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Strategic Management Model



Fig. 3: Strategic Management Model

The strategic management process can best be studied and applied using a model. Every model represents some kind of process. The model illustrated in Fig. 3 model is a widely accepted and comprehensive model. This model like any other model of management does not guarantee sure-shot success, but it does represent a clear and practical approach for formulating, implementing and evaluating strategies. Relationships among major components of the strategic management process are shown in the model.

  • Analysis
  • Implementation
  • Evaluation

The strategic management process is dynamic and continuous. A change in anyone of the major components in the model can necessitate a change in any or all of the other components.  For instance, a shift in the economy could represent a major opportunity and require a change in long-term objectives and strategies; a failure to accomplish annual objectives could require a change in policy; or a major competitor’s change in strategy could require a change in the firm’s mission.

Therefore, strategy formulation, implementation and evaluation activities should be performed on a continual basis, not just at the end of the year or semi-annually. The strategic management process never really ends.

The strategic management process is not as cleanly divided and neatly performed in practice as the strategic management model suggests. Strategists do not go through the process in lockstep fashion. Generally, there is give-and-take among hierarchical levels of an organization. Many organizations conduct formal meetings semi-annually to discuss and update the firm’s vision/mission, opportunities/threats, strengths/weaknesses, strategies, objectives, policies, and performance. Creativity from participants is encouraged in the meeting. Good communication and feedback are needed throughout the strategic management process.


Stages in Strategic Management

Crafting and executing strategy are the heart and soul of managing a business enterprise. Strategic management involves the following stages:

  1. Developing a strategic vision and formulation of statement of mission, goals and objectives.
  2. Environmental and organizational analysis.
  3. Formulation of strategy.
  4. Implementation of strategy.
  5. Strategic evaluation and control.


Stage 1: Strategic Vision, Mission and Objectives

Vision – Vision is the road map of company.

Mission and Strategic Intent: Mission is the reason to exist. A company must know what it does, how it does, for whom he does.

Goals and Objectives of a company must be crystal clear.


Stage 2: Environmental and Organizational Analysis

This stage is the diagnostic phase of strategic analysis. It entails two types of analysis:

-Environmental scanning

- Organizational analysis

External environment of a firm consists of economic, social, technological, market and other forces which affect its functioning. The firm’s external environment is dynamic and uncertain. So, the management must systematically analyze various elements of environment to determine opportunities and threats for the firm in future.

Organizational  analysis  involves  a  review  of  financial  resources, technological resources,  productive  capacity,  marketing  and  distribution  effectiveness,  research and development, human resource skills and so on. This reveals organizational strengths and weaknesses which could be matched with the threats and opportunities in the external environment. This provides a framework for SWOT analysis (Strength, Weakness, Opportunity and Threat) which could be in the form of a table highlighting various strengths and weaknesses of the firm and opportunities and threats which the environment creates for the firm. The concept of SWOT analysis is already elaborated in chapter 2.


Stage 3: Formulating Strategy

The first step in strategy formulation is developing strategic alternatives in the light of organizational strengths and weaknesses and opportunities and threats in the environment. The second step is the deep analysis of various strategic alternatives for the purpose of choosing the most appropriate alternative which will serve as strategy of the firm.

A company may be confronted with several alternatives such as:

  • Should the company continue in the same business carrying on the same volume of activities?
  • If it should continue in the same business, should it grow by expanding the existing units or by establishing new units or by acquiring other units in the industry?
  • If it should diversify, should it diversify into related areas or unrelated areas?
  • Should it get out of an existing business fully or partially?

The above strategic alternatives may be designated as stability strategy, growth/ expansion strategy and retrenchment strategy. A company may also follow a combination of these alternatives called combination strategy. The details of the strategies have been given in chapter 4.


Stage 4: Implementation of Strategy

Implementation and execution is an operations-oriented, activity aimed at shaping the performance of core business activities in a strategy-supportive manner. It is the most demanding and time-consuming part of the strategy-management process. To convert strategic plans into actions and results, a manager must be able to direct organizational change, motivate people, build and strengthen company competencies and competitive capabilities, create a strategy-supportive work climate, and meet or beat performance targets.

In most situations, strategy-execution process includes the following principal aspects:

-              Developing budgets that steer ample resources into those activities critical to strategic success.

-              Staffing the organization with the needed skills and expertise, consciously building and strengthening strategy-supportive competencies and competitive capabilities, and organizing the work effort.

-              Ensuring that policies and operating procedures facilitate rather than impede effective execution.

-              Using the best-known practices to perform core business activities and pushing for continuous improvement.

-              Installing information and operating systems that enable company personnel to better carry out their strategic roles day in and day out.

-              Motivating people to pursue the target objectives energetically.

-              Creating a company culture and work climate conducive to successful strategy implementation and execution.

-              Exerting the internal leadership needed to drive implementation forward and keep improving strategy execution.

When the organization encounters stumbling blocks or weaknesses, management has to see that they are addressed and rectified quickly. Good strategy execution involves creating strong “fits” between strategy and organizational capabilities, between strategy and the reward structure, between strategy and internal operating systems and between strategy and the organization’s work climate and culture.


Stage 5: Strategic Evaluation and Control

The final stage of strategic management process – evaluating the company’s progress, assessing the impact of new external developments, and making corrective adjustments – is the trigger point for deciding whether to continue or change the company’s vision, objectives, strategy, and/or strategy-execution methods. So long as the company’s direction and strategy seem well matched to industry and competitive conditions and performance targets are being met, company executives may decide to stay the course. Simply fine-tuning the strategic plan and continuing with ongoing efforts to improve strategy execution are sufficient.

But whenever a company encounters disruptive changes in its external environment, questions need to be raised about the appropriateness of its direction and strategy. If a company experiences a downturn in its market position or shortfalls in performance,  then company managers are obligated to ferret out whether the causes relate to  poor strategy, poor execution, or both and then to take timely corrective action. A company’s direction, objectives and strategy have to be revisited every time external or internal conditions warrant. It is to be expected that a company will modify its strategic vision, direction, objectives, and strategy overtime.

Proficient strategy execution is always the product of much organizational learning.   It is achieved unevenly, coming quickly in some areas and proving nettlesome and problematic in others. Periodically assessing what aspects of strategy execution are working well and what needs improving is normal and desirable. Successful strategy execution entails vigilantly searching for ways or continuously improves and then making corrective adjustments whenever and wherever it is useful to do so.

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