Steps in Strategic Management Process
The strategic management process typically outlines the organization’s planned strategies towards its marketing stability and achieving its set goals and objectives. It also involves the stages that managers engage towards making a given choice of procedures for the business that will allow it to fulfill and acquire advanced performance. Notably, strategic management is an ongoing process that evaluates the industry and companies in which the sector is involved; evaluates its competitors, and fixes objectives with the aim of achieving all the present and future rivalry and reexamines each technique. The first step in strategic management procedure involves environment scanning that engages gathering, scrutinizing and relaying data for a diplomatic process (Barney & Hesterly, 2010). The second step is strategy formulation that involves coming up with the most preferred course of action for achieving the set business objectives and thus fulfilling an institutional purpose. The third stage is the strategy implementation that engages making the planned strategy successful or putting the business’s projected strategy into action and also involves the distribution of resources and controlling the human resources. Lastly, strategy evaluation is the last phase and includes activities such as evaluating the internal and external considerations that are fundamental to the present procedures.
Importance of Strategic Management Process
Some of the reasons as to why executives should embrace the strategic management process into the business are that it provides an opportunity for detailed decision-making procedures where all the workers can make a day-to-day operational decision and get to understand the significance of the made decisions. Another advantage is that allows for measurement of progress as it forces a business to come up with detailed objectives and measures of their planned success (Hill, Jones & Schilling, 2014). The coming up with proposals of success needs an institution to first highlight some of the significant aspects of its ongoing success and later the establishment of goals. Another reason for incorporating strategic management process is that it creates opportunities for institutional perspective and also focuses on the entire components and the interrelationship existing between these components. The method also discharges board responsibilities as the essential reason that a majority of business have a strategic management process is due to its effort to fulfill duties to the board of directors.
External Analysis and its Significance
External assessment typically takes into consideration the opportunities and threats that are available in a business surrounding as both threats and opportunities are considered as independent aspects of an institution. Differentiating between strengths/weaknesses and opportunities/threats typically evaluates if there could be an issue existing if the business did not survive. Opportunities are considered to be favorable status in a company surrounding that is capable of producing rewards in leveraged efficiently thus must be embraced if the industry wants to benefit from them (Zott, Amit & Massa, 2011). An external evaluation assists an organization to stay on top of processes and actions within the firm that is likely to affect the organization but is out of control. The method also allows an organization to make and put into action decisions that are significant in assisting the company to strive forward and become more competitive in the ever-changing business environment. Also, it also makes a business keep track of the existing competitors that is a threat towards acquiring more market share.
Elements in External Evaluation
Managers should typically focus on some details when performing an external analysis with the first element being the market analysis that looks into the existing opportunities and threats of the company in competition. In this section, there is the need to focus at the general size of the business with the aim of getting to understand the total number of organizations that produce the same products and services (Zott, Amit & Massa, 2011). The second element is competitive analysis since keeping a close look at business competitors is a significant factor if one wants to acquire a substantial market share or to stay competitive. Looking into the performance of a business through reviewing the kind of services and goods they offer and the mode of pricing structure is a fundamental consideration. The third element in the external environment is the customer analysis where there is the need to look into the consumer’s taste among other concerns. Executives are capable of efficiently responding to clients wants through proactively scrutinizing the external surrounding together with the evolving trends.
Elements of Internal Analysis
An internal evaluation involves the exploration of a business’s competency, value position, and competitive viability within the market environment thus carrying out an internal analysis typically incorporates considerations that provide essential data regarding the company’s strengths, weaknesses, opportunities, and threats. Elements of internal analysis include cost position and opportunities where the cost position consists of the business’s efforts to incorporate and manage the limited resources and deliver the needed value to the consumers in a unique manner (Zott, Amit & Massa, 2011). Also, a well-designed internal analysis should outline and provide practical solutions to the weaknesses available and the areas that ought to be improved together with the objectives that are not realized.
Advantages of a Business Plan
Coming up with a business allows one to evaluate the existing potential challenges and opportunities that the company is likely to encounter, avoid any forms of penalties or other legal issues, and adapt to the changes in the marketing surrounding. Therefore, a business plan will enable the manager to acquire funding from lenders as the plan will typically show how one is organized and having followed the marketing, legal, human resource and other effects of administering a business. A business plan also allows one to identify the existing challenges within an industry as a detailed plan will incorporate the entire areas of beginning and managing a business (Teece, 2010). It also allows managers to check the financial numbers as business plans ought to incorporate financial strategies for the organization that is significant in keeping operations running and steady.
Value Chain in Internal Analysis
A value chain is the entire range of operations that involves designing, production, marketing, and distribution and for those institutions that produce products, the value chain begins with the raw materials utilized in the production of goods and typically outlines everything incorporated before the goods are sold to the clients. The value chain also assists one to acknowledge how a business can lower the cost, increase efforts, eliminates waste and boost profitability (Teece, 2010). Elements include the resources that typically outline the factors that create the business’s strengths thus allowing operational and supporting all the administrative activities. There are also the capabilities or processes that describe the manner in which an organization utilizes its resources in creating a competitive advantage.
According to Teece, D. J. (2010), there are two types of competitive advantage: one originating from many resources and the one arising from a better effort to differentiate. Many resources including people strategically make organizations work and also evaluate how efficient the business is in its production and service delivery efforts. Therefore, people are fundamental for assessing an organization’s cost base and form that its competitive advantage. Many resources come up with innovative strategies for a business to differentiate its goods and services from its stiff competitors thus becoming essential in developing a competitive advantage. Also, the reputation of a company originates from its people and their efforts to serve consumers.
Barney, J. B., & Hesterly, W. S. (2010). Strategic management and competitive advantage: Concepts. Englewood Cliffs, NJ: Prentice hall.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.
Teece, D. J. (2010). Business models, business strategy and innovation. Long range planning, 43(2-3), 172-194.
Zott, C., Amit, R., & Massa, L. (2011). The business model: recent developments and future research. Journal of management, 37(4), 1019-1042.