Strategic Management Concepts & Nature PDF

**Information Sheet CBMEC 413 -1** THE CONCEPTS AND NATURE OF STRATEGIC MANAGEMENT **Learning Objectives:** At the end of this module you must be able to understand and articulate answers to the following questions: 1. What is difference between strategy and strategic management? 2. What is t...

**Information Sheet CBMEC 413 -1** THE CONCEPTS AND NATURE OF STRATEGIC MANAGEMENT **Learning Objectives:** At the end of this module you must be able to understand and articulate answers to the following questions: 1. What is difference between strategy and strategic management? 2. What is the Nature of Strategic Management? 3. What are the basic elements of Strategic Management? 4. What is the basic strategic management process? 5. What are the benefits and importance of Strategic Management? In the business parlance, there is no definite meaning assigned to strategy but it is a space of knowledge, the attitude in the struggle for existence and the growth, which is indeed very hard for the businesses, and stay in a competitive environment to have sustainable development. The strategy process of the firm is how its managers envision the future, a moving target, and guide the firm toward it. Since the firm and the environment are changing in unpredictable ways, the firm must structure its processes so that it can follow the right strategic path in an ever-changing world. However, the term "**Strategy"** is derived from the ancient Greek word "*Strat Agos"*, which can noted the art and science of directing military general or forces. Thus, Strategy is we well thought out systematic plan of action to defeat one or to defeat rivals. It is formulated in anticipation of the possible positions, move actions and reactions of the rivals. These are broad goals that help the organization to move forward toward its vision, when accomplished. **Strategy** also provides the direction that an organization wants to move toward to be more successful. Firms routinely revise or create new strategies, by assessing and reacting to external and competitive forces and to maximize the organizational performance. As what happened during the COVID-19 pandemic, these new or revised strategies may be developed as a result of changes in the business environment. In addition, **Strategy** can be defined as a set of decisions, what business are we in, what products and services will we offer, at what prices, to whom, on what terms, against which competitors, on what basis will we compete. Also, **Strategy** is a comprehensive master plan stating how the corporation will achieve its mission, and long terms objectives by setting the decisions. **Defining Strategic Management** Approximately 3,500 years ago, the earliest-known presentation of strategy was offered in the Old Testament of the Bible (Exodus 14). Moses faced a quite challenging group when he was leading his fellow Hebrews out Egypt in the enslavement. Moses was the lone strategist during that time to lead the nation that might exceed 600,000 people (men) out of Egypt. Moses began delegating authority to other leaders, based on the advice from his father-in-law, Jethro. This hierarchical delegation of authority created a command structure that freed Moses to concentrate on to the biggest decisions and also helped him implement his strategies. Likewise, the demands for strategic management today are simply too much for the top leaders of the company to handle alone. Other important tasks are then entrusted to other executives and vice presidents. The concepts of strategic management have been developed by lot os authors like Igor Ansoff, Michael E. Porter, Peter Drucker, Willliam Glueck, Alfred Chandler, Kenneth Andrews and a lot more. There are several definitions of strategic management. Some of them are: **Strategic management** consists of the analysis, decisions and actions organization undertakes in order to create and sustain competitive advantages" *- Dess, Lumpkin & Taylor , 2005* **"Strategic management** is the set of decisions and actions resulting in the formulation and implementation of plans designed to achieve a company's objectives" --*Pearce and Robinson, 1988* **"Strategic management** is concerned with the determination of the basic long-term goals and the objectives of an enterprise and the adoption of courses of action and allocation of resources necessary for carrying out these goals" -- *Alfred Chandler, 1962* From the above definitions, different authors have defined Strategic Management differently, yet there are three important elements that we derived from: - Making and planning; - Set of activities related to formulation and implementation of strategies - Achievement of the organizational objectives/ long-term goals Then, the strategic management involves strategic intent, environmental scanning for both the internal and external factors, and strategy formulation, strategy implementation and evaluation and control. **NATURE OF STRATEGIC MANAGEMENT:** **Strategic management** can be defined as the art and science of formulating, implementing and evaluating, cross-functional decisions that enable an organization to achieve its objectives. **Strategic Management** involves elements geared toward a firm's long-term survival and achievement of management goals. Without understanding and commitment, strategy-implementation efforts face major problems Implementing strategy affects an organization from top to bottom; The nature of Strategic Management is different from other aspects of management as it demands attention to the \"big picture\" and a rational assessment of the future options. It provides: 1. *a strategic direction endorsed by the team and stakeholders* - A business has to travel on the same route map with the support of the team. Strategic Management gives the route map for the firm which makes it possible for the firm to take decisions concerning the future with a greater awareness of their implications. - The Strategic management also provides direction to the company, it indicates how growth could be achieved. 2. *a clear business strategy and vision for the future* - Strategic Management is based around on organization's understanding of its mission, its vision for where it wants to be in the future; and the values that will guide its courses of actions. 3. *a mechanism for accountability* - Without accountability, the ability to manage doesn't exist as expert says. As managers and the whole team supports the strategies created, everyone is held accountable, like the responsibility for creating a culture of accountability on the team. The Vision and Mission statements of the organization will lead everyone towards its achievement, then make every employee accountable in delivering on a commitment. 4. *a framework for governance at the various levels* - Through strategic management, a set of mechanisms will be used to manage the relationships and conflicting interests, when arises, among stakeholders. To determine and control the strategic direction and performance of the organizations, this must be aligned to the company values. When the top level managers are motivated to act in the best interest of the organization, the shareholders and company values should increase. 5. *a coherent framework for managing risk for ensuring business continuity*. - Strategic Management helps to formulate better strategies through the use of a more systematic, rational and logical approach. Through the process involvement, managers and employees become committed to supporting organizations. 6. *the ability to exploit opportunities and respond to external change by taking ongoing strategic decisions* - Strategic planning offers a systematic means of coping with uncertainty and adapting to change. It enables managers to consider how to grasp opportunities and of course, avoid problems, to establish and coordinate appropriate courses of actions and to set targets for achievement. **BASIC ELEMENTS OF STRATEGIC MANAGEMENT:** See the source image 1. **Strategy Analysis** is re-examining the position in the market place or competition in-terms of its products, services, strategies etc. 2. **Strategic Choice** which formulation of suitable courses of action, their evaluation and the choices between them. 3. **Strategy Implementation** where the mobilization of employees takes place to translates formulated strategies into concrete actions. 4. **Strategy evaluation and control** measure performance and take corrective actions  1. **[Strategy Analysis]** is the foundation of strategy is a definition of organizational in purpose. This defines the business of an organization and what type of organization it wants to be. Some organizations develop broad statement of its purpose in its Vision, Mission statements. 2. [**Environment Analysis**:] Assessing both the external and internal environments is the next step in the strategy process. Managers need to assess the opportunities and threats of the external environment in the light of the organization's strengths and weaknesses keeping in view of the expectations of the stakeholders. The SWOT Analysis, Michael Porter's Five forces and PESTLE analysis can be used in this process. This analysis lets the organization to set more specific goals or objectives which might direct where the people are expected to focus their efforts. When a more specific set of objectives are available, managers can plan how to achieve them. 3. **[Strategic Choice:]** the analysis stage provides the bases for strategic choice. It allows managers to consider what the organization could do given the mission, environment and capabilities -- a choice which also reflects the values of managers and other stakeholders. 4. **[Strategy Implementation:]** Implementation depends on ensuring that the organization has a suitable structure, the right resources and competences, right leadership and culture. **[Strategic Evaluation and Control:]** Organizations set up appropriate monitoring and control systems, develop standards and targets to judge performances **involved in the Strategic Management Process:** **BENEFITS OF STRATEGIC MANAGEMENT (SM):** 1. SM helps to envision an organization's future, formulate mission and make objectives clear 2. SM Process helps to understand each and every people of an organization what the present stands and what could be the development path charted out, what are the planned results over a period of time. 3. It makes people realize what are they working for, what is expected of each unit, division, functional department even the individuals. 4. SM helps to facilitates the better delegation, coordination, monitoring, performance evaluation and control 5. The identification of Strengths and weaknesses may help an organization to take measures to overcome / minimize the weaknesses and reinforce the strength. 6. The SWOT analysis, which is a part of the SM, helps a company to adopt suitable strategies for exploiting opportunities and combating threats. It will also help the company to drop that business where it would not be successful or which do not meet the objectives. 7. SM helps company to develop Realistic and long-term plan by constant monitoring its objectives. 8. SM makes the management dynamic, appropriate to the environment and result oriented. 9. SM enables a company to meet competition more effectively. 10. SM leads the company in a Standard and competitive. **IMPORTANCE OF STRATEGIC MANAGEMENT (SM):** Strategic management being objective oriented can provide all the employees with clear understanding about what to do, when to do, where to do and how to do. This also helps the decision makers to get equipped with the management concepts and tools or anticipate changes and direct the organizational activities along the right path. In practicing strategic management can help reduce risk of operations by helping the organization to innovate in time and take an action the earliest possible. Below are the number of reasons given by some authors and executives as to why organizations should engage in strategic management: - Initiate and influence firm's activities; - Enhanced problem-prevention capabilities; - Formulate better strategies ( systematic, logical, rational); - Reduced resistance to change; - Enhanced awareness of threats; - Proactive in shaping firm's future and - Improved understanding of competitors' strategies