comprehensive environmental features is almost
limitless. In actual act an organization must set its priorities and observe the
factors that influence the industry. (Strategic Management)
SWOT Analysis
While an organization is to be analyzed in terms of its strategic planning the
Strengths, Weaknesses, Opportunities and Threats analysis is a simple method for
generating strategic options from a situation analysis. It is appropriate at the
corporate level or the business organizational level and is commonly seen in
different plans. The SWOT analysis can help an organization as a filter to
lessen the information to a convenient extent of major concerns. The SWOT
analysis categorizes the internal factors of the organization as strengths or
weaknesses and the external factors as opportunities or threats. Strengths can
act as a foundation for developing into a competitive advantage, and weaknesses
may hamper. However the understanding and effective extraction of relevant
information out of the four aspects of an organization can offer a situation
where the organization could improve on its weaknesses, take advantage of
opportunities, and discourage potentially disturbing threats. (White Paper -
Developing a Business Strategy)
• Internal Analysis
The internal analysis of an organization is a complete assessment of the
internal environment's potential strengths and weaknesses. All possible factors
should be evaluated across the organization to include, company culture, its
reflection, its organizational structure and the main staff. Further elements
for analysis can be its ability to access to natural resources, operational
efficiency and operational capacity. The market share, financial resources and
exclusive contracts can also be helpful. The SWOT analysis sums up the internal
factors of the firm as a list of potency and limitations.
• External Analysis
While analyzing the external analysis the possibility to take advantage of the
opportunity by the organization should not be missed. It is always the chance to
introduce a new product or service that can produce greater income.
Opportunities can take place when change occurs in the external environment. A
lot of these changes can be professed as threats to the market position of
present products and may require a change in product specifications or the
perfection of new products in order for the organization to stay as a
competitive organization. Changes in the external environment may be associated
with:
• Customers, competitors, market trends and suppliers. The partners, social
changes, new technology, economic situation and political and regulatory
environment can also be linked with the changes in the external environments.
Conclusion
The strategic analysis of any business concern helps the organization form its
future decisions and also to know as to where the organization stands in the
field of the activities amongst its competitors. The setting of the aims and the
goals sets the correct direction of the organization, which does not allow the
organization to go astray. In the light of this methodology of the strategic
management any plan of a corporate organization can be evaluated.
References
The Strategic Management Process: An Overview http://highered.mcgrawhill.com/sites/0072443715/student_view0/chapter1/key_concepts_and_principles.html
Strategic Management, November 9, 2002,
http://www.netmba.com/strategy
Arthur A. Thompson Strategic Management Concepts
And Cases http://highered.mcgrawhill.com/sites/0072443715/student_view0/chapter2/key_concepts_and_principles.html
Michael E. Porter, Competitive Strategy, 1980, p. 49.
Edmund P. Learned, C. Roland Christiansen, Kenneth Andrews, and William D. Guth
in Business Policy, Text and Cases (Homewood, IL: Irwin, 1969).
White Paper - Developing a Business Strategy, November 9, 2002, http://www.planware.org/strategy.htm
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