According to peter Drucker,” Management is a function, discipline, task to be done and managers practice this discipline, carry out the functions and discharge these tasks.” The most significant improvement in the management process comes when strategy is taken into consideration.
Here, the term strategy is a long-term plan for executing ideas into action. It is required for short-term, medium-term as well as long-term. Strategy refers to analytical thinking, planning for and commitment of resources to action. It is a planned set of actions that managers employ to make the best use of the firm's resources and core competencies in order to capture the competitive advantages. It is concerned with evaluating the firm's competencies that keep it distinctive and different from its competitors.
Now, strategic management refers to the process of forming a vision, setting objectives, building a strategy, implementing and executing the strategy and then initiating adjustments to achieve the objectives. It is also known as art and science of formulating, implementing and evaluating cross-functional decisions that will enable an organization to achieve its objectives. In short, here strategic management consists of the analysis, decisions, and action an organization undertakes in order to create and sustain competitive advantages. It set the long term goal and objectives.
The three components of strategic management are
The sum of these components is known as strategic management.
There are three strategic levels in organization
Organization level: Here the role of corporate level executives is to oversee the development of strategies for the whole organization. The corporate level of management consists of the chief executive officer (CEO), other senior executives, the board of directors and corporate staffs. In consultation with other senior executives, the role of corporate level managers is to oversee the development of strategies for the whole organization. The corporate level strategy targets to increase the profitability of organization in the long run. E.g. maintaining least cost capital structure, to maximize the shareholder returns.
There are certain characteristics of analysis and management decisions at the corporate level.
Business level: Here business level general managers are concerned with strategies that are specific to a particular business. The executive at the business level or the business level manager is the head of the division. The strategic role of the managers is to translate the general statements of the direction and intent that come from the corporate level into concrete strategies for individual business. This strategy enables a business to position itself in a way to gain competitive advantages in its marketplace. E.g. Cost leadership, service network leadership, focuses on a particular segment of customers or combination of these can be adopted as a business level strategy.
There are certain characteristics of analysis and management decisions at business level.
Functional level: Functional level managers are responsible for the specific business functions (marketing, finance, production, HR, and accounting) that perform a company or one of its decisions. Here functional managers develop functional strategies in their area that help to fulfill the strategic objectives set at business and corporate level. Functional level decisions principally involve action oriented operational issues. These decisions are made periodically and lead the direct implementation of some part of the overall strategy formulated at the corporate and business level. In short, without analyzing functional area strategy cannot be implemented and strategic management cannot be done.
For example, The marketing functions are possible on the support of finance, also the functions of marketing have financial implications. The costs of HR are analyzed in capital budgeting decisions and that financial management will be effective on effective human resources. Likewise, the capital budgeting manager uses the revenue forecast from the sales department and the production volume and costs from the production department in order to analyze an investment alternative.
Opportunities are the favorable conditions in the organization's external environment. The firm exploiting organization's strength in relation to its competitors as some example given below.
Opportunity assessment is the way of evaluating an idea, concept, or opportunity to determine whether there is sufficient strategic, market and financial merit for continued consideration and possible improvement into a product or items. Opportunity assessment furnishes with an independent, target investigation of an innovation opportunity. It examines, at a high level, the intersection of the idea with relevant technologies, industries, and markets, dramatically reducing the uncertainty surrounding the idea and allowing you to make decisions about whether to invest further. It is an investigation of an organization's logistics' business using information, data gathering and examination, meetings and execution benchmarking. The end of this evaluation is the distinguishing proof and prioritization of opportunities for making a move to amplify execution while containing speculation and working expenses.
Global market opportunity is a favorable combination of circumstances, location or timing that offers prospects for exporting, investing, sourcing or partnership in the foreign market.
International managers must seek the most relevant data and knowledge or information to attain international opportunities. He/she is to coordinate manufacturing, marketing and other value adding activities on a worldwide basis.
Pearce, J.A., & Robinson, R.B. (2012).Strategic management: Formulation, Implementation, and Control.New York: McGraw-Hill Irwin
Johnson G., Scholes K., Whittington R. (2008). Exploring corporate strategy (8thed.). Pearson:Edinburgh Gate, Prentice hall:
The three components of strategic management are strategic analysis, choice, and implementation.
There are three strategic types in organization.