Strategic Management: Definition, Process And Key Components

What is Strategic Management?

Question:

Describe about the Strategy Formulation, Strategy Implementation and Risk associated with strategy implementation?

To achieve the objectives by implementation, formulation and evaluation of cross-functional decisions, strategic management is used with a well defined art and science. By this definition, we can conclude that, strategic management keeps its light of focus on accounting, development/research, information systems, production/operation, so that we can achieve desired height of the company in context of development. With the term strategic management, we can refer the formulation along with implementation, evaluation. There are three phase of strategic management, i.e.

Includes the development of  mission, vision along with the identification of external opportunities of an organization, determination of weakness and strengths, long term and alternative objectives are set, and what will be the desired strategy to peruse with, how resources should be allocated , how the hostile takeover can be deducted.

This stage is also called as action stage, sometimes considered as much difficult stage to be dealt with in strategic management. It requires to be disciplined towards the work and its environment, sacrifice and commitments.

As a last stage in strategy evaluation a strategists looks for the faulty strategies, which are not working. Though we know, being a strategist one must keep in touch with updates on internal and external factors, as they are changing with time. So by the objective of evaluation, we can identify three phases-

 Internal and external factor must be reviewed, which are bases of currently running strategies

 Correct actions should be taken in order to reach the goal.

In context of Strategic planning, we can say it company’s game plan. It results by having a good managerial or decision maker choice which commits to specific policies, markets, procedures with operation to be built along. There are many colleges and universities available where the strategic management term is used as a course BA (Business Administration) (Small Business – Chron.com, 2015).

As a broad plan a strategy is developed by an Organization to carry out and deploy the plan from the origin to its goal. A strategy which is designed well can carries capability to reach the goal as per the requirement of the organization. A good strategy with its effectiveness allows the environment to adapt changes which are meant by the strategy. To develop the strategy, it is needed perform Strategy formulation. It should be known to all employees, so that they always aware about the company’s purpose, vision, objectives. An Organization is always pushed towards the track  to evaluate the company’s budget allocation,  evaluation of resources and determination of most applicable plan for the maximization of the Return On Investment(ROI) (Jurevicius, 2015).

It is required to have series of sequentially maintained step to do Strategy formulation. It is must to take the steps in order as they build in order upon each other. Strategy formulation requires few steps, which are-

• Definition of Organization: As a definition of the organization it is always intended to know first about the customer of the company.

• Definition of Strategic mission: It defines a clearly stated fact that to go forward what actually company is striving for and it provides a perspective of long range. It states the fact of value, business nature, position held by the company in marketplace. Being aware about the company’s value one can establish mission and vision over that, which will become the foundation or base of the strategy, which is going to be built.

• Definition of strategic Objectives: Here an Organization requires identification of needed target on performance. This purpose include some objectives: productivity of services and goods, advanced technology, increment of sales, desirable market share, improved service for the customers.

• Definition of Competitive Strategy: In this step it is determined that in what stage the company is holding its position in marketplace. It is applicable not only as a whole on the company, but applies itself throughout the each and every small unit in the organization and determines the performance to hold the position of the company, which is in competitive position in market.

• Continuous implementation: It is simply a process of maintaining and implementing the parts of strategy, which are going to help in the next step of strategy formulation.

• Assessment of value: every organization has its own value, when we will be developing a strategy for a organization, we should keep in mind that, it should follow the values, culture, stakeholders, operating philosophy of the organization.

There are three Stages defined in the Strategy Formulation:

• Input stage(stage 1):

It is a stage where formulation done on the framework consists of  IFE matrix,

INTERNAL STRENGTH	WEIGHT	RATING	WEIGHTED SCORE
Largest manufacturer	10%	4	0.40
suppliers	12%	4	0.48
Good reputation	4%	3	0.12
Close proximity/location	8%	4	032
Increasing cash flow	4%	3	0.12
Loyal employees	5%	3	0.15
reliable and cheap financing	4%	3	0.12
minimal service complaints	3%	4	0.12
strong management team	4%	3	0.12
Financial ratios	%%	4	0.20
INTERNAL WEAKNESS
Saturated market	10%	1	0.10
Sensitive to raw material prices	15%	2	0.30
Little diversification	8%	2	0.16
Absence of strategic partner	4%	1	0.04
Lack of resources	4%	1	0.04
Major weakness (1), minor weakness (3), minor strength (3), major strength (4)
TOTAL WEIGHTED SCORE	100%	2.79

EFE matrix

OPPERTUNITIES	weight	rating	Weighted score
Industry consolidation	11%	4	0.44
Privatization in CE countries	12%	3	0.36
Growth of low-cost sector	10%	2	0.20
Increased demand	8%	4	0.32
THREATS
Declining margins	16%	3	0.48
Government oversight	10%	1	0.10
Climbing prices of key inputs	5%	3	0.15
New security tax	8%	2	0.16
Economic down turn	5%	2	0.10
Sudden replacement of key person	15%	1	0.15
poor(1), below avg.(2), above avg.(3), superior(4)
TOTAL WEIGHTED SCORE	100%	2.46

	Comapany T J MAX
Critical success factor	weight	Rating	score
Reputation of brand	0.12	4	0.48
product integration level	0.08	2	0.16
Product range	0.06	3	0.18
New, successful integration	0.03	2	0.06
Market share	0.15	1	0.15
Per employee sale	0.07	3	0.21
Low structure of cost	0.06	6	0.36
Varieties in distribution channel	0.07	4	0.28
Retention of customers	0.02	8	0.16
Superiors in it capabilities	0.12	7	0.84
Strong presence during online	0.14	4	0.56
Successful promotion	0.08	8	0.64
total	1.0	–	4.08

This stage summarizes the basic need information on input for the formulation of the strategy.

• The machine stage (stage 2): after aligning the important external and internal factors, machine stage focuses on the generation of alternative feasible strategies. It includes the StrategicPosition and Action Evaluation (SPACE) Matrix, Boston Consulting Group (BCG) Matrix, Threats-Opportunities-Weaknesses-Strengths (TOWS) Matrix, Internal-External (IE) Matrix (Mba-tutorials.com, 2015).

Threats-oppertunities-weakness-strenghts(TOWS) matrix

• Decision Stage: Using only the Quantitative Strategic Planning Matrix (QSPM), it uses only this single technique. It uses the required information available In stage 1, to evaluate the alternatively available strategies, which are feasible enough to deal with in stage 2 (Education Portal, 2015).

Here are few points must be highlighted to make projection on  to implement the strategies –

• Establishment of annual objectives.
• Policies should be devised.
• Motivate employees.
• Allocate resources.
• Developing cultures, which are strategy supportive.
• Creation of organizational structure.
• Redirection on the efforts on market.
• Preparation of budgets.
• Development of information system.

• Uncertain economic conditions: due to having a slump in economic situation, it is may be need to alter the schedule made for implementation. It may happen that the assumption on the demands and the services on products may go lower. Here, in order to cut the expenses it may be needed to scale back my marketing plan with such a uncertain economic conditions.

• Competitive factors: It often happens that small and medium business enterprise can face the competitors and challenging situation in market. It may happen that existing competitors have launched new product or the advance version of the existing product. Strategists must have to adjust his/her strategy to encounter such tricky situation.

• Delays made to complete a project: strategy implementation may require a series of step to be completed by different department. It may happen that if one task is delayed by one department, it may happen that other departments will delay their task due to its dependence on other task. E.g. if a launch of product is made by T. J. MAX by the coming year, but if it happens that there is delay in design phase and also in the phase of testing of the product, then obviously there will be a delay in strategic implementation.
• Unavailability of key person: delays in implementation of strategies may cause by the sudden unavailability of the key person, such as, sudden death, or urgent shifting from the current place can raise this situation, as the implementation needs another responsible and qualified person in replacement of the pervious person.
• Higher cost in for the implementation which is beyond the forecasting: According to the chosen strategy, staffs of T. J. MAX will be preparing marketing budget according to the relative cost. Though previously not build plans in company may make situation, where it is not easy to do forecast on cost assignment. It may happen that, cost needed in strategy crosses the forecast which requires taking decision to reduce the cost to reach goal as a ultimate profit.
• Unavailability of key distributers and suppliers: some time organizations like T J MAX depend on one or more suppliers for the supply of the key product. It may happen that there is sudden unavailability of the suppliers, due to which the achievement of revenue growth, which was forecasted in strategic plan, may not achieve. Here company requires a new distributor renewing the distribution agreement.
• Regulation made by government: company may face difficulties due to the introduction of the new government rules and norms. E.g. it may happen that due the govt. rules, municipality didn’t allow the company to have additional location planned by the strategists (Referenceforbusiness.com, 2015).

As a strategy formulation, it is important keep our focus also on strategy evaluation, as we plan it to build it and evaluates it. With the strategy evaluation, we can throw light on the effective and efficient facts of the plans under concerned. As final phase of strategic management strategic evaluation is done.

• Setting benchmark: in projection we highlight the beneficial factors of the strategy driven plan. By setting benchmark, some factors are encountered, such as- proper way to set benchmark and proper way to express them which in turn determines the performance. By performance, it is very essential o to discover the requirements, specially needed to perform the main task. There are two criteria to available for assessment of the performance, which are quantitative criteria (ROI, net profit, per share earnings, employee turnover rate, production cost) and qualitative criteria (potential of risk taking, skills, flexibility etc.) .

• Measurement of performance: Being a bench mark of standard performance, actual performance is needed to compare. The communication and reporting system helps in measuring the performance.

• Analyzing the variance: While the comparing and performance is measured with the standard performance , may be there analyzing of variances is required. Degree of tolerance must be mentioned by the strategies which limits between standard and actual performance able to be accepted.

• Taking corrective Actions: a corrective action by a well planned strategy is needed where deviation of performance exists. If consistently the performance is decreasing from the desiring performance, then the strategists needed to carry the detailed analysis of factors, which are responsible for this kind of performance (Ewaluacja.gov.pl, 2015).

Conclusion:

Here to draw the conclusion on strategic management of T J MAX, I must bring some facts in context that it competed with wal-mart and other off-pricers. The report on opinion –research have citied the T.J.MAX, which early mapped against some most of its competitors in a widely competitive space in major cities of Boston, New York, Chicago and Washington as of 2007 (Jurevicius, 2015).

References

Education Portal,. (2015). Strategy Formulation: Definition, Model & Process | Education Portal. Retrieved 11 February 2015, from https://education-portal.com/academy/lesson/strategy-formulation-definition-model-process.html

Ewaluacja.gov.pl,. (2015). Definition and Types of Evaluation. Retrieved 11 February 2015, from https://www.ewaluacja.gov.pl/english/Strony/Evaluation.aspx

Jurevicius, O. (2015). Strategy Tools | Strategic Management Insight. Strategicmanagementinsight.com. Retrieved 11 February 2015, from https://www.strategicmanagementinsight.com/tools.html

Mba-tutorials.com,. (2015). Internal External- IE Matrix. Retrieved 11 February 2015, from https://www.mba-tutorials.com/strategy/391-internal-external-ie-matrix.html

Referenceforbusiness.com,. (2015). Strategy Formulation – organization, levels, system, advantages, manager, school, company, hierarchy, business. Retrieved 11 February 2015, from https://www.referenceforbusiness.com/management/Sc-Str/Strategy-Formulation.html

Small Business – Chron.com,. (2015). Business Strategies. Retrieved 11 February 2015, from https://smallbusiness.chron.com/business-strategies/?__hstc=753710.624565fe59b2bacaba16576ddf1a89a7.1423634914130.1423634914130.1423634914130.1&__hssc=753710.1.1423634914133&__hsfp=2062607028