Strategic management refers to the continuous planning, analysis, monitoring, and of organizational resources to meet the goals and objectives of business (Sekhar 14). The strategic management process comprises of nine critical tasks as outlined below:
- Formulate the organization’s mission, including the statements about its goals, purposes, values, and philosophies.
- Conduct an internal environmental analysis.
- Assess the company’s external environment.
- Analyze the company’s capabilities to achieve its goals by assessing the available internal resources.
- Identify and evaluate desirable options in view of the company’s mission and values.
- Identify and select the most suitable long-term objectives.
- Formulate annual objectives and short-term strategies that are relevant to the company’s long-term goals.
- Use the budgeted resources to implement the company’s strategic choices.
- Evaluate the overall strategic process to identify areas of improvement.
The main Porter’s generic company strategies are cost focus, cost leadership, and differentiation.
Cost leadership entails minimization of costs during the delivery of products and services. Differentiation strategy entails the production of goods and services that are different from those of the competitor. Lastly, organizations use the focus strategy to concentrate on specific market niches.
The remote environment of a business consists of three factors, namely economic, social, and political. Social factors refer to human aspects such as beliefs, traditions, and lifestyles. Differently, economic factors include environmental aspects such as interest rates, purchasing power, unemployment rates, and inflation. Lastly, political factors are governmental and administrative aspects such as laws and programs.
The Porter’s five-force model refers to a simple and powerful tool that businesses can use to enhance their competitiveness.
Competition in the industry: The number of competitors in the market and their ability to threaten the business’ survival
Bargaining power of supplier: The ability of suppliers to drive up the prices of raw materials.
Bargaining power of buyer: Ability of customers to drive down the prices of products or services.
Threat of substitute products: Competitors’ products similar to those of the company
Potential new entrants: New businesses represent a threat to existing industry players.
To attain long-term prosperity, managers need to establish long-term objectives in seven key areas:
Profitability: Ability to generate revenues from sale of products and services
Competitive position: Ability to establish a market niche to ensure long-term stability
Employee relations: Employees must be able to demonstrate the necessary skills and competencies when performing their roles.
Public responsibility: Businesses should ensure that they meet the needs of the public
Productivity: The ability to offer products and services to the market
Employee development: Organizations need to identify the perfect match between employees and job role
Tech leadership: Business must be responsive to the emergent technologies in order to remain relevant.
Leveraging core competencies refer to the ability of a business to exploit its strengths and internal capabilities in order to attain a competitive advantage in the market.
The portfolio approach refers to a business’ competitive strategy based on market share and investment segments (Freeman 68). Businesses use the portfolio approach to assess the feasibility of their internal operational units. The two models that businesses can use to develop the portfolio approach are the Boston Consulting Group Portfolio Matrix and the McKinsey model.
Short-term objectives are useful in the implementation of the overall strategy because they are timed, measureable, and specific.
Short-term objectives have three main qualities:
- Measureable: Short-term objectives have measureable metrics. For example, a marketing manager may have the goal of increasing market share volume by 40%.
- Specific: Organizations have clear goals about the outcomes of short-term objectives. For example, a company can aim to reduce employee turnover by 20% before the end of the year
- Timed: Managers must accomplish short-term objectives within specified time-frames. For example, the HR manager can have the objective of training employees on a new production process within six months
Functional tactics are specific activities that business can execute in various functional areas. Examples of functional tactics in an organization include financial, production, marketing, research, and human resources.
A functional organization is a business that uses the principle of specialization based on functions and roles. Unlike businesses with simple organizational structures, functional organizations are efficient and easier to manage. In addition, functional organizations are able to exploit opportunities in their external environment because of their large resource capabilities.
The two types of divisional structures are territorial divisions and product structure.
Benefits of divisional structures:
- Each division can function independently
- Better utilization of resources
- Timeliness and effectiveness of decisions
Disadvantages of divisional structures:
- Unsuitable for small organizations
- Difficulty in controlling each division from the head office
- Complications of activities may occur in different divisions
Businesses in the 21st century use technology to develop new ideas and to communicate their brands to consumers. Notably, the 21st century organizations may exist in any of the following forms:
- Virtual organizations: Refers to network and independent firms that use technology to temporarily offer products and services. Virtual organizations do not have a physical location and primarily use technology to connect to consumers (Hedberg et al. 122).
- Agile organizations. Refers to businesses that are quick to respond to the emerging changes in the market place or environment. They focus on customers using customized rather than standardized offerings
- Modular organizations: Refers to businesses that can be separated and recombined to attain efficiency
- Learning organizations: Companies that facilitate the learning of their employees to provide solutions to modern business problems
The seven main sources of power for an organizational leader are:
- Coercive power: Ability to impose sanctions and punishments to enforce compliance
- Reward power: Ability enforce compliance through provision of rewards
- Legitimate power: The right to influence others by virtue of job title or position
- Expert power: Ability to gain respect based on skills and experience
- Referent power: Power that one gains based on integrity and ethics
- Information power: Ability to possess or access valuable information
- Connection power: Access to influential individuals who can provide rewards or sanctions
The following are the transformational leadership steps:
- Personalize management style:
- Encourage creativity
- Guide, motivate, and inspire
- Become a role model
The four main leadership styles that are applicable in an organizational setting are:
- Transformational: Individuals lead through vision and inspire others to achieve personal and organizational objectives
- Autocratic: Leaders make decisions on their own without consulting subordinates
- Democratic: Subordinates are actively involved in the decision-making processes
- Strategic: A strategic leader provides a strong sense of purpose and direction
- Transactional: transactional leaders avoid change and instead, maintain the status quo of the organization
Strategic control refers to the organizational process of tracking the formation and execution of strategic plans. The four types of strategic control are:
- Premise control: Designed to systematically check whether the assumptions on which the strategy is based are still valid
- Strategic surveillance control: Designed to monitor a broad range of environmental factors that are likely to affect the implementation of strategy
- Special alert control: The thorough and systematic reconsideration of a firm’s strategy to adjust to a sudden and unexpected occurrence
- Implementation control: Designed to assess whether the manager needs to review the overall strategy
The balanced scorecard model allows managers to evaluate the effectiveness of a company’s strategies from different perspectives. Managers can use the balanced scorecard model to enhance strategic and implementation control through various perspectives, namely financial performance, customer knowledge, internal business processes, and learning and development
The Six Sigma is a tool that organizations use to streamline quality. The Six Sigma is important in the improvement of the current processes, products, and services. The Six Sigma entails six main steps:
- Define: Identify the problem, the customer, and the requirements of the project
- Measure: Establish a data-collection plan
- Analyze: Establish the root cause of any variations to the project
- Improve: Use innovation solutions to eliminate the root cause of defects
- Control: Establish measures to ensure that the project remains on track
Invention refers to the creation or development of a brand new product or device. In contrast, innovation entails making changes to an already existing product through the introduction of new ideas or concepts. The three main types of innovation are:
- Incremental innovation: Use of existing technology to add value to customers
- Disruptive innovation: Involves the application of new technology or process to company’s current market
- Architectural innovation: Businesses use experience and overall technology to modify the current market
- Radical innovation: Entails the creation of new and revolutionary products or services.