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The strategic management process is more than just a set of rules to follow. Every model represents some kind of process. As you can see, it’s easy to get overwhelmed trying to figure out the school of thought of strategic management that best suits your organization. They should conduct a SWOT analysis strengths, weaknesses, Opportunities, and Threats), i.e., they should make best possible utilization of strengths, minimize the organisational weaknesses, make use of arising opportunities from the business environment and shouldn’t ignore the threats. This is the sixth Process of Strategic Management and it means the last stage in strategic planning is the choice of an appropriate strategy for the attainment of specified objectives. So it becomes necessary to evaluate the performance after the strategy implementation. We mentioned above that the main elements of a typical strategic management process include strategic planning followed by implementation, and finally strategic tracking and iteration. iv. Crafting a Strategy 4. Decision-making constitutes an important process in an organisation that looks into aspects like the people who are involved in the decision-making process, the method of information collection, the time span of the decision-making process, and the credibility of the sources of information. Leaders must create a “learning organisation” to ensure that the entire organisation can benefit from individual and collective talents. (iv) The organisation’s structure is suitable or not. Thomson and Strickland write, “Companies whose managers neglect the task of thinking strategically about the company’s future business path or who are indecisive in committing the company to one direction instead of another are prone to drift aimlessly and lose any claim to being an industry leader.”. Such an assessment is necessary because every incident or change will have either positive or negative impact on the business. Before publishing your Articles on this site, please read the following pages: 1. A mission statement should be viewed as the guiding principle for an entire business. While assessing culture, an organisation clearly needs to articulate core values and philosophies that guide day-to-day activities. i. A factor is considered a strength only when a firm has a distinct competency in it than the competitors in the industry. The strategic management process consists of eight steps including strategic planning, evaluation and implementation. Since economic and business situations can change, you should also have alternative approaches for each stage of your strategic management plan. Transformational strategic management involves the transformation of an entire company or organization. Part of that journey is the strategy and part of it is execution. v. An important part of organisational self-assessment is analysis of past strategy that helps identify the loopholes and find out why a particular strategy was not successful. It is a philosophical approach to business. (b) Differentiation – A company following this strategy seeks to build customer loyalty by positioning its goods in a unique or different fashion. It is always incumbent on management to evaluate the organisation’s performance and progress. Strategy formulation is the process of deciding best course of action for achieving organizational objectives. All the organizations have missions that define the significance of those organizations with practical. They include the culture, organisational structure, power dynamics, decision-making process, analysis of the organisation’s past strategy and present mode of functioning and work systems. Valuing Stakeholders (Strategic Constituencies Analysis): Behaviour in and by organisations will be affected in part by values. Strategy Formulation 6. It is concerned with identifying the impact on strategy of the external environment. 01– The first step is the identification of mission, goals and strategies. The requirement of physical assets vary from industry to industry. After an organisation has assessed the internal and external environment, it has to set its goals and objectives. It is the specific collection of values, norms, beliefs, and attitudes shared by people and groups in an organisation. A strategy determines the basic short/long-term goals and objectives of an organization, the course of action to achieve the goals, and the resources necessary for carrying out those goals. Intangible resources include brand name, and goodwill. One cannot exist without the other. Step # 1. The graphic depicts the basic steps of the strategic management process. Strategy control keeps the company’s strategy up to date. : BRG3_1 ST SEM_SY2020-2021 The strategic management process described earlier can be … The steps to be followed for the formulation of a strategy are explained below: The first step in the formulation of a strategy is a clear definition of the mission of the company. i. Capturing attractive growth opportunities. v. Points an organisation in a particular direction and charts a strategic path for it to follow. The information on this site is provided as a courtesy. Various components of models used for analysis of strategic management are quite similar. Strategic management process requires a practical control system. Establishing strategy-supportive policies and operating procedures. The strategic management process defines the organization’s strategy. The firm must analyse its strengths and weaknesses. However, strategy may also emerge through adaptation to circumstances. Strategic management can also be defined as a bundle of decisions and acts which a manager undertakes and which decides the result of the firm’s performance. Future objectives relate to the overall purpose of the firm (mission), what it seeks to become (vision) and specific performance targets. The strategic management process framework typically involves setting clear goals, devising plans, aligning business activities and allocating resources to meet the objectives. Instituting best practices and programmes for continuous improvement. Thus, strategy implementation is concerned with making a variety of managerial decisions such as the type of organisational structure, the type and source of information systems, leadership “fit,” and the type of control mechanism that should be employed.”, Leadership plays a central role, including ensuring that the organisation is committed to excellence and ethical behaviour. It is applicable to both small as well as large organisations as even the smallest organisation faces competition and, by formulating and implementing appropriate strategies, they can attain sustainable competitive advantage. It enables an organization or group to: Identify strengths and weaknesses ii. It is concerned with putting the strategy into operation or translating the strategy into strategic action. Related: Ultimate Guide to Strategic Planning. Evaluation of Strategies. In two – way linkages the strategic planning units and HR are interdependent. So, the strategists should examine whether –, (i) The strategy is relevant to the mission of the company or not, (ii) The strategy is helpful to accomplish the long-term objectives or not, (iii) The strategy is fit to the strategic strengths and weaknesses of the company or not. A strategic management process is a documented set of steps that you'll go through to turn the 'concept' of strategic management into reality for your organization. An important linkage between the phases is established through a feedback mechanism or corrective action. Strategic Process: Vision and Mission. Strategic management is the evaluation of an organization and its customers and competitors to establish and maintain the best management practices. Scholar Michael Porter believes that the critical issue in respect to the external environment is how it impacts competition within the industry. So, the strategists should examine whether –, (i) The strategy satisfies the criterion of ROI to the management or not, (ii) The strategy is acceptable to the shareholders or not, (iii) The strategy will affect the present employees or not, (iv) The strategy will affect the relationship with the existing customers and suppliers or not. f. Winning a stronger foothold in international markets, h. Gaining a sustainable competitive advantage, and. Setting Objectives 3. This involves the local laws and international laws, if the company is operating in the global business environment. A company decides to sell its products online to increase sales. vii. The collective learning of the organisation over time. It involves – (a) analysis of remote environment and (b) analysis of operating environment. Spells out long-term business purpose and molds organisational identify. You can evaluate your progress by comparing the actual results with your plan. (d) The significant opportunities and threats facing the business. (c) Focus – A focus strategy recognizes that not all markets are homogeneous. Building an organisation capable of carrying out the strategy successfully. It involves the examination of certain forces operating in an industry to understand the nature and the degree of competition in that industry. Strategic planning includes the first four strategic management tasks. The strategic management formulation and implementation normally vary from company to company, from product to product, many times even with the changing environment within and outside the organisation, and various other factors. A company should evaluate the strategic management process that can help track the progress levels. Organisational structure, control, and culture are the means by which an organisation motivates, coordinates, and “incentivizes” its members to work towards achieving the building blocks of competitive advantage. Strategic management process starts with the establishment of strategic intent, where- by the firm clearly indicates the position it wants to achieve in future. Building an organisation structure capable of carrying out the strategy successfully. It helps in analyzing the internal and external factors influencing an organization. In the strategic management process 6 steps, the strategists primarily determine objectives and make strategic directions and actions. For the final task, consider writing a mission statement that clearly communicates your objectives to your shareholders and staff. Fourth, managers must formulate effective entrepreneurial initiatives. Identifying the Key Factors for Success in the Business: Key success factors come in a variety of different patterns depending on the industry. To implement the chosen strategy, managers will have to develop the needed organisational capabilities. It is a philosophical approach to business. iii. Collect as much knowledge as you can on how to achieve your vision. It is concerned with a systematic appraisal or examination of the internal capabilities of a firm. The following diagram illustrates the five important steps of strategic management process. Next, create a list of problems that are affecting your company in order of importance. A factor is considered a weakness only when a firm performs it poorly than the competitors in the industry. x. Exerting the internal leadership needed to drive implementation. Second, the HR department analyses the strategies and presents the results of the analysis to the strategic planning department. In this linkage, HR functions are integrated into the formulation and implementation of the strategy. After executing the process, management should evaluate it on a continuous basis and strive to improve it. Share Your PPT File, What is Strategic Management Process – Steps, Stages and Phases, What is Strategic Management Process – Top 5 Steps in Strategic Management Process (With Introduction), ii. ii. This can be approached by a technique known as SWOT analysis – the internal analysis of organisational Strengths and Weaknesses as well as the external analysis of environmental Opportunities and Threats. Effective control systems should be developed to align employee goals with the goals of the organisation. Successful strategy evaluation starts with determining the parameters to be measured. Make sure you assign each of your staff members a task they can perform effectively. (c) Other organisations that may threaten the success of a firm’s products. Establishing Goals and Objectives and 5. It necessitates three interrelated activities of (i) Determination of annul objectives, (ii) Development of specific functional strategies, and (iii) Development of policies. Place the steps in the strategic-management process in the correct order, with the first step listed at the top. The strategic management process is more than just a set of rules to follow. These may be controllable variables that determine the relative success of market participants. It is concerned with devising a suitable plan of action after studying the external business environment, analysing the industry and assessing the internal capabilities of the business concern. Translate the Mission into Strategic Goals: 4. Evaluating Performance, Monitoring New Developments, and Initiating Corrective Adjustments. Strategic … The managerial skill here is figuring out what must be done to put the strategy in place, carry it out proficiently, and produce good result.”. The 5 steps stated above may have to be revisited multiple times and still the results may differ. Allocating company resources so that organisational units charged with performing strategy-critical activities and implementing new strategic initiatives have sufficient people and funds to do their work successfully. Revising compensation practices, and. i. The strategic management process defines the organization’s strategy. It should tell a company, its employees, vendors, customers, investors, the goal of the organisation. vi. Work systems are concerned with the design of the jobs and the responsibilities that have to be assigned to the employees. Strategic choices can be distilled to two basic questions: The answers to these questions also define the major areas of a firm’s strategy – corporate strategy and business strategy. This phase is succeeded by evaluation of strategies. These steps provide the foundation for understanding strategic management as a whole and will serve you well as you deal with management decision-making situations. Fast-paced innovation, dynamic technologies and ever-so-challenging customer expectations have forced organizations to think and make decisions strategically to remain successful. A systematic internal analysis of the firm involves (a) identification of strategic internal factors and (b) evaluation of the strategic internal factors to identify the key strategic strength and weakness. How to achieve strategic and financial objectives. The process through which the groups and departments interact for accomplishment of the organisational goals can have an impact on the performance of the employees. Purpose – What is the project designed to accomplish? Increased competitiveness and stronger business position. It communicates ‘who we are, what we do, and where we are headed’. By following the strategic management process an enterprise can easily plan for its success. Developing Vision, Mission and … Most often, the strategic planning process has 4 common phases: strategic analysis, strategy formulation, implementation and monitoring (David, Johnson, Scholes & Whittington, Rothaermel, Thompson and Martin). 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