Current Event Short Paper: Strategic Management in Action

Module 6: Module Notes: Implementation of Strategic Management

The strategic management process begins when executives evaluate their current position with respect to the company’s mission, goals, and strategies. Managers then scan the organization’s internal and external environments and identify strategic issues that may require change. Internal or external events may indicate a need to redefine the mission or goals or to formulate a new strategy at the corporate, business, or functional level. The final stage in the strategic management process is execution of the new strategy. With regard to strategic management metrics, a SWOT analysis reviews the strengths (S), weaknesses (W), opportunities (O), and threats (T) that affect organizational performance.

Effective leaders and managers live in the present—but concentrate on the future. James L. Hayes

To understand strategic management, one should start with the root word strategy, which in leadership and management circles refers to a comprehensive action plan that identifies long-term direction and guides resource use to accomplish organizational goals. Strategic management largely determines which organizations succeed and which ones struggle. When thinking strategically in a leadership or management role, you may perform strategic planning (planning for competitive actions), strategic thinking (long-term views), and strategic management (decisions and actions used to formulate and implement strategies that enable an organization to achieve organizational goals).

Overall, strategic management is a type of planning process in which management sets the organization’s general direction and objectives, formulates a specific strategy, plans and carries out the strategy’s implementation, and finally, monitors results and makes necessary adjustments.

Different levels of the organization have different challenges to meet and must ask different questions while planning, as the table shows.

Levels of an Organization and Questions to Consider while Planning to Meet Different Challenges

Level Questions to Consider

Corporate level What industries should we get into or out of?

What markets should the firm be in? What should our international presence consist of?

In which businesses should we invest money? How should resources be allocated across our business units?

Business level Who are our direct competitors?

What are their strengths and weaknesses?

What are our strengths and weaknesses?

What do our customers want? How can we provide it?

Do we have any advantages over the competition? If so, how can we leverage those advantages? If not, can we develop any advantages?

Functional level What activities does my unit need to perform well in order to meet customer expectations?

What information about competitors does my unit need in order to help the organization compete effectively?

What are my unit’s strengths and weaknesses?

One of the main benefits of strategic management is that it provides a clear sense of the organization's strategic vision. This focus is important because of the requirement for improved business understanding in a rapidly changing global environment. Some of the main strategic management questions asked are, where is the organization now, and where will the organization be 1, 3, 5, or even 10 years from now? Moreover, where will the organization be if no business changes are made? While looking at these questions, leadership must not only take action (especially if the answers are unacceptable), but also weigh the risks and payoffs. Smaller businesses may engage in strategic management to ensure that they adapt to trends and external changes such as globalization.

Strategic management is a process, and this process works best when the entire organizational structure understands it. The process typically has five stages: goal setting, analysis, strategy formation, strategy implementation, and strategy monitoring. The purpose of goal setting is to clarify the vision for the organization. This stage consists of identifying short- and long-term objectives, determining how to meet these objectives, and building the process to achieve success. Information gathered during analysis is then used in strategy formulation and implementation. Data gained during analysis needs to be relevant and should focus on understanding the needs of the organization. During strategy formulation, information from the analysis is reviewed; it is here that organizations start to determine what resources are available to help them attain their goals. Strategy implementation is the action stage of the strategic management process. If the strategy being implemented does not work with the organization’s structure, a new structure should be implemented at this juncture. Finally, there is strategy monitoring, which covers evaluation and control. It is in this final step that evaluation of the strategy begins and progress results are measured.

Strategic Management Process. Steps involve goal setting, analysis, strategy formation, strategy implementation, and strategy monitoring.

As mentioned above, a key concept at the core of strategic management is the development of organizational goals. Along with goals, an organization may develop a mission statement, or even formulate its core values. By setting goals, managers make strategic decisions such as how to meet sales targets and how to generate higher revenue. Additionally, if goals are specific and measurable, organizations could use goal metrics to plan how to compete in the business arena.

One of the key metrics used in measuring strategic management initiatives is the SWOT analysis. SWOT analysis includes strengths, weaknesses, opportunities, and threats that affect organizational performance. Organizational strengths and weaknesses are viewed as being internal to the organization. Strengths are positive internal characteristics organizations can exploit to achieve strategic performance goals. Weaknesses are internal characteristics that may inhibit or restrict the organization’s performance. Internal information comes from reports, budgets, financial ratios, surveys of employee attitudes, and meetings. Organizational opportunities and threats are viewed as being external to the organization. Opportunities are characteristics of the external environment that have the potential to help the organization achieve or exceed its strategic goals. Threats are characteristics of the external environment that may prevent the organization from achieving its strategic goals. The task environment sectors are the most relevant to strategic behavior and include the behavior of customers, competitors, suppliers, and the labor supply. External information about opportunities can be obtained from customers, government reports, professional journals, suppliers, bankers, friends, and consultants. Here is an example of a SWOT analysis.

So far, you have reviewed strategic management, and understand one of its primary benefits is the ability to provide a clear sense of the organization's long-term vision. Additionally, you should recognize that strategic management is a process, and this process typically has five stages: goal setting, analysis, strategy formation, strategy implementation, and strategy monitoring. Moreover, strategic management is a comprehensive action plan that identifies long-term direction and guides resource use to accomplish organizational goals. It is now time to incorporate these items into the next set of activities.