Strategic Management: How It Can Help You Grow

What is Strategic Management?

It is art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objective. It is a process of formulating objective of an organization and developing method to achieve them. 

The term "Strategic Management" is gaining importance in the era of privatization, globalization and liberalization. A few aspects regarding the nature of strategy are as follows:

• Strategic Management is related mostly to external environment.
• Strategic Management is being formulated at the higher level of management. At operational level, operational strategies are also formulated.
• Strategic Management integrates three distinct and closely related activities in strategy making. The activities are strategic planning, strategic implementation and strategic evaluation and control.
• Strategic Management is related to long term.
• It requires systems and norms for its efficient adoption in any organization.
• It provides overall frame work for guiding enterprise thinking and action.
• It is concerned with a unified direction and efficient allocation of organization resources.
• Strategic Management provides an integrated approach for the organization and aids in meeting the challenges posed by environment.

Arthur Sharplin (1985) Strategic Management. "A plan or course of action which is of vital, pervasive or continuing importance to the organization as a whole".

According to Glueck It is a Stream of decision and actions which leads to the development of an effective strategy to help achieve corporate objective. It has three aspects

• Determination of basic long-term goals and objective
• Adoption of courses of action to achieve these objective
• Allocation of resource of action.

Strategy management

Component of Strategic Management

The major components of Business strategy are purpose and objectives, vector, competitive advantage, synergy, personal values and aspirations and social obligations. AP soff has used the term "common thread" for the purpose. According to him, the common thread is a statement of relationship between present and future product market postures. In this section, the different components of Business strategy are discussed.

1. Objectives: Business objectives should be stated in such a way so that they may provide a clear idea about the scope of the enterprise's business. Objectives give the direction for which action plan is formulated. Objectives are open-ended attributes denoting a future state. Objectives translate the purpose into goals. A few specific aspects about objectives are as follows: The objectives should have 
• time frame
• be attainable
• be challenging 
• be Understandable 
• be measurable and controllable 
• For having clarity in objectives, the business domain is de fined specifically in terms of a product class, technology, customer group, market need or some other combination.
2. Vector: Business strategy has one more important component i.e. Vector. Vector gives the directions within an industry and across industry boundaries which the firm proposes to pursue. If an organization has the objective to maximize sales, the series of decisions will be to enhance salesman's commission, release nationwide advertisement, introduce total quality management and introduce new product range. Vector signifies that a series of decisions are taken in the same direction to accomplish the objectives. 
3. Competitive Advantage: Business strategy is relative by nature. In the formulation of Business strategy, the mana0ernent should isolate unique features of the organization. The steps to be taken must be competitively superior. While making plans, competitors may be ignored. However, when we formulate Business strategies, we cannot ignore competitors. If all organization does not look at competitive advantage, it cannot survive in a dynamic environment. Tills aspect builds internal strength of the organization and enhance the quality of Business strategy. 
4. Synergy: Synergy means measurement of the firm's capability to take advantage of a new product market move. If decisions are made ill the same direction to accomplish the objectives there will be synergic impacts. The Business strategy will give the synergy benefit.

Nature of Strategic management

1. It involves wide ramification – its activities are related to the total system or a significant segment of these activities may be a change in organization goals.
2. It involves a long-time perspective – the directional decision in strategic management can be expected to have effects on the organization for more than 1 year.
3. It Use critical resource towards perceived – opportunities or threats in a changing environment the most important human, financial and other resources bear in certain situation which provided the organization.
4. It is an intellectual process – in it individual perceive, analyses & choose between alternative interrelating such elements as definition of business, objective, functional strategies.
5. It is a continuing dynamic social process – it not just a to be undertaken a few times each year when top management meets to decide critical issues. rather, it continually implements and revise strategies in the organization as changes occur in resource & environment.

Functions of Strategic Management

Strategic Management performs the following functions: 

1. It provides a dual approach to problem solving. Firstly, it exploits the most effective means to overcome difficulties and face competition. Secondly, it assists ill the deployment of scarce resources among critical activities. 
2. It focuses attention upon changes ill the organizational set up, administration of organizational process affecting behavior and the development of effective leadership. 
3. It offers a technique to manage changes. The management is totally prepared to anticipate, respond and influence to look at changes. It also offers a different way of thinking. 
4. It furnishes the management with a perspective whereby, the latter gives equal importance to present and future opportunities. 
5. It provides the management with a mechanism to cope with highly complex environment characterized by diversity of cultural, social, political and competitive forces. 

Importance of Strategic management

1. Pattern in stream of decision and action

2. Provide framework for thinking about business.

3. Creates a fit between the organization and its external environment.

4. Forward looking and it has orientation towards future.

5. Determination of basic long-term objective of the organization

6. Recognize which competitor's action need critical attention.

7. Carefully crafted plan with steam of decision and action over a tome.

8. Adopting course of action necessary for allocation of resources.

9. Adopting of course of action to achieve Organization's objective.

10. Developing the company from its position to the desired future position.

Strategic Management in international and Global Industry

Strategic management is the process of strategic decision-making that sets the long-term direction for the organization. The central thrust of strategic management is achieving a sustainable competitive advantage. The strategy process consists of the analysis, development, and implementation steps. Hence ‘international strategy’ and ‘global strategy’ are sometimes used interchangeably. We take global strategy to mean something new and different from international strategy. 

We group them into four main phases

1. Single-country strategy - Most firms operating around the world at one time operated in a single country. Firms that are now household names around the world started as small ventures in a single country. Firms operating strictly within the confines of their home country use single-country strategies to compete in their home market, where they face only one set of business factors and one set of customers. The firm’s home market kept growing and remained profitable; there was no urgent need to expand into foreign markets. Internationalization was often considered when the firm’s home market became unprofitable or the prospect for growth Started to diminish, and attractive opportunities to expand internationally were available. Even for firms that do not operate internationally, formulating and implementing a strategy that focuses solely on local competitors and customers may not guarantee their strategic competitiveness.
2. Export strategy - Before a firm establishes subsidiaries outside its home market and becomes directly involved in their management, it may start by exporting its products and services outside its home market. In most exporting firms the domestic strategy remains of primary importance. While an exporting firm makes strategic decisions to select appropriate countries to export to, determines the appropriate level of product modification to meet local market peculiarities, and sets and manages export channels, the thrust of its strategy deals with the management of the firm in the home country. For this reason, this phase could be considered as a domestic strategy with an export strategy attached to it.
3. International strategy - When firms first establish subsidiaries outside their home market, they move from a domestic strategy phase to an international strategy phase. Firms that manufacture and market products or services in several countries are called ‘multinational firms’. During this phase, each subsidiary is likely to have its own strategy, and will analyze, develop, and implement that strategy by tailoring it to its particular local market. At this phase, adaptation of products to fit local market peculiarities becomes the main concern for multinational firms. Internationally scattered subsidiaries act independently and operate as if they were local companies, with minimum coordination from the parent company. This approach leads to a wide variety of business strategies, and a high level of adaptation to the local business environment.
4. Global strategy - As multinationals mature and move through the first three stages, they become aware of the opportunities to be gained from integrating and creating a single strategy on a global scale. A global strategy involves a carefully crafted single strategy for the entire network of subsidiaries and partners, encompassing many countries simultaneously and leveraging synergies across many countries. A global strategy involves the carefully crafted single strategy for the entire network of subsidiaries and partners, encompassing many countries simultaneously and leveraging synergies across many countries. This stands in contrast to an international strategy, which involves a wide variety of business strategies across countries, and a high level of adaptation to the local Business environment.

International strategy and global strategy: what is the difference? 

There are three key differences.

1. The first relates to the degree of involvement and coordination from the centre. Coordination of strategic activities is the extent to which a firm’s strategic activities in different country locations are planned and executed interdependently on a global scale to exploit the synergies that exist across different countries. International strategy does not require strong coordination from the centre. Global strategy, on the other hand, requires significant coordination between the activities of the centre and those of subsidiaries.
2. The second difference relates to the degree of product standardization and responsiveness to local business environment. Product standardization is the degree to which a product, service, or process is standardized across countries An international strategy assumes that the subsidiary should respond to local business needs unless there is a good reason for not doing so. In contrast, the global strategy assumes that the centre should standardize its operations and products in all the different countries, unless there is a compelling reason for not doing so.
3. The third difference has to do with strategy integration and competitive moves. ‘Integration’ and ‘competitive move’ refer to the extent to which a firm’s competitive moves in major markets are interdependent. For example, a multinational firm subsidizes operations.

FAQs

Define strategic Management?

Strategic Management is defined as the dynamic process of formulation, implementation, evaluation and control of strategies to realize the organizations strategic intent.

What is Strategy at Different Levels of a Business?

Strategies exist at several levels in any organization - ranging from the overall business through to individuals working in it. 

Corporate Strategy –It is believed that strategic decision making is the responsibility of top management. It is concerned with the overall purpose and scope of the business to meet stakeholder expectations. This is a crucial level since it is heavily influenced by investors in the business. At the corporate level, the board of directors and chief executive officers are involved in strategy making. Corporate planners and consultants may also be involved. Mostly, corporate level strategies are futuristic, innovative and pervasive in nature. 

Business Unit Strategy -It is concerned more with how a business competes successfully in a particular market. Managers are involved at this level in taking strategic decisions. These strategies relate to a unit within an organization. It concerns strategic decisions about choice of products, meeting needs of customers, creating new opportunities etc. It is more specific and action oriented. It relates mainly with “how” aspect. The corporate level strategy is related to “what” aspect of corporate strategy. 

Operational Strategy – This level of strategy is at the operating end of the organization. It is also known as functional level strategy. It is concerned with how each part of the business is organized to deliver the corporate and business-unit level strategic direction. Operational strategy therefore focuses on issues of resources, processes, people etc. These decisions relate to training, investment in plant, advertising, sales promotion, total quality management, market segmentation etc. They deal with a relatively restricted plan providing objectives for specific function, allocation of resources among different operations within the functional area and coordination between them.