Strategic Management Process - Steps involved in the Strategic Management Process. The strategic management process can be described as a set of managerial decisions and actions which determines the long-run direction and performance of the organization’. The strategic management process can be described as a set of managerial decisions and actions which determines the long-run direction and performance of the organization’.
Some of the steps involved in the process of strategic management:-
1. Environmental Scanning
2. Developing Vision, Mission, and Objectives
3. Debarking to Corporate Analysis
4. Strategy Formulation
5. Strategy Implementation
6. Strategy Evaluation and Control.
Strategic management as a process involves a set of activities or elements. One thing should be made clear at this juncture, that all experts do not agree over these activities or elements of the strategic management process and the fashion in which they interact among themselves.
Through strategic management process philosophy remains the same, it is bound to differ in the case of those firms which have single SBUs and those which have multiple SBUs.
The following are the steps of the strategic management process in the case of single SBU enterprise and multiple SBUs enterprises and the integrated over a model where the elements of it remain the same.
Steps involved in the Strategic Management Process
The following paragraphs discuss the strategic management process:
Step # 1. Developing Vision, Mission, and Objectives:
The strategic management process begins with the development of corporate vision, mission, and objectives. Every organization has a vision, mission and objectives, even if they are not consciously developed, written or communicated. If the firm’s existing vision, mission, and objectives are not relevant to its business, they need to be rewritten. A corporate vision delineates management’s aspirations for the business, providing a panoramic view of “where we are going” and a convincing rationale for why this makes good business sense for the organization.
A mission statement defines the core purpose of the organization — why it exists; it examines the “raison d’etre” for the organization beyond simply increasing shareholder’s wealth, and reflects employees’ motivation for engaging in the company’s work. Effective missions are inspiring, long-term in nature and easily understood and communicated.
An objective is a desired future state or goal that a company attempts to realize. The goals or objectives of an organization are based on vision and mission. The objective must be specific, realistic, and must be measurable. A detailed discussion on vision, mission, and objectives is in order.
Vision:
Vision is the starting point for articulating an organization’s hierarchy of goals and objectives. A vision statement is a vivid idealized description of the desired outcome that inspires, energizes and helps the firm to create a mental picture of its target. It represents a destination that is driven by and evokes passion, but it does not specify the means that will be used to reach the desired destination. The vision provides the point of reference on the horizon — a beacon of light. It seeks to answer the basic question, “What do we want to become?”
Corporate success depends on the vision articulated by the chief executive officer or the top management. In other words, developing and implementing a vision is one of a leader’s central roles. CEO or top management need to have not only a vision statement but also a plan to implement it. This view was supported by research conducted with a sample of 1500 top-level employees (630 senior leaders and 870 CEOs) from 20 different countries.
The respondents were asked what they believed were the key traits that leaders must have ninety-eight percent of respondents opined that “a strong sense of vision,” was the most important trait. Similarly, when asked about the critical knowledge skills, the respondents cited “strategy formulation to achieve a vision,” as the most important skill.
Mission:
Mission follows vision. Creating a strategic vision is concerned with “what do we want to become?” On the other hand, a company’s mission statement outlines the core purpose of the organization, “why it exist?” The mission examines the “raison d’etre” of a company. The vision becomes tangible as a mission statement.
A company’s mission statement is defined by the buyer needs it seeks to satisfy, the customer groups and market segments it is endeavoring to serve and the resources and technologies that is developing in trying to please its customers. A mission statement is a message designed to be inclusive of the expectations of all stakeholders for the company’s performance over the long run. The executives and board who prepare the mission statement attempt to provide a unifying purpose for an organization, that will lay emphasis on business and thereby path for development.
Objectives:
A vision statement tends to be very short in length but broad in scope and can be described as a destination. On the other hand, mission statements are more specific and address questions concerning the reason for an organization to exist, and its competitive advantage in the marketplace. Vision and mission statements need to be followed by objectives. Mission statements seek to make a vision more specific and objectives are attempts to make mission statements more concrete.
Put in simple words, objectives are used to operationalize the mission statement and use them as performance targets. These objectives act as a yardstick for measuring a company’s performance. Objectives are futuristic that a company attempts to realize.
Step # 2. Analysis of Company’s External Environment:
The second phase of the strategic management process is an analysis of an organization’s external operating environment. The prime purpose of analyzing the external operating environment is to identify (organization’s) strategic opportunities and threats for the organization, in which the organization pursues its vision, mission, and goals.
The key environmental factors that affect an organization are political and legal, economic, technological, socio-cultural, and societal factors. All these factors may be grouped into three categories, they are –
(i) industry environment,
(ii) national environment, and
(iii) macro environment.
Step # 3. Analysis of the Company’s Internal Environment:
It is the third phase of the strategic management process. The essential purpose of the internal analysis is to identify the strengths and weaknesses of the organization. The internal environment of the organization consists of variables that are within the organization itself. They are the structure, culture, and resources. A business becomes strong when it has all these three in balance. The absence of all these or any of them makes the firm weak.
Step # 4. Strategy Formulation
Strategy formulation is the development of long-range plans for the effective management of environmental opportunities and threats. In this step, managers develop a series of strategic alternatives to pursue. The alternative strategies may be at the global level, corporate level, business level, and functional level. Managers develop a firm-specific model, which will align, fit or match the company’s resources and capabilities. Strategies should help build a competitive advantage.
Step # 5. Strategy Implementation
After developing alternative strategies and selecting a specific strategy to achieve a competitive advantage, strategy developers must ask managers to put it into action. Sometimes, the existing culture, structure and policies may not support the strategy implementation. In such cases, there is a need to change them or modify them according to the requirement. Managers should not pursue a strategy that does not suit the existing culture, structure, and policies. Generally, strategy implementation is done by middle and operating level managers and the same is reviewed by top-level managers.
Step # 6. Strategy Evaluation and Control
Strategy Evaluation and Control go side by side with strategy implementation. Just strategy formulation and implementation may not help in achieving corporate objectives. Good control is critical for corporate success.
Strategic evaluation and control is the process in which corporate activities and performance results are measured and monitored with a view to comparing actual results with the predetermined target performance. If the corporate objectives are not achieved, then managers need to take corrective action. Evaluation and control help in identifying weaknesses in implementing strategies.