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What is Strategic Management?

 a set of management decisions and actions that determines the long-run performance of a corporation. It
includes environmental scanning, strategy formulation, strategy implementation and evaluation and control to
achieve the objectives of an organization.
 The study of strategic management emphasizes the monitoring and evaluating of external opportunities and
threats in light of a corporation’s strengths and weaknesses.
 As per Fred R. David, strategic management is an art and science of formulating, implementing and evaluating
cross functional decisions that enable an organization to achieve its objectives.
 As per Channon, strategic management is defined as that set of decisions and actions that result in formulating
of strategy and its implementation to achieve the objectives of the corporation.
 Most important part is developing strategic plans
- Plans must remain current as changes occur inside and outside the company
 Involves many levels of management
- Top level formally develops basic plans
- Different departments may be asked to develop plans for their own areas
- A solid plan guarantees that plans are coordinated and are supported by everyone in the company
 Strategic Management includes all the decisions and actions set by the managers and provides a gauge on the
performance of a particular organization.
Strategic Management Process
SITUATION ANALYSIS
STRATEGY FORMULATION
Mission/Vision Strategies/Policies

STRATEGY IMPLEMENTATION
Programs/Activities Budget/Procedures

STRATEGY EVALUATION AND CONTROL

Performance Actual Results
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The table signifies the strategic management process which outlines how an organization formulates, implements,
and evaluates systems and processes for efficient and effective company performance
 SITUATION ANALYSIS
- purpose: is to determine the features in a company’s internal and external environment that will mostly
directly affect its strategic options and opportunities
- includes environmental scanning
 Environment means surroundings or conditions that influence develop or growth, in organizations and
environment we mean interaction of an organization and its environment
 (Worthington and Britton, 2009)Identify changes or trends that have a potential to generate
opportunities and threats to the organization’s current or future intended strategies
- provides the information necessary to formulate the company’s vision/mission statement
- involves scanning and evaluating the organization, which includes the external environment
- analyzing the environment using several techniques
 There is a need for a method for singling out critical developments and relating them to plan for a
business organization’s situational analysis. That method is known as SWOT Analysis, which means
Strenght, Weaknesses, Opportunities and Threats. Or TOWS
 Scenario Planning - the effect of the environment forces on their operations, they prequently develop
scenario of the future
 Forecasting – predicting what will happen in the future
 Benchmarking – undertakes to compare its practices and technologies with those other organizations
- internal environment should be observed, includes employee interactions with one another regardless of
rank
- analyze the external environment, this comprises of customers, suppliers, creditors, and competitors
The environment is observed internally on the organizational culture – how employees interact with
each other, how relationships are formed and enhanced. Their behavior is observed, employees are interviewed
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and focused group discussions are done. These techniques are used to provide a better picture of organizational
culture.
In the external environment, customers, suppliers, competitors, among others are observed. Who are
the customers and who are the direct and indirect competitors? What is the relationship of the company and
the suppliers?

 STRATEGY FORMULATION
Developing the grand- and business-level strategies to be used by the company
- Company’s strengths/weaknesses and threats/opportunities shape the strategies
- First step is to understand the current position of the company
 Identify mission, identify past and present strategies, diagnose the company’s past and present
performance, set objectives for the company’s operation
Identify the mission statement
 Outlines why the company exists
 Describes the company’s basic products and/or services and defines markets and sources of revenue
 Designed to accomplish several goals and ensures a common purpose within the company

Identifying Past and Present Strategies

 Companies need to understand and appreciate their corporate history
 Strategic managers should ask
- Has past strategy been developed?
- If not, can past history of the company be analyzed to identify the strategy that has evolved?
- If yes, has the strategy been recorded in writing?
- Strategic Management Process
Diagnosing Past and Present Performance
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 A corporate planner must decide if past strategies worked and if strategic changes are needed by
asking:
- How is the company currently performing?
- How has it performed during the past few years?
- Is the performance trend moving up or down?
Setting Goals
 Concise statements that provide direction employees and set standards for achieving the company’s
strategic plan
 Established in many areas
 Goals must be reevaluated as the environment and opportunities change
 Multiple goals are used to reflect the desired performance
Policies, Procedures, and Rules
 Policies are broad general guides to action that establish boundaries within which employees must
operate
- “answering all written customer complaints in writing within 10 days”
 Procedures are detailed series of related steps/tasks written to implement a policy
- Define methods through which policies are achieved
- “the customer service representative must note the complaint of Form 622 and forward the
yellow copy of the form…”
 Rules detail specific and definite corporate actions that employees must follow
- Leave little doubt about what is to be done
- “no smoking in the conference room”

 STRATEGY FORMULATION
- involves the development of company strategies
- composed of three organizational levels: operational, competitive and corporate
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Operational strategies are short-term and a associated with the various operational departments of the company
such as human resources, finance, marketing, and production. The traditional definition of operational strategies
refers to solely to the set of processes and structures. There were no strategies that direct overall performance and
day-to-day priorities specific functions.

Competitive strategies are those related to the techniques in competing in a certain industry. The company must
identify the strengths and weaknesses of its competitors; thus, formulate strategies to gain competitive advantages.
These strategies deal with establishing competitive strength against competitors.

Corporate strategies are long-term and are involved in providing direction for the organization.
- to be able to improve both operational and competitive strategies
- there should be a synergy between the operating units and thus, competitive strategies should support overall
corporate strategies
- these strategies solidify all the other strategies that will result to overall organizational performance

Competitive Advantage
- looks at quality
- it is tantamount to superior quality wherein a customer would pick out a particular brand and no other,
because of the belief that a particular brand provides excellent performance
- the brand name’s image and reputation speaks quality
- customer can rely on the product and it is long-lasting
- building a competitive advantage means that the
product or service provides efficiency on the part of the company producing, supplying or giving
- more goods or services are provided with minimum cost of production without sacrificing product or service
quality
- a competitive edge also covers continuous innovation
- the product or service matures in the product life cycle, it is enhanced or improved
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- continuous improvement means the company wants to maintain its customers, no brand
switching
- also achieved when the company always anticipates what the customers need and want
- it responds to customers’ suggestions, and attends, analyzes, and monitors customer’s complaints

 STRATEGY IMPLEMENTATION

- the action stage of strategic management

- involves the development of procedures, programs and activities to put the strategies into practice
- it also the time to determine which strategies should be implemented first.
- should arrest potential hazards like communication of the strategies to be implemented
- failure to communicate the strategies to the entire organization loses the ability of the
organization to implement the strategies

 STRATEGY EVALUATION AND CONTROL

- the process of monitoring corporate activities and performance results so that actual
performance can be compared with desired performance
- it includes appraising the company’s performance
- all employees are involved in strategy evaluation
- there is always a need to modify strategies because the environment is constantly
changing
- there is always a quest for these modifications to make the strategies more attuned these
changes