Strategic Management

Definition of strategic management

Strategic management involves the formulation and implementation of the major 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.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."

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.

Formulation

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 and regulatory landscape;
• 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; and
• Internal environment, regarding the strengths and weaknesses of the organization's resources (i.e., its people, processes and IT systems).^[10]

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 resources 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?

The answers to these and many other strategic questions result in a series of specific short-term and long-term goals or objectives and related measures.

Implementation

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.

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.

Many definitions of strategy

In 1988, Henry Mintzberg described the many different definitions and perspectives on strategy reflected in both academic research and in practice. He examined the strategic process and concluded it was much more fluid and unpredictable than people had thought. Because of this, he could not point to one process that could be called strategic planning. Instead Mintzberg concludes that there are five types of strategies:

• Strategy as plan – a directed course of action to achieve an intended set of goals; similar to the strategic planning concept;
• Strategy as pattern – a consistent pattern of past behavior, with a strategy realized over time rather than planned or intended. Where the realized pattern was different from the intent, he referred to the strategy as emergent;
• Strategy as position – locating brands, products, or companies within the market, based on the conceptual framework of consumers or other stakeholders; a strategy determined primarily by factors outside the firm;
• Strategy as ploy – a specific maneuver intended to outwit a competitor; and
• Strategy as perspective – executing strategy based on a "theory of the business" or natural extension of the mindset or ideological perspective of the organization.

In 1998, Mintzberg developed these five types of management strategy into 10 “schools of thought” and grouped them into three categories. The first group is normative. It consists of the schools of informal design and conception, the formal planning, and analytical positioning. The second group, consisting of six schools, is more concerned with how strategic management is actually done, rather than prescribing optimal plans or positions. The six schools are entrepreneurial, visionary, cognitive, learning/adaptive/emergent, negotiation, corporate culture and business environment. The third and final group consists of one school, the configuration or transformation school, a hybrid of the other schools organized into stages, organizational life cycles, or “episodes”.

sumber: en.wikipedia.org