Business Policy

Elements of Strategic Management

Figure: Elements of Strategic Management



(i) Strategic Analysis

Strategic analysis is concerned with understanding the strategic position of the organisation.
What changes are going on in the environment, and how will they affect the organisation and
its activities? What is the resource strength of the organisation in the context of these
changes? What is it that those people and groups associated with the organisation --
managers, shareholders or owners, unions and so on -- aspire to, and how do these affect the
present position and what could happen in the future?

The aim of strategic analysis is, then, to form a view of the key influences on the present and
future well-being of the organisation and therefore on the choice of strategy. These influences
are discussed briefly below. Understanding these influences is an important part of the wider
aspects of strategic management.

(a) The environment

The organisation exists in the context of a complex commercial, economic, political,
technological, cultural, and social world. This environment changes and is more complex for
some organisations than for others. Since strategy is concerned with the position a business
takes in relation to its environment, an understanding of the environments effects on a
business is of central importance to strategic analysis. The historical and environmental
effects on the business must be considered, as well as the present effects and the expected
changes in environmental variables. This is a major task because the range of environmental
variables is so great. Many of those variables will give rise to opportunities of some sort, and
many will exert threats upon the firm. The two main problems that have to be faced are, first,
to distil out of this complexity a view of the main or overall environmental impacts for the
purpose of strategic choice; and second, the fact that the range of variables is likely to be so
great that it may not be possible or realistic to identify and analyse each one.

(b) The resources of the organisation

Just as there are outside influences on the firm and its choice of strategies, so there are
internal influences. One way of thinking about the strategic capability of an organisation is to
consider its strengths and weaknesses (what it is good or not so good at doing, or where it is
at a competitive advantage or disadvantage, for example). These strengths and weaknesses
may be identified by considering the resource areas of a business such as its physical plant,
its management, its financial structure, and its products. Again, the aim is to form a view of
the internal influences -- and constraints -- on strategic choice.

(c) The expectations of different stakeholders

The expectations are important because they will affect what will be seen as acceptable in
terms of the strategies advanced by management. However, the beliefs and assumptions that
make up the culture of an organisation, though less explicit, will also have an important
influence. The environmental and resource influences on an organisation will be interpreted
through these beliefs and assumptions; so two groups of managers, perhaps working in
different divisions of an organisation, may come to different conclusions about strategy,
although they are faced with similar environmental and resource implications. Which
influence prevails is likely to depend on which group has the greatest power, and
understanding this can be of great importance in recognising why an organisation follows or
is likely to follow, the strategy it does.

Together, a consideration of the environment, the resources, the expectations, and
the objectives within the cultural andpolitical framework of the organisation provides the
basis of the strategic analysis of an organisation. However, to understand the strategic
position an organisation is in, it is also necessary to examine the extent to which the direction
and implications of the current strategy and objectives being followed by the organisation are
in line with and can cope with the implications of the strategic analysis. In this sense, such
analysis must take place with the future in mind. Is the current strategy capable of dealing
with the changes taking place in the organisations environment or not? If so, in what respects
and, if not, why not?

It is unlikely that there will be a complete match between current strategy and the picture
which emerges from the strategic analysis. The extent to which there is a mismatch here is
the extent of the strategic problem facing the strategist. It may be that the adjustment that is
required is marginal, or it may be that there is a need for a fundamental realignment of
strategy.


(ii) Strategic Choice

Strategic analysis provides a basis for strategic choice. This aspect of strategic management
can be conceived of as having three parts.

(a) Generation of strategic options

There may be several possible courses of action. At a given time a company might face a
decision about the extent to which it has to become a multinational firm. But, at a later time,
the international scope of the company's operations might bring up other choices: which areas
of the world are now the most important to concentrate on; is it possible to maintain a
common basis of trading across all the different countries? Is it necessary to introduce
variations by market focus? All of these considerations are important and need careful
consideration: indeed, in developing strategies, a potential danger is that managers do not
consider any but the most obvious course of action -- and the most obvious is not necessarily
the best. A helpful step in strategic choice can be to generate strategic options.

(b) Evaluation of strategic options

Strategic options can be examined in the context of the strategic analysis to assess their
relative merits. In deciding any of the options a company might ask a series of questions.
First, which of these options built upon strengths, overcame weaknesses and took advantage
of opportunities, while minimising or circumventing the threats the business faced? This is
called the search forstrategic fit or suitability of the strategy. However, a second set of
questions is important. To what extent could a chosen strategy be put into effect? Could the
required finance be raised, sufficient stock be made available at the right time and in the right
place, staff be recruited and trained to reflect the sort of image the company wants to project?
These are questions of feasibility. Even if these criteria could be met, would the choice be
acceptable to the stakeholders?

(c) Selection of strategy

This is the process of selecting those options which the organisation will pursue. There could
be just one strategy chosen or several. There is unlikely to be a clear-cut right or wrong
choice because any strategy must inevitably have some dangers or disadvantages. So in the
end, choice is likely to be a matter of management judgement. It is important to understand
that the selection process cannot always be viewed or understood as a purely objective,
logical act. It is strongly influenced by the values of managers and other groups with interest
in the organisation, and ultimately may very much reflect the power structure in the
organisation.


(iii) Strategy Implementation

Strategy implementation is concerned with the translation of strategy into action.
Implementation can be thought of as having several parts.

(a) Planning and allocating resources

Strategy implementation is likely to involve resource planning, including the logistics of
implementation. What are the key tasks needing to be carried out? What changes need to be
made in the resource mix of the organisation? By when? And who is to be responsible for the
change?

(b) Organisation structure and design

It is also likely that changes in organisational structure will be needed to carry through the
strategy. There is also likely to be a need to adapt the systems used to manage the
organisation. What will different departments be held responsible for? What sorts of
information system are needed to monitor the progress of the strategy? Is there a need for
retraining of the workforce?

(c) Managing strategic change

The implementation of strategy also requires managing of strategic change and this requires
action on the part of managers in terms of the way they manage change processes, and the
mechanisms they use for it. These mechanisms are likely to be concerned not only with
organisational redesign, but with changing day-to-day routines and cultural aspects of the
organisation, and overcoming political blockages to change.


A Summary of the Strategic Management Process

The influences on, and elements of, strategic management discussed above are summarised in the
figure above. The figure is intended not as a prescription of what strategic management should be,
but as a framework which readers can use to think through strategic problems.

It was stated earlier that there is a danger of thinking of the process of strategic management as an
orderly sequence of steps; the danger is that readers might not find the elements described here
existing in practice, and might therefore argue that strategic management in their organisation does
not take place. It is important to stress that the model summarised here is a useful device for
structuring the study of strategic management and a means by which managers and students of
strategy can think through complex strategic problems. It is not, however, an attempt to describe how
the processes of strategic management necessarily take place in the political and cultural arenas of
an organisation. The traditional view of strategic management, common in books of the 1960s and
1970s, was that strategy was, or should be, managed through planning processes, in the form of a
neat sequence of steps building on objective setting and analysis, through the evaluation of different
options, and ending with the careful planning of the strategy implementation. Many organisations do
have such systems, and find that they contribute usefully to the development of the strategy of their
organisations. However, not all organisations have them, and even when they do, it would be a
mistake to assume that the strategies of organisations necessarily come about through them.

The management of the strategy of an organisation can also be thought of as a process of crafting.
Here strategic management is seen not so much as a formal process, but rather as a process by
which strategies develop in organisations on the basis of managers experience, their sensitivity to
changes in their environments, and what they learn from operating in their markets. This does not
mean that managers are not thinking about the strategic position of their organisation, or the choices
it faces; but this may not be taking place in a highly formalised way.


Source: Johnson, G. and Scholes, K. (1997). Exploring corporate strategy (Fourth Edition). New York: Prentice Hall.