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Introducing strategy andstrategic management

Prepared by Rohan Wickremasinghe

AIB (SL), Dip Mgt., MBA (SGU), Dip B. (BPUSL)

Introducing strategy

Strategies are the means to an organizations objectives.

Whilst an organization will have an existing strategy, it may not be explicit.

Whilst established objectives may be used to determine strategies to achieve them(what we know as intended strategies) the actual strategies being pursued andthe level of success determines the level of overall achievement.

Generally speaking, both strategies and objectives evolve and emerge as problemsare identified and resolved, and opportunities are identified and exploited.

Research suggests that existing strategies frequently evolve incrementally withdecisions and changes in various parts of the organization rather than changesbeing the result of a formal planning system, i.e. strategic change in reality is often agradual process.

There is likely to be, however, an overall strategic direction dictated by topmanagement and this will aim to create and sustain a match or fit between the

organization and its environment.

Environmental crises or changes at the top may well cause a change in the overalldirection. The direction is often reflected in corporate mission and vision statements.

Formal planning or corporate planning does have a useful role in helping carry outstrategic analyses, and in assessing alternative course of action, but, quite simply,there is more to strategic management than planning.

The courses followed by an organization are heavily influenced by the values held bypeople within the organization. Logically, these values come from the top.

Levels of strategy: corporate competitive and functional strategies

It is important to distinguish between:

Corporate strategy which is deciding what businesses the organization should bein and how the overall group should be managed.

It can be defined as: the overall plan for a diversified company and it represents thetotal perspective of the business.

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Competitive strategy which is concerned with creating and maintaining acompetitive advantage in each and every area of business a clear and defensibleedge which distinguishes an organization from its rivals.

It must be looked at from the position of individual products or services or business

units. Competitive advantage can be achieved from any one or a combination of thefunctions of the organization, for example technology lead, quality management,distribution system, low borrowing costs.

Functional strategies designed also to inter-relate and contribute to theorganizational whole, are an important third level. The three levels are linked andinter-dependent. Whilst changes to the corporate strategy are typically seniormanagement decisions, all managers can influence change at the competitive andfunctional levels hence all managers are strategy makers.

The strategic management process

Strategic management is the process by which an organization establishes itsobjectives, formulates actions designed to achieve these objectives in the desiredtimescale, implements the actions and assesses progress and results.

At the heart of it is strategic awareness:

Understanding the organizations strengths and weaknesses normally

relative to any competition.

Appreciating threats and potential threats to the organization and

competitive opportunities for it within its environment.

This, in turn, requires an understanding of the relative power and influence ofthe various stakeholders in the business.

Being able to identify and evaluate suitable changes again, ahead of

competitors.

There is also the element of management

The way the organization is structured to harness, co-ordinate and control

resources.

The way people are treated and managed.

Effective strategic management requires an organization to be (always) considering

the following issues:

Where are we now?

Where do we want to go?

How are we going to get there?

Getting There. What do we have to do?

Have we got there? If not, why not?

Issues and challenges

There are a number of major issues or challenges for organizations in the twenty-firstcentury, including the following:

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The need for many businesses to develop a culture of change orientation

without losing internal cohesion and stability. This implies an explicit andshared vision of where the organization is heading.

The need to improve performance continually with existing competitive

strategies (continuous change) whilst looking for opportunities to create(radically) new competitive strategies ahead of competitors (discontinuouschange).

The need to decentralize and give managers more delegated authority whilst

not losing sight (at chief executive level) of the changes they are introducing.

The trade-off between such empowerment (designed to make the business

more effective in its relations with all its stakeholders) and the greaterefficiencies often yielded by centralized control and the systems whichharness the latest information technology.

The need to act quickly in response to opportunities and threats, but not at the

expense of product and service quality achieving high quality at the sametime as cutting costs and improving efficiencies.

These five challenges are all related.

Finally, the dilemma of economic recessions. Organizations must cut back, controltheir costs and accept lower margins as supply potential exceeds demand in manyindustries. Profits fall. Paradoxically, those organizations which are able toconsolidate and invest strategically during the recession will be best prepared for theeconomic upturn.

Three analytical frameworks

Strategic management involves:

awareness

choice of new strategies

implementing current and new strategies

All of the decisions are affected by the strategic leadership and organization culture.

Strategic effectiveness depends upon:

strategic awareness and learning (affecting strengths, weaknesses,

opportunities, threats);

strategy content the ability of the organization to exploit its resources and

competencies to add value for customers, create and sustain competitiveadvantage;

processes for managing change encapsulating strategic vision (frequently

driven by the strategic leader), planning, and responsiveness in a dynamiccompetitive environment.

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The challenge facing organizations involves changing strategies (content) bothcontinuously and discontinuously (process) whilst dealing with the important issuesor challenges they face.

Visionary leadership and entrepreneurialism

It is not essential for leaders to be visionary but many argue that the mostentrepreneurial organizations have visionaries at their head. These organizations arethe ones which are growth-oriented and willing to take risks, at least up to a certainlevel.

Ineffective leadership

Poor strategic leadership is typically reflected by low competitiveness (theorganizations marketing is relatively weak), inadequate financial strengths (lowprofitability through costs which are too high; or a poor cash flow) and inappropriate

decisions which can range from not making changes when strategies have driftedfrom being relatively strong to relatively weak, to the pursuit of over-ambitiousstrategies which stretch the organizations resources too far.

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