Strategic Management Process - Meaning, Steps and

Components

The strategic management process means defining the organization’s strategy. It is also defined as the process
by which managers make a choice of a set of strategies for the organization that will enable it to achieve better
performance. Strategic management is a continuous process that appraises the business and industries in
which the organization is involved; appraises it’s competitors; and fixes goals to meet all the present and future
competitor’s and then reassesses each strategy.

Strategic management process has following four steps:

1. Environmental Scanning- Environmental scanning refers to a process of collecting, scrutinizing and providing information for strat
It helps in analyzing the internal and external factors influencing an organization. After executing the environmental analysis proces
should evaluate it on a continuous basis and strive to improve it.

2. Strategy Formulation- Strategy formulation is the process of deciding best course of action for accomplishing organizational objec
hence achieving organizational purpose. After conducting environment scanning, managers formulate corporate, business and func
strategies.
3. Strategy Implementation- Strategy implementation implies making the strategy work as intended or putting the organization’s cho
into action. Strategy implementation includes designing the organization’s structure, distributing resources, developing decision ma
and managing human resources.
4. Strategy Evaluation- Strategy evaluation is the final step of strategy management process. The key strategy evaluation activities a
internal and external factors that are the root of present strategies, measuring performance, and taking remedial / corrective actions
makes sure that the organizational strategy as well as it’s implementation meets the organizational objectives.
These components are steps that are carried, in chronological order, when creating a new strategic
management plan. Present businesses that have already created a strategic management plan will revert to
these steps as per the situation’s requirement, so as to make essential changes.

 
Components of Strategic Management Process

Mission and Goals

Strategic choice - SWOT

Internal Analysis External Analysis

Strengths and Weaknesses Opportunities and Threats
 Strategy formulation

Business-Level Strategy Corporate-Level Strategy

Strategy implementation

Defining Organizational Structure Designing Control Systems

Matching Strategy, Structure and Controls

Feedback

4) What is Strategic Management Process? Explain each step briefly.

Here are few definitions of Strategic Management Process.

1) According to Glueck it’s a stream of decisions and actions that lead to the development
of an effective strategy/ Strategies to help achieve Corporate Strategies.
2) According to Hofer it’s the process, which deals with fundamental Organisational,
renewal & growth with the development of strategies, Structures and Systems necessary
 to achieve such renewal and growth and with the organizational systems needed to
effectively manage the strategy formulation and implementation process.
3) Ansoff defines it as “ The Systematic approach & important responsibility of general
management to position and relate the firm to its environment in a way that will assure
its Continued Success and make it secure from surprises”.
4) Sharplin defines as the formulation & implementation of plans and Carrying out activities
related to the matters, which are vital, and of continuing importance to the total
organization.
5) According to Harrison & St John – Strategic Management is the process through which
organization learn from their internal & external environment, establish strategic
decision create strategies that are intended to help achieve establish goals & execute
there strategies achieve Establish goals and execute there Strategies all in an effort to
satisfy key organizational stake holders.

COMPANY VISION &MISSION/ REQUIREMENTS OF MAJOR

STOCK HOLDERS STRATEGIC INTENT

EXTENAL & INTERNAL ANALYSIS /

SWOT ENVIRONMENT ANALYSIS

DEFINE STRENGTHS/WEAKNESS/ CORE

COMPENTENCIES

GENERATE STRATEGIC ALTENATIVES/ EVALUATE & SELECT

IMPLEMENT/ FEEDBACK/CONTROL
 From the above block diagram it states that Strategic Management is a process, which leads
to the formulation of Strategy/ Set of Strategies & managing thru Organisational System for
the achievement of Vision, Mission Goals and Objectives.

Company Vision / Mission

1) Company Vision is What a Company Wishes to become or aspire to be.

2) Company Mission is what the Company is and why it exists
3) James Parras & James Collins divides Vision/Mission into 2 Parts.

Vision/ Core Ideology Core Values

Core Purpose

MissionEnvisioned Future Audaclous Goals

Vivid Description

Core Ideology: Is the unchanging part of organization. It is the character of an

organization, this would not change for a longer time even it were disadvantage.

Core Values : what it believes in.

Core Purpose: Existence of Organization and that goes far behind

Envisioned Future: Are the goals to be reached.

It is classified into:

Audaclous Goals: These are the goals that the company would like to achieve. They are tough
needs extraordinary commitment and effort.
Vivid Description: These Goals are put into words that evoke a picture of what it would be like
to achieve the Audaclous Goals.

SWOT Analysis: External & Internal Analysis:

1. The External Environment is made up of all the Factors, Conditions & influences outside
the organizations.
2. it gives rise to opportunities which can be exploited or it may give rise to threats which
can weaken / cause problem to the organization.

STRENGTHS/WEAKNESS/CORE COMPETENCIES

Strengths: it’s always in relation to the environment. It’s an unborn capacity, which needs to
fulfill two conditions.
1) Requirement for success.
2) It gives the Strategic Advantage.
It has strengths more than the competitor; it could gain more than the Competitor.
E.g. Superior research where new products & Innovations are required.

Weakness: It’s something required for success is missing/inherent inadequacy. It gives strategic
disadvantage to the Organisation.
E.g. Over dependence on a single product line in a mature market.

Core Competencies: Is developed over a period of time, using these competencies exceeding
well, it develops a fine art of Competition with its rules. This capacity of exercing turns them to
core competencies.

General Strategic Alternatives / Evaluate & Select.

It means that there is a proper evaluation and exercing a choice from various alternative
available resources in such a way it may lead to the achievement of company’s objective.

Implement / Feedback/ Control

Implementation is the responsibility of CEO. He is responsible from implementation to review of
Strategic Management.

Advantages of Strategic Management

12.01.2011 | Author: admin | Posted in Finance

The Concept of Strategic management became well accepted in the field of business and that
proves it utility. For maximum utilization of resources and to earn maximum return on
investment stress is given on strategic management. In modern time stability in organization,
control and also for the development, Strategic management is considered necessary. To face the
future uncertainty, the concept of Strategic Management become more useful.
2. Advantages of Strategic Management: Due to the strategic management company receives the
following type of economic and non-economic advantages.

(1) Increase in rate of return on investment: Due to the strategic management there is a noble
increase in the rate of return on investment made in the project. On the basis of the information
received through analysis of internal and external environment the managers can increase the
rate of return on investment by making a maximum use of resources.

(2) Reduction in Cost of Capital: It is a fact that the unit which is successful in raising the capital
of the lowest possible cost is almost eligible to face the competition right from the beginning.
After getting the estimate of capital requirement the managers select the sources of capital from
where they can acquire the capital in a strategically manner. The strategic management has been
proved to be very useful to raise the estimated capital at lowest possible rate, simple conditions
for mortgage, return of borrowed capital and conversion of borrowed capital into owner’s
capital.

(3) Increase in Trading on Equity: Trading on equity depends upon many factors. Among to this,
by making a maximum use of borrowed capital in a creative manner through strategic
management process, the profitability of the unit can be increased and the equity share holders
can be paid maximum dividend. If an appropriate strategically arrangement is not made for the
use of financial resources, then its profitable use will not be successful and the interest on the
borrowed capital will also become burdensome.

(4) Increase in Profitability: The profitability of a unit depends upon the maximum use of limited
resources. Through strategically management process, the managers cannot only make the
maximum use of financial resources but also they can use maximum man power to increase the
overall productivity and profitability of the unit.

(5) Reduction in fixed and flexible expenses: The capital invested in the fixed assets is a fixed
capital. Instead of purchasing the fixed assets, the managers may buy such assets on rent to
decrease the fixed capital investment. In the same way, the flexible expenses can also be reduced
through collection arrangement. Making changes in packing, of making changes in full, by
acceptance, the strategy of machinery resources in management etc.

(6) Motivation to group activity: By taking strategic decisions through the group, integration
between group members increases on accepting various optional strategies which result in to co-
operation and unity. Not only that, but the managers can also get the advantage of special
strength of group members.

(7) Increase in the efficiency of the employees:  The officers and experienced employees of all
the three levels of reengagement are included in strategic management process. The necessary
inter-process is being done with them and for the success of strategy necessary training is also
given to them. By this there is a notable increase in efficiency of employees and they get
inspiration to work more.
(8) Alertness in employees:  The alertness among the employees increases the success of
objectives and targets due to strategic management. While framing the strategy management
studies the capability and weaknesses of employees and resources and taking the steps to
improve them, the employees become more alert about their own performance and the group
activity.

(9) Prevention of overlapping of work:  Due to the interaction with employees and officers
working at all the levels of the organization the question does not arise at all for the distribution
of one work to more than one employee or even the overlapping work is also not possible. When
the same activity is done by more than one employee At that time there is a wastage of time and
materials. The problem of co-ordination also arises. With the help of strategic process, the
managers can prevent the overlapping of work.

(10) Prevention of organizational gap: Out of the departmental activities o organization if any
activity is not allotted to any employee, that activity is known as organizational gap. If the
allotment of any work is left out by mistake, then none of the employees can be held responsible
for it. In strategic management process, because of the interacting process being done with each
employee, all the employees are given equal works and so there does not arise a question of
organizational gaps.

(11) Acceptance of Organizational Changes:  Normally the employees do not accept the changes
made in the organization, because due to that the change occurs in their roles also. As a result the
necessity to giving training of the new work to the employees arises. Not only that but because of
such changes many departments also have to be closed. In these circumstances the problem of
the safety of job arises. In strategic management process the capability of employees is also
considered. Not only that, but for its development, efforts are made through training programme
so no question arises for the employees for not accepting the changes.

3. Conclusion: The concept of strategic management is connected with the development and
profitability of business unit. By adopting this concept cost of production can be reduced and
business competition can be faced. Efforts are made for the success of strategic decisions at the
all three levels of strategy. Hence, more alertness seen in the employees of this companies.

Strategy Formulation

Strategy formulation involves designing and developing the company strategies. Determining
company strengths aids in the formulation of strategies. Strategy formulation is generally
broken down into three organizational levels: operational, competitive, and corporate. 

Operational strategies are short-term and are associated with the various operational
departments of the company, such as human resources, finance, marketing, and production
(Coulter, 2005, p. 7). These strategies are department specific. For example, human resource
strategies would be concerned with the act of hiring and training employees with the goal of
increasing human capital.

Competitive strategies are those associated with methods of competing in a certain business or
industry. Knowledge of competitors is required in order to formulate a competitive strategy. The
company must learn who its competitors are and how they operate, as well as identify the
strengths and weaknesses of the competition. With this information, the company can develop a
strategy to gain a competitive advantage over these competitors.

Corporate strategies are long-term and are associated with "deciding the optimal mix of
businesses and the overall direction of the organization" (Coulter, 2005, p. 216). Operating as a
sole business or operating as a business with several divisions are both part of the corporate
strategy.

Strategy formation
Strategic formation is a combination of three main processes which are as follows:

 Performing a situation analysis, self-evaluation and competitor analysis: both internal and
external; both micro-environmental and macro-environmental.
 Concurrent with this assessment, objectives are set. These objectives should be parallel to a
time-line; some are in the short-term and others on the long-term. This involves crafting vision
statements (long term view of a possible future), mission statements (the role that the
organization gives itself in society), overall corporate objectives (both financial and strategic),
strategic business unit objectives (both financial and strategic), and tactical objectives.
 These objectives should, in the light of the situation analysis, suggest a strategic plan

Product life cycle (PLC)

Like human beings, products also have a life-cycle. From birth to death, human beings pass
through various stages e.g. birth, growth, maturity, decline and death. A similar life-cycle is seen
in the case of products. The product life cycle goes through multiple phases, involves many
professional disciplines, and requires many skills, tools and processes. Product life cycle (PLC)
has to do with the life of a product in the market with respect to business/commercial costs and
sales measures. To say that a product has a life cycle is to assert three things:

 Products have a limited life,

 Product sales pass through distinct stages, each posing different challenges, opportunities, and
problems to the seller,
 Products require different marketing, financing, manufacturing, purchasing, and human
resource strategies in each life cycle stage.