STRATEGIC MANAGEMENT

STRATEGIC MANAGEMENT

The Strategic Management Process

The strategic management process consists of three, four, or five steps depending upon how the different stages are labeled and grouped. But all of the approaches include the same basic actions in the same order. A brief description of these steps follows:

1. Strategic Objectives and Analysis. The first step is to define the vision, mission, and values statements of the organization. This is done in combination with the external analysis of the business environment (PESTEL) and internal analysis of the organization (SWOT). An organization’s statements may evolve as information is discovered that affects a company’s ability to operate in the external environment.
2. Strategic Formulation. The information from PESTEL and SWOT analyses should be used to set clear and realistic goals and objectives based on the strengths and weaknesses of the company. Identify if the organization needs to find additional resources and how to obtain them. Formulate targeted plans to achieve the goals. Prioritize the tactics most important to achieving the objectives. Continue to scan the external environment for changes that would affect the chances of achieving the strategic goals.
3. Strategic Implementation. Sometimes referred to as strategic execution, this stage is when the planning stops and the action begins. The best plans won’t make up for sloppy implementation. Everyone in the organization should be aware of his or her particular assignments, responsibilities and authority. Management should provide additional employee training to meet plan objectives during this stage, as well. It should also allocate resources, including funding. Success in this stage depends upon employees being given the tools needed to implement the plan and being motivated to make it work.
4. Strategic Evaluation and Control. Because external and internal conditions are always changing, this stage is extremely important. Performance measurements (determined by the nature of the goal) will help determine if key milestones are being met. If actual results vary from the strategic plan, corrective actions will need to be taken. If necessary, reexamine the goals or the measurement criteria. If it becomes apparent that the strategy is not working according to plan, then new plans need to be formulated (see Step 2) or organizational structures adjusted. Personnel may need to be retrained or shifted to other duties. You may even have to repeat the strategic management process from the beginning, including the information and knowledge gained from this first attempt.

Strategic management is the continuous planning, monitoring, analysis and assessment of all that is necessary for an organization to meet its goals and objectives. Fast-paced innovation, emerging technologies and customer expectations force organizations to think and make decisions strategically to remain successful. The strategic management process helps company leaders assess their company's present situation, chalk out strategies, deploy them and analyze the effectiveness of the implemented strategies. The strategic management process involves analyzing cross-functional business decisions prior to implementing them. Strategic management typically involves:

• Analyzing internal and external strengths and weaknesses.
• Formulating action plans.
• Executing action plans.
• Evaluating to what degree action plans have been successful and making changes when desired results are not being produced.

Importance of strategic management

Strategic management necessitates a commitment to strategic planning, which represents an organization's ability to set both short- and long-term goals, then determining the decisions and actions that need to be taken to reach those goals.

The strategic management process is a management technique used to plan for the future: Organizations create a vision by developing long-term strategies. This helps identify necessary processes and resource allocation to achieve those goals. It also helps companies strengthen and support their core competencies.

By determining a strategy, organizations can make logical decisions and develop new goals quickly to keep pace with the changing business environment. Strategic management can also help an organization gain competitive advantage and improve market share.

SWOT analysis

A SWOT analysis is a crucial element of strategic management by helping companies identify their strengths, weaknesses, opportunities and threats. The SWOT analysis helps detect and analyze internal and external environments and other factors that may impact the business, and helps organizations prepare for the future. It also aids decision-makers by analyzing key aspects of their organizational environment to help formulate competitive strategies.

   

The process is helpful when determining whether the firm's resources and abilities will be effective in the competitive environment within which it has to function, and when developing their goals and strategies to remain successful in this environment.

The value of organizational culture in strategic management

Organizational culture can determine the success and failure of a business and is a key component that strategic leaders consider when developing a dynamic organization. Culture is a major factor in the way people in an organization outline objectives, execute tasks and organize resources. A strong business culture will make it easier for leaders to motivate their staff to execute their tasks in alignment with the outlined strategies.

 Therefore, it is important to create strategies that are suitable to the organization's culture. If a particular strategy does not match the organization's culture, it would hinder the ability to accomplish the outcomes expected from that strategy implementation.

Operation Strategy

Operational strategy is essential to achieve operational goals set by organization in alignment with overall objective of the company. Operational strategy is design to achieve business effectiveness or competitive advantage.

Operational strategy is planning process which aligns the following:

In this global competitive age organization goal tend to change from time to time therefore operations strategy as a consequence has also be dynamic in nature. A regular SWOT analysis ensures that the organization is able to maintain competitive advantage and business leadership.

  





 

Strategic Management Process for Production and Operation

For success of organizational strategic objective, strategic planning has to trickle down to various function areas of the business. In order to build strategy management process a sequential process as below is followed

Competition Analysis: In this step company evaluates and studies current competition in the market and practices that are followed in the industry for operations and production vis--vis company policies

Goal Setting: Next step involves narrowing down the objective towards which the organization wants to move towards.

Strategy Formulation: The next step is breaking down of organizational goals into operations and production strategies.

Implementation: The final step is to convert operations and production strategies into day to day activities like production schedule, product design, quality management etc.

As organizations are always customer-centric, production and operation strategy for organization are built around them

Productivity

Measurement of formulated operations and production strategy is important to maintain alignment with the organization objectives. In simple terms productivity is defined as sum of total output per employee or per day. Productivity of company is dependent on industry and environmental conditions in which it is operating.

Two essential part of productivity are labor and capital. In scenario of limited resources, optimum and efficient utilization of labor and capital will generate favorable productivity. Productivity measurement also enables company to identify areas which require improvement or special focus. Also productivity provides ready report card to measure status against company’s production objective.

Productivity measurement can be classified in three categories based on the inputs used for calculation. Partial productivity ration of output is compared to one of resource used for example, labor productivity where output is compared to the labor wages.

Total productivity measure takes into consideration sum of all input factors which are used for the output.

In the modern age technology plays an important part in productivity.

Wastivity

Another important factor is the case of production is wastivity. Not 100% of input would be converted to output, there is going to waste during production. Wastivity is reciprocal of productivity. Classic examples of wastivity are defective products and services which either have to be re-cycle or disposed of completely. Other example is idle capacity of material, man-power equipment etc.

5 Core Operational Strategies

Operational strategies refers to the methods companies use to reach their objectives. By developing operational strategies, a company can examine and implement effective and efficient systems for using resources, personnel and the work process. Service-oriented companies also use basic operational strategies to link long- and short-term corporate decisions and create an effective management team.

Corporate Strategy and Cross-Functional Interactions

Corporate strategies involve seeing a company as a system of interconnected parts. Just as the muscles of the heart depend on brain functions in a human body, each department in a company depends on the others to stay healthy and achieve desired outcomes. The additional core strategies that a company uses should support the corporate strategy and use cross-functional interactions.

Customer-driven Strategies

Operational strategies should include customer-driven approaches to meet the needs and desires of a target market. To do so, a company must develop strategies that evaluate and adapt to changing environments, continuously enhance core competencies and develop new strengths on an ongoing basis. When evaluating environments, a company should monitor market trends to take advantage of new opportunities and avoid possible threats.

Developing Core Competencies

Core competencies are the strengths and resources within a company. While core competencies can vary by industry and business, they can include having well-trained staff, optimal business locations and marketing and financial expertise. By identifying core competencies, a company can develop processes such as customer satisfaction, product development and building professional relationships with stakeholders.

Development of Competitive Priorities

The development of competitive priorities comes from the creation of a corporate strategy, market analysis, defining core processes and conducting a needs analysis. To create competitive priorities, an organization evaluates operational costs, the quality of a product or service, the time it takes to develop and deliver a good or service and the flexibility of a good or service with regard to variety, volume and customization. Competitive priorities should include being able to provide a quality product or service at a fair cost that consistently meets the needs of a customer.

Product and Service Development

Strategies behind the development of products and services should consider design, innovation and added values. When developing new customer products, a company can decide to be a leader in introducing a new product or service, wait for the introduction of innovations on the market to improve upon them or wait to see if a company’s innovation is successful before moving forward. When developing a service, companies should consider packaging it with immediately observable and psychological benefits and support services. When developing a good or service, a company should consider the wants of its customers, how its stands against the competition and how its technical measures relate to its customers’ needs

Strategic OM Decisions

These three concepts come into play as operations managers make good decisions in the seven major functional areas of operations management, otherwise known as operations decisions.

1. Product and Service Management. What good or service do we offer and what is the design of it?
2. Operations and Supply Chain Management.Should we make or buy what we need to produce our good or service? If we purchase it, who can supply it?
3. Inventory Management. How much should we keep on hand? When do we re-order?
4. Forecasting and Capacity Planning. What does the short-term and long-term schedule look like? How much can we make in what period of time?
5. Operations Scheduling. What do we need for materials? Personnel?
6. Management of Quality. What quality system should we use? What impact does quality have on our organization?
7. Facilities Planning and Management. How is the facility used in production? What is its relationship to other resources? How should it be arranged?

When sound operations management decisions are made, it shows that the strategies were effective, and the organization's mission can be met.

Decision Making in Operations Management

The three concepts of differentiation, cost, and response come into play as operations managers make good decisions in the seven major functional areas of operations management, otherwise known as operations decisions.

Whatever the decision is to be made, consistent consideration about the company's goals, in conjunction with a persistent process in decision making, will keep the operations manager on course and successful.

Process

First step in the process is to evaluate whether the issue is goods- or service-related. Very few products are either all goods or all service. Defining the product at this stage plays an important part in how a decision is implemented.

 

Operations Decision	Goods	Services
Product and Service Management	Tangible	Intangible
Operations and Supply Chain Management	Critical to final product	Important, but not critical
Inventory Management	Stored	Not stored
Forecasting and Capacity Planning	Can schedule production	Supply on demand
Operations Scheduling	Workforce centered on technical skills	Customer interaction is key
Management of Quality	Objective standards	Subjective standards – nice color
Facilities Planning and Management	Near materials; layout affects productivity	Near customer; enhances product as well as production

Research

The second step of effective decision making in Operations Management needs to involve research.

An organization called the Strategic Planning Institute has a program called PIMS, or profit impact of market strategy. It collected data from more than 3000 companies to determine characteristics of firms that achieve a high return on investment (ROI). These also influence decision making.

1. Low direct cost per unit

2. Low investment intensity

3. High capacity utilization

4. High product quality

5. High operating efficiency

These characteristics are key not only to strategy, but to implementation. They can be measured and evaluated, and should be, to determine if the decision was a good one and where to go next.

Preconditions

There are many factors, internal and external, that can influence the success of a decision. Those factors require consideration for possible outcomes. While the list is long, at a minimum, the following should be evaluated:

1. Product life cycle

2. Resources available

3. Strengths and weaknesses of competitors

4. Commitment of suppliers and distributors

5. Current and possible environmental, technological, legal, and economic issues

6. Integration with the firm's strategy

7. Integration with other functional areas

Dynamics

All areas of a company are subject to change, or dynamic. Those changes can affect a company's strengths and weaknesses and have an impact before, during, and after the execution of a decision. Therefore, it is important to consider possible dynamics, as well. The two most common are changes within the organization -- such as personnel, finance, and others -- and changes in the environment. When market and customer expectations change, so must the firm to maintain its viability and ensure ultimate success.

Fundamentals

Once an operations manager understands the issues involved in decision making, it is important to step back and assess the company itself. What is it good at? What is it poor at? What will propel it forward?

SWOT Analysis

The SWOT analysis is a great tool with which to start. SWOT stands for Strengths, Weaknesses, Opportunities and Threats. This is critical to establishing competitive advantage. The purpose of a SWOT analysis is to maximize opportunities and minimize threats in the environment, while maximizing advantages of the organization strengths and minimizing its weaknesses. This should be constantly evaluated against the successes of the firm.

Critical Success Factors

Critical success factors (CSFs) are those activities that are necessary for the firm to achieve its goals. They are so important that the very survival of the company depends upon them.

Each functional area should be assessed for its contribution to the company's CSFs. For instance, Marketing could have the CSFs for service, distribution, promotion, price and product positioning. Without those things, a product would never be seen by the consumer.

Core Competencies

Core competencies are the set of skills, talents and activities that a firm does extremely well. These are the building blocks for competitive advantage and set it apart. Here are some questions to help determine core competencies:

1. What tasks must be done well for the company to meet its goals?

2. What gives the company its competitive advantage?

3. What elements have the highest likelihood of failure?

4. What elements have the highest likelihood of success?

5. What requires additional commitment of resources – monetary, personnel, IT, or managerial?

Staffing

Whatever strategy is decided upon, and regardless of how it is grouped with other necessary activities, the next step for an operations manager is to build and staff the organization to support it. While the operations manager may not have influence over other key managers, such as marketing and finance, it is important to participate in the team environment and select individuals who can get the job done well. Never forget that the role of the operations manager is to implement strategy, provide competitive advantage, and increase productivity. Each organization goes about it differently.