Strategic management is also known as institutional management. It is the art and technology of making, putting into action and analyzing cross-functional decision making that helps a business to accomplish its long-term targets. In this process the organization's mission, vision and objectives are mentioned and developed. After these aims are developed, the regulations, plans, with respect to projects and programs, were created, and then resources are allocated or budgeted to put into practice them and achieve the targets. (wikipedia n. d. )
Strategic management contains a set of activities that come under setting up goals and over the process of putting together tactics to attain these goals and targets. How tactical management is completed is determined by the organizational structure of the company. The Panel of Directors, the management team as well as other stake holders of the company can be engaged in these activities that fall under strategic management.
Strategy can be defined as "unified, comprehensive and involved plan that pertains to the strategic advantages of the company to the obstacles of the environment. It is designed to ensure that the essential objectives of the business are achieved through the correct execution by the business. " (Jauch and Glueck 1988)
Formulating a technique for achieving a target or a couple of aims is a combines three main operations which are:
By studying the situation, self-evaluation and rival examination: both inside and external, both micro-environmental and macro-environmental.
After this assessment, aims are place. These objectives should be parallel to a time-line; some are in the short-term as well as others on the long-term. This calls for creating vision claims (which is the permanent view of your possible future), objective assertions (which is the role that the business gives itself in world), overall corporate and business aims (both financial and proper), proper business unit targets (both financial and strategic), and tactical aims.
These goals should be analyzed combined with the results of the problem evaluation and a proper plan can be produced. The plan supplies the details of how to achieve these objectives.
Environmental research is a process that begins from identification of environmental factors, examining their characteristics and impact, auditing those to find their impact to the business enterprise, and making various information for placement.
All the decisions taken by the organization and the impact of these decisions be based upon the organization's inside and exterior environmental factors. These environmental factors should be carefully analyzed before taking any decisions.
Environmental analysis comprises of the functions of scanning, monitoring, examining, and forecasting the business situations and factors of the surroundings. Scanning is done to get information from the environment. Monitoring is done to check the nature of the environmental factors. Analyzing requires data collection and the utilization of tools and techniques. Forecasting is a method to find the near future possibilities predicated on days gone by results and present circumstance. (Business Environment Analysis n. d. )
Different types of methods, tools, and techniques are being used for environmental research. A number of the major ways of analysis are Situation Building, Benchmarking, and Network methods.
Scenario building provides an overall picture of the full total system with the factors which affect it. Benchmarking is for the best standard in an industry and also to compare the one's talents and weakness with the standard.
Network method is to assess organizational systems and its outside environment to get the power and weakness, opportunity and threats of a business. A number of the techniques of main information collection can be Delphi, Brainstorming, Review, and Historical enquiry. Delphi approach collects indie information from the experts without blending them. Brainstorming is information collection approach being wide open minded without criticizing others. Survey is to design questions and to keep these things the participants whereas the historical enquiry is a kind of case examination of past period. Evaluation tools can be statistical such basic descriptive tools as mean, median, setting, consistency or tools can be inferential as ANOVA, correlation, regression, factor, cluster, and multiple regression examination. (BADU 2002)
A check out of the inner and exterior environment can be an important area of the tactical planning process. Environmental factors inner to the organization usually can be classified as talents (S) or weaknesses (W), and those external to the organization can be labeled as opportunities (O) or dangers (T). This is called SWOT evaluation. (QuickMBA n. d. )
The SWOT analysis provides information that is effective in matching the firm's resources and features to the surroundings where it functions.
A matrix of these factors can be produced. This matrix will be helpful in expanding the strategies for the company. The SWOT matrix (also called a TOWS Matrix) is shown within the next page:
S-O strategies pursue opportunities that are a good fit to the company's strengths.
W-O strategies get over weaknesses to follow opportunities.
S-T strategies identify techniques the firm may use its strengths to reduce its vulnerability to external threats.
W-T strategies establish a defensive plan to prevent the firm's weaknesses from so that it is highly susceptible to external threats.
The organizations should adapt themselves and their strategy to the exterior environment which is constantly changing. The external environment is also known as macro environment. These forces of the exterior environment cannot be manipulated and can be examined using a variety of tools and techniques such as Environmental Scanning and Infestations analysis.
Environmental scanning is thought as the process that seeks information about occurrences and human relationships in a firm's environment, the knowledge which help top management graph the firm's future.
In this process, the exterior environment is split into industries or areas such as politics, economic, cultural, scientific and further research such as Pest analysis can be done after scanning the environment. Information is accumulated by monitoring and forecasting any changes that eventually the parameters of the environment that contain been identified previously. This collection of information helps the organizations to determine where they are lacking and just what they need which helps them in formulating the strategies. (Acar 1995) Environmental scanning is employed to gather information from the surroundings.
A PEST research looks at the Political, Economic, Sociable and Technological drivers or the external forces that have an impact on the organization. It really is most useful when used together with other tools such as the SWOT examination.
These factors may have direct or indirect effect on the organization's operation. Decisions made by the federal government may impact the business. The political world has a major influence how organization operates.
Economic factors such as the market prices and market cycles impact the purchasing power and patterns of the consumers.
These factors are the demography, lifestyle, social areas of the consumers. These factors have a major influence on the buyer needs and would like. Sociological factors also affect how big is potential market segments.
Technological changes play an important role in shaping how organizations operate. Technological factor is very important to gain competitive advantage. Technological innovation can also increase the creation efficiency, quality and rate. New technology is changing how organizations operate.
Porter identified the following five forces model of competitive strategy:
The threat of new entrants and the appearance of new competitors
The degree of rivalry among existing competitors in the market
The bargaining ability of buyers
The bargaining power of suppliers
The threat of substitute products or services which could shrink the market
The strength of each of these pushes varies from industry to industry, but used together they determine long-term profitability. These five factors impact the strategy of the business. It's important to investigate and research these five makes to be able to craft a successful strategy. To be successful, the organization must reply effectively to the pressures of these five makes.
The resources, advantages, behaviors, weakness and distinctive competences are major the different parts of the inner environment of an organization. A business uses different kinds of resources which help them achieve their targets and how they utilize their resources can be the source of their talents or weaknesses. This can be thought as organizational ability which is used to develop the strategies and targets which the company can achieve and these shouldn't unrealistic corresponding to its functions.
Some of the components of the inner environment of a business are:
These are all the tangible and intangible inputs found in the organization to build outputs in the company of product or services by having a transformation process.
The patterns of a business demonstrates is the result of forces functioning internally that will determine the power or constraints in the utilization of resources.
Competency of a business is the capability to do what its competition cannot do or the capability to do much better than what they can do. This concept can be used for strategy formulation.
It is seen that the analysis of the surroundings is crucial to the success of the decisions that managers have to make which have widespread effect on the functions and techniques of the business enterprise.