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Strategic management is a field that deals with the major intended and emergent

initiatives taken by general managers on behalf of owners, involving utilization of


resources, to enhance the performance of firms in their external environments. It entails
specifying the organization's mission, vision and objectives, developing policies and
plans, often in terms of projects and programs, which are designed to achieve these
objectives, and then allocating resources to implement the policies and plans, projects and
programs.

Strategic management is a level of managerial activity under setting goals and over
Tactics. Strategic management provides overall direction to the enterprise and is closely
related to the field of Organization Studies.

“Strategic management is an ongoing process that evaluates and controls the business and
the industries in which the company is involved; assesses its competitors and sets goals
and strategies to meet all existing and potential competitors; and then reassesses each
strategy annually or quarterly [i.e. regularly] to determine how it has been implemented
and whether it has succeeded or needs replacement by a new strategy to meet changed
circumstances, new technology, new competitors, a new economic environment., or a
new social, financial, or political environment.”

Strategic Choices

International business firms can use 4 basic strategies:

• International
• Multidomestic
• Globalization
• Transnational

"An international strategy is a strategy through which the firm sells its goods or
services outside its domestic market" (Hill 378). One of the primary reasons for
implementing an international strategy (as opposed to a strategy focused on the domestic
market) is that international markets yield potential new opportunities.

Multidomestic strategy is a strategy by which companies try to achieve maximum local


responsiveness by customizing both their product offering and marketing strategy to
match different national conditions. Production, marketing and R&D activities tend to be
established in each major national market where business is done.

Multinational companies gain economies of scale through shared overhead and market
similar products in multiple countries. Multi domestic companies have separate
headquarters in different countries, thereby attaining more localized management but at
the higher cost of forgoing the economies of scale from cost sharing and centralization.
Global strategy as defined in business terms is an organization's strategic guide to
globalization. A global strategy may be appropriate in industries where firms are faced
with strong pressures for cost reduction but with weak pressures for local responsiveness.
Therefore, it allows these firms to sell a standardized product worldwide. These firms are
able to take advantage of economies of scale, because it is able to mass-produce a
standard product which can be exported (providing that demand is greater than the costs
involved).

Global strategies require firms to tightly coordinate their product and pricing strategies
across international markets and locations, and therefore firms that pursue a global
strategy are typically highly centralized.

The transnational strategy is an international marketing method that, according to the


Institute for Working Futures, "seeks to combine the benefits of global-scale efficiencies
with the benefits of local responsiveness" rather than settling for the limitations of either
strategy.

Strategic Management Process

The strategic management process is made up of 4 elements: situation analysis, strategy


formulation, strategy implementation, and strategy evaluation. These elements are steps
that are performed, in order, when developing a new strategic management plan. Existing
businesses that have already developed a strategic management plan will revisit these
steps as the need arises, in order to make necessary changes and improvements.

Situation Analysis

Situation analysis is the first step in the strategic management process. The situation
analysis provides the information necessary to create a company mission statement.
Situation analysis involves "scanning and evaluating the organizational context, the
external environment, and the organizational environment". This analysis can be
performed using several techniques. Observation and communication are two very
effective methods.

To begin this process, organizations should observe the internal company environment.
This includes employee interaction with other employees, employee interaction with
management, manager interaction with other managers, and management interaction with
shareholders. In addition, discussions, interviews, and surveys can be used to analyze the
internal environment.

Organizations also need to analyze the external environment. This would include
customers, suppliers, creditors, and competitors. Several questions can be asked which
may help analyze the external environment. What is the relationship between the
company and its customers? What is the relationship between the company and its
suppliers? Does the company have a good rapport with its creditors? Is the company
actively trying to increase the value of the business for its shareholders? Who is the
competition? What advantages do competitors have over the company?

Strategy Formulation

Strategy formulation involves designing and developing the company strategies.


Determining company strengths aids in the formulation of strategies. Strategy
formulation is generally broken down into three organizational levels:
• Functional
• Business
• Corporate

Functional strategies are short-term and are associated with the various
operational departments of the company, such as human resources, finance,
marketing, and production. These strategies are department specific. For example,
human resource strategies would be concerned with the act of hiring and training
employees with the goal of increasing human capital.

Business strategies are those associated with methods of competing in a certain


business or industry. Knowledge of competitors is required in order to formulate a
competitive strategy. The company must learn who its competitors are and how
they operate, as well as identify the strengths and weaknesses of the competition.
With this information, the company can develop a strategy to gain a competitive
advantage over these competitors.

Corporate strategies are long-term and are associated with "deciding the optimal
mix of businesses and the overall direction of the organization"
In general there are 4 categories:
 Growth: These strategies can be promoted internally by investing in expansion &
can be promoted externally by acquiring additional business divisions.
 Stability: Stability, sometimes called a pause strategy, means that the
organization wants to remain the same size or to grow slowly and in a controlled
manner.
 Retrenchment: Forced decline either by shrinking current business units or selling
off or liquidating entire business.
 Combintaion: These strategies include all possible combinations of the strategies.

Strategy Implementation

Strategy implementation involves putting the strategy into practice. This includes
developing steps, methods, and procedures to execute the strategy. It also includes
determining which strategies should be implemented first. The strategies should be
prioritized based on the seriousness of underlying issues. The company should first
focus on the worst problems, then move onto the other problems once those have
been addressed.
Implementing strategy tools:
 Leadership:
n Persuasion
n Motivation
n Culture/values
 Structural design:
 Organization Chart
 Teams
 Centralization
 Decentralization,
 Facilities, task design
 Information and control systems:
 Pay, reward system
 Budget allocations
 Information systems
 Rules/procedures
 Human resources:
 Recruitment/selection
 Transfers/promotions
 Training
 Layoffs/recalls

Strategy Evaluation

Strategy evaluation involves "examining how the strategy has been implemented as
well as the outcomes of the strategy". This includes determining whether deadlines
have been met, whether the implementation steps and processes are working
correctly, and whether the expected results have been achieved. If it is determined
that deadlines are not being met, processes are not working, or results are not in line
with the actual goal, then the strategy can and should be modified or reformulated.

Both management and employees are involved in strategy evaluation, because each is
able to view the implemented strategy from different perspectives. An employee may
recognize a problem in a specific implementation step that management would not be
able to identify.

The strategy evaluation should include challenging schedules and timetables that are
achievable. If it is impossible to achieve the schedules and timetables, then the
expectations are unrealistic and the strategy is certain to fail.
Conclusion

The strategic management process is a continuous process. "As performance results


or outcomes are realized - at any level of the organization - organizational members
assess the implications and adjust the strategies as needed" (Coulter, 2005, p. 9). In
addition, as the company grows and changes, so will the various strategies. Existing
strategies will change and new strategies will be developed. This is all part of the
continuous process of improving the business in an effort to succeed and reach
company goals.

Strategic management is of vital importance as CEOs and managers have to


constantly reassess their strategy management models and implement change and
improvement wherever needed.