BASICS -OF-STRATEGIC-MANAGEMENT

The “Strategy” of a company is a comprehensive master plan which states how the company can achieve its mission and objectives. Strategy which is well built, maximizes competitive advantage of the company and minimizes its competitive disadvantage. 

A typical business company considers three types of strategy – Corporate, Business and Functional.

Corporate Strategy describes a company’s direction on the whole in terms of its general outlook towards growth and its wise management of various businesses and product lines.

Business Strategy usually occurs at the business unit or at product level and improves company’s competitive position through its various products or services either in one industry or many industries.

Functional Strategy / Operational Strategy is usually taken in a functional area such as marketing, operations like Research & development, etc. to achieve corporate or a business unit objectives by maximizing productivity or throughput with limited resources. This strategy helps in developing and nurturing the core competence of the company and gives the company necessary advantage or the edge over the others. Business firms use all these three types of strategies simultaneously to meet their goals and reach their objectives.

Importance of Strategic Management

Research has revealed that companies that engage in strategic management generally do better than those companies that do not follow strategic management. The appropriate match between a company’s environment and its strategy gives a positive impact on a company’s performance. Strategic management is that set of managerial decisions and actions that determine the long-run performance of the company. Strategic management as a field of study incorporates the business policy of the company along with a greater emphasis on environmental factors and its strategy. Strategic management has now evolved so much that its primary value is to operate successfully in a dynamic and complex environment we live in today.

In the past, a competitive strategy simply meant defining a competitive position and protecting it. But with growing technological and functional excellence and advancement, companies are finding that there is no concept of permanent competitive advantage, as we do not have stable environments any more anywhere. In this ever changing dynamic environment companies must develop strategic flexibility, which in turn demands long-term commitment to develop and nurture company’s vital resources. Strategic flexibility demands that a company become a learning organization, which strives to continuously learn, implement and evolve. For an organization to be learning, people at all levels, not just the top management, need to get involved in strategic management and be the part of that learning curve.

Basic Model of Strategic Management:

Strategic Management consists of four basic elements:

·    Environment Scanning – It is to monitor, evaluate and distribute the information acquired from both external and internal environments. The external environment consists of various opportunities or threats outside the organization along with those that operate within a company’s specific task environment. The internal environment consists of strengths & weaknesses of company’s inner circle but those which are not usually within the control of top management in short run such as corporate structure, culture and resources.

·   Strategy Formulation – It consists of development of long – range plans for the effective management of corporate SWOT (Strengths, weakness, opportunities and threats) analysis. Strategy formulation includes corporate mission, objectives, strategies and policy guidelines.

·    Strategy Implementation – It is a process by which strategies and policies are used for the development of programs, financial planning and formulation of procedures of the company, where all these are put into action in such a way that might bring in the changes within overall culture, structure or the system of the whole company and in all areas of its operations.

·     Evaluation & Control – It is a process which monitors the company’s activities and performance results, which are compared with actual vs. desired performance results. Managers of the companies use these results for corrective action and to resolve the problems. Based on performance results management needs to adjust its strategy formulation, implementation or both.

A sound strategic management involves a continual improvement in all these four elements along with a solid feedback system, as it helps the company to strengthen its operations and improve the lacunae in meeting its mission and objectives. 

-          Ms. Madhavi Eswara, Research Scholar (PhD)