Strategic Management Process

Definition: strategic management is the set of managerial decisions and actions that determines the long-run performance of an organization. It involves all the four functions of management. Strategic plans provide a common vision for the whole organization. The strategic management process is a series of steps that formulates the strategic planning, implementation and evaluation. Step 1: The first step is identifying organization’s current mission, objectives and strategies. Every organization needs a mission.

Defining the organization’s mission forces managers to carefully identify the scope of its products and services. It is also important for managers to identify the goals currently in place and the strategies currently being pursued. A company’s goals provide the measurable performance targets that employees strive to reach. Knowing the company’s current goals gives managers a basis for assessing whether those goals need to be changed. For the same reasons, it is important for managers to identify the organization’s current strategies.

Step2: The second step is external analysis. Analyzing the environment is a critical step in strategy process. Managers in every organization need to do external analysis. They need to know, for instance, what the competition is doing, what pending legislation might affect the organization, or what the labor supply is like in locations where it operates. In analyzing the external environment, managers should examine both the specific and general environments to see what trends and changes are occurring.

After analyzing the environment, managers need to assess what they have learned in terms of opportunities that the organization can exploit, and threats that it must counteract. The same environment can present opportunities to one organization and pose threats to another in the same industry because of their different resources and capabilities. For example, southwest Airlines has prospered in a turbulent industry, while others such as American and Delta have struggled. Step3: The third step is internal analysis.

This step forces managers to recognize that every organization, no matter how large or successful, is constrained by the resources and capabilities it has available. An understanding of the organization’s culture is a crucial part of Step 3 that’s often overlooked. Managers should be aware that strong and weak cultures have different effects on strategy and that the content of a culture has a major effect on strategies pursued. The combined external and internal analyses are called he SWOT analysis because it’s an analysis of the organization’s strengths, weaknesses, opportunities, and threats. Based on the SWOT analysis, managers can identify a strategic niche that the organization might exploit. Step4: the forth step is formulating Strategies. Once the SWOT analysis is complete, managers need to develop and evaluate strategic alternatives, then select strategies that capitalize on the organization’s strengths and exploit environmental opportunities or that correct the organization’s weaknesses and buffer against threats.

Strategies need to be established for the corporate, business, and functional levels of the organization. This step is complete when managers have developed a set of strategies that give the organization a relative advantage over its rivals. Step5: the fifth step is implementing strategies. To be successful, strategies must be implemented carefully. People with the right skills may be needed to make some of the strategies to work. Re-organizing the existing structure to meet the new business environment may be necessary as well.

Employees and managers at all level must be briefed about the strategy, so that there will be a unified vision in the organization. Step6: the sixth step is evaluating the strategies implemented. The actual performance is measured and compared against set standards. If necessary, corrective action is taken. Anne Mulcahy, chairman and CEO of Xerox Corporation, made strategic adjustments to improve her company’s competitiveness in the information services industry. She did this after assessing the results of previous strategies and determining that changes were needed.

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