Definition of Strategic Management Process :
Strategic management process is by which managers formulate and implement strategies. We consider what might be described as a typical, formal strategic planning.
A Model of the Strategic Planning Process:
The formal strategic planning process has five main steps –
- Select the corporate mission and major corporate goals.
- Analyze the organization’s external competitive environment to identify opportunities and threats.
- Analyze the organization’s internal operating environment to identify strengths and weaknesses.
- Select strategies that build on the organization’s strengths and correct its weaknesses in order to take advantage of external opportunities and counter external threats. These strategies should be consistent with the mission and major goals of the organization. They should be congruent and constitute a viable business model.
- Implement the strategies.
The task of analyzing the organization’s external and internal environments and then selecting appropriate strategies constitutes strategy formulation. In contrast, as noted earlier, strategy implementation involves putting the strategies into action. This includes taking actions consistent with selected strategies of the company at the corporate, business, and functional levels; allocating roles. And responsibilities among managers; allocating resources; setting short term objectives; and designing the organization’s control and reward system.
Main Components of the Strategic Planning Process:
Mission Statement Step of Strategic Management Process
The first component of the strategic management process is crafting the organization’s mission statement. Which provides the framework within which strategies are formulated. A mission statement has four main components; a statement of the organization’s reason for existence. Normally referred to as the mission; a statement of some desired future state, usually referred to as the vision; a statement of the key values to which the organization is committed; and a statement of major goals.
The Mission:
A company’s mission describes what the company does. For example, the mission of Google is to organize the world’s information and make it universally accessible and useful.
Vision:
The vision of a company defines a desired future state; it articulates, often in bold term, what the company would like to achieve. Microsoft operated with a very powerful vision of a computer on every desk and in every home.
Values:
The values of a company state how managers and employees should conduct themselves, how they should do business, and what kind of organization they should build.
Major Goals Important Step of Strategic Management Process
In management, Having stated the mission, vision, and key values. Strategic managers can take the next step in the formulation of a mission statement: establishing major goals. A goal is a precise, measurable, desired future state that a company attempts to realize. In this context, the purpose of goals is to specify with precision what must be done if the company is to attain its mission or vision.
External Analysis is also Strategic Management Process :
The second component of the strategic management process is an analysis of the organization’s external operating environment. The essential purpose of the external analysis is to identify strategic opportunities. And threats within the organization’s operating environment that will affect how it pursues its mission. Three interrelated environments should be examined when undertaking an external analysis. The industry environment in which the company operates the country or national environment, and the wider socioeconomic o macroeconomic.
Internal Analysis:
In strategic management, Internal analysis, the third component of the strategic planning process, focuses on reviewing the resources, capabilities. And competencies of a company in order to identify its strengths and weakness.
SWOT Analysis:
The 4th component of strategic thinking requires the generation of a series of strategic alternatives. Or choices of future strategies to pursue, given the company’s internal strengths and weakness and its external opportunities and threats. The comparison of strengths, weakness, opportunities and threats is normally referred to as a SWOT analysis.
Strategy Implementation:
Once managers have chosen a set of congruent strategies to achieve a competitive advantage. And increase performance, those strategies have to be implemented. Strategy implementation involves taking actions at the functional, business, and corporate levels to execute a strategy plan.
The Feedback:
The feedback loop indicates that strategic planning is ongoing; it never ends. A strategy has been implemented, its execution must be monitored to determine the extent to which strategic goals. And objectives are actually being achieved, and to what degree competitive advantage is being created and sustained. This information and knowledge is returned to the corporate level through feedback loops, and becomes the input for the next round of strategy formulation and implementation.
