The Five Steps of Strategic Management (b) Differentiation – A company following this strategy seeks to build customer loyalty by positioning its goods in a unique or different fashion. Strategy evaluation is the last step of the stages of strategic management process. If you are undertaking this type of strategy management, you are responsible for guiding the changes that take place in in the company and managing employee morale, which can be challenging in times of change. Strategic management is the process of formulating and implementing strategies that will help in aligning the organisation and its environment to achieve organisational objectives. Objectives specify the desired end state while strategy stresses upon th… Strategy formulation usually takes place with the involvement of the top management. The strategies a company selects depend on its competitive advantages in the market segments in which it competes. Forecasting is the act of making predictions about future situations based on the analysis of past and present data. As needed reactions to unanticipated developments and fresh market conditions and competitive pressures, and. Creating an organisational culture is the third element of strategy implementation. TOS4. Also, find out if you need external resources. Setting Organizations objectives– The key component of any strategy statement is to set the long-term objectives of the organization. The strategic management process is more than just a set of rules to follow. Your objectives should be realistic, detailed and in line with your values. A customer can buy an iPod that plays music from iTunes—all of which can be stored in Apple’s Mac computer. Strategic management process normally followed in an organization. Work systems are concerned with the design of the jobs and the responsibilities that have to be assigned to the employees. It enables an organization or group to: Identify strengths and weaknesses It deals with making and implementing decisions about future direction of an organisation. Technological resources are the processes the organisation employs to produce goods. Analysis of Organisational Resources and Capabilities and Firm’s Internal Environment: The strategic management process always involves careful analysis of organisational resources and capabilities. The strategy-making task thus involves – (a) developing an intended strategy, (b) adapting it as events unfold (adaptive/reactive strategy), and (c) linking the firm’s business approaches, actions, and competitive initiatives closely to its competences and capabilities. Most often, the strategic planning process has 4 common phases: strategic analysis, strategy formulation, implementation and monitoring (David, Johnson, Scholes & Whittington, Rothaermel, Thompson and Martin). This is the second step in the strategic management process. Evaluating Performance, Monitoring New Developments and Initiating Corrective Adjustments, What is Strategic Management Process – 4 Major Steps: Strategic Analysis and Inputs, Strategy Formulation, Strategy Implementation & Strategic Evaluation and Control, i. Strategy evaluation and control is the last phase in the strategic management process. The strategists determine objectives and make strategic decision; to implement them effectively. It takes into account factors such as: For example, your company is receiving more customer inquiries than it can handle. Each alternative has its own merits and demerits but all alternatives cannot be equally appropriate. Instituting best practices and programmes for continuous improvement. Such an assessment is necessary because every incident or change will have either positive or negative impact on the business. However, strategy may also emerge through adaptation to circumstances. An organisation is said to have competitive advantage if its profitability is higher than the average profitability for all companies in its industry. Creating a company culture and work climate conducive to successful strategy implementation and execution. ii. Present businesses that have already created a strategic management plan will revert to these steps as per the situation’s requirement, so as to make essential changes. ii. Objectives build a result-oriented climate throughout the enterprise. The strategic management formulation and implementation normally vary from company to company, from product to product, many times even with the changing environment within and outside the organisation, and various other factors. The company can also let the IT department handle the project instead and have its manager provide regular updates. One view is that strategy is the result of managers engaging in deliberate, rational analysis. Management monitors the extent to which the firm is meeting its strategic goals and asks why deviations exist. It is a strategy in which a company selects one or more market segments, identifies customers’ special needs, wants, and interests, and approaches them with a good or service designed to excel in meeting those needs, wants, and interests. Objectives are the “ends”, and strategy is the “means” of achieving them. To evaluate and control the effectiveness of your strategic management plan, you have to create and use performance measurements, regularly review internal and external factors, and take corrective measures when necessary. The strategic management process has five steps; mission and goals, environmental analysis, strategic formulation, strategy implementation and strategy evaluation. It is concerned with putting the strategy into operation or translating the chosen strategy into strategic action. It is the specific collection of values, norms, beliefs, and attitudes shared by people and groups in an organisation. ii. The HR department does not form a part of the plan design team. After analysing the external environment, the next step for an organisation would be to assess the internal environment. Strategic Planning Process: 9 Steps of Setting Proper Strategic Plan. A strategy determines the basic short/long-term goals and objectives of an organization, the course of action to achieve the goals, and the resources necessary for carrying out those goals. Strategic planning includes the first four strategic management tasks. About Us; Contribute; Advertise; Contact Us; My Account; PRINCE2® Search all BA Times Articles. It involves six important steps. This is the sixth Process of Strategic Management and it means the last stage in strategic planning is the choice of an appropriate strategy for the attainment of specified objectives. The external business environment thus provides opportunities or threats to the business concerns. A to Z of Creativity Techniques; Previous Strategic Choice Approach: Next Successive Element Integration : This is a six-stage process, run in-house usually by a Strategic Management Group. Defining the Business. There are many core steps in the entire process of strategic management and many of them are defined as well as described well in the various executive leadership development program. It is a highly complex process that may require radical changes, which is why it is not as common as the other two types of strategic management. Thus, the employees can judge the impact of such changes on their own job and can effectively face the changes. These decisions affect the long-term well-being of the organisation but are made in the present. This is the one goal all members of the organization should be able to reproduce and chant at any time. This involves the local laws and international laws, if the company is operating in the global business environment. Definition of the Business and its Mission: 3. ii. Analysing the Environment 3. First, the strategic planning department brings to the notice of the HR department the various strategies that the company plans to consider. Installing information, communication, and operating systems that enable company personnel to carry out their strategic roles effectively day in, day out. The strategic management process is about getting from Point A to Point B more effectively, efficiently, and enjoying the journey and learning from it. c. Overtaking key competitors on product quality or customer service or product innovation. Strategy evaluation is concerned with examining whether the strategy implemented is working or producing results or accomplishing its objectives or not. Strategic planning is a process by which an organization develops a long-term vision and a plan to implement it. The company’s vision is a “general statement of its intended direction that evokes emotional feelings in organisation members”. The strategic management process is best implemented when everyone within the business understands the strategy. Statement of Corporate Mission and Objectives: No human activity is unintentional. The management should select the strategic management should select the strategic alternative which is best suited to the organization’s capabilities. 5. The collective learning of the organisation over time. Work system design is another important part of internal assessment. One cannot exist without the other. The strategic management process can be studied and applied using a model. Strategy evaluation which is the final step of strategy management process involves- appraising internal and external factors, measuring performance, and taking remedial/corrective actions. The level of competition in an industry depends on five basic forces which determine the profit potential of an industry. The vision describes where the business wants to reach and mission tells us the business values and its purpose of existence. However, most successful strategic management processes have certain standard components, including: Finance has a direct impact on the scope and effectiveness of a strategic management process. iii. Make sure you assign each of your staff members a task they can perform effectively. By analysing the industry structure and the competitive work environment, an organisation can identify the main competitors and the strategies that have to be framed. But actions in the present are also the one and only way to make the future.”. The steps in effective strategic management include attaining internal and external inputs, developing goals and objectives, developing strategies and … The process of strategic management consists of: 1. Share Your Word File Making Choices and Strategy Formulation, Other Elements of Strategy Implementation, What is Strategic Management Process – 6 Step Process: From Defining Business Mission to Performance Evaluation. A popular article called “The Five Stages of the Strategic Management Process” skillfully describes how to do strategic management properly. It relates to the industry or industries in which the firm is located, the products it supplies, the customer groups it targets, the countries and localities in which it operates and the vertical range of activities it undertakes. Certainly, part of Apple’s success is due to the unique products it offers the market, as well as how these products complement one another. Planning without control has little operational value. The basic point of the strategic plan should be to choose a direction for the firm that makes sense in terms of the external opportunities and threats it faces and the internal strengths and weaknesses it possesses. Management is a strategic process and the steps in that process are critical to ensure the success of a business, business unit or individual. Large firms have diverse products, operations, markets, and technologies and hence they have to essentially use complex systems. This concludes a standard strategic planning process. Through organisational cultures, the values of managers and other members are shaped and pointed in common directions. The e-business strategic management process illustrated in Figure 1 is based on the traditional model of strategic management. These useful active listening examples will help address these questions and more. Next, create a list of problems that are affecting your company in order of importance. Strategic Process: Vision and Mission. 1. It also promotes learning and continuous improvement and acts entrepreneurially in creating and taking advantage of new opportunities. An organisation is said to have competitive advantage if its profitability is higher than the average profitability for all companies in its industry. In different companies these phases may have different nomenclatures and the phases may have a different sequence, however, the basic content remains the same. This website includes study notes, research papers, essays, articles and other allied information submitted by visitors like YOU. We mentioned above that the main elements of a typical strategic management process include strategic planning followed by implementation, and finally strategic tracking and iteration. These may be factors like cost, distribution, product quality supplier relationships, number of services offered, prime store locations, available customer credit, and many other factors. Two-way linkages make HR a part of the strategic formulation plan team. vii. Crafting a Strategy 4. In the business context, it involves the evaluation of factors that can affect an organization’s growth or expansion. The managerial skill here is figuring out what must be done to put the strategy in place, carry it out proficiently, and produce good result.”. It is concerned with a systematic appraisal or examination of the internal capabilities of a firm. But all of the approaches include the same basic actions in the same order. It coordinates the efforts of employees at all levels. This phase is succeeded by evaluation of strategies. In two – way linkages the strategic planning units and HR are interdependent. Really, it’s just a matter of finding a process that works best for your organization’s needs. Create Effective Plan in 8 Steps (Planning Process) 6 Elements of Organizational Structure. Firms undertake the development of strategy in a variety of ways. Strategy describes the way in which the firm will accomplish the vision it has established and, is the theme incorporated in a set of strategic decisions. Establishing Goals and Objectives and 5. The last step in the formulation of a strategy is strategic analysis and choice. It should tell a company, its employees, vendors, customers, investors, the goal of the organisation. Crafting strategy is partly an exercise in entrepreneurship because it is actively searching for opportunities to do new things or to do existing things in new ways. The Strategic Management process is an approach to business which dictates everything from planning to execution and ensures that strategic thinking is at the forefront of all operations.. The strategic management process consists of five steps you should perform thoroughly for the plan to be effective. You can set professional and personal goals to improve your career. Strategic management process 6 steps is an identifiable flow of information through interrelated stages of analysis directed toward achieving an aim. Rather, it integrates them into a broader context, taking into account the external environment, internal organisational capabilities, and an organisation’s overall purpose and direction. Some other factors that need to be considered are the barriers to entry, opportunities for mergers and acquisitions and the impact of complementary industries on the company’s products. A strategy is the result of managers engaging in deliberate, rational analysis. Strategy formulation (strategic planning) involves making strategic decisions concerning the organisation’s mission, philosophy, objectives, policies, and methods of achieving organisational objectives. v. How to manage each functional piece of the business and develop needed organisational capabilities. The information on this site is provided as a courtesy. Collect as much knowledge as you can on how to achieve your vision. The concept of strategic management involves a continuous process of planning, monitoring, analyzing and assessing everything that is necessary for an organization to meet its goals and objectives. The mission is, thus, the basic, unique purpose that differentiates a business from others. R. Simmons has pointed out, “Strategic control is not just about monitoring how well an organisation and its members are performing currently or about how well the firm is using its existing resources. It includes the external environment such as competitors, market trends, technological changes, Government regulations, economic policies, etc. The management process designs and maintains an environment in which personnel’s, working together in groups, ... Steps, Process, Advantages and Disadvantages. If you find that your strategy is not helping your company achieve its goals, you have to take corrective actions. iv. The process of strategy formulation, thus, comes to an end with the choice of an appropriate strategy. Share Your PPT File, What is Strategic Management Process – Steps, Stages and Phases, What is Strategic Management Process – Top 5 Steps in Strategic Management Process (With Introduction), ii. Managing the strategy execution process is primarily a hands-on, close-to-the-scene administrative task that includes the following activities: i. Strategy implementation means translating the strategies into actions and results – by actually hiring people, building or closing the plants, and adding or eliminating product or product line. v. Motivating people in ways that induce them to pursue the target objectives. vii. Strategic management process begins with recognizing and formulating the vision and mission of the organization. If everyone buys into the Strategic Management process, things in the business will align and stand the chance of … Good strategy making is inseparable from good business entrepreneurship. Strategic management can be beneficial to a company, department or team in many ways. Organisation self-assessment is also about understanding the various components of change like culture, structure, power, the decision-making process and past strategy and work systems. (iv) The strategy exploits the external business opportunities or minimises its activities to overcome the threats or not. Note that analysis, decision making, and action happen in all of the steps and throughout the process Republic of the Philippines NUEVA VIZCAYA STATE UNIVERSITY Bayombong, Nueva Vizcaya INSTRUCTIONAL MODULE IM No. It gives character to an organisation in the eyes of its employees and external stakeholders. For example, growth strategy may be achieved by intensive growth strategy of market penetration, market development, and product development or integrative growth strategy of horizontal integration and vertical integration or diversification strategy depending upon the internal strengths and weaknesses provided the external business environment is favorable. The strategic management process framework typically involves setting clear goals, devising plans, aligning business activities and allocating resources to meet the objectives. Essentially, a mission statement defines a company’s values a. nd outlines its organisational purpose and reasons for existent. Making efforts to change the culture, viii. Putting a freshly chosen strategy into place. The ‘hows’ of strategy tend to be company specific. This stage comprises three important tasks: identifying your short-term and long-term objectives, determining the process for accomplishing your goals and customizing the process for your staff. Strategies don’t always succeed. Using Strategic Management Process, an organization decides to implement a selected few strategies along with stakeholders, details the implementation plan and keeps on appraising the progress & success of implementation through … The third step in the formulation of a strategy is an analysis of the industry. This is necessary to formulate an ideal strategy. By following the strategic management process an enterprise can easily plan for its success. In this article series, we will be going ‘back to basics’ and examining the five different elements of the organisational strategic process.These elements – at their most basic – are vision, mission and goal setting, research and analysis, formulation of objectives, actual implementation and evaluation and control. A factor is considered a weakness only when a firm performs it poorly than the competitors in the industry. Strategic management process is defined by four major steps which can be defined as follows: Environmental Scanning– Environmental scanning refers to a process of collecting, scrutinizing and providing information for strategic purposes, analyzing the internal and external factors influencing the organization. ii. It is the process of managing, planning, and analyzing in order to reach all organizational goals. f. Winning a stronger foothold in international markets, h. Gaining a sustainable competitive advantage, and. Thompson and Strickland point out that, “The managerial task of implementing and executing the chosen strategy entails assessing what it will take to develop the needed organisational capabilities and to reach the targeted objectives on schedule. 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