Strategy 2
Content
Strategic management involves the formulation and implementation of the major goals and
initiatives taken by a company's top management on behalf of owners, based on consideration
of resources and an assessment of the internal and external environments in which the
organization competes.[1]
Strategic management provides overall direction to the enterprise and involves specifying the
organization's objectives, developing policies and plans designed to achieve these objectives,
and then allocating resources to implement the plans. Academics and practicing managers have
developed numerous models and frameworks to assist in strategic decision making in the context
of complex environments and competitive dynamics.[2] Strategic management is not static in
nature; the models often include a feedback loop to monitor execution and inform the next round
of planning.[3][4][5]
Michael Porter identifies three principles underlying strategy: creating a "unique and valuable
[market] position", making trade-offs by choosing "what not to do", and creating "fit" by aligning
company activities with one another to support the chosen strategy.[6] Dr.Vladimir Kvint defines
strategy as "a system of finding, formulating, and developing a doctrine that will ensure long-term
success if followed faithfully."[7]
Corporate strategy involves answering a key question from a portfolio perspective: "What
business should we be in?" Business strategy involves answering the question: "How shall we
compete in this business?"[8] In management theory and practice, a further distinction is often
made between strategic management and operational management. Operational management is
concerned primarily with improving efficiency and controlling costs within the boundaries set by
the organization's strategy.
Strategic management involves the formulation and implementation of the major goals and
initiatives taken by a company's top management on behalf of owners, based on consideration
of resources and an assessment of the internal and external environments in which the
organization competes.[1] Strategy is defined as "the determination of the basic long-term goals of
an enterprise, and the adoption of courses of action and the allocation of resources necessary
for carrying out these goals."[9]Strategies are established to set direction, focus effort, define or
clarify the organization, and provide consistency or guidance in response to the environment. [10]
Strategic management involves the related concepts of strategic planning and strategic thinking.
Strategic planning is analytical in nature and refers to formalized procedures to produce the data
and analyses used as inputs for strategic thinking, which synthesizes the data resulting in the
strategy. Strategic planning may also refer to control mechanisms used to implement the strategy
once it is determined. In other words, strategic planning happens around the strategic thinking or
strategy making activity.[11]
Strategic management is often described as involving two major
processes: formulation and implementation of strategy. While described sequentially below, in
practice the two processes are iterative and each provides input for the other.[11]
Formulation[edit]
Formulation of strategy involves analyzing the environment in which the organization operates,
then making a series of strategic decisions about how the organization will compete. Formulation
ends with a series of goals or objectives and measures for the organization to pursue.
Environmental analysis includes the:
Remote external environment, including the political, economic, social, technological,
legal and environmental landscape (PESTLE);
Industry environment, such as the competitive behavior of rival organizations, the
bargaining power of buyers/customers and suppliers, threats from new entrants to the
industry, and the ability of buyers to substitute products (Porter's 5 forces); and
Internal environment, regarding the strengths and weaknesses of the organization's
resources (i.e., its people, processes and IT systems).[11]
Strategic decisions are based on insight from the environmental assessment and are responses
to strategic questions about how the organization will compete, such as:
What is the organization's business?
Who is the target customer for the organization's products and services?
Where are the customers and how do they buy? What is considered "value" to the
customer?
Which businesses, products and services should be included or excluded from the
portfolio of offerings?
What is the geographic scope of the business?
What differentiates the company from its competitors in the eyes of customers and other
stakeholders?
Which skills and capabilities should be developed within the firm?
What are the important opportunities and risks for the organization?
How can the firm grow, through both its base business and new business?
How can the firm generate more value for investors?[11][12]
The answers to these and many other strategic questions result in the organization's strategy
and a series of specific short-term and long-term goals or objectives and related measures. [11]
Implementation[edit]
The second major process of strategic management is implementation, which involves decisions
regarding how the organization's resources (i.e., people, process and IT systems) will be aligned
and mobilized towards the objectives. Implementation results in how the organization's resources
are structured (such as by product or service or geography), leadership arrangements,
communication, incentives, and monitoring mechanisms to track progress towards objectives,
among others.[11]
Running the day-to-day operations of the business is often referred to as "operations
management" or specific terms for key departments or functions, such as "logistics
management" or "marketing management," which take over once strategic management
decisions are implemented.[11]
initiatives taken by a company's top management on behalf of owners, based on consideration
of resources and an assessment of the internal and external environments in which the
organization competes.[1]
Strategic management provides overall direction to the enterprise and involves specifying the
organization's objectives, developing policies and plans designed to achieve these objectives,
and then allocating resources to implement the plans. Academics and practicing managers have
developed numerous models and frameworks to assist in strategic decision making in the context
of complex environments and competitive dynamics.[2] Strategic management is not static in
nature; the models often include a feedback loop to monitor execution and inform the next round
of planning.[3][4][5]
Michael Porter identifies three principles underlying strategy: creating a "unique and valuable
[market] position", making trade-offs by choosing "what not to do", and creating "fit" by aligning
company activities with one another to support the chosen strategy.[6] Dr.Vladimir Kvint defines
strategy as "a system of finding, formulating, and developing a doctrine that will ensure long-term
success if followed faithfully."[7]
Corporate strategy involves answering a key question from a portfolio perspective: "What
business should we be in?" Business strategy involves answering the question: "How shall we
compete in this business?"[8] In management theory and practice, a further distinction is often
made between strategic management and operational management. Operational management is
concerned primarily with improving efficiency and controlling costs within the boundaries set by
the organization's strategy.
Strategic management involves the formulation and implementation of the major goals and
initiatives taken by a company's top management on behalf of owners, based on consideration
of resources and an assessment of the internal and external environments in which the
organization competes.[1] Strategy is defined as "the determination of the basic long-term goals of
an enterprise, and the adoption of courses of action and the allocation of resources necessary
for carrying out these goals."[9]Strategies are established to set direction, focus effort, define or
clarify the organization, and provide consistency or guidance in response to the environment. [10]
Strategic management involves the related concepts of strategic planning and strategic thinking.
Strategic planning is analytical in nature and refers to formalized procedures to produce the data
and analyses used as inputs for strategic thinking, which synthesizes the data resulting in the
strategy. Strategic planning may also refer to control mechanisms used to implement the strategy
once it is determined. In other words, strategic planning happens around the strategic thinking or
strategy making activity.[11]
Strategic management is often described as involving two major
processes: formulation and implementation of strategy. While described sequentially below, in
practice the two processes are iterative and each provides input for the other.[11]
Formulation[edit]
Formulation of strategy involves analyzing the environment in which the organization operates,
then making a series of strategic decisions about how the organization will compete. Formulation
ends with a series of goals or objectives and measures for the organization to pursue.
Environmental analysis includes the:
Remote external environment, including the political, economic, social, technological,
legal and environmental landscape (PESTLE);
Industry environment, such as the competitive behavior of rival organizations, the
bargaining power of buyers/customers and suppliers, threats from new entrants to the
industry, and the ability of buyers to substitute products (Porter's 5 forces); and
Internal environment, regarding the strengths and weaknesses of the organization's
resources (i.e., its people, processes and IT systems).[11]
Strategic decisions are based on insight from the environmental assessment and are responses
to strategic questions about how the organization will compete, such as:
What is the organization's business?
Who is the target customer for the organization's products and services?
Where are the customers and how do they buy? What is considered "value" to the
customer?
Which businesses, products and services should be included or excluded from the
portfolio of offerings?
What is the geographic scope of the business?
What differentiates the company from its competitors in the eyes of customers and other
stakeholders?
Which skills and capabilities should be developed within the firm?
What are the important opportunities and risks for the organization?
How can the firm grow, through both its base business and new business?
How can the firm generate more value for investors?[11][12]
The answers to these and many other strategic questions result in the organization's strategy
and a series of specific short-term and long-term goals or objectives and related measures. [11]
Implementation[edit]
The second major process of strategic management is implementation, which involves decisions
regarding how the organization's resources (i.e., people, process and IT systems) will be aligned
and mobilized towards the objectives. Implementation results in how the organization's resources
are structured (such as by product or service or geography), leadership arrangements,
communication, incentives, and monitoring mechanisms to track progress towards objectives,
among others.[11]
Running the day-to-day operations of the business is often referred to as "operations
management" or specific terms for key departments or functions, such as "logistics
management" or "marketing management," which take over once strategic management
decisions are implemented.[11]
