Strategic Management Process

Strategic Management Process Strategic management is an ongoing process of managing an organization strategically. This involves a set of management decisions and actions that result in formulating and implementing strategies that determine the performance and success of the organization. The focus is primarily on large-scale, future-oriented strategies that allow an organization to achieve its objectives, considering the environment in which it operates. Strategic management requires good strategic thinking to be successful. As you read this module and study the strategic management model it describes, try to avoid "losing sight of the forest because of all the trees," i.e., becoming so focused on the model that you lose sight of the fundamental importance of thinking strategically. Strategy-making is an ongoing effort that proceeds on two fronts: one proactively through analysis and thought in advance, the other emerging and/or conceived in response to new developments, special opportunities, and experience with prior strategic actions. You need to understand the model very well and use it throughout the course, but your application of the model will be of little value without good strategic thinking. Please read several times the module on strategic and critical thinking. It also will be helpful to read the page on strategic management terms before proceeding with this rest of this module. As we consider business cases, and actual strategic management situations, we are primarily trying to answer a framework of questions such as: What are the current purposes and strategy of the firm? What are its strengths and weaknesses? What are the major opportunities and threats in the firm's environment? And, how can those organizational capacities and industry opportunities be related effectively? A complementary perspective is that we are trying to answer three deceptively simple questions for each organization at a particular time: (1) where are we (the organization) now? (2) where do we need to or want to be? (3) how do we get there? Throughout this course, we will use a model of the strategic management process that has three phases: diagnosis, formulation, and implementation. These three phases are outlined below, including a summary table, and are discussed in more detail in three separate modules: Diagnosis This component or phase of the strategic management process (and case analysis process) includes: (1) performing a situation analysis (analysis of the internal environment of the organization), including identification and evaluation of current mission, strategic objectives, strategies, and results, plus major strengths and weaknesses; (2) analyzing the organization's external and competitive environment, including major opportunities and threats; and (3) identifying and discussing the major critical issues, which are a small set of major problems, threats, weaknesses, and/or opportunities that require particularly high priority attention by management. You should be sure you are dealing with causal problems rather than their results and symptoms. Both immediate and long-range problems should receive attention. The final result or output of the diagnosis phase should be a precise, clear statement of the critical strategic issues to be addressed. Formulation The output of this phase should be a clear set of recommendations, with supporting justification, that revise as necessary the mission and objectives of the organization, and supply the strategy and plans for accomplishing them. Your recommendations should cover: 1. Corporate-level strategy - with three components: (a) growth or directional strategy (what should be our growth objective, ranging from retrenchment through stability to varying degrees of growth - and how do we accomplish this), (b) portfolio strategy (what should be our portfolio of lines of business, which implicitly requires reconsidering how much concentration or diversification we should have), and (c) parenting strategy (how we allocate resources and manage capabilities & activities across the portfolio - where do we put special emphasis, and how much do we integrate our various lines of business) 2. Competitive (or business-level) strategy - (i.e., how we will compete within each business or industry segment) 3. (Possibly) Other strategies - sometimes functional-level strategies, to finish addressing address all your Critical Issues (usually, most {possibly, all}of your CIs will have been addressed in your recommendations regarding corporate-level and competitive strategy). It is important to consider "fits" between resources plus competencies with opportunities, or between risks and expectations. A good recommendation should be: effective in solving the stated problem(s), practical (can be implemented in this situation, with the resources available), feasible within a reasonable time frame, cost-effective, not overly disruptive, and acceptable to key "stakeholders" in the organization. In developing your recommendations, especially those to address the Critical Issues, your process should have three primary elements: (a) formulating a rich range of strategic alternatives to address the major issues, (b) evaluating the alternatives in terms of feasibility and expected effects on the problem(s) and other outcomes, (c) deciding on the alternatives to be implemented/recommended. Implementation In business, and in the practice of strategic management, plans must be implemented to achieve the intended results. The most wonderful plan in the history of the world is useless if not implemented successfully -- and it is not acceptable just to complain "they didn't support it." Recommendations about implementation are a vital part of a case analysis, and you will be expected to provide a specific implementation plan as part of the recommendations for cases. The implementation plan is basically a sequence of action steps necessary to bring about the chosen new (or change in) strategy, derived from considering: what has to be done, how will it get done, who will do it, when will it be done, where will it be done, and why are we doing it this way (i.e., provide key elements of the reasoning). Among the topics to be considered you address these six key questions and design the implementation steps are: resources (financial, human, physical, technological) and including action steps to obtain needed resources that you don't have initially, reward systems, timing and sequencing of the actions, developing and maintaining support for change, organization structure, and how to monitor and control the implementation to produce the desired results. Developing a detailed implementation plan, as you might do for an important change in a company, can take a lot of effort and become a lengthy document. However, for the major case reports in this course, your plan can be much simpler. The final plan would be only 1-2 pages in a 20-page report, so you can/need not go into great detail. Your final plan should be a numbered set of the major action steps necessary to effect the strategic change(s) you have recommended, considering the key six questions plus topics given earlier in this paragraph. You should provide some text, not just an outline. The steps should be arranged in a sequence that reflects general timing and constraints. COMPONENT DIAGNOSIS Basic question Where are we (org. in context of environment)? Output/product Set of critical issues (CIs) plus improved understanding of the organization & its environment FORMULATION Where do we need/want to be? Strategy-level recommendations to ensure success & address the critical issues * Identify & critique current 1. Formulate rich range of mission, objectives, & (especially) alternatives strategies 2. Evaluate alternatives, including feasibility & * Analyze data about external & effects on issues internal environment to evaluate 3. Select a set performance plus identify SWOT * Need clear & CIs recommendations with supporting justification * External: competitive * May revise mission, environment (5-force model) + objectives, strategies societal environment * Three levels of strategy (political/legal, technological, recommendations: economic, sociocultural) + corporate, competitive, and stakeholders. Also social "other" responsibility IMPLEMENTATION How do we get there? Process & elements * Plan is a set of basic action steps addressing: what, how, who, where, when & why - is necessary to make the strategy work. - Recommendations should be: effective in solving problems, practical, feasible, cost-effective, & acceptable to key - No set protocol or checklist. Do stakeholders what is necessary to understand & - Is vital to ensure that all develop CIs. Analysis is CIs have been addressed a means to this end. adequately - Consider both immediate and long-range problems - causes rather than symptoms. * Internal functional areas: financial; marketing; production/operations; technology; organizational Successful implementation of the strategies (an implementation plan, for this course) * Resources (financial, human, physical, technological) * Obtaining & maintaining support for changes * Reward systems * Timing (especially sequencing & constraints) * Organization structure * Tracking & control systems * Leadership, managing change - Those who implement & are affected by strategy changes are often different from those who formulate the changes (often producing the "NIH syndrome")