Chapter 1 What is Strategic Management Show
Strategic Management The analyses, decisions, and actions an organization undertakes in order to create and sustain competitive advantages. The essence of strategic management is the study of why some firms outperform others: strategy is all about being different from everyone else. The four key attributes of Strategic Management are: 1) It is directed toward overall organizational goals and objectives; 2) It includes multiple stakeholders in decision making; 3) It requires incorporating both short-term and long-term perspectives; 4) It involves the recognition of trade-offs between effectiveness and efficiency. Stakeholders Individuals, groups, and organizations who have a stake in the success of the organization, including owners (shareholders in a publicly held corporation), employees, customers, suppliers, and the community at large. Stakeholder Group Nature of claim Stockholders - dividends, capital appreciation. Employees - wages, benefits, safe working environment. Suppliers - payment on time, assurance of continued relationship. Creditors - payment of interest, repayment of principal. Customers - value, warranties Government - taxes, compliance with regulations. Communities - good citizenship behavior such as charities, employment, not polluting the environment. Effectiveness Tailoring actions to the need of an organization rather than wasting effort, or “doing the right thing.” Efficiency Performing actions at a low cost relative to a benchmark, or “doing things right.” Operational Effectiveness Performing similar activities better than rivals. Ambidexterity The challenge mangers face of both aligning resources to take advantage of existing product markets as well as proactively exploring new opportunities. The Strategic Management Process Three ongoing processes that are central to strategic management are analyses, decisions and actions. These three processes, referred to as strategy analysis, formulation and implementation, are highly interdependent. An alternative model of strategy development : Intended strategy: strategy in which organizational decisions are determined only by analysis. Realized strategy: strategy in which organizational decisions are determined by both analysis and unforeseen environmental developments, unanticipated resource constraints, and/or changes in managerial preferences. The Role of Corporate Governance and Stakeholder Management Corporate Governance The relationship among various participants in determining the direction and performance of corporations. The primary participants are: 1) the shareholders; 2) the management (led by the chief executive officer); 3) the board of directors.Generating long- term returns for the shareholders is the primary goal of a publicly held corporation.
Strategic management is a set of decisions and actions used to formulate and execute strategies that will provide a superior fit between the organization and its environment and helps to achieve organizational goals. The main features or characteristics of strategic management are mentioned below: Facilitates Strategy ImplementationOne of the main characteristics of strategic management is that it facilitates the effective implementation of strategy or strategies. Formation and implementation of strategies are the main functions of strategic management for achieving organizational goals. In addition, the essence of strategic management lies in the implementation of strategy – if strategies are only formulated and not implemented this can not be strategic management. Directed Towards Overall Direction of an OrganizationStrategic management means influencing the overall direction of the organization. It includes the top management decisions and actions to direct the overall activities to achieve certain defined objectives. Goals and objectives are set at both functional and organizational levels. They include production goals, marketing goals, human research goals, research & development goals, and financial goals. Goals should be in such a way that there is a high degree of rationality between the functional and organizational goals. Strategic management is always directed toward the overall direction and set of goals and objectives of the organization that help to reach there. Multiple Stakeholders in Decision MakingStakeholders are people or organizations who have a say in how a company operates and achieves its goals. In a company, there are numerous stakeholders. Customers, employees, suppliers, labor unions, financial institutions, social institutions, and the government are among them. They all have distinct reasons for being a part of the organization. They will continue to support a company until it meets or surpasses their expectations. Organizations that manage stakeholder interactions efficiently perform well. In strategic decision-making, stakeholder support is critical. Ambitious/UncertainStrategic management is nothing but the planning of predictable and unfeasible contingencies. It operates in an uncertain environment. It develops plans ambitiously though it guarantees positive results sometimes the results are uncertain or unexpected. ComplexStrategic management is a complex phenomenon. It operates in an environment that is uncertain and unpredictable. As the environment is uncertain, the uncertainty leads to complexity. Managers need to be more focused on the complexities of the environment and analyze forces that may affect the setting of long-term objectives. FundamentalStrategic management is fundamental for the organization. Without a strategy, an organization looks like a ship moving around a circle with no rudder. Strategy is the crucial means for the organization without it the organization could not achieve its goals. Future-Oriented or Long-Term ImplicationsStrategic management talks about the future prospects and influences the future growth of the organization. It could have set objectives of more than five years. It has the least focus on the short objectives of the organization. It predicts the future, reads market conditions, analyzes likely threats & opportunities of environments, and sets objectives that influence the long-term goals of the organizations. Doing so concerns the organization’s vision, mission, and objectives. Incorporation of Both Long-Term and Short-Term ObjectivesThe desired outcomes over a set length of time are referred to as objectives. Strategic management takes into account both long- and short-term goals. Managers must retain both a vision for the organization’s future as well as a focus on its current operational requirements. According to studies, corporate leaders frequently take a short-term approach to the cost of long-term shareholder value creation. Short-term objectives must be met in order to achieve long-term goals. They should not, however, be overemphasized at the expense of long-term goals. Trade-Off Between Effectiveness and EfficiencyEffectiveness is tailoring actions to the need of an organization rather than wasting efforts whereas efficiency is performing actions at a low cost relative to a benchmark. In other words, effectiveness is doing the right things and efficiency is doing things right. Strategic management is directed toward establishing a trade-off between effectiveness and efficiency. It has a short-term focus to maintain efficiency and a long-term focus to anticipate opportunities in the competitive environment for effectiveness. Competitive AdvantageA firm’s resources and competencies that enable it to overcome the competitive dynamics in its industry are referred to as competitive advantage. It is a company’s competitive advantage over its competitors. When a company implements a strategy that its competitors are unable to duplicate or find too costly to imitate, it gains a competitive advantage. Firms must realize that no competitive advantage lasts forever. Increase the value of the product to enhance customer satisfaction to get a competitive advantage. It is critical to an organization’s success. As a result, strategic management focuses on developing competitive advantages that are distinct, valued, and difficult to copy or imitate by competitors. Strategic FitThe right match between organizational strengths and opportunities in the environment is known as a strategic fit. The search for a strategic fit with the company environment can be viewed as strategic management. An organization’s strategic fit prepares it to deal with environmental uncertainty. As a result, strategic management strives for a strategic fit in order to achieve superior results. A Means OnlyStrategic management is only a means to achieve organizational goals. In other words, it is not the end itself. It may not work in many instances especially when the assumptions on strategy formulation change during strategy implementation and poor control has been exercised. Hence, strategic management does not always guarantee success. What is directed toward overall organizational goals and objectives?First, strategic management is directed toward overall organizational goals and objectives. That is, effort must be directed at what is best for the total organization, not just a single functional area.
What is the main purpose of strategic management in an organization?Strategic management provides overall direction by developing plans and policies designed to achieve objectives and then allocating resources to implement the plans. Ultimately, strategic management is for organisations to gain a competitive edge over their competitors.
What are the 2 types of strategic management?In our experience, there are two key types of strategic planning that organizations undertake: internal strategic planning for the future and building a competitive strategy for the external marketplace.
What are the 3 role of strategic management?A: The general roles of strategic management are:- 1. Strategic Visionary 2. Strategic Leader and Decision Maker 3. Creating Superior Performance and Competitive Advantage 4.
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