What is Strategic Management?

This paper is a summary of the book Strategic Management
Concept and Case : A Competitive Advantage Approach 6th edition by Fred R. David and Forest R. David Pages 1–41

What Is Strategic Management?

Strategic management is the science of designing and formulating, implementing, evaluating cross-functional organizations to achieve their goals. Management Strategist focuses on the integration between management, marketing, finance and accounting, product and operations, R&D, and information systems to achieve organizational success. The goal of strategic management is long-term planning and optimizing future trends.

Stages of Strategic Management

Strategic Management consists of 3 stages :

1. Strategy Formulation, in this stages, developing the vision and mission, identify external organization opportunities and threats, determining internal strengths and weakness, establishing long-term objectives, generating alternative strategies and determining strategies to pursue. issues in formulating strategy include deciding which business to enter, whether to expand operations or diversify, whether expand market to international market, merge or join venture, and how to avoid a hostile takeover. strategies determine long -term competitive advantages.
2. Strategy Implementation, requires the firm to establish anual objective, motivate the employees an d allocated resources to executing strategy that formulated. strategy implementation means implementing the strategy that has been formulated. At this stage it becomes a challenge for each division and department because they have to decide how to implement the company’s strategy and how to get the job done.
3. Strategy Evaluation, In this stage, the manager can find out whether the previously formulated strategy was executed properly or not, whether the formulated strategy is correct or not. activities carried out in three activities in strategy evaluation, namely 1) reviewing internal and external factors that form the basis of the current strategy, 2) measuring performance, 3) taking corrective action.

Formulation, Implementation, and Evaluation of strategy occur at three levels : Corporate, divisional or strategic business unit, and functional. the prime task of strategic management is setting of objective, development of strategist and making today decisions for tomorrow results.

Integration Intuition and Analysis

Th strategic management process can be described as an objective, logical, systematic approach for making decision on organization. Intuition is essential to making good strategic decisions. its helpful when highly interrelated variables exist or when need to chose from several plausible alternatives. Some organization can survive an prosper from integration and analysis in decision making. management Strategies Process integrate goes in the mind and business knowledge using analysis to formulated effective strategies.

Adapting to Change

organization should observe internal and external events and trends so that timely changes can be made as needed. the Strategic management Process allowing the organizations to adapt effectively to change over long term goals. the successful organizations adaptive to survive the shock and prosper from the forces that decimate the competition by manage change, adapting strategies, systems, products and culture. To adapt, key strategic management which answered like, kind of business should become, at in right fields, need to reshape business or not, thinking about new competitors entering our industry and strategy should pursue, how customers changing, and what technologies being developed can put off the business.

Key Terms in Strategic Management

Competitive Advantages

Strategic Management is all about gaining and maintaining competitive advantages, an it can about resource a firm prossesses that competitor firm desire. keeping competitive advantages is essential for long term success. Normally, a firm can sustain a competitive advantage for only a certain periode because of rival firms imitating and undermining that advantage. so, It is not enough if only with a competitive advantage, the company must have a sustainable competitive advantage in a way 1) continually adapting to changes in external trends and events and internal capabilities, 2) formulate, implement, and evaluate effectively strategies that take advantage of these factors.

Strategist

strategist are the individuals most responsible for the success or failure of an organization. Jay Conger, London Business Schools Professor says, that all strategist have to be chief learning officers. we are in an extended periode of change. if leaders aren’t highly adaptive and great modules during this periode, then company won’t adapt either, because ultimately leadership is about being a role model. strategist gather, analyze, and organize information, track industry and competitive trends, develop forecasting model and scenario analyses, evaluate corporate and divisional performance, catch emerging market opportunities, identify business threats, and develop creative action plan.

strategic planners usually found in higher levels of management. they have authority for firm decision making. Many factors may lead firm’s decision to appoint a Chief Strategy Officer (CSO),

a. When the business portfolio increases

b. as acquisition activity expands

c. as alliance activity increases

d. as a firm size grow

e. as top management team independence increases

increase in management interdependence and growth in acquisition activity were most commonly associated with hiring new CSO.

Vision and Mission Statements

developing vision statement is often considered the first step in strategic planing. a vision statement answer the question “What we do we want to become?”. Mission are statement of purpose that distinguish one business from other similar firms, its addresses the basic question that faces all strategist : “What is our business?”. A clear mission describe the values and priorities of an organization. Developing a mission compels strategist to think potential attractiveness of future markets.

External Opportunities and Threats

External opportunities and external threats refer to economic, social, cultural, demographic, environmental, political, legal, governmental, technological, and competitive trends and events that could significantly benefit or harm in the future. External trends and events are creating a different type of consumer and consequently a need for different types of products, services, and strategies. competitors’ strengths can be threats and competitors’ weaknesses can be opportunities for the company. Companies need to formulate strategies to take advantage of external opportunities and reduce external threats. This is the process of conducting research and gathering and assimilating external information
is sometimes called environmental scanning or industry analysis.

Internal Strengths and Weaknesses

Internal Strengths and Weaknesses arise in the management, marketing, finance/accounting, production/operations, research and development, and management information systems (MIS) activities of a business. Strengths and weaknesses are determined relative to competitors. internal and external factors should be stated as specifically as possible using numbers, percentages, dollars, and ratio, as well as comparisons over time to rival firms. if strategies are to be formulated and resources allocated based on information. the more specific the underlying external and internal factors are, the more effective the strategy will be can be formulated and resources allocated. Internal factors can be determined in a number of ways, including calculating ratios, measuring performance, and comparing to past periods and industry averages. Various types of surveys can also be developed and managed to examine internal factors, such as employee morale, production efficiency, advertising effectiveness, and customer loyalty

Long-Term Objectives

Long term objective is spesific result that organization seek to achieve more than one year. Long terms goals is important because they provide direction, aid in evaluation, create synergy, reveal priorities, focus coordination, and basis for effective planning, organizing, motivating, and controlling activities. Objectives should be challenging, measurable, consistent, reasonable, and clear.

Strategies

Strategies are way to achieve long term goals. Business strategies may include geographic expansion, diversification, acquisition, product development, market penetration, retrenchment, divestiture, liquidation, and joint ventures. Strategy affects the long-term prosperity of the company which is usually made within 5 years and future oriented.

Annual Objectives

Annual objectives are short-term milestones that organizations must achieve to reach long-term objectives. Like long-term objectives, annual objectives should be measurable, quantitative, challenging, realistic, consistent, and prioritized. Annual Objective also be established at the corporate, divisional, and functional levels in a large organization. Annual goal should be expressed in terms of management, marketing, finance/accounting, production/operations, R&D, and MIS achievements. One set of annual goals is required for each long-term goal. These goals are very important in strategy implementation, while long-term goals are very important in strategy formulation. Annual goals provide the basis for allocate resources.

Policies

Policy is a way to achieve annual goals. Policy includes guidelines, rules and procedures established to support efforts to achieve the goals set. Policies are guides for making decisions and dealing with recurring or recurring situations. Policy is very important in strategy implementation because they outline the organization’s expectations of its employees and managers.