Strategic Management
From Virbus
Contents |
[edit] 1 Summary
A strategy is a long term plan of action designed to achieve a particular goal. It is differentiated from tactics which incorporate short term activities Strategic management is the ongoing process of specifying the organization's objectives, developing plans to achieve these objectives, and allocating resources to implement the policies and plans to achieve the organization's objectives.
[edit] 2 Why should you use it?
Strategic management is the highest level of managerial activity. According to Michael Porter „Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unnique mix of value.“ So the purpose of strategic management is to gain sustainable competitive advantages in the market.
[edit] 3 Why has it been developed and who developed it?
With regard to it’s etymologic origin the word “strategy” derives from the Greek word stratēgos, which derives from two words: stratos (army) and „Agein“ (ancient Greek for leading). Stratēgos referred to a 'military commander' during the age of Athenian Democracy. In its purest form, strategy dealt solely with military issues. In earlier societies, a king or political leader was often the same person as the military leader.Strategy was understood to govern the prelude to a battle in order to execute the enemy. In nowadays economic view strategies strive for dominating or coexisting ones competitors rather than eleminating them. Strategic management as a business economics discipline originated in the 1950s and 60s in the course of game theory discussions. Although there were numerous early contributors to the literature, the most influential pioneers were Alfred D. Chandler, Jr., Philip Selznick, Igor Ansoff, and Peter Drucker. During the years the understanding of strategic management focused on different topics.
[edit] 4 When should you use it?
Strategies are geared to long-term competitive advantages. Due to an organisations situation the strategy will be formulated diffent. Especially in tourism business the environment is instable and dynamic. Therfore strategy has to be checked and adapted permanently. Strategy evolves over time by responding to dynamics of competition, changing customer needs, changes in trade barriers or new regulations.
[edit] 5 How does it work?
The strategic management process comprises the following phases:
[edit] 5.1 1. Developing the vision, mission statement and objectives
Vision and mission statement mark the distinction and uniqueness between an organisation and its competitors. They are quite unspecific but build the basis for determining strategies, objectives and measures. By deriving strategic long-term objectives the vision is converted into concrete specific and measurable performance outcomes. According to the principle „what you can´t measure – you can´t manage” complex long-term objectives often need to be broken down into measurable short-run objectives which provide benchmarks for judging organisational performance.
[edit] 5.2 2. Analysing the internal and external business environment
Precondition for formulating the strategy is to analyse the direct and indirect business environment in order to learn about the specific opportunities and threats for the organisation. A firm’s strategy must be well matched to its internal strengths and weaknesses and competetive capabilities. Analyzing the external business environment means to find out how the global environment with its societal, political, regulatory and citizenship considerations may influence the organisation in future. It also means to analyse the industry attractiveness and competitive conditions. With the help of Porter’s Five-Forces scheme the relevant competitive branch factors - which are threats because of provider, supplier, market power of customers, substitutes and competitors - can be surveyed. Within the scope of an internal business analysis an organisation finds out about it s strengths and weaknesses. Organisational resources and competences regarding personal ambitions, business philosophies and ethical principles of key executives are evaluated by their potential to gain competitive advantages. Results of both external and internal business analysis can be summarized into a SWOT diagram. By reflecting the before analysed strengths and weaknesses as well as the opportunities and threats it gives good starting point for deriving the strategy.
[edit] 5.3 3. Formulating and chosing the strategy
Finding the right strategy is the core phase of strategic management. Based on the results of the strategic analysis you can draw conclusions about how internal/external factors matter to reach the objectives. A well conceived strategy aims at capturing a company’s best growth opportunities and defending against external threats to ist well-being and future performance. Matching objectives and strategies is called strategic fit. By doing a strategic fit the question “What do we have to do in order to achieve our objectives?” is answerd. In order to achieve the objectives strategies can regard to content or structure. Strategies on the content level can regard to: growth (according to Ansoff this can be divided into: market penetration, diversification, market development, product development), stabilisation and shrinkage. Strategies on the structural level can regard to: corporate level, business unit level, functional area level. By setting scenarios, identification and evaluation of different strategy alternatives you finally find out the right strategy for your organisation.
[edit] 5.4 4. Implementing the strategy
Implementation involves the communication of vision, mission and objectives to each element of the organisation. It means to allocate the sufficient amount of resources in terms of financial, personnel, time, technology support. Further it means to establish an organisational structure for implementation and managing the process of implementation by assigning responsibility of specific tasks or processes to specific individuals or groups
[edit] 5.5 5. Controlling of the strategy’s outcome
Evaluation means measuring the effectiveness of the implemented organizational strategy. Task of a strategic controlling is to assess the level of performance achievment by permanent target-performance comparisons. Also the development of internal and external business environment has to be observed continuously in order to predict changes and react to them by adapting strategy.
[edit] 6 Related topics/tools
• ABC-Analysis
• Balanced Scorecard
• BCG-matrix (growth-share matrix)
• Branch structure analysis according to Porter’s Five-Forces scheme
• experience curve
• 4-C-concept
• McKinsey-Portfolio
• QHAR-concept
• St. Galler Management-Modell
• Strategic group/Space Map
• Success Resource Deployment
• SWOT-Analysis
• Traffic-Light-Portfolio
• value-chain
[edit] 7 links/sources
Hungenberg, Harald (2001): Strategisches Management in Unternehmen, 2.Auflage, Wiesbaden.
Mintzberg,Henry (1995): Die Strategische Planung, München.
Porter, Michael (1984):Wettbewerbsstrategie, Frankfurt/Main.
Welge, Martin K./Al-Laham, Andreas (1999): Strategisches Management - Grundlagen, Prozess, Implementierung, Wiesbaden.