1.2.

Basic concepts and characteristics of strategic

management

Strategic management is defined as the art and science of formulating, implementing and
evaluating cross-functional decisions that enable an organization to achieve its objectives.
As the definition itself implies, strategic management focuses on integrating administration,
marketing, finance and accounting, production and operations, research and development
activities, as well as computerized information systems, to achieve success. of the
organization. In this text the term strategic management will be used as a synonym for
strategic planning. The latter term is more frequently used in the business world, while the
former is more common in academia. Sometimes the term strategic management is used
to refer to the formulation, implementation and evaluation of strategy, while strategic
planning refers only to the formulation of strategy.
The purpose of strategic management is to take advantage of existing opportunities and
create new and different ones for the future; In contrast, long-term planning seeks to
optimize today's trends for tomorrow.
The term strategic planning was coined in the 1950s and was in common use from the
mid-1960s to the mid-1960s. At that time, it was believed that strategic planning was the
answer to all problems. At the time, most of corporate America was “obsessed” with
strategic planning. However, after that boom, during the 1980s the concept stopped being
used after various planning models did not report the high returns that were expected. Still,
the 1990s brought a resurgence of strategic planning, and today the process is widely
practiced in the business world.
A strategic plan is, in essence, the company's game plan. Just as a football team needs a
good game plan to have a chance at success, a company must have a good strategic plan
to be successful in competing.
In most industries, profit margins between companies have narrowed so much that there is
no room for error in the overall strategic plan. A strategic plan is the result of an arduous
selection process, by management, among several good alternatives, and indicates a
commitment to specific markets, policies, procedures and operations, discarding other
ways of acting that are “less desirable.”
The term strategic management is used in many universities as a subtitle for the final
business administration (business policy) course, which integrates material from all
business courses.

Stages of strategic management

The strategic management process consists of three stages: formulation, implementation
and evaluation of the strategy. Strategy formulation includes developing the vision and
mission, identifying external opportunities and threats to the organization, determining
internal strengths and weaknesses, establishing long-term objectives, generating
alternative strategies, and choosing particular strategies to pursue. Among the issues in
strategy formulation are deciding which new businesses to start, which ones to abandon,
how to allocate resources, whether to expand operations or diversify, whether it is
advisable to enter international markets, whether it is better to merge or create a joint
venture, and how to avoid a hostile takeover.
Because no organization has unlimited resources, strategists must decide which
alternative strategies will benefit the company most. Decisions related to strategy
formulation bind an organization to specific products, markets, resources, and
technologies over an extended period. Strategies determine long-term competitive
advantages and, for better or worse, strategic decisions have important cross-functional
consequences and lasting effects on an organization. Executives have the best
perspective to fully understand the ramifications of strategy-making decisions, and they
have the authority to allocate the resources necessary for their implementation.
Strategy implementation requires the company to set annual objectives, formulate policies,
motivate employees, and allocate resources to implement the strategies. Strategy
implementation involves developing a supportive culture, creating an effective
organizational structure, redirecting marketing efforts, developing budgets, developing and
using information systems, and linking employee compensation to organizational
performance. .
Strategy implementation is often called the “action stage” of strategic management.
Implementing strategy means mobilizing employees and managers to put formulated
strategies into practice. Often considered the most difficult stage within strategic
management, strategy implementation requires personal discipline, commitment and
sacrifice. Successful implementation depends on managers' ability to motivate employees,
which is more of an art than a science. Strategies formulated but never put into practice
serve no useful purpose.
Interpersonal skills are essential for successful strategy implementation. Strategy
implementation activities affect all employees and managers in an organization. Each
division and department must decide how to answer questions such as: “What must we do
to implement our part of the organization's strategy?” and “How well can we do the job?”
The challenge of implementation is to motivate managers and employees of an
organization to work with pride and enthusiasm to achieve the objectives set.
Strategy evaluation is the final stage of strategic management. Managers need to know
immediately that certain strategies are not working well, and strategy evaluation is the
primary means of obtaining this information. All strategies are susceptible to future
modifications, since both external and internal factors constantly change. Three
fundamental activities of strategy evaluation are:
1. Review the external and internal factors that are the basis of current strategies
2. Measure performance
3. Take corrective actions. Strategy evaluation is so necessary because today's success
does not guarantee tomorrow's success!
Success always generates new and different problems; Organizations that are self-
indulgent are condemned to disappear.
In large organizations, strategy formulation, implementation and evaluation activities occur
at three hierarchical levels: corporate, divisional (or strategic business units) and
functional. By encouraging communication and interaction between managers and
employees at different hierarchical levels, strategic management helps a company function
as a competitive team.
Most small companies, and even some large ones, do not have divisions or strategic
business units; They only have the corporate and functional levels. However, managers
and employees at these two levels must actively participate in strategic management
activities.
Peter Drucker states that the main task of strategic management is to think about the
overall mission of a company:
[...] that is, asking the question "what is our business?", which leads to setting objectives,
developing strategies and making today's decisions for tomorrow's results. This, without a
doubt, must be carried out by a part of the organization that can see the business as a
whole, that is capable of balancing the objectives and needs of today with the needs of
tomorrow and that is in a position to allocate human and financial resources towards key
results.

Benefits of strategic management

Strategic management allows an organization to be productive rather than reactive when it
comes to shaping its future; It allows you to initiate and influence activities (rather than
simply respond to them) and therefore exercise control over your own destiny.
Small business owners, CEOs, presidents and managers of many for-profit and nonprofit
organizations recognize and are aware of the benefits of strategic management.
Historically, the main benefit of strategic management has been to help organizations
formulate better strategies using a more systematic, logical and rational approach to
strategic choice. This remains one of the greatest advantages of strategic management,
but recent studies indicate that its most important contribution is the process itself, rather
than the decisions or documents.
Communication is the key to successful strategic management. Through participation in
the process, managers and employees become more committed to supporting the
organization. Dialogue and participation are essential ingredients.
Therefore, the way strategic management is carried out is exceptionally important. The
fundamental objective of the process is to achieve the understanding and commitment of
all managers and employees. Understanding is the most important benefit of strategic
management, followed by commitment. When managers and employees understand what
the organization does and why it does it, they often feel a part of the company and are
more committed to helping it. This is especially true when employees also understand the
relationship between their compensation and the organization's performance. Managers
and employees become amazingly creative and innovative when they understand and
support the company's mission, goals, and strategies. In this way, a great benefit of
strategic management is the opportunity for the process to grant more decision-making
powers to individuals.
Granting decision-making powers or empowerment is the act of strengthening employees'
sense of effectiveness by encouraging them to participate in decision-making, to exercise
their initiative and imagination, and rewarding them for doing so.
More and more organizations are decentralizing the strategic management process,
recognizing that planning must include managers and lower-level employees. The notion
of centralized personnel planning is giving way to decentralized planning by the line
manager in organizations. For example, Walt Disney Co. in 2005 dismantled its strategic
planning department and returned those responsibilities to Disney's business divisions.
Michael Eisner, the former CEO, had favored the centralized approach to strategic
planning, but the new CEO, Robert Iger dissolved the strategic planning department a few
weeks after taking his position, the most important at Disney. The process is an activity of
learning, helping, educating and supporting, not simple paperwork between senior
executives.
In strategic management, dialogue is more important than any strategic management
document, no matter how well bound. The worst thing strategists can do is develop
strategic plans on their own and then present them to operations managers for
implementation. Through participation in the process, line managers become “owners” of
the strategy. The key to success is that those who must implement the strategies take
ownership of them.
Although making good strategic decisions is the primary responsibility of the owner or
CEO of an organization, managers and employees must participate in the activities of
strategy formulation, implementation, and evaluation. Participation is a key to achieving
the level of commitment needed for change.
More and more corporations and institutions are using strategic management to make
effective decisions. But strategic management does not guarantee success; If done
without order it could be dysfunctional.
Bibliography
https://sites.google.com/site/gech1itslp/1-2
Fred R. David, (2008). Concepts of strategic administration. Eleventh edition. Mexico:
Pearson Prentice Hall.