Fundamental Approach to Strategic Management

The approach to strategic management should be an integrated one. The approach should bring together various aspects of management such as marketing strategy, strategic planning, financing strategic formulation, choice (selection) implementation, evaluation including strategy on Information Communication and Technology (ICT). 

A comprehensive toolbox approach to techniques and their application should be adopted for the entire discipline of strategic management. Therefore, for effective coverage of the strategic management course, the entire discipline is divided into fifteen units. These units are indicated in the Course Guide. This approach is quite in order since strategic management is a solid foundation within which all the functioning management practices are bundled or put together.

The general approach could be broadly divided into two opposing but complementary approaches, which are as follows (Wikipedia, free encyclopedia):

Industrial organisations approach which is based on economic theory and deals with issues such as competitiveness, resources allocation and economies of scale. The assumption underlining this approach includes self-discipline and profit maximisation.

Sociological approach, which deals primarily with interactions.

The assumptions of the approach include satisfying behaviour sub-option profit and bounded rationality. An example of a company that currently uses this approach is Google.

Strategic management techniques can also be viewed as bottom-up, top-down or collaborative processes. The bottom-up approach involves the employees submitting proposals to their respective managers who, in turn, channel the best ideas further up the organisation ladder. The proposals are accompanied by a capital budgeting process. Each proposal is then assessed based on financial criteria such as cost-benefits analysis and return on investment. Any approved proposal then forms the substance of a new strategy. All these may be done without a grand strategic design. The most common approach is the top-down approach.

In this practice, the chief executive officer (CEO), with the assistance of his strategic planning team, takes decision on the overall direction the company should go.

In addition to these two major approaches, some organisations have started experimenting on corroborative strategic planning techniques that recognise the emerging nature of strategic decisions.

Strategic Management Process

Strategic management process (SMP) can be an objective, logical systematic approach to making major decisions in an organisation. SMP attempts to organize qualitative and quantitative information in a way that allows for effective decision making under conditions of uncertainty.

Strategic management process (SMP) can therefore, be defined as the way the strategists determine corporate objectives and make strategic decisions. The strategic decisions are designed to achieve ends or to achieve organisation’s objectives. SMP consist of three stages, namely, strategy formulations, strategy implementation and strategy evaluation.

However, some schools of though see SMP as consisting of two sub-processes which are strategic planning (SP) and strategic implementation (SI). In this, the SP process is broken down into analysis/diagnosis and choice while the SI sub-process is broken down into implementation and evaluation. This gives rise to the formula:

SMP    =          SP        +          SI

=          Analysis/Diagnosis + Choice +Implementation + Evaluation

The planning has to do essentially with the work programme. All senior management officers from all major functions of the organisation should be involved in planning. A planning committee may be set up to be in charge. The planning officer is the catalyst and coordinator to make sure the plan is implemented. The planning committee may be responsible for the strategic planning

The strategic management process has been presented in various models. However, the model we shall adopt here is that of the strategic decision-making process proffered by Johnson and Scholes (1993). The model consists of three interacting elements: strategic analysis, strategic choice and strategic implementation.

Johnson and Scholes’s model representation is adopted because it is convenient to use, well known and is used by many authors.  For instance, it was used by Dess and Miller (1993) and Rowe et al. (1994).

It is such a powerful model that we can use to organise our thoughts without losing sight of the interacting nature of the elements. However, it is important to note that the purpose of each model is the same in every case, which is to provide a vehicle through which to explain something complex, even if the preference as to names may differ a bit. The strategic decision-making process produces the strategy itself as made up of three interacting elements.

Fig. 1 is structured around the convenient model for studying and understanding the complexity of the strategic management process as three interacting elements that Johnson and Scholes (1993) present. The figure shows that SMP comprises mainly strategic analysis, choice and implementation.

Strategic Analysis

Strategic analysis is part of overall management process which is concerned with attempts to understand the strategic position of the organisation, to consider goings-on in the environment and judge how the happenings can affect the organisation. It also considers the organisation” s strengths and weaknesses with respects to the happenings and assesses the feelings of the stakeholders. Strategic analysisactually helps to form a picture of the factors that influence the organisation so that it can be informed of the strategic choice element of the overall strategic management process. Johnson and Scholes (1993) identify three factors in strategic analysis, namely (i) environment (ii) values and objective (iii) resources.

In explaining fig. 2, it means that good managers must constantly be abreast of what is happening in the organisation’s environment. They should know how changes taking place in the environment may affect organisation’s available resources, strengths of the organisation and weaknesses. This is equated with the culture of the organisation, including management style and relative power of the stakeholder group. Values and objectives will influence the acceptability to each stakeholder group. Through the perception of acceptability other influence, may come since organisations exist in a complex environment with enormous set of variables. The resources provide the internal influences on strategic choice. The analysis of resources aims to build its picture.

Three factors in strategic analysis (Johnson and Scholes, (1993)

It is clear therefore, that strategic analysis is not a static snapshot event but a continuous process since the strategic choices and their implementation impact upon the environment, culture and resources of the organisation.

Strategic Choice

The choice element is the SMP is concerned with choosing a strategy based upon the foundations laid by strategic analysis. A good manager must be able to generate and evaluate possible strategy taking the nature of the organisation into consideration. The three issues of concern are risk, structure and culture of the organisation.

 

Generating Strategic Options

This involves identifying as many options as possible among potential courses of action. It is usually difficult, if not impossible, to identify all these as only the very obvious ones are often identified and considered.

Evaluating Strategic Options

Evaluation of strategic options is per formed within the framework of strategic analysis. The alternative strategies listed in the strategic option have to be tested using three main criteria of (i) strategic fit, (suitable) (ii) feasibility and (iii) acceptability.

Selecting Strategic Options

The selection of strategic option may result in a single strategy to be adopted by the organisation. It can also result in a strategic set to be adopted in the strategic implementation of the process. The culture and the power structure of the organisation have a significant impact on the strategy selection process.

Fig. 4 describes the general model of strategic management elements arising from the three major concepts of strategic analysis, strategic choice and strategy implementation. The subsequent units of this course shall be devoted to the other elements of strategic management

In order to achieve corporate objectives and organisational goals, strategists must make strategic decisions and formulate strategies. The processes involved have been variously defined but basically include strategic analysis, choice implementation and evaluation.