Strategic Management: Definition and Value for Managers

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Strategic Management: Definition and Value for Managers

Introduction

Strategic management can be defined as either an art or science of business management strategy that helps to formulates, implement, and evaluate some specific decisions that prove very critical in reaching the organizational objectives (David, 2007). This definition, therefore, means that strategic management is a type of management inclined towards integrating management process, marking, finance, productions, research and development, and technology to reach organizational maximum success (David, 2007; Hill & Jones, 2005). On some occasions, strategic management is used in relation or synonymously with the strategic plan of a firm (Hammer & Champy, 1993). But the most common application of strategic management is in the strategy formulation, implementation, and evaluation. That is to say that once a strategic plan is put in place, it takes strategic management initiative to carry out the plan and proceed with the process of implementation and evaluation. One can therefore safely argue that strategic management is to exploit as well as create new and different opportunities for tomorrows plans.

Strategic Management Stages

Strategic Formulation

The strategy formulation stage involves developing a vision and mission, establishing the external opportunities and threats of the firm, establishing internal strength and weaknesses of the firm, long term objective establishment, identifying and generating alternative strategies, and finally choosing certain strategies to follow up (Hitt & Ireland, 2008). It is the process of formulation that guides the managers on certain principles of business reorganizations. Some of the formulation processes are linked to the ability of the manager to decide on whether to pursue new business opportunities to enter, what business initiatives to drop, how to allocate the available resources to different initiatives, guides the decision on whether to expand certain operations or just diversify, whether to go into the international market, whether to involve the firm into a merger or joint venture initiative, or sometimes how to maneuver and avoid unfriendly take over (Stahl & Grigsby, 2008; Johnson & Scholes, 2003; Hitt & Ireland 2008).

In the strategy formulation stage, one principle of operations is anchored in the belief that no organization has unlimited resources. It, therefore, means that managers of every organization would be hard-pressed to produce the best results with the limited resources available. Thus, the strategy-formulation decisions will tie an organization to produce only certain products, venture into specific markets, use the available resources prudently with improved technology as a supporting tool over a particular period (Yip, 2004). According to Warnaby & Woodruffe (1995), strategies determine long-term competitive advantages over time. Irrespective of the economic situation, strategic decisions have multidimensional consequences and long-term effects on the organizations future (Warnaby & Woodruffe, 1995). It is through it that top managers can get the best perspective to fully conceptualize the effects of their decisions to formulate; and have the authority to weigh on the resources needed to achieve a specific goal of implementation (De Toni & Tonchia, 2003).

Strategy Implementation

In this stage, the managers are expected to establish annual objectives, identify and implement policies, be the motivational factor to employees, and allocate resources such that the strategies that were formulated can be carried out (Drejer, 2000). In other words, strategy implementation involves developing a culture that is supportive of the set strategy, creating an effective structure for the organization, refocusing the marketing efforts, budget preparation and development and usage of information systems, and ensuring that the organizations performance is connected to the employee compensation.

Strategy implementation, often considered to be the action stage of strategic management, involve the mobilization of employees together with managers to put into action the formulated strategies (Drejer, 2000). In most cases, this stage is considered to be the most challenging stage of strategic management. Experts believe that this is the stage where strong personal discipline, commitment, and sacrifice are required (De Toni & Tonchia, 2003; David, 2007). Acur & Bititci (2004) observe that successful strategy implementation lies in the ability of the manager to motivate his staff, putting a lot of emphasis on both material and emotional motivation. This calls for strong interpersonal skills among the management and employees alike (Acur & Bititci, 2004). This is because its a process that affects all the employees and managers in the organization. Such questions as; what must be done for successful implementation of part of this plan? How can it be done best? In this regard, the challenge involved is to psych up managers and employees to continuously and consistently work towards the set strategic goal.

Strategy Evaluation

This is the last stage of strategic management. The primary method to establish whether a particular strategy is not working is through evaluation (Porter, 1980). Evaluation helps the managers establish whether a particular strategy is successful or not. Since external and internal factors continuously affect strategic management, strategy evaluation would help in the establishment of what areas to change or to emphasize (Acur & Bititci, 2004). The basic activities involved in evaluation are: reviewing of external as well as internal factors is combined to form the base for the present strategies, performance measurements, and taking corrective actions (Acur & Bititci, 2004). Drejer, (2000, p.206) observes that strategy evaluation is necessary because todays success is not a guarantee of tomorrows success; as success will always create unique problems with it, which may be as a result of complacency.

Tesco Strategic Management

There has been intense pressure for retail stores in the UK to reduce their prices and improve the way they handle suppliers (Finch, 2004). This particular pressure has been concentrated on retail supermarkets that have their label like Tesco (Clarke, Bennison & Guy, 2006). Given the fact that Tesco is the largest supermarket store in the UK in terms of revenue and profitability, the retail store has to contend with the constant pressure in the face of global economic crisis to reduce the price of their products to compete favorably with other giant global retailers like Wal-Mart. To match this demand, the company has successfully applied strategic management in its operations for the last ten years.

Tesco has provided a perfect example of how a company can use strategic management to withstand constant external and internal challenges of operating large business units and continue expanding and excelling where many have failed. Tesco is the largest retailer in the UK and one of the biggest food and beverage retailers globally, managing over 2300 retail stores with well over 320,000 people (Clarke, Bennison & Guy, 2006). The company runs its operations under four main banners in the name of Extra, Superstore, Metro, and Express (Clarke, Bennison & Guy, 2006, p.11). Other than the physical retail stores, Tesco has excelled in the online retail business under its subsidiary Teco.com (Clarke, Bennison & Guy, 2006, p.16). In addition, its label products take half of its sales turnover and are placed under three levels of operations in value, normal and finest (Clarke, Bennison & Guy, 2006, p.17). To diversify its products, Tesco has ventured into the financial services to its customers and retailing in other areas of industry like the sale of petroleum products. In principle, all these achievements could not be maximized if there was no strategic management in place, as the complexity of business increases every day with such kind of expansion.

Factors that Initiated Strategic Management Needs

Operating in different countries with completely different socio-political and economic factors, Tesco had to adopt strategic management techniques to launch and maintain proper market entry and penetration into each of the markets. Its operations in main European and Asian markets such as UK, Turkey, Ireland, Japan, South Korea, and Malaysia among many others needed a thorough understanding of political, legislative as well as cultural understanding of these markets (Wrigley, 2000). Another factor that was considered in their strategic management plans was the economic factor, which demanded that they withstand the external influence of prices, costs, and demand.

Conclusion

Strategic management stages (strategy formulation, implementation, and evaluation) occur in three levels of hierarchy in big organizations. The best way to accomplish a firms objectives and make strategic management adaptable at all levels of the organization is through communication (Stahl & Grigsby, 2008). This can be emphasized by encouraging interactions between managers, especially line managers, whose knowledge of the set goal would help the firm participate in the market competitively. It is observed that the majority of small businesses as well as some large ones do not have specific divisions or business units that can trickle the information down the lowest hierarchy of the organizational human resources. Instead, they only have corporate or functional departments. However, managers and employees at the above-mentioned two levels of organizational structure should actively participate in the strategic management process.

Reference

Acur, N., & Bititci, U. (2004), A balanced approach to strategy process, International Journal of Operations & Production Management, Vol. 24 issue 4, pp.388-408.

Clarke, I., Bennison, D. & Guy, C. (2006), The Dynamics of UK Grocery Retailing at the Local Scale, International Journal of Retail & Distribution Management, Vol. 22 Issue 6, pp.11-20.

David, F. (2007), Strategic Management: Concepts and Cases. Oxford. Oxford University Press.

De Toni, A., & Tonchia S. (2003), Strategic planning and firms competencies: Traditional approaches and new perspectives, International Journal of Operations & Production Management, Vol. 23 Issue 9, pp.947-976;

Drejer, A. (2000), Organisational learning and competence development, The Learning Organization, An International Journal, Vol. 7 Issue 4, pp.206-220;

Finch, P. (2004), Supply chain risk management, Supply Chain Management, An International Journal, Vol. 9 Issue 2, pp.183-196.

Hammer, M. & Champy, J. (1993), Reengineering the Corporation, Harper Business, New York.

Hill, C., & Jones G. (2005), Strategic Management: An Integrated Approach, Boston. Wiley Publishers.

Hitt, M., & Ireland, D. (2008), Strategic Management: Competitiveness and Globalization, Concepts and Cases. London. London School of Economics.

Johnson, G., & Scholes, K. (2003), Exploring Corporate Strategy, 6th ed., Prentice Hill: London.

Porter, M. (1980), How Competitive Forces Shape Strategy, The McKinsey Quartely, 1980, pp.34-50.

Stahl, M., & Grigsby, D. (2008), Strategic Management: Total Quality and Global Competition, New York. Wiley Publishers.

Warnaby, G. & Woodruffe, H. (1995), Cost Effective Differentiation: an Application of Strategic Concepts to Retailing, International Review of Retail, Distribution & Consumer Research, Vol. 5 Issue 3, pp.253-270.

Wrigley, N. (2000), Strategic market behaviour in the internationalization of food retailing, European Journal of Marketing, Vol. 34 Issue 8, pp.891-920.

Yip, G. (2004), Using Strategy in Change Your Business Model, Business Strategy Review, Vol. 15 Issue 12, pp. 17-24.

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