STRATEGIC MANAGEMENT

STRATEGIC MANAGEMENT What is strategic management? Strategic management can be used to determine mission, vision, values, goals, objectives, roles and responsibilities, timelines, etc. Strategic management process has following four steps:
1. Environmental ScanningEnvironmental scanning refers to a process of collecting, scrutinizing and providing information for strategic purposes. It helps in analyzing the internal and external factors influencing an organization. After executing the environmental analysis process, management should evaluate it on a continuous basis and strive to improve it. 2. Strategy FormulationStrategy formulation is the process of deciding best course of action for accomplishing organizational objectives and hence achieving organizational purpose. After conducting environment scanning, managers formulate corporate, business and functional strategies. 3. Strategy ImplementationStrategy implementation implies making the strategy work as intended or putting the organizations chosen strategy into action. Strategy implementation includes designing the organizations structure, distributing resources, developing decision making process, and managing human resources. 4. Strategy EvaluationStrategy evaluation is the final step of strategy management process. The key strategy evaluation activities are: appraising internal and external factors that are the root of present strategies, measuring performance, and taking remedial / corrective actions. Evaluation makes sure that the organizational strategy as well as its implementation meets the organizational objectives.

These components are steps that are carried, in chronological order, when creating a new strategic management plan. Present businesses that have already created a strategic management plan will revert to these steps as per the situations requirement, so as to make essential changes.

Components of Strategic Management Process Strategic management is an ongoing process. Therefore, it must be realized that each component interacts with the other components and that this interaction often happens in chorus. Type of Organizational Strategies There are two types of organizational strategies Corporate Level Strategies Every business leader would like to create a sound strategy and have it executed well. Accomplishing this, however, remains an elusive goal for most business organizations. Devising and implementing new and innovative strategies to exploit opportunities in a competitive world is daunting. Clearly, no one corporate level strategy fits all companies. The functional strategies involve creating competencies throughout the organization to support the business strategy. The functions are generally considered to include marketing, production/operations, human resources, and finance. Detailed plans should be developed for various levels of the organization, all consistent with the articulated corporate level strategy. Business Level Strategies An organization's core competencies should be focused on satisfying customer needs or preferences in order to achieve above average returns. This is done through Business-level strategies. Business level strategies detail actions taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product or service markets. Business-level strategy is concerned with a firm's position in an industry, relative to competitors and to the five forces of competition. Customers are the foundation or essence of a organization's business-level strategies. Who will be served, what needs have to be met, and how those needs will be satisfied are determined by the senior management.

Five Competitive Forces

THREAT OF NEW ENTRANTS

Barriers to Entry Absolute cost advantages Proprietary learning curve Access to inputs Government policy Economies of scale Capital requirements Brand identity Switching costs Access to distribution Expected retaliation Proprietary products

THREAT OF SUBSTITUTES

Switching costs Buyer inclination to substitute Price-performance Trade-off of substitutes

BUYER POWER

Bargaining leverage Buyer volume Buyer information Brand identity Price sensitivity Threat of backward integration Product differentiation Buyer concentration vs. industry Substitutes available Buyers' incentives

 SUPPLIER POWER

Supplier concentration Importance of volume to supplier Differentiation of inputs Impact of inputs on cost or differentiation Switching costs of firms in the industry Presence of substitute inputs Threat of forward integration Cost relative to total purchases in industry

DEGREE OF RIVALRY

Exit barriers Industry concentration Fixed costs/Value added Industry growth intermittent overcapacity Product differences Switching costs Brand identity Diversity of rivals corporate stakes