- Enhance organizational performance.
- Effective utilization of resources.
- Reduce uncertainty.
- Change management.
- Participative management.
- Meet competition.
Process of Strategic Management
The strategic management process is a six-step process that encompasses (covers) strategic planning, implementation and evaluation. Although the first four steps describe the planning that must take place, implementation and evaluation are just as important. Even the best strategies can fail if management doesn’t implement or evaluate them properly. The following are the steps of strategic management process.
- Identifying organization’s mission, objectives, and strategies: it is the initial step of strategic management It is the reason for the existence of an organization. It states that who we are and what we would like to become. It is developed by top-level management. Mission defines the fundamental unique purpose that is different from the other organization of similar type. This mission of eBay is “to build an online marketplace that enables practically anyone to trade practically anything almost anywhere in
the world.” This statement provides clue to what this organization sees as its reason for being in business. Strategy is a comprehensive master plan that explains how the organization will achieve its mission and goals. It adopts a course of action and allocation of resources necessary to achieve the goals.
- Analyzing external environment: analyzing the environment is a critical step in the strategy process. External environment refers to the forces and institutions outside the organization that affect the organization’s The external environment consists of specific or tasks and general environment. In analyzing the external environment, managers should examine both the specific and general environments to see what trends and changes are occurring. The task environment consists of customers, suppliers, competitors, government, pressure groups etc and general environment consists of politics, economy, society, culture, technology etc. such external environmental forces must be carefully analyzed for strategic management process. After analyzing the external environment managers need to identify opportunities that can be capitalized; and threats that an organization may face. Opportunities are the positive trends and scope for organization to grow and threats are the negative trends and challenges to the organization.
- Analyzing internal environment: internal environment consists of all forces and conditions within the organization that affect business operation. Managers need to analyze the internal environment to understand about the position of organizational resources such as financial capital technical experience, skilled employees, experienced managers and so forth and capabilities in performing the different functional activities such as marketing, manufacturing, information systems, human resource management and so Analysis of internal environment helps in identifying strengths and weaknesses of an organization. Strength is a position of organization with unique resources and efficiency in activities. Weakness is the activities that the organization does not do well and organization is lacking with valuable resources. The management must identify the strength to capitalize and weakness to overcome the organization’s limitations.
- Formulating strategies: are developed on the basis identification of mission and environmental analysis. Environmental analysis is also called SWOT Once SWOT analysis is complete, managers need to develop and evaluate strategic alternatives and then select strategies that capitalize on the organization’s strengths and exploit environmental opportunities or that correct the organization’s weaknesses and safeguard
against threats. Strategies must focus to corporate and functional levels. Managers need to develop and evaluate strategic alternatives and then choose a strategy that gives the organization competitive advantages
- Implementing strategies: After strategies are formulated, they must be No matter how effectively an organization has planned its strategies, it can’t succeed if the strategies aren’t implemented properly. Select strategies are put into action through plans, policies, tactics, programs and procedures. Translating strategy into action phase is the strategy implementation phase. Team building and managing effective teams is an important part of implementing strategy. Top management leadership is a necessary ingredient in a successful strategy. Moreover, motivated group of middle and lower level managers are needed to carry out the organization’s specific strategies.
- Evaluating results: The final step in the strategic management process is evaluating How effective have the strategies been? What adjustments, if any, are necessary? Such adjustments improve company’s competitiveness. This step helps to assess the results of previous strategies and determines that changes are required. Thus evaluation and control is the process by which corporate activities and performance results are monitored so that actual performance can be compared with desired performance. Although the evaluation is the final step of strategic management process, it also can pinpoint weaknesses in previously implement strategic plans and thus stimulate the entire process to begin again.