Strategic Management
Term Strategy: Developed from Military.
The strategy is a particular kind of policy which has been formulated by top
management for the purpose of accomplishing a goal. It is an action plan to be
implemented.
Strategic management
Definition
According to Kenneh Hatten, strategic management is the process
by which an organization formulates objectives and manages to achieve them.
It is the way through which an organization can achieve its
goal.
Strategic
evaluation & control
Strategy evaluation is the final step of
strategy management process. The key strategy evaluation activities are:
appraising internal and external factors that are the root of present
strategies, measuring performance, and taking remedial / corrective actions.
Evaluation makes sure that the organizational strategy as well as it’s
implementation meets the organizational objectives. Strategic Evaluation is
defined as the process of determining the effectiveness of a given strategy in
achieving the organizational objectives and taking corrective action wherever
required.
Strategic Management Process
In
the absence of such a mechanism, there would be no means for strategists to
find out whether or not the strategy is producing the desired effect. There has
to be a way of finding out whether the strategy being implemented will guide
the organization towards its intended objectives. Strategic evaluation and
control, therefore, performs the crucial task of keeping the organisation on
the right track. During the strategic management process, the strategists
formulate the strategy to achieve a set of objectives and then implement the
strategy. q Nature of the
strategic evaluation and control process is to test the effectiveness of
strategy.
Nature of Strategic Evaluation
What
needs to be done to ensure that resources are utilized properly and objectives
met?
§ Are the resources
being utilized properly?
§ Are the time
schedules being adhered to?
§ How is the
organization performing?
§ Is there a need to
change and reformulate the strategy?
§ Are the organization
and its managers doing things which ought to be done?
§ Is the strategy
guiding the organization towards its intended objectives?
§ Are the premises made
during strategy formulation proving to be correct?
§ Through the process
of strategic evaluation and control, the strategists attempt to answer set of
questions, as below.
The
process of strategic evaluation provides a considerable amount of information
and experience to strategists that can be useful in new strategic planning.
Strategic evaluation, through its process of control, feedback, rewards, and
review, helps in a successful culmination of the strategic management
process. Strategic evaluation can help
to assess whether the decisions match the intended strategy requirements.
Importance of Strategic Evaluation
Middle-level
managers, Corporate Planning Staff or Department , Audit and Executive
Committees , External and Internal Auditors , Company secretaries , Financial
controllers , Profit-centre heads , Chief executives , Board of Directors ,Shareholders
,Participants in Strategic Evaluation
Quantitative criteria includes
determination of net profit, ROI, earning per share, cost of production, rate
of employee turnover etc.
Among the Qualitative factors are subjective
evaluation of factors such as - skills and competencies, risk taking potential,
flexibility etc. The organization can use both quantitative and qualitative
criteria for comprehensive assessment of performance.
In
order to determine the benchmark performance to be set, it is essential to
discover the special requirements for performing the main task. While fixing the benchmark, strategists
encounter questions such as - what benchmarks to set, how to set them and how
to express them.
Process of Strategic Evaluation
1) Fixing benchmark of
performance
If
the performance is consistently less than the desired performance, the
strategists must carry a detailed analysis of the factors responsible for such
performance.
§ Once the deviation in
performance is identified, it is essential to plan for a corrective action.
§ The strategists must
mention the degree of tolerance limits between which the variance between
actual and standard performance may be accepted. 4) Taking Corrective Action
§ While measuring the
actual performance and comparing it with standard performance there may be
variances which must be analyzed.
§ For measuring the
performance, financial statements like - balance sheet, profit and loss account
must be prepared on an annual basis. 3) Analyzing Variance
§ The reporting and
communication system help in measuring the performance.
§ The standard performance
is a bench mark with which the actual performance is to be compared.
2) Measurement of
performance
Techniques
of Strategic Evaluation 1 GAP Analysis 2 SWOT Analysis 3 PEST Analysis 4
Benchmarking
Special
alert control
§ Strategic
surveillance
§ Implementation
control
§ Premise control
§Types of Strategic
Control The types of strategic controls are:
Strategic Control Strategic controls
take into account the changing assumptions that determine a strategy,
continually evaluate the strategy as it is being implemented, and take the
necessary steps to adjust the strategy to the new requirements. Most
commentators would agree with the definition of strategic control offered by
Schendel and Hofer: "Strategic control focuses on the dual questions of
whether: (1) the strategy is being implemented as planned; and (2) the results
produced by the strategy are those intended.“
It
involves the checking of environmental conditions. Premises are primarily
concerned with two types of factors: a. Environmental factors (for example,
inflation, technology, interest rates, regulation, and demographic/social
changes). b. Industry factors (for example, competitors, suppliers,
substitutes, and barriers to entry)
§ Premise control has
been designed to check systematically and continuously whether or not the
premises set during the planning and implementation process are still valid.
§ Every strategy is
based on certain planning premises or predictions.
§
1)
Premise Control
The
two basis types of implementation control are: a. Monitoring strategic thrusts
(new or key strategic programs): Two approaches are useful in enacting
implementation controls focused on monitoring strategic thrusts: (1) one way is
to agree early in the planning process on which thrusts are critical factors in
the success of the strategy or of that thrust; (2) the second approach is to
use stop/go assessments linked to a series of meaningful thresholds (time,
costs, research and development, success, etc.) associated with particular
thrusts. b. Milestone Reviews: Milestones are significant points in the
development of a programme, such as points where large commitments of resources
must be made. A milestone review usually involves a full-scale reassessment of
the strategy and the advisability of continuing or refocusing the direction of
the company.
§ Implementing a
strategy takes place as a series of steps, activities, investments and acts
that occur over a lengthy period. §
2) Implementation
Control
Strategic
surveillance appears to be similar in some way to "environmental
scanning." Strategic surveillance is designed to safeguard the established
strategy on a continuous basis.§ The basic idea behind
strategic surveillance is that some form of general monitoring of multiple
information sources should be encouraged, with the specific intent being the
opportunity to uncover important yet unanticipated information.
§ Strategic
surveillance is designed to monitor a broad range of events inside and outside
the company that are likely to threaten the course of the firm's strategy. §
3) Strategic
Surveillance
An
example of such event is the acquisition of your competitor by an outsider.
Such an event will trigger an immediate and intense reassessment of the firm's
strategy. Form crisis teams to handle your company's initial response to the
unforeseen events.
§ The analysts of
recent corporate history are full of such potentially high impact surprises
(i.e., natural disasters, chemical spills, plane crashes, product defects,
hostile takeovers etc.). § "A special alert
control is the need to thoroughly, and often rapidly, reconsider the firm's
basis strategy based on a sudden, unexpected event."
§ Another type of
strategic control is a special alert control.
4) Special Alert
Control
The
fact that hot water freezes faster than cold water still remains a mystery…
……………….
Some useful
Links
Full
SWOT
Analysis
Evaluation
and control
Blue
ocean strategy
Stay home. safe home. Use this links for Strategic Management Classes.
Best of Luck
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