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