Essentials of Strategic Management for the Achievement of Organisational Strategic Success - Coursework Example

Student number: Name: Date Submitted: MGT3SMG-All Instances-S1-2015 TOPIC: ESSENTIALS OF STRATEGIC MANAGEMENT FOR THE ACHIEVEMENT OF ORGANIZATIONAL STRATEGIC SUCCESS Campus: Lecture time: Lecturer: Tutor: Tutorial Time: Essentials of Strategic Management for the Achievement of Organisational Strategic Success Word Count: 2535 excluding references Introduction Strategic management is the process by which organisational management teams analyze both the internal and external environments for the purpose of coming up with strategies and a formula of allocating resources to achieve competitive advantage. The concept of competitive advantage is a key foundation for a firm that aims to achieve strategic success and firm’s goal. In the context of strategic success the concept of strategic management entails understanding of the organization strategic position. Understanding strategic position enables organizations to make strategic choices for the organisation’s future management strategy. According to Wallace Stettinius (2005) strategic management is basically a strategic process which involves formulation of strategic vision, objective setting, strategy formulation, implementation and execution (Wallace 2005). To ensure that strategic success is achieved, strategic management of an organisation should be a continuous process with the focus on efficient utilization of both internal and external resources for the achievement of competitive advantage. An organisation which has achieved competitive advantage has differentiated itself from its competitors in terms of competencies, knowledge and strategic skills. Organizations with the best integration of organizational strategy, competitive advantage through suitable strategic management tend to achieve strategic success in the long-term. This involves appropriate mobilization of organisational skills, knowledge, competencies and resources taking into account the present organizational positioning thus building sustain competitive advantages. The key strategic management areas are mainly integrated in the organisational analysis, formulation of strategies, execution and implementation for the purpose of achieving competitive advantage in the industry. Strategic Management Areas The notable key areas of strategic management comprises of four elements which include strategy formulation, environmental scanning, implementation of the strategy, evaluation and control. Mats Alvesson (2003) argue that the core virtue underlying strategic success involves the scanning of the organisation external environment aiming to identify opportunities and threats (Mats Alvesson 2003). On the other hand internal environmental scan seeks to identify the strengths and weaknesses. Therefore, it can be argued that strategic factors holding the organisational future are the strengths, weaknesses, opportunities and threats. Strategy formulation This area of strategic management refers to the development of organisational long-term plans for the effective management of its environmental opportunities and threats’ taking into account it’s corporate weaknesses and strengths. An organization can achieve this through proper definition of its mission, achievable objectives, strategy development and setting of proper policy guidelines (Mats Alvesson 2003). Mission of an organization is the purpose for organisation existence and it states the fundamentals and unique purposes that differentiate it with other organizations in the industry. The objectives states what the organisation seeks to accomplish within a certain time framework and it fulfills the organization mission. A strategy provides a plan on how an organisation achieves its objectives and mission. Strategic success is achieved when organisational strategy maximizes competitive advantage while minimizing competitive disadvantage (Wallace Stettinius 2005). A typical organization should have functional, business and corporate strategy. Policies provide the organisation scope for decision making in regard to strategy formulation and implementation. Strategic decision making entails long-run future of an organisation and they are typically and unusual have a precedent. Directive-strategic decisions provides a guideline for lesser decisions, consequential-strategic decisions facilitates commitment of substantial demand and resources on organizational commitment. Organization strategic decision making are usually planned, entrepreneurial and adaptive. Hrebiniak (2013) provides that strategic planning entails the basic aspects of strategic management processes; this is argued to being the most rational way of making strategic decisions. Strategic decision-making involves current evaluation of organisation performance, reviewing corporate governance, scanning of external environment, analysis of strategic factors, selecting the best alternative strategy, implementing the selected strategies and evaluating the implemented strategies (Hrebiniak 2013, p. 45). Corporate governance and social responsibility is also a factor to consider in strategic formulation. This enables the stakeholder or investor to participate in the profits of an organisation without being directly involved in its operations. It is notable that the organization management only runs the operations without being directly involved with the funds provisions. There are representatives mainly the directors who are obligated in running the organization operations. The representatives notably approve all the decisions that affect the long term performance of the organisation (Mats 2003). Therefore, corporate governance plays the role of building the relationship between the directors, shareholders and the management. Board of directors is responsible for setting the corporate strategy, mission, vision and direction. Other responsibilities include hiring and firing, the top management, supervising, monitoring, reviewing and approving resource allocation and safeguarding the interest of stakeholders. The role of the board in the context of strategic management is to monitor, initiate, determine, evaluate and influence the strategic direction of the organisation (Robert 2013). Industry Analysis and Environmental Scanning According to Rainey (2010) environmental scanning involves monitoring, evaluation and dissemination of information obtained from both internal and external environments for the stakeholders within the organisation (Rainey 2010). Environmental scanning is used to avoid strategic surprise on the stakeholders to ensure long-term strategic health of the organisation. External environmental scanning are the forces or factors that directly affect and influence long-run decisions of an organization as opposed to those touching only the short-run activities. The forces underlying this include economic forces, technological forces, political-legal forces and socio-cultural forces. Social environment scanning also comprises of notable strategic factors. This is attributed to the fact that many countries in the world have various unique societal forces. Some of these factors are similar across some neighboring countries. Organisations should also monitor the social trends where organisations categorize the social environment in various regions and the scan focuses on the organisation wide relevance (Rainey 2010). These trends are usually important for strategic success. This is because trends in the economic part affect business activity in the context of societal environment. Organisation should consider demographic trends in the scanning of the societal environment. Organisations should consider the international society and face the societal environment with a new strategy considering the various economic, political-legal, technological and socio-cultural variables. For organisations considering exploring international markets should consider the varying societal environments. Therefore, the organisation internal environment and strategic management should be flexible. Different social environment significantly affect the operations of companies going internationally. Organisations should also scan the task environment analyzing all the relevant elements. These are individual reports by various individuals in different parts of the firms. The underlying reports are transmitted up to the top management for the purpose of strategic decisions (Rainey 2010). The top management takes into account new developments in strategic areas. Also underlying this organisations identify strategic external factors which include identify the likely trends in the tasks and societal environment, probability assessment of the underlying tasks and their impacts. In the context of industry analysis organisations should adopt Michael porter approach. This involves analysis of new entrants and newcomers in the industry, rivalry among the existing firms which is the level of competition (Wallace 2005, p.58). It is also important for organization to analyze their substitute products and services as they pose threat to existing organizations products and services. Organizations also analyze the bargaining power of buyers since it influences the prices. Bargaining power of the suppliers is also analyzed as the suppliers have the ability to raise prices as well as determining quality of goods and services. Corporate strategy is the directional choice of an organization which include decision on the flow of financial and organisation resources. Directional strategies are decisions underlying organisation’s orientation towards growth whether to expand its operations, put more emphasis on certain operations and the level of internal development. Growth strategies are strategies designed for an organisation achievement of growth in profit, sales and assets. Concentration strategies are also essential which include vertical and stability strategies where organization takes over the functions of the suppliers. Stability strategies are where organisation makes decision on whether to pursue stability or growth in its current operations in an industry. According to Hiriyappa (2013) stability strategies are suitable when an organisation operates in a predictable environment. Strategy Implementation This is an area of strategic management where all the identified strategic choices and activities are put together for execution as provided in the strategic plan. In regard to this, policies and strategies are acted upon through development programs, procedures and budgets. Implementation usually comes after the formulation of the strategy and it comprises a key part of strategic management. Organisations usually have different people who formulate strategies and those who formulate it. It is notable that individuals who are responsible for strategic success usually have little to do with the formulation and development of corporate and business strategy (Rainey 2010, p.62). Therefore it can be argued that involving middle managers in strategy formulation tend to result into organisation strategic success and organizational performance. Divisional managers coordinate with fellow managers to develop programs, develop procedures and the implementation of strategy. A program is a plan for organisational activities that requires to be accomplished in the strategic plan. Organisation budget is a program outlining monetary terms. Budgeting process begins after programs have been developed. Budget plan is developed to provide a real check on the organization feasibility on the selected strategy. Budgeting process contains the cost of the implementation programs in detail. Procedures are the sequential techniques that give description on how particular organisation tasks are done. According to Simerson (2011) he provides that strategic success when organizations achieve synergy in its strategic implementation in its functions and business units and the overall organization’s activities (Simerson 2011). Organisations synergy aims to achieve some advantages of scale in its functional areas. Organisations which have achieved strategic success notably follow structural development stages. Most entrepreneurial firms are usually organized in functional lines notably marketing, production and finance departments. Larger and growing organisations are usually organized into interconnected divisions. Another key area underlying the implementation of strategies is the organisation lifecycle which describe how organization grow, develop and recess. The description of an organisation includes birth, growth, maturity, decline and death (Rainey 2010). An in advance organisational structure in the context of corporate development is the matrix and network. In regard matrix structure most organizations are organized around functions, products and services. Matrix organizations are opposed to the organisations ascribing to functional and divisional forms. Matrix structured organizations combine both functional and product forms cutting across products and projects needed, when there is scarcity in resources and situations when the ability to process information for decision making needs improvement. Network structure is a non-structure which eliminates the organisation business functions with the option of adopting long-term contracts with its suppliers and distributors. This structure is suitable for organisations operating in unstable environments as it provides increased flexibility. Staffing is also vital in the strategy implementation which focuses on the selection and utilization of employees. Strategy implementation requires organization to hire new staff for new skills and training. Implementation also requires leading through motivation of staff to effectively and efficiently utilize their skills and abilities for the achievement of organisational objectives. Leading as a contributor to strategic success takes the form of effective management leadership, best organization culture and effective organisational communication. Evaluation and Control Evaluation and control is the process involves monitoring organisation activities and performance to determine whether actual performance matches the desired performance. The process entails determination on what to measure, establishment of performance standards, and performance of actual measurements, comparison of actual performance with the standard and initiating the corrective measure (Simerson 2011). Evaluation and control involves analysis of performance data and the organization activity reports. This involves engagement with the top management, in cases where undesired reports are established then the top management need to develop new implementation procedures and programs (Rainey 2010). This process should be relevant to what it is being monitored. Effective control and evaluation should adopt appropriate measures of the relevant outputs and activities. It is notable that return on investments is used mostly in organisations to evaluate departmental abilities to achieve profitability objectives. It is also suitable for measuring the achievement of corporate objectives such as employee development and social responsibility. Suitable organisation measures should predict profitability and ability to measure variable that influence future organization profitability. Organization controls should focus on the actual performance results and those activities generating performance. Behavior controls should be implemented through policies, standards, rules and the operating procedures. On the other hand output controls should focus on the result to the end result through performance or objectives targets. The output controls can be used effectively in cases where the output measures are agreed on no clear cause and effect connection between the organizational results and activities (Simerson 2011). It is important for organizations to adopt activity based costing in the allocation of fixed and indirect costs on the value added activities. This method is suitable in the context of value-chain activities. It also enhances accountability on the allocation of overheads in an organization. Corporate performance measure is achieved by using return on investment method. It measures the effectiveness of the decisions taken in regard division of assets and generation of profits. Stakeholder measures are the set criteria by each of the stakeholders aiming to determine the organisation performance (Kachru 2009, p.36). It is appropriate for the organization management to come up with measures for stakeholder categories to keep track of the stakeholder interests and concerns. Organisations should determine the shareholder value which basically determines the present value and the anticipated future values and streams of cash flows. It is notable that the value of an organization is its value of the cash flows discounted with the present value. This measure is suitable in the determination of the pre-strategy value of the organisation. Responsibility centres are also important for the evaluation of the various divisions of an organisation (Simerson 2011). These centres include revenue centres, expense centres, profit centres, standard cost centres and investment centres. Organizations should measure its performance to effectively undertake evaluation and control processes. To achieve strategic success evaluation and control should have a clear objective, operational and have timely measurements. Conclusion In conclusion, strategic management of an organisation significantly contributes to the achievement of organization strategic success. Effective and efficient strategic management clearly provides a strategic plan on the prediction of an organizational business and industry environmental changes. Strategic management provides an evaluation of the organisation internal potential and external threats. Operation strategies are developed through modifications and developments that harmonize with the environment that an organization operates. Strategic management facilitates the achievement of the organisational mission, vision and objectives so as to achieve sustainability in regard to competitive advantages. Strategic management focuses on the achievement of competitive position to fit into competitive industry environment. Therefore, for organisations to achieve strategic success they should formulate strategies, implement, and monitor and control them in all the levels of the organisation. Strategic success lies on the organisations strategic management decision making and the actions which determines both the short-run and the long-run performance of an organization. Strategic management process entails scanning of internal and external environments, strategic and long range planning, effective implementation of the strategy and evaluation and control. The bottom-line underlying strategic success of an organisation is achieved when an organisation effectively utilizes its external opportunities factoring in the threats considering the organization strengths and weaknesses. References Ansoff, HI. & McDonnell, E 2000, Implanting Strategic Management, Prentice Hall, London. Hill, WL. & Jones, G.R 2008, Strategic Management Theory: An Integrated Approach, Honghton Muffiliu, New Jersey. Hiriyappa 2013, Corporate Strategy Formulation and Implementation Process, Booktango, New York. Hiriyappa, B 2013, Corporate Strategy: Managing The Business, AuthorHouse, Indiana. Hrebiniak, LG 2013, Making Strategy Work: Leading Effective Execution and Change, Pearson Education, New York. Kachru, U 2009, Strategic Management: Concepts and Cases, Excel Books India, New Delhi. King WR. & Cleland D 2007,Strategic Planning and Policy Van. Nostrand Renihold, New York M. K. Nandakumar, S. J 2014, Organisational Flexibility and Competitiveness Flexible Systems Management, Springer Science & Business Media, New York. Mats Alvesson, H. W 2003, Studying Management Critically, SAGE, London. Mohapatra, S 2012, Case Studies in Strategic Management: A Practical Approach, Pearson Education, New Delhi. Rainey, DL 2010, Enterprise-Wide Strategic Management: Achieving Sustainable Success Through Leadership, Strategies, and Value Creation, Cambridge University Press, Cambridge. Robert Kaplan, DP 2013, The Execution Premium: Linking Strategy to Operations for Competitive Advantage, Harvard Business Press, Harvard. Simerson, BK 2011, Strategic Planning: A Practical Guide to Strategy Formulation and Execution: A Practical Guide to Strategy Formulation and Execution. Publisher ABC-CLIO, Boston. Wallace JL 2005, How to Plan and Execute Strategy: 24 Steps to Implement Any Corporate Strategy Successfully, McGraw Hill Professional, New York. Read More