MMSU

MARIANO MARCOS
College of Business,
Economics and Accountancy
STATE UNIVERSITY

John Michael A. Cua

BSBA HRM II-B
BA 27 – Strategic Management

What is Strategic Management?

Strategic management is the ongoing planning, monitoring, analysis and assessment of all
that is necessary for an organization to meet its goals and objectives. Changes in the business
environment require organizations to constantly assess their strategies for success. The strategic
management process helps organizations take stock of their present situation, chalk out strategies,
deploy them and analyze the effectiveness of the implemented management strategies.

Strategic Management concept

Strategic management is predicated on an organization's clear understanding of its mission,

or purpose for existing; its vision for where it wants to be in the future; and the values that will
guide its actions. It requires a commitment to strategic planning, the subset of business
management that involves an organization's ability to set both short- and long-term goals and plan
the strategic decisions, activities and resource allocation needed to achieve those goals.

A process for managing an institution's strategies helps organizations make logical

decisions and develop new goals quickly in order to keep pace with evolving technology, market
and business conditions. Strategic management can, thus, help an organization gain competitive
advantage, improve market share and plan for its future.

5 stages of Strategic Management process

There are many schools of thought on how to do strategic management, and academics and
managers have developed numerous frameworks to guide the strategic management process.

In general, the process typically includes five phases:

 assessing the organization's current strategic direction;
 identifying and analyzing internal and external strengths and weaknesses;
 formulating action plans;
 executing action plans; and
 evaluating to what degree action plans have been successful and making changes when desired
results are not being produced.
MMSU
MARIANO MARCOS
College of Business,
Economics and Accountancy
STATE UNIVERSITY

Effective communication, data collection and organizational culture also play an important part in
the strategic management process, especially at large, complex companies. Lack of
communication and a negative corporate culture can result in a misalignment of the organization's
strategic management plan and the activities undertaken by its various business units and
departments. Thus, strategy management includes analyzing cross-functional business decisions
prior to implementing them to ensure they are aligned with strategic plans.

What is the importance of Strategic Management?

Strategic management, especially when done well, is important for a business' long-term
success. When we say that a business is carrying out strategic management, what is meant is that
"strategic management" defines a strategy for its business activities, with clear, well-defined goals.
The business will then create clear, well-defined plans that it will then put in action to achieve its
goals and to align its business activities, so that the business will be in harmony with those goals.
It also will allocate all of the necessary resources to achieve those goals.

A good strategic management plan goes beyond the improving a business' bottom line. A
good plan also gives the company a valid social license for operations. In today's environment, this
is becoming an ever-more important aspect for each business, because businesses have multiple
internal and external stakeholders. For example, consumers are seeing an increase in their
awareness of their products being sold by companies. They're also becoming increasingly more
interested, not only in the products a business produces, but also in the way that a company
conducts its business activities. This includes operations from an environmental standpoint as well
as from an ethical one. All of these aspects should be considered in strategic management and
should be included in the business' plans, which should ensure that the business will survive in the
long run.

Characteristics of Strategy

1. Strategy is a systematic phenomenon:

Strategy involves a series of action plans, no way contradictory to each other because a
common theme runs across them. It is not merely a good idea; it is making that idea happen too.
Strategy is a unified, comprehensive and integrated plan of action.

2. By its nature, it is multidisciplinary:

Strategy involves marketing, finance, human resource and operations to formulate and
implement strategy. Strategy takes a holistic view. It is multidisciplinary as a new strategy
influences all the functional areas, i.e., marketing, financial, human resource, and operations.
MMSU
MARIANO MARCOS
College of Business,
Economics and Accountancy
STATE UNIVERSITY

3. By its influence, it is multidimensional:

Strategy not only tells about vision and objectives, but also the way to achieve them. So, it
implies that the organization should possess the resources and competencies appropriate for
implementation of strategy as well as strong performance culture, with clear accountability and
incentives linked to performance.

4. By its structure, it is hierarchical:

On the top come corporate strategies, then come business unit strategies, and finally
functional strategies. Corporate strategies are decided by the top management, Business Unit level
strategies by the top people of individual strategic business units, and the functional strategies are
decided by the functional heads.

5. By relationship, it is dynamic:
Strategy is to create a fit between the environment and the organization’s actions. As
environment itself is subject to fast change, the strategy too has to be dynamic to move in
accordance to the environment.
Success of Microsoft appears to be very simple as far as software for personal computers are
concerned, but Microsoft strategy required continuous decisions in a turbulent and dynamic
environment to remain leader.

6. The purpose of strategy is to create competence (things firm does better than competitors),
synergy (between different parts of the organization and their activities) and value creation
so as to attain vision and mission.
An organization can reach its destiny (vision) only if it can create value for the firm and its
stakeholders (mission). Value creation involves economic value addition (profits for the company),
customer value addition (Value customers perceive in relation to competitors), people value
addition (Value gained from enabling employees to be most productive resource.) so as to fulfil
the needs of all concerned.

7. Strategy requires searching for new sources of advantage:

To achieve sustainable long term competitive advantage, the firm must invent new rules
and new games to become unique and create wealth. Simply copying the leader means value is
destroyed for all the firms. Thus to look different, strategy differentiation is a must.

9. Strategy is almost always the result of some type of collective decision-making process:
The vision, mission, objectives, and corporate strategies are determined by top
management. Business Unit strategies are decided by heads of business units and functional plans
by functional heads. But the top management consent is a must. It is the senior management which
resolves paradoxes between the conflicting objectives, existing functions and future activities, and
the resources allocation.
MMSU
MARIANO MARCOS
College of Business,
Economics and Accountancy
STATE UNIVERSITY

Components of a Strategy Statement

The strategy statement of a firm sets the firm’s long-term strategic direction and broad
policy directions. It gives the firm a clear sense of direction and a blueprint for the firm’s activities
for the upcoming years. The main constituents of a strategic statement are as follows:

1. Strategic Intent
An organization’s strategic intent is the purpose that it exists and why it will
continue to exist, providing it maintains a competitive advantage. Strategic intent gives a
picture about what an organization must get into immediately in order to achieve the
company’s vision. It motivates the people. It clarifies the vision of the vision of the
company.

Strategic intent helps management to emphasize and concentrate on the priorities.

Strategic intent is, nothing but, the influencing of an organization’s resource potential and
core competencies to achieve what at first may seem to be unachievable goals in the
competitive environment. A well expressed strategic intent should guide/steer the
development of strategic intent or the setting of goals and objectives that require that all of
organization’s competencies be controlled to maximum value.

Strategic intent includes directing organization’s attention on the need of winning;

inspiring people by telling them that the targets are valuable; encouraging individual and
team participation as well as contribution; and utilizing intent to direct allocation of
resources.

Strategic intent differs from strategic fit in a way that while strategic fit deals with
harmonizing available resources and potentials to the external environment, strategic intent
emphasizes on building new resources and potentials so as to create and exploit future
opportunities.

2. Mission Statement
Mission statement is the statement of the role by which an organization intends to
serve its stakeholders. It describes why an organization is operating and thus provides a
framework within which strategies are formulated. It describes what the organization does
(i.e., present capabilities), who all it serves (i.e., stakeholders) and what makes an
organization unique (i.e., reason for existence).

A mission statement differentiates an organization from others by explaining its

broad scope of activities, its products, and technologies it uses to achieve its goals and
objectives. It talks about an organization’s present (i.e., “about where we are”). For
instance, Microsoft’s mission is to help people and businesses throughout the world to
realize their full potential. Wal-Mart’s mission is “To give ordinary folk the chance to
MMSU College of Business,
MARIANO MARCOS Economics and Accountancy
STATE UNIVERSITY
buy the same thing as rich people.” Mission statements always exist at top level of an
organization, but may also be made for various organizational levels. Chief executive plays
a significant role in formulation of mission statement. Once the mission statement is
formulated, it serves the organization in long run, but it may become ambiguous with
organizational growth and innovations.

In today’s dynamic and competitive environment, mission may need to be

redefined. However, care must be taken that the redefined mission statement should have
original fundamentals/components. Mission statement has three main components-a
statement of mission or vision of the company, a statement of the core values that shape
the acts and behaviour of the employees, and a statement of the goals and objectives.

Features of a Mission
a. Mission must be feasible and attainable. It should be possible to achieve it.
b. Mission should be clear enough so that any action can be taken.
c. It should be inspiring for the management, staff and society at large.
d. It should be precise enough, i.e., it should be neither too broad nor too narrow.
e. It should be unique and distinctive to leave an impact in everyone’s mind.
f. It should be analytical,i.e., it should analyze the key components of the strategy.
g. It should be credible, i.e., all stakeholders should be able to believe it.

3. Vision
A vision statement identifies where the organization wants or intends to be in future
or where it should be to best meet the needs of the stakeholders. It describes dreams and
aspirations for future. For instance, Microsoft’s vision is “to empower people through
great software, any time, any place, or any device.” Wal-Mart’s vision is to become
worldwide leader in retailing.

A vision is the potential to view things ahead of themselves. It answers the question
“where we want to be”. It gives us a reminder about what we attempt to develop. A vision
statement is for the organization and its members, unlike the mission statement which is
for the customers/clients. It contributes in effective decision making as well as effective
business planning. It incorporates a shared understanding about the nature and aim of the
organization and utilizes this understanding to direct and guide the organization towards a
better purpose. It describes that on achieving the mission, how the organizational future
would appear to be.

An effective vision statement must have following features-

a. It must be unambiguous.
b. It must be clear.
c. It must harmonize with organization’s culture and values.
d. The dreams and aspirations must be rational/realistic.
e. Vision statements should be shorter so that they are easier to memorize.
In order to realize the vision, it must be deeply instilled in the organization, being owned
and shared by everyone involved in the organization.
MMSU College of Business,
MARIANO MARCOS Economics and Accountancy
STATE UNIVERSITY
4. Goals and Objectives
A goal is a desired future state or objective that an organization tries to achieve.
Goals specify in particular what must be done if an organization is to attain mission or
vision. Goals make mission more prominent and concrete. They co-ordinate and integrate
various functional and departmental areas in an organization. Well-made goals have
following features-

a. These are precise and measurable.

b. These look after critical and significant issues.
c. These are realistic and challenging.
d. These must be achieved within a specific time frame.
e. These include both financial as well as non-financial components.

Objectives are defined as goals that organization wants to achieve over a period of time. These are
the foundation of planning. Policies are developed in an organization so as to achieve these
objectives. Formulation of objectives is the task of top level management. Effective objectives
have following features-

a. These are not single for an organization, but multiple.

b. Objectives should be both short-term as well as long-term.
c. Objectives must respond and react to changes in environment, i.e., they must be flexible.
d. These must be feasible, realistic and operational.