Fundamental Approach to Strategic Management

 

The approach to strategic management should be an integrated one. The approach should bring together
various aspects of management such as marketing strategy, strategic planning,
financing strategic formulation, choice (selection) implementation, evaluation
including strategy on Information Communication and Technology (ICT). 

A
comprehensive toolbox approach to techniques and their application should be
adopted for the entire discipline of
strategic management. Therefore, for effective coverage of the strategic
management course, the entire discipline is divided into fifteen units. These
units are indicated in the Course Guide. This
approach is quite in order since strategic management is a solid foundation
within which all the functioning management practices are bundled or put
together.

The general approach could be
broadly divided into two opposing but complementary approaches, which are as
follows (Wikipedia, free encyclopedia):

Industrial
organisations approach which is based on economic theory and deals with issues
such as competitiveness, resources allocation and economies of scale. The
assumption underlining this approach includes self-discipline and profit maximisation.

Sociological
approach, which deals primarily with interactions.

The assumptions of the approach
include satisfying behaviour sub-option profit and bounded rationality. An
example of a company that currently uses this approach is Google.

Strategic management techniques can
also be viewed as bottom-up, top-down or collaborative processes. The bottom-up
approach involves the employees submitting proposals to their respective
managers who, in turn, channel the best ideas further up the organisation
ladder. The proposals are accompanied by a capital budgeting process. Each
proposal is then assessed based on financial criteria such as cost-benefits
analysis and return on investment. Any approved proposal then forms the
substance of a new strategy. All these may be done without a grand strategic
design. The most common approach is the top-down approach.

In this practice, the chief
executive officer (CEO), with the assistance of his strategic planning team,
takes decision on the overall direction the company should go.

In addition to these two major
approaches, some organisations have started experimenting on corroborative
strategic planning techniques that recognise the emerging nature of strategic
decisions.

Strategic Management Process

Strategic management process (SMP)
can be an objective, logical systematic approach to making major decisions in
an organisation. SMP attempts to organize qualitative and quantitative
information in a way that allows for effective decision making under conditions
of uncertainty.

Strategic management process (SMP)
can therefore, be defined as the way the strategists determine corporate
objectives and make strategic decisions. The strategic decisions are designed
to achieve ends or to achieve organisation’s objectives. SMP consist of three
stages, namely, strategy formulations, strategy implementation and strategy
evaluation.

However, some schools of though see
SMP as consisting of two sub-processes which are strategic planning (SP) and
strategic implementation (SI). In this, the SP process is broken down into
analysis/diagnosis and choice while the SI sub-process is broken down into
implementation and evaluation. This gives rise to the formula:

SMP    =          SP        +          SI

=          Analysis/Diagnosis
+ Choice +Implementation + Evaluation

The planning has to do essentially
with the work programme. All senior management officers from all major
functions of the organisation should be involved in planning. A planning
committee may be set up to be in charge. The
planning officer is the catalyst and coordinator to make sure the plan is implemented. The
planning committee may be responsible for the strategic planning

The strategic management process has
been presented in various models. However, the model we shall adopt here is
that of the strategic decision-making process proffered by Johnson and Scholes
(1993). The model consists of three interacting elements: strategic analysis,
strategic choice and strategic implementation.

Johnson and Scholes’s model
representation is adopted because it is convenient to use, well known and is
used by many authors.  For instance, it was used by Dess and
Miller (1993) and Rowe et al. (1994).

It is such a powerful model that we
can use to organise our thoughts without losing sight of the interacting nature
of the elements. However, it is important to note that the purpose of each
model is the same in every case, which is to provide a vehicle through which to
explain something complex, even if the preference as to names may differ a bit.
The strategic decision-making process produces the strategy itself as made up
of three interacting elements.

Fig. 1 is structured around the
convenient model for studying and understanding the complexity of the strategic
management process as three interacting elements that Johnson and Scholes
(1993) present. The figure shows that SMP comprises mainly strategic analysis,
choice and implementation.

Strategic Analysis

Strategic analysis is part of
overall management process which is concerned with attempts to understand the
strategic position of the organisation, to consider goings-on in the
environment and judge how the happenings can affect the organisation. It also considers
the organisation” s strengths and weaknesses with respects to the
happenings and assesses the feelings of the stakeholders. Strategic analysis
actually helps to form a picture of the factors that influence the organisation
so that it can be informed of the strategic choice element of the overall
strategic management process. Johnson and Scholes (1993) identify three factors
in strategic analysis, namely (i) environment (ii) values and objective (iii)
resources.

In explaining fig. 2, it means that
good managers must constantly be abreast of what is happening in the
organisation’s environment. They should know how changes taking place in the
environment may affect organisation’s available resources, strengths of the
organisation and weaknesses. This is equated with the culture of the
organisation, including management style and relative power of the stakeholder
group. Values and objectives will influence the acceptability to each stakeholder
group. Through the perception of acceptability other influence, may come since
organisations exist in a complex environment with enormous set of variables.
The resources provide the internal influences on strategic choice. The analysis
of resources aims to build its picture.

Three factors in strategic analysis (Johnson and Scholes, (1993)

It is clear therefore, that
strategic analysis is not a static snapshot event but a continuous process
since the strategic choices and their implementation impact upon the environment,
culture and resources of the organisation.

Strategic
Choice

The choice element is the SMP is
concerned with choosing a strategy based upon the foundations laid by strategic
analysis. A good manager must be able to generate and evaluate possible
strategy taking the nature of the organisation into consideration. The three
issues of concern are risk, structure and culture of the organisation.

Generating Strategic Options

This involves identifying as many
options as possible among potential courses of action. It is usually difficult,
if not impossible, to identify all these as only the very obvious ones are
often identified and considered.

Evaluating Strategic Options

Evaluation of strategic options is
per formed within the framework of strategic analysis. The alternative
strategies listed in the strategic option have to be tested using three main
criteria of (i) strategic fit, (suitable) (ii) feasibility and (iii)
acceptability.

Selecting
Strategic Options

The selection of strategic option
may result in a single strategy to be adopted by the organisation. It can also
result in a strategic set to be adopted in the strategic implementation of the
process. The culture and the power structure of the organisation have a
significant impact on the strategy selection process.

Fig. 4 describes the general model
of strategic management elements arising from the three major concepts of
strategic analysis, strategic choice and strategy implementation. The
subsequent units of this course shall be devoted to the other elements of
strategic management

In order to achieve corporate objectives and
organisational goals, strategists must make strategic decisions and formulate
strategies. The processes involved have been variously defined but basically
include strategic analysis, choice implementation and evaluation.

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