Strategic Management Process - Term Paper Example

Strategic Management Table of Content Table of Content 1 Introduction 3 Scope and Concept 3 Roles 4 Strategic Issues and its Evaluation 6 Schools of Thought 7 Different Levels of Strategy 9 Different Perspectives of Social Science Disciplines in Strategic Management 13 Analysis of the Implications of Various Perspectives for Theory 15 Conclusion 18 References 19 24 Bibliography 25 Introduction Strategic management is the process through which any organization analyzes and learns from the internal and external environments, develops strategic course of direction and accordingly creates strategies and makes necessary arrangement for its effective implementation which guides the organization in the direction to satisfy the key stakeholders. The key stakeholders include employees, customers, environment, shareholders, owners and promoters to name a few. Hence, the stakeholders maybe defined as an individual or a group of individual who have a significant influence on the working of the organization and are directly or indirectly affected by the organization’s activities (Wiley, n.d). Strategic management is undoubtedly the prime tool for the success of the business organisations in the dynamic environment of today. Scope and Concept Strategic management is the vital part of decision making of the larger as well as smaller organization. The scope basically encapsulates the creation of value for the stakeholders and the long term sustainable business process for the organisation. The concept of strategic management encompasses following aspects: Goal of Business - Depending upon the kind of organization, the management has to decide where they want to see their company in the next definite period. Business Strategy - After framing the policies, the management decides the future course of action or plan to be implemented which will enable it to effectively and efficiently utilise the scarce resources to develop competitive advantage. Business Process Evaluation - Once the implementation of the strategy takes place in full swing, it is the duty of the management to constantly evaluate the process. This will provide the necessary feedback regarding the loopholes to be immediately modified and the effectiveness of the strategy. Identification of opportunities and risks in the market can contribute to the success of the organization. Personal skills and merits and demerits of entering the business are to be analyzed properly (Maps of World Finance, n.d). Roles Strategic management helps the organization to determine its mission, vision, goals, values, objectives, roles and responsibilities, timelines, etc. It is an art of planning. Vision statement leads to an establishment of short term and long term goals where as mission statement assesses the steps taken by the organization to accomplish their goals. The other important roles played by the strategic management are as follows: Framing of the financial and strategic objectives of the organization Strategic objectives functions as the performance yardstick for the company Delegating the chain of command and matching the individuals with right skill, knowledge and experience to meet the needs and the objectives of the organization Responsibilities and task to be distributed between the various workforce in teams and individuals so that it becomes a collective effort towards the achievement of the organisational goal Strategic management entails allocation of the resources of right quantity and quality at the right place in the right time Strategic management is not a static process hence the management must be dynamic in their response. Effective strategic management helps the organization to move up to the ladder of success in the eve of new challenges (AllBusiness, 2010). Strategic Issues and its Evaluation In simple words, a strategic issue is actually a problem which needs to be answered. It is like a decision which will relate to the future of a particular event. Strategic issues are basically long term and goal oriented. It has a major role in the future course of the business. The major questions which at the outset needs to be answered are “what, whom and how” relating to the business. The answers should describe the prime motto of the business or the goals of the business. Second important factor is that whom will the business cater and the last important but not the least consideration is the fact that how will it fulfil its goal. Strategic issues are the lifeline of the business and are the only step towards a more refined and simple strategic plan. The identification of strategic issues is also an important process. Without proper identification, the whole process will be faulty and would serve no purpose to the organization. And only few of the strategies are viable. Some of the important factors which must be taken in consideration while addressing to strategic issues are understanding the strategic implications of all the information available to the organization and to make a review of all the issues which are important for the organizational decisions. Issues which are strong are surfaced when the SWOT analysis is made. Potential issues are very hard to be surfaced. Various topics which help in surfacing the strategic issues are strategic focus, organizational change, organizational behaviour, strategic focus, resource limitations and strategic alliances. There are other topics too which address strategic issues (Ambler, n.d.). Strategic issues are very much beneficial for the organization. Firstly, it provides the direction for the future course. If the direction is set then the goal can be achieved quite easily. But the main factor in this case is that the direction should be with respect to the policies and activities of the organization. Often, it may lead to hostile atmosphere in the organization because of the conflict of interests from several groups. Other benefit is that in this dynamic world where the business protocols are changing now and then, strategic issues cope up with the ever growing pressure and stabilizes the disruptions in the organization. Success is the key word in today’s business but it is very hard to achieve. It is with the active help of strategic implementation it can be achieved. Schools of Thought Debate has been never ending between the two schools of thoughts (prescriptive school and descriptive school) regarding the strategic issues. The three key attributes that are design, planning and positioning are considered to be prescriptive in their characteristics whereas other essential topics such as entrepreneurial, learning, cultural, cognitive and environmental belongs to the descriptive group. Various scholars have different approaches towards these ideologies. It is hard to consider which is right and which is wrong but it is true to the fact that both group have certain key components without which strategic implementation is incomplete (Watson, n.d.). Different Levels of Strategy The various levels of strategy are as follows: Strategy System as Process of Conception: Design Design school states, strategy systems are set to be intentional in character and strategy development is regarded as a process of mindful consideration. It should be formulated by the head of the organization. It should be straight and simple. It should be in sync with the plans and policies of the organization and also should be an individual effort rather than a collective effort. Strategy System as Formal Process: Planning Planning is a very important step in strategic decisions. It is composed of various interrelated decisions which will help in developing the organization. A proper planning strengthens the vision of the organization and can eventually help in bringing the organization towards its goals. It is a very formal procedure as there are various steps in it. Each and every step has its own significance. And skipping of any of the steps can prove to be detrimental for the organization. Strategy System as Analytical Process: Positioning The majority of the related portions of positioning come from the subject of economics. The major highlight of this step is to position the business in the market place. Thus, it is the analyzing step because various analyses are to be made before the positioning. This is a very important step because generally feedbacks are expected from this stage, which in turn helps the organization to take further decisions. Strategy System as Visionary Process: Entrepreneurial Visionary process is believed to be developed only in the minds of the leaders. Thus, this process is totally dependent on the belief and attitude of the leader. The leader has the authority to decide upon the long term goals of the organization and is best suitable because of his motive. Strategy System as Mental Process: Cognitive The major force behind cognition is psychology. The psychologists have a major role to play in this process because it is believed that majority of the mapping and plotting is done by the psychologists. Cognition has major pressure on the functioning of the whole system. So, this process has a lot to deal with the mental ability and conceptualization. Strategy System as Emergent Process: Learning The process gives major importance to learning. Learning in itself is a process, so it is actually a two way process, one regarding diffusion of learning and another being in the process of learning. In this process, decisions can be analyzed and with prior learning, necessary actions may be taken. Strategy System as Process of Negotiation: Power Process of negotiation gets its roots from political science. Various factors come into play as the likes of bargaining power to moral persuasions. It is sometimes divided into micro and macro power. The micro part basically deals with the issues in an organization whereas the macro part deals with the issues from the external environment. Strategy Systems as Collective Process: Cultural The basic root of this process comes from anthropology. This process actually states that an organization is operating within the society. Thus, it has to maintain certain norms regulated by the society. Culture is one of the greater issues and has a great influence on strategic processes. Strategy System as Reactive Process: Environment It has major roots in biology. It is more or less similar to cultural process. It states that the organization is operating in an environment. Situations can be for its favour or adverse but the organization should have strategic tools to counter act the situations (Kemp & Joshi, 2003). Different Perspectives of Social Science Disciplines in Strategic Management The various aspects of an organization i.e. individuals, systems, actions and decisions that are the integral part while studying or practising strategy or strategic management is basically obtained from the results of the general disciplines of strategic management and other disciplines of social science. Strategic management as a separate discipline is still in the nascent stage. According to interpretive sociology, an organization is a socially constructed system. Strategic decisions are found to vary by the industry and executives on the basis of age, educational qualification, amount and type of work experience and their level in the management structure. The micro dimension involves individual behaviour along with the macro dimensions of regional competition with respect to the appearance of the global competition, with usual analysis and interpretation of the firm, the network and the industry. Scholars need to continuously confront with the issues relating to the difference between fundamental cultural and institutional diversity that epitomize East-West and North-South interactions and their implications upon the strategic decision-making and behaviour. It is quite undeniable that the strategic management is drawn extensively on parts of selected social science discipline. This leads to the realization of fact that there is a continuous involvement and engagement with collaborative work of the scholars of social science discipline. On the micro side, there has been a development in new methodologies observing the behaviour of human mind at work. The advent of such discipline has led to the evolution of the metrics and concepts available for empirical as well as theoretical analysis of individual and firm behaviour. The cognitive, psychological, emotional and behavioural aspects of individuals involved in strategic decision making as managers, employees and stakeholders affect the outcomes. On the macro side, there has been a major evolution of the variety of capitalism in the face of global crisis. There needs to be a multi-disciplinary effort with social scientists specializing in various fields of political, sociological and economics. The various forces among the regional and national level immensely affects the strategic behaviour of the firm and subsequently the quality of its output. The dynamics of macro-economic, socio-political and natural environment influence the goals, aspirations and strategies developed by the firm. Thus, it is seen that both micro and macro perspectives of social science have a tremendous influence upon the strategic decision making. Strategic formulation and implementation can benefit from inclusive and integrative approach as it involves the use of various performance measurements. For the firm to be proactive in its approach, it could combine the traditional approach with more recent developments in behavioural and psychological aspects to enhance their competitiveness (Global Strategy Journal, n.d). Analysis of the Implications of Various Perspectives for Theory Strategic management is a significant part of managerial decision making. In case of a top manager’s practical value analysis, the two interconnected concepts that are analysed are strategic belief management and also that of paradigm. Each and every person generally has a believed view point which is shared by a colleague, team, and family. The strategic beliefs of a top manager are a very important part of strategic management as the view of the manager is shared by the managers’ colleagues and also the team. Schools of thought are a set of paradigm which is shared by top managers. The schools of thought are generally considered as a strategy development procedure related framework, approaches, views, strategy making processes and also organisational decision related strategies (Jelenc & Raguž, 2010). In schools of strategy for strategic management analysis, the two schools which are analysed are the prescriptive school and the descriptive school. Henry Mintzberg analysed the two schools of thought and prepared a premise for it. According to Mintzberg’s analysis of prescriptive schools of strategy, strategy makers have been able to acquire and also learn formally the different acts related to strategy making. As per the analysis, it shows that the strategy is mainly made without the help of any of the non conscious intuition. In this school of thought, the main focus lies in the procedure of strategy making instead of contents of the strategy. Strategy implementation is considered after full formation of the strategy. In this school of thought, a clear formation of strategy has been given a primary importance. A formal planning related technique is used in the strategy formulation like plans, checklists, and programs are used in the process of preparing a strategy. In terms of business related scenario for the prescriptive school of strategy as per Mintzberg’s approach, Chief Executive Officer (CEO) is the maker or the formulator of a strategy. The employees are the implementers of the strategy. The organisational goals, programs, and budgets are the integral parts of the strategy implementation. In business terms market positions are a very important part of any business organisations strategy formulation. Therefore, strategies which may not be unique are selected after a proper market position analysis is conducted. A formal analysis related to market scenario plays a crucial role in strategy formation. The analysis and the calculation are the depending factors in this approach. Market analysis provides a comprehensive strategy which is then implemented. Strategy making can be considered as a continuum. In case of business perspective an organisation is more likely to follow the end of the prescriptive school related model. According to Mintzberg, the prescriptive view related approach can be taken by an organisation which is mainly ‘coming out of a period of changing circumstances and also into one of the operating stability’. Machinery bureaucracy is the main part in this process which can be used as part of the strategy continuum. The Mintzberg’s approach in some circumstances has been critically viewed by a counter critique Igor Ansoff. According to Ansoff’s arguments, the Mintzberg’s emergent or descriptive approach and trail and experience approach will be difficult to employ in a business scenario. In a business scenario such as ‘mergers and acquisitions’ a planned approach is required to fulfil the need of diversification. The critiques’ arguments however points out those planning and prescriptive modes of strategy formulation that are largely suitable in case of a diversified as well as large business for mergers and acquisition activities. Mintzberg’s conviction that strategy formulation is almost impossible in case an environment related business is stable and predictable has run into critiques. Ansoff contradicted the idea and has raised the point that an explicit strategy is mainly made if a business environment is uncertain and turbulent. Ansoff has suggested that the prescriptive model identified by Mintzberg is mainly a valid and useful prescription for an organisation which is looking to optimize the performance in various environments in which strategy related changes are incremental in nature. In these environments, the speed associated with any change like scenario is slow as compared to the speed related to the organisational responses. Therefore, the prescriptive strategy generally is believed to work in stable business environment and also mainly in large organisations (Yazdani, 2010). The strategic schools of thoughts were mainly labelled as classical perspective as per the classification of Whittington. Whittington along with Rouleau and Sequin devised taxonomy in order to relate classification related criteria for the purpose of underlying differing principles related to various contributions in the field of strategic management (Volberda & Elfring, 2001). The four perspectives prescribed by Whittington generally differ from each other fundamentally along the two dimensions like the outcome related to a strategy and also the procedure which has been followed to prepare the strategy. A distinction can be made among the nine schools of thoughts proposed by Mintzberg in terms of descriptive and prescriptive approach. The design and also the planning and positioning school parts are mainly prescriptive while the rest are of descriptive type (Volberda & Elfring, 2001). In the descriptive approach, strategy formation as well as implementation generally occurs on a simultaneous basis. Strategy preparation is not forced upon a single individual and the responsibility is shared. In this approach an organisation generally learns different approaches as well as implementations (Elfring & Volberda, n.d.). Long term vision and past experience are considered as a very integral part of strategy making. In this approach a strategist generally formulate a strategy in their mind as mainly a thought process. In this approach strategy is hard to attain and if attained is hard to change. Descriptive approach is more useful for an organisation which is small or medium in size. An organisation which is at the starting phase of its business cycle would be primarily receiving benefit by this approach as they can look to employ turnaround strategy. This approach can be suitably employed in flat structure and in horizontal organisational hierarchy scenario and also decentralised decision making process (Yazdani, 2010). Conclusion It can be said without much doubt from the above critical analysis that the debate in the arena of strategy formulation and implementation is long term and never ending. Despite the debate, the importance of strategy in any business organisation cannot be undermined. Though the scholars might differ with respect to the intricate definitions and classifications of strategy, but it can be said without hesitation that the significant role that the discipline plays in the day to day business function have long term impact upon the organisations. References AllBusiness, 2010. What is strategic management, Home. [Online] Available at: http://webcache.googleusercontent.com/search?q=cache:1wYyLRi43pAJ:www.allbusiness.com/management/2975129 [Accessed August 19, 2010]. Ambler, T. E., No Date. Strategic Issues: The Pivotal Process for Strategic Success. Compass Points. [Online] Available at: http://www.strategyletter.com/cp_0799/FeaturedArticle.php [Accessed Aug 19, 2010]. Darden School of Business. No Date. Strategic Thinking. Chapter 1. [Online] Available at: http://faculty.darden.virginia.edu/bourgeoisj/files/Chapter%201.html [Accessed Aug 19, 2010]. Elfring, T. & Volberda, H. W., No Date. 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