Introduction To Strategic Management
When we talk about strategic management for the first time, the obvious question that comes to mind is, “What is the difference between management and strategic management?” Well to answer that question, let me take you outdoors to a jogging track. Here you will find two types of joggers. One who jog for general well being and the others who jog to raise their fitness level & performance to a desired benchmark in order to compete in some kind of sport. Both of them are committed and disciplined. The difference between the two is that the first type of joggers strive to preserve and enhance general physical fitness and remain healthy. The second type of joggers intend to reach a specific level of physical fitness to compete and win.
That is the precise difference between management and strategic management. Management is all about ensuring smooth functioning of a business while addressing all the day-to-day issues. Strategic Management on the other hand, is about identifying an objective, planning to achieve it, formulating a strategy and then implementing it effectively to ensure the stated objective is achieved within the expected time frame.
Components of Strategy
Description of Objectives
They are the destination a business is trying to reach within a given context. The objectives should be Specific, Measurable, Achievable and Time Bound (SMART). In order to identify SMART objectives, study of factors like situation analysis and environmental scanning should be carried out before setting out to define objectives. Some examples of management objectives are;
- Market Share Milestones
- Profitability Percentage
- Customer Satisfaction Level
- New Product Launch
- Distribution Expansion
- Brand Awareness
- Employee Engagement
Milestones & Timelines
Milestones & Timelines are the waypoints that need to be reached within the stipulated time and available resources in order to reach the final objective. Breaking a strategy into milestones & timelines makes it easier to monitor the progress.
Roadmap to be followed
It is the description of actual set of activities that need to be performed in order to accomplish the objectives. Every function of the organization has its own roadmap, leading to the accomplishment of the shared objective.
Evaluation & Control
Evaluating the performance and outcome during the implementation of a strategy ensures that the implementation is on course and if there are any deviations from the benchmarked outcomes, necessary course corrections can be done while it is still time. Another function of evaluation & control is to evaluate the effectiveness of strategic planning in achieving the desired objectives, once the implementation is over. This could be an important input in the future strategic planning process.
Business Vs Military Strategies
Both military and businesses employ strategies to achieve their objectives. They both are similar in terms of their framework and stages. The difference could be in terms of the impact of a success and failure. While the business strategy success or failure could have economic implications, the success or failure of a military strategy could have more far reaching consequences for the people of a country or the region or the entire world.
Strategy Vs Tactics
Strategy is the complete roadmap to achieve an intended objective. Whereas tactics are individual steps or actions undertaken within a strategy, to advance towards objectives. For example, an automobile company could have a strategy to promote and improve their share of electric vehicles in the market. The tactic could be to offer free charging for two years for every EV that they sell.
Levels Of Strategy
Generally, three levels of strategies are found in organizations. These are
Corporate Strategy
This strategy deals with the attainment of overall goals for the entire organization as such. A large corporate house with multiple business divisions such as telecom, infrastructure and FMCG may create a strategy for improving the overall image of the organization.
Business Strategy
Strategies that are made at the business level generally chase more specific objectives like profitability, market share, product innovation etc.
Functional Strategy
Every business strategy is actually implemented through the individual functions in the organization such as Marketing, HR, Finance, Operations etc. Each of these functions align their strategies towards the achievement of the overall business objective.
Majority of times, the functional strategies are aligned to the business strategy and the business strategy is a component of the corporate strategy. When all these three strategies are perfectly aligned, the organization successfully achieves its common objectives, thus benefiting every stakeholder.
Henry Mintzberg’s Model Of Strategy
In order to explain the strategic management process, Henry Mintzberg proposed the 5-P Model Of Strategy. According to this model there are five different approaches or definitions for strategy. These approaches are:
Plan
This is the most obvious description of strategy that comes to mind. This is about identifying goals and creating a roadmap to accomplish those goals. Essentially, it is about identifying where you are and where you intend to reach within a specified time frame and how you are going to do that.
Pattern
Maintaining consistency w.r.t a company’s product line or actions can be a strategic decision. If a cellphone manufacturer launches a new handset every six months, this could be a pattern. Pattern can be a very effective towards creating competitive advantage.Position
When all actions of a business are aimed at creating a statement in the market, it is called position. This achieves the intended purpose of creating a niche in the market.Perspective
When an organization relies heavily on its internal environment rather than the external, it is called perspective. The organization is driven by its culture and strives to create a shared perspective amongst all employees. This shared perspective is then used as a strength to drive organizational goals.
Strategic Intent
Strategic intent refers to the desired direction in which a company is expected to be headed in. This happens in a top-down approach, where it all starts with the process of envisioning and from there the whole chain of creating a mission statement, identifying goals, setting objectives etc. starts.
Hierarchy Of Strategic Intent
Vision
A vision statement provides the strategic direction and describes what the owner or founder wants the company to achieve in the future.
Mission
Purpose or reason for the existence of an organization. A well-written mission statement must answer the following questions.
- What an organization is?
- Why it exists?
- What is should be?
Goals
They are qualitative in nature and roughly describe the vision of the company in more realistic and achievable segments.Objectives
Objectives are the specific milestones that together make it possible to accomplish goals. Objectives are however very accurate and realistic. Objectives are designed to be Specific, Measurable, Achievable, Realistic and Timebound (SMART).Critical Success Factors (CSFs)
CSFs are the factors that are necessary for an organization or a project to achieve its goals. It is a critical factor or activity required for ensuring the success of a company or an organization.Key Performance Indicators (KPIs)
A set of quantifiable measures that a company or industry uses to gauge or compare the performance in terms of meeting their strategic and operational goals. KPIs vary between companies and industries, depending on their priorities or performance criteria. Also referred to as “key success indicators (KSI)”.Metrics
Metrics are the quantitative benchmarks that are set to measure and evaluate the progress and outcome as a result of strategy implementation. These are the parameters against whom the performance is evaluated.Measurements
The actual process of measuring the outcome of a strategy and its implementation such as sales figures, market share movement, brand recall studies etc. done periodically, as determined by the strategy. The measurement results are then compared against the benchmarks to evaluate the performance.
Further Reading – Environmental Appraisal – A Precursor To Strategy
Finally, at the end of this article, it is important to note that the success of strategic management lies in three important factors. These are
Strategy Formulation – While formulating the strategy, the implementation should be kept in mind and it is always advisable to include representatives from the implementation side to provide valuable inputs with respect to the ground realities and the challenges faced while actually materializing the strategy on the field.
Strategy Implementation – Implementation is the conversion of a strategy into action. It is imperative that the implementation team has the ‘buy in’ for the strategy in order for it to be implemented exactly the way it was intended to be. It would be advisable to include members from the formulation team to witness the strategy being implemented to guide the implementation team and to also gain inputs for future strategy formulations.
Strategy Evaluation – It is important to have controls and benchmarks against which the outcome of the strategy can be evaluated on an ongoing basis. This ensures that the implementation stays on course and there are no surprises in end. Post implementation evaluation is important and the outcome, whether positive or negative, can be used as the basis for future strategy formulations.
“A strategy is only as good as it is implemented.”
