Strategic Management Process - Essay Example

Strategic Management Name Institution Date Strategic Management Management is a difficult endeavour since it involves dealing with many components to ensure they run smoothly and efficiently to achieve a common goal which more than often is to make a profit. Since it is a process, it requires one to have set plans to act as guidelines in which all activities should follow. Therefore, managers have a hard duty to come up with these schemes and implement them all as well as motivate stakeholders to accept and make it work. The strategic management process is complete when after implementation evaluation is carried out. Indeed, evaluation is a continuous review of the performance of the plan; it is done to check the efficiency of the plan and to identify problem areas that may require improvement. Strategic Management could be defined as “…The process of identifying, choosing and implementing activities that finally enhance the long-term performance of an organisation by setting direction, and by creating ongoing compatibility between the internal skills and resources of the organisation, and the changing external environment within which it operates…”[Vil03]. A strategic manager needs to be an innovative and knowledgeable individual who exhibits strong leadership skills. Indeed, this is due to the many components involved in business operations that ought to be aligned to work together for an extended period to ensure they achieve the set long term goal. Maintaining discipline and a firm grip and understanding of the business operations are among the job requirements of a strategic manager. One component that requires constant monitoring is competition. Managers, especially the Chief Executive Officer, need to constantly monitor the external industry to identify and monitor the competition to be able to come up with plans to counter and outdo the competition. The competition has a large influence on business operations, the main one being pricing. With a limited demand pool, these business factors such as quality, quantity and prices may affect consumer choice and with its market choice. Being too pricey can deter consumers from purchasing a person’s products pushing them towards the competition despite the type of quality. A competent manager needs to form flexible plans that can counter any efforts by the competition to attract customers and increase or solidify their market share. Certain concepts that a manager needs to understand are Strategic capabilities, core competencies and competitive advantage. Strategic capabilities refer to the ability of a business to come up with and implement successful competitive strategies that would enable it to increase its value and survive a tough business environment. These capabilities usually focus on the firm’s resources including its human resources, assets and market share which enable analysts to predict its ability to implement strategies in the long term. These factors have varying effects on a firm’s future. Some have a direct impact on business operations such as production. Therefore, it is a manager’s duty to come up with ways to measure these factors’ impact to assess how they can be used to form effective plans to ensure the businesses long term success[Sny92]. The managers have a difficult challenge in measuring these capabilities since there is no universally accepted metric for doing so. Indeed, this challenge is one that helps strategic managers stand out from other types of managers. There are many stakeholders interested in a company’s strategic capabilities; one such stakeholder is investors. A company should always look toward expanding, and one sure way of expanding is getting investors who will assist in increasing capital in the business. Investors’ are interested in this information since it helps them evaluate the stability and growth potential of the firm and whether it will continue to generate profit in the long run. Additional investment can also improve the company’s strategic capabilities as investors have a tendency of coming in groups. For instance, an investor can easily bring in another. The government is another stakeholder in the information on strategic capabilities; this is because of their industry management and monitoring activities. Government regulators such as tax agencies and the government treasures can make long-term plans with this information; they will also be able to form policies that can help enable the industrial growth since the success of local businesses is a success for the government. In fact, employees are key stakeholders who have an interest in a firm's capabilities since one of the factors involved human resource. The company’s stability and future outlook can influence their morale and job choices since job security is their main concern. A favourable measurement or outlook can calm their financial anxieties and can also serve as a motivator. A good outlook can also influence their salary demands. For instance, if a company is said to have a good chance of increasing profits in the future, employees will be motivated work harder and even negotiate for a salary increase. Indeed, positive motivation can improve a firm’s position further as employees increase productivity. Core competencies is another fundamental concept that a manager should know and understand. It simply refers to a company’s strengths that give them a competitive edge in the business marketplace. These are the strengths that any successful manager needs to identify and nurture to stay competitive. For a company to maintain a top position in the competitive business world, they need to work on their strengths as much as possible and strengthen their weak points too. These strengths are one of the key influencers of a company’s strategic planning and any manager willing to should not ignore. The elements mostly valued in core competencies are technology and collective knowledge. Also, technology is a highly dynamic factor since it continues to improve every other day and could become obsolete easily. For sure, companies that have embraced technology have strong advantages like an increase in speed of operations, improved quality and lower costs among other benefits. However, making a plan flexible to accommodate new technologies is a challenge for CEOs and other managers as they look to improve their operation while keeping the cost of improving to a minimum. Also, it is the function of strategic managers to ensure the company has the technical knowledge required in running and maintaining these technologies[Sri05]. Core competencies should not be easy for competitors to copy as they look to counter a firm’s rise and expansion. Competition is usually tough in any industry, but one trend that is universally accepted is smaller companies will always try and mimic the industry leaders’ actions to try and improve their position. It is, therefore, an industry leader’s responsibility to come up with innovative ways to stay ahead or else risk losing market share to mimicking firms. Therefore, to achieve this task, CEOs are constantly researching ways to develop their businesses; established companies have Research and Development (RAD) Departments to do so. This department is often the chief determiner and improvers of a company’s core competencies[Pra90]. These competencies though have to have a benefit to consumers to be considered as a core competency. One known competency is the durability of a product; consumers value some products due to their durability, therefore, giving the business an edge in the market. The final concept that managers need to have knowledge on is Strategic Competitive advantages. A company considered having a competitive advantage when it performs well-exceeding industry averages. If a company produces and sells more than the industry average, it is said to have a competitive edge over its rivals. Two main types of strategic advantages include Cost and Differential advantages. Cost advantages refer to when a firm’s operation costs are lower than the industry average. A company can manage to offer the same benefits to consumers, but at a lower cost than its competitors and that is a strategic cost advantage. In fact, low-cost carriers are the best example of cost advantages, in aviation, these carriers have a competitive edge as they offer aviation services at lower costs than its competitors albeit with less luxury. A cost edge enables businesses to be able to sell their products at lower prices than the competition thus increasing their revenue. Differential advantage refers to the marginal difference in goods or services offered that give a product a strategic advantage over others[Qui10]. For example, car wash service providers can introduce additional services to outdo each other. This difference can have an impact on customer attraction and with its market share. These three concepts are similar and interrelated but are different and distinct in one way or another. Strategic capabilities can be said to be a prelude to core competencies by initially identifying the strategic abilities; a young business can identify its strong points in which they can nurture to become core competencies. If a company then discovers their core competencies and nurtures them well, they tend to become strategic competitive advantages that managers can exploit to grow, expand and increase their market share. In reality, one can argue that strategic capabilities can be potential core competencies. A competent CEO should be able to know how to identify the main strategic capabilities which have the ability to be improved and emphasised to become a strategic advantage in the long run. Certainly, a manager needs to be able to measure these capabilities which are an arduous task. A strategic director, therefore, needs to come up with a method of measuring them first before forming a strategic plan. Although one can use models to individually assess the concepts and draw up a conclusion from the information generated, no single method can be used to assess and evaluate the relationship between the three. A strategic manager can benchmark with industry leaders and closest competitors to assess their business’ strategic capabilities. A SWOT technique can be very helpful in evaluating strategic capabilities and core competencies while industry studies can help guide the evaluation of strategic competitive advantages. Consumers can be surveyed to find out why they value a product over all the others in the industry; this will be able to inform businesses on their strengths and weakness. The information gathered from the analysis of these individual concepts compared to those of similar businesses can help establish a relationship. Linkedin can be said to be a prime example of the application of these concepts. Its fast growth from a small networking site to what it is today is noteworthy. Its first CEO Dan Nye was instrumental in playing to the company’s strengths. The company was already thriving, but after the CEO came in and implemented his plans, the company grew three times as much. Mr Nye identified core areas where the company could focus on technology and marketing[BeB16]. He emphasised on the two, and this helped grow user base from 9 million to 35 million. Following the excellent performance due to the application of these concepts, the company was able to attract private investment that enabled it to expand and establish itself as the global networking leader. With time, the company has focused on improving services and technology; it even has an app to enable ease of access. Indeed, by focusing on its core capabilities that had been identified earlier on resulted in an expanding of their market share. Conclusion Proper prior planning prevents poor performance is an adage that seems to guide most strategic managers. To draw up a proper plan, a manager needs to have quality information to ensure accuracy and efficiency. One such information is the company’s strengths and weaknesses, this will help form long-term plans that will ensure the firm's stability and future profitability. This information can also inform where the company needs to expand to take full advantage of these strengths. The managers need to be cautious not to forget to strengthen their weakness when focusing on their strengths since one is always as strong as their weakness References Vil03: , (Viljoen & Dann, 2003), Sny92: , (Snyder, 1992), Sri05: , (Srivastava, 2005), Pra90: , (Prahalad & Hamel, 1990), Qui10: , (Quick MBA, 2010), BeB16: , (BeBusinessed, 2016), Read More