Process of Strategic Management
The strategic management process refers to the development of vision and mission to strategy formulation and evaluation in order to achieve organizational goals and objectives. It helps managers to how and which strategy to choose and gives proper direction on how to best implement it.
The strategic management process also called a model of strategic management, is dynamic and continuous. Any modification in one of the model’s stages may demand changes in all of the other components. A shift in the economy, for example, could create a huge opportunity and necessitate a change in long-term aims and strategies; failure to meet annual objectives could need a policy change, or a major competitor’s strategy change could necessitate a change in the firm’s mission.
As a result, strategy design, implementation, and evaluation should be done on a regular basis rather than only at the end of the year or semi-annually. The strategic-planning process is never truly completed.
The steps in the strategic management process include the seven – the development of vision and mission, external and internal environment analysis, establishing long-term objectives, generating, evaluating, and selecting strategies, implementation, and strategy evaluation and control.
Development of Vision and Mission
In the first step of the strategic management model/process, organizational vision and mission are developed.
A vision is a representation of an organization’s anticipated future condition. It’s a concise one-sentence remark. It identifies the course that a company intends to take in order to grow and strengthen its business. The cornerstone for establishing a thorough mission statement is a clear vision. Although many businesses have both a vision and a mission statement, the vision statement should come first.
The mission statement is a declaration of an organization’s reason for existing. It is an everlasting statement of purpose that separates one organization from others with similar missions. In terms of customers, employees, suppliers, and the community, a mission statement defines the company.
It reflects all aspects of the company, including product range and nature, pricing, quality, service, marketplace position, growth potential, technology use, and relationships with customers, employees, suppliers, competitors, and the community. It also aids in the clarification of the company’s scope and objectives. It also reflects the company’s unique selling point.
External Environment Analysis
The firm’s external environment is examined in the second stage of strategic management. The external environment refers to the circumstances that exist outside of a company. Operating and remote environments make up a company’s external environment.
Customers, shareholders, suppliers, the media, the government, pressure groups, and financial institutions are all part of the operating environment. Political, economic, socio-cultural, technological, legal, and global forces all play a role in the remote or general environment.
The external environment is examined in order to determine whether an opportunity or a threat exists. An opportunity is a situation in the general environment that, if properly utilized, can assist a company in achieving strategic competitiveness.
A threat, on the other hand, may obstruct a company’s efforts to achieve strategic competitiveness. To deal with uncertainty and achieve strategic competitiveness, businesses must be aware of and thoroughly grasp the various sectors of the external environment.
Internal Environment Analysis
The internal environment refers to the conditions and resources that exist within a company. It’s also known as the resource environment or the firm. In the long run, the corporation can influence its internal environment.
It establishes the firm’s relative strengths and weaknesses. Positive internal features that the organization can use to attain its strategic goals are known as strengths. Internal features that may limit or constrain an organization’s functioning are known as weaknesses.
For decision-makers, understanding how to harness the firm’s internal components is critical. A healthy internal environment aids in the creation of a competitive advantage that propels a company toward its objectives.
Establish Long-Term Objectives
Objectives are a term used to describe a company’s desired outcomes. They turn the strategic vision into measurable performance goals. The objectives demonstrate the managerial commitment to reaching performance targets.
Long-term objectives should be defined as part of the strategic management process when an environmental evaluation is completed. They have to do with increasing market power, competitiveness, and future business potential for the corporation. Long-term goals must be established as part of strategic management.
Generate, Evaluate and Select the Best Strategy
After proper analysis of the environment and the establishment of long-term objectives, strategic alternatives are generated at different levels.
- Corporate-level strategies provide overall direction to the organization. They attempt to obtain synergy among numerous product lines and business units.
- Business level strategies are formulated for different strategic business units. They indicate how a firm competes successfully in an individual product market.
- Functional level strategies attempt to enhance the operational capability of an organization in production, marketing, human resource, finance, and research and development. They support the business-level strategy.
The strategic alternatives are evaluated on grounds of suitability, acceptability, and feasibility.
- Suitability is concerned with the strategic options’ environmental appropriateness. It necessitates a wide examination of the extent to which new strategies would align with future trends and changes in the environment, leverage an organization’s strategic capability, and meet stakeholder expectations.
- Acceptability is concerned with expected performance outcomes. The acceptability of the possible strategic options can be assessed in three broad ways: return, risk, and stakeholders’ expectations.
- Feasibility refers to the availability of resources and competencies to deliver a strategic choice. The feasibility assessment determines whether or not the strategy alternative can be successfully implemented. As a result, it determines the viability of a given alternative in practice.
After the evaluation of strategic options or alternatives, the best one is selected that promises to give better results.
Implementation of Strategy
This is the most crucial stage of the strategic management model. The overall essence of strategic management lies in the implementation of the strategy. In this stage, the strategies are translated into action i.e. they are implemented. The essential elements of strategy implementation are given below.
- Structure Design: For the strategy to be implemented successfully, it must have a clear organizational structure. Responsibility, accountability, the chain of command, and the span of control are all established by organizational structure. For the implementation of a strategy, a sound structure is critical.
- Resource Planning: The implementation of a specific strategy necessitates a long-term commitment of resources. As a result, resource planning is critical in the implementation of a strategy. Human and other resources, such as finance, technology, and information, are included in resources. A good match between resources and environmental potential is required. The allocation of resources in various enterprises and divisions is also part of resource planning.
- Management System: A management system is critical for the strategy’s successful implementation. It includes putting together a strong management team, managing human resources effectively, managing information, and developing leaders. A management system is created in such a way that changes are managed and change barriers are gradually reduced or eliminated.
Strategy Evaluation and Control
Organizational performance or activities are monitored at this level of the strategic management model to ensure that strategy implementation is going in the proper direction. The present strategy’s assumptions about the internal and external environment are examined, and the actual performance is measured.
If necessary, corrective action is done at some point. It’s a never-ending process. If necessary, tweaks or alterations to the approach are performed. The corrections between the strategic plan and strategy implementation are ensured by strategy evaluation and control.