The practice of strategic management is recognition of the complexity and sophistication demanded by business decision making. Managing the various and multifaceted internal activities of a company is only part of the modern executive’s responsibilities.The firm’s immediate external environment poses a second set of challenging factors. It includes competitors whenever profits seem possible, suppliers of ever more scarce resources, government agencies which watch for adherence to an ever increasing number of regulations, and customers whose often inexplicable preferences must be anticipated.
Additionally, there is a remote external environment which contributes to a general yet pervasive climate for business. It consists of economic conditions, social change, political priorities, and technological developments. An executive must anticipate, monitor, assess, and incorporate each of these factors in top-level decision making. However, the attention to all of these influences is often subordinated to the fourth major consideration in executive decision making—the multiple and often mutually inconsistent objectives of the stakeholders of the business: its owners, top managers, employees, communities, customers, and country.
To deal effectively with all of the considerations which affect the ability of a company to grow profitably, executive officers design strategic management processes which they feel will facilitate the optimal positioning of the firm within its competitive environment. Such positioning is made possible because of the value of these processes both in more accurately acting in anticipation of environmental changes and in improving preparedness for reacting to unexpected internal or competitive demands.
The sophistication of broad-scope, large-scale management processes has increased dramatically since the end of World War II, principally as a reflection of the increases in the size and number of competing firms; of the heightened intervention of government as a buyer, seller, regulator, and competitor in the free enterprise system; and of the greater involvement of businesses in international trade.
Strategic management is defined as the set of decisions and actions result¬ ing in the formulation and implementation of strategies designed to achieve the objectives of the organization. It involves attention to no less than nine critical areas.
1. Determination of the mission of the company, including broad statements about its purpose, philosophy, and goals.
2. Development of a company profile which reflects its internal condition and capability.
3. Assessment of the company’s external environment, both in terms of competitive and general contextual factors. 4. Interactive opportunity analysis of possible options uncovered in the matching of the company profile with the external environment.
5. Identification of the desired options uncovered when the set of possibilities is considered in light of the company mission.
6. Strategic choice of a particular set of long-term objectives and grand strategies needed to achieve the desired options.
7. Development of annual objectives and short-term strategies which are compatible with the long-term objectives and grand strategies.
8. Implementation of strategic choice decisions based on budgeted resource allocations and emphasizing the matching of tasks, people, structures, technologies, and reward systems.
9. Review and evaluation of the success of the strategic process to serve as a basis of control and as an input for future decision making.