In the field of management, strategic management involves the formulation and implementation of the major goals and initiatives taken by an organization's managers on behalf of stakeholders, based on consideration of resources and an assessment of the internal and external environments in which the organization operates. Strategic management provides overall direction to an enterprise and involves specifying the organization's objectives, developing policies, and plans to achieve those objectives, and then allocating resources to implement the plans. Academics and practicing managers have developed numerous models and frameworks to assist in strategic decision-making in the context of complex organizational environments and competitive dynamics. Strategic management is not static in nature; the models can include a feedback loop to monitor execution and to inform the next round of planning. Michael Porter identifies three principles underlying strategy:
Creating a "unique and valuable [market] position". Making trade-offs by choosing "what not to do". Creating "fit" by aligning company activities with one another to support the chosen strategy. Corporate strategy involves answering a key question from a portfolio perspective: "What business should we be in?" Business strategy involves answering the question: "How shall we compete in this business?" Alternatively, corporate strategy may be thought of as the strategic management of a corporation (a particular legal structure of a business), and business strategy as the strategic management of a business. Management theory and practice often make a distinction between strategic management and operational management, where operational management is concerned primarily with improving efficiency and controlling costs within the boundaries set by the organization's strategy.
Definitions
Michael Porter defined strategy in 1980 as the "...broad formula for how a business is going to compete, what its goals should be, and what policies will be needed to carry out those goals" and the "...combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there." He continued that "The essence of formulating competitive strategy is relating a company to its environment." However, in 1988, Henry Mintzberg described the many different definitions and perspectives on strategy reflected in both academic research and in practice. He examined the strategic process and concluded it was much more fluid and unpredictable than people had thought. Because of this, he could not point to one process that could be called strategic planning. Instead Mintzberg concluded that there are five types of strategies:
Strategy as plan – a directed course of action to achieve an intended set of goals; similar to the strategic planning concept; Strategy as pattern – a consistent pattern of past behavior, with a strategy realized over time rather than planned or intended. Where the realized pattern was different from the intent, he referred to the strategy as emergent; Strategy as position – locating brands, products, or companies within the market, based on the conceptual framework of consumers or other stakeholders; a strategy determined primarily by factors outside the firm; Strategy as ploy – a specific maneuver intended to outwit a competitor; and Strategy as perspective – executing strategy based on a "theory of the business" or natural extension of the mindset or ideological perspective of the organization. In 1998, Mintzberg developed these five types of management strategy into 10 "schools of thought" and grouped them into three categories. The first group is normative. It consists of the schools of informal design and conception, the formal planning, and analytical positioning. The second group, consisting of six schools, is more concerned with how strategic management is actually done, rather than prescribing optimal plans or positions. The six schools are entrepreneurial, visionary, cognitive, learning/adaptive/emergent, negotiation, corporate culture and business environment. The third and final group consists of one school, the configuration or transformation school, a hybrid of the other schools organized into stages, organizational life cycles, or "episodes". Some complexity theorists define strategy as the unfolding of the internal and external aspects of the organization that results in actions in a socio-economic context. Michael D. Watkins (2007) argued that strategic management operates as a critical bridge between an organization's mission, vision, and execution. He asserted that if the mission statement and goals answer the 'what' question, and if the vision statement answers the 'why' questions, then strategy provides answers to the 'how' question of business management. In other words, strategy encompasses the methods, frameworks, and decision-making processes that enable a company to translate its aspirations into concrete actions and competitive success.
Application
Strategy is defined as "the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals". Strategies are established to set direction, focus effort, define or clarify the organization, and provide consistency or guidance in response to the environment. Strategic management involves the related concepts of strategic planning and strategic thinking. Strategic planning is analytical in nature and refers to formalized procedures to produce the data and analyses used as inputs for strategic thinking, which synthesizes the data resulting in the strategy. Strategic planning may also refer to control mechanisms used to implement the strategy once it is determined. In other words, strategic planning happens around the strategic thinking or strategy making activity. Strategic management is often described as involving two major processes: formulation and implementation of strategy. While described sequentially below, in practice the two processes are iterative and each provides input for the other.
Formulation Formulation of strategy involves analyzing the environment in which the organization operates, then making a series of strategic decisions about how the organization will fulfill its mission. Formulation ends with a series of goals or objectives and measures for the organization to pursue. Environmental analysis includes the:
… excerpt ends here. Continue reading the full article.
