Note: Strategic Management is now full subject and specialization in management. But it is essential to note from this chapter that strategy making is a part of management process and is a part of planning function of management. Every student of management has to learn strategy development. It is a core management step or activity as we stated earlier that planning is a primary function of management.
Some writers include both the end points (purpose, mission, goals, objectives) and the major means of achieving them (programs, policies, and plans) in strategy of the firm. Others emphasize the means.
Conceptually, strategic planning is very simple: Analyze the current and future environmental situation, assess the firm's capabilities, determine the direction of the firm (mission), and develop means of achieving the mission. In practice, it is a complex process.
The Strategic Planning Process
The goal inputs of various claimants on the organization have to be ascertained.
Enterprise profile gives where the company is presently. It also gives present competitive situation in the industry and the position of the company in it.
Orientation of Top Managers
The enterprise profile is shaped by people, especially top managers. They set the organizational climate and they determine the direction of the firm.
Purpose and Major Objectives
An organization may may focus on niche (one or two customer segments) and or produce and offer complete product line to cater to various customer segments. A firm can specialize in one product or it can diversify into multiple products. Growing internationally is another strategic choice. Retrenchment or sales of certain parts of the organization and liquidation are also strategic choices.
Evaluation and Choice of Strategies
Various strategic alternatives have to be carefully evaluated before the choice is made. Risk assessment also needs to be done as certain failures can bankrupt the organization.
SWOT Analysis or TOWS Matrix
External opportunities and threats and Internal strengths and weaknesses are to be evaluated by organizations as a part of strategic planning process. If an opportunity and strength match, the organization can exploit the opportunity with confidence. If there is a threat and company seems to be weak in the area, retrenchment can be an alternative.
The Product Portfolio Matrix
It classifies the products based on two dimensions: Business growth rate and relative market position.
Stars, Cash cows, Question marks and Dogs are the four quadrants.
Michael Porter outlined that as generic strategies organizations can follow cost leadership or differentiation to achieve competitive advantage or higher profit margins. Similarly focus on special groups of customers can also be a generic strategic choice.
Steps for successful Implementation Strategies
1.Communicating strategies to all key decision-making managers.
2. Developing and communicating planning premises
3. Ensuring that action plans contribute to and reflect major objectives and strategies.
4. Reviewing strategies regularly.
5. Developing contingency strategies and programs.
6. Making organization structure fit strategic needs
7. Continuing to emphasize planning and implementing strategy.
8. Creating a company climate that forces planning.
Policies - Definition and Types
Policies are guides to thinking in decision making. They reflect and interpret objectives and guide decisions to to achieve the objectives. They establish the framework for planning programs. They establish limits or boundaries to plans whereas planning premises provide the operational background.
Policies themselves are plans. They are also the result of planning and decision making. Policies also have levels. A policy can be a major as that of financing growth through retained profits.
Policies can be categorized as originated policy, appealed policy, implied policy, and externally imposed policy.
The most logical way of policy setting is that originated by managers at a certain level for the express purpose of guiding their decisions and the decisions of their subordinates in the operation of business.
The decisions made by superiors in the on problems referred to them can develop into policies and such policies are termed as appealed policy.
Many times policies develop from the actions that people see about them. If a company talks of high quality in speeches and slogans, but is frequently producing and selling shoddy goods, people working in the company assume that poor quality is the policy of the company. Implied policy emerges from instances where stated policy is not enforced.
Government, trade associations and trade unions impose certain policies on the organizations.
Guidelines for Effective Policies
Policies should reflect objectives and plans.
Policies should be consistent.
Policies should be flexible
Policies should be distinguished from rules and procedures.
Policies should be in writing.
Policies should be taught.
Policies should be controlled
Policies in Various Functional Areas of Business
In the following functional areas, policies are announced generally to guide decision making.
Product selection and development
Production and inventory
Personnel selection and training
ReferenceManagement: A Global Perspective, Heinz Weihrich, and Harold Koontz, Tenth Edition, McGraw-Hill, 1993
Principles of Management, Harold Koontz and Cyril O'Donnell, Fourth Edition, McGraw-Hill, 1968
Updated on 24 July 2014, 12 Dec 2011
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