Without a strategy an organization is a ship without a rudder, Competitive going around in circles. It’s like a tramp; it has no place to go”- Joel Ross and Michael Kami
Have you ever heard of a company that made big profits during recession? In the year 2008, most of the big organizations all across the world were trying hard to get through the recession period. During those tough times there was only one company that increased its revenues from $22.7 billion in 2007 to $23.5 billion in 2008. The company was McDonald’s and in the year 2009, the company was rated by the esteemed Fortune Magazine as their “16th Most Admired Company in the World” for their successful efforts in management and performance. Those times were really tough and most of the small and medium sized businesses were shutting down their doors because of the lack of funds and sales. Amazingly during those tough years when most of the companies were struggling to maintain a stable position in the market, McDonald’s added 650 new outlets to its umbrella in the year 2009. Jim Skinner CEO of McDonald’s said “We do so well because our strategies have been so well planned out”.
Strategic Management
What Actually is Strategic Management?
Strategic management defines the power of the company to survive during tough times in the market. Strategic management focuses on formulation of strategies that help a company achieve and maintain competitive advantage. Walmart creates a competitive advantage for itself by providing competitive products at a very low cost to its customers. According to David “Strategic management can be defined as the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives”. Strategic management is often referred to as strategic planning in the corporate world. The term strategic planning originated in the year 1950’s and since then it has gained huge popularity in the corporate world.
Strategic Management Process
Strategic planning involves making a game plan which is also known as the strategy of the company. Any successful mission needs a strategy or a game plan. A cricket match played by a team of cricketers requires a strategy or a game plan for the entire team to achieve success on the field. Strategy involves getting all the strategic elements together and putting them in one place for efficient execution.
Different Stages of Strategic Management
Strategy starts at the top level of the company and then it moves to lower levels within the organization. Every department right from HR to Marketing has a strategy in place and it is the need of the organization to align these independent strategies with the common objectives of the organization within a particular time frame. Why does it happen that the companies start reducing their recruitment and training budgets when they see a global recession coming in the near future? All these activities are a small part of the bigger strategic management process that can be created in various steps.
Strategy Formulation
Strategy formulation is the first step in strategic planning. Strategy formulation involves:
Creating a Vision and Mission for the organization
Identifying External Opportunities and Threats for the organization
Deciding on Internal strengths and Weaknesses of the organization
Establishing long-term objectives for the organization
Creating Alternative Strategies for the organization
Deciding on which Competitive Strategy to use for success
Formulating a strategy is a long-term process and an organization’s top management should use their authority to commit the resources required for the successful implementation of the chosen strategy.
Strategy Implementation
Strategy implementation effort by an organization requires:
Establishing annual objectives
Devising Policies
Motivating employees
Allocating required resources for the implementation of the formulated strategies
An organization needs to create an effective organizational structure, link employee pay to organizational performance, prepare the required budgets for various departments and redirect its marketing efforts in the right direction for the successful implementation of the formulated strategies. Implementation of the formulated strategies requires bringing all the core processes of an organization under the umbrella of one single organizational objective that can be achieved, with the help of the strategy in action. Strategy implementation brings about a ‘change’ in the strategic management process of an organization and this change impacts each and every employee within the organization. An organization undergoing any kind of change needs strong interpersonal skills to make the employees understand the reason behind the change and the objectives that need to be accomplished with the help of the undergoing change. This helps in motivating the managers and the employees during the implementation process of the formulated strategy.
Strategy Evaluation
This is the final step in strategic management process. This step involves:
Reviewing internal and external factors that are the bases for the current strategy
Measuring Performance
Taking Corrective Actions
The whole process of strategic planning takes place at three hierarchical levels within an organization: corporate, divisional or strategic business unit and functional. The success of the strategic management process depends on the communication within the organization as it helps the organization work as a competitive team for achieving the required objectives successfully.
