Strategic Management Process/Framework

 Strategic management is the ongoing planning, monitoring, analysis and assessment of all necessities an organization needs to meet its goals and objectives. Changes in business environments will require organizations to constantly assess their strategies for success. Strategic Management Process refers to the steps taken by which the management converts a firm’s Mission, Objectives and Goals into a workable strategy. The Strategic Management Process has evolved over a period of time. The strategic planning process in every business decides the way the organization should lead along with its objectives. On the other hand, strategic management plans the process to follow to achieve the defined objective.

In 1981, Ken Simmonds defined Strategic management process as the collection of management accounting information about a business and its competitors for use in developing and monitoring the business strategy.

Strategic management helps in processing the ways in which the goals of the organization can be attained. The two important objectives of using the strategic management process are

1.      To obtain a higher level on your competitors

2.      Act as a guide which helps in business development.

It also helps in adapting new changes which are both internal as well as external. The internal changes comprise of company policies, procedures etc and the external factors like new changes which affect business, customer’s likes and wishes, competitors’ strategic steps, etc.

Strategic Management Process Model:

Defining strategic intent:

·         Establishing a vision

·         Designing mission

·         Setting objectives

Strategy formulation:

·         Performing environmental and organizational appraisal

·         Considering strategies

·         Carrying out a strategic analysis

·         Making strategies

·         Preparing a strategic plan

Strategy implementation:

·         Putting strategies into practice

·         Developing structures and systems

·         Managing the behavioural and functional implementation

Strategic Evaluation and Control

·         Performing evaluation

·         Exercising control

·         Recreating strategies

The Strategic Management Process is taken up at 3 or 4 levels depending upon the size of the organisation. These are Corporate level, Business Unit level, Functional level and Operational level. Hence we have classification of strategies on these names. 

The Strategic Management Process is done in a dynamic environment & so response also needs to be ; it thrive for value creation more than that of the inputs and  focus on

–     Core competency

–     Develop synergy

–     Create value for customers

. Let us look at these three in the following:

1.      Core Competency

Core competency is a narrowly defined field or task at which a company excels. A firm's core competencies are difficult for its competitors to mimic, allowing the company to differentiate itself. Most core competencies will be applicable to a wide range of business activities, transcending product and market borders. For any organization, its core competency refers to the capabilities, knowledge, skills and resources that constitute its "defining strength." A company's core competency is distinct, and therefore not easily replicated by other organizations, whether they're existing competitors or new entrants into its market. An organization's core competencies -- sometimes called core capabilities or distinctive competencies -- explain what it can do better than any other company, and why. These capabilities provide a strong foundation from which the business will deliver value to customers and stakeholders, seize new opportunities and grow. They set the company apart from its peers and help create a sustained competitive advantage in its industry or sector. the concept of core competence originated as a resource-based approach to corporate strategy, introduced by C.K. Prahalad and Gary Hamel. In their 1990 book "The Core Competence of the Corporation," they describe various core competencies as meeting three universal conditions:  

• They provide consumer benefits.
• They're not easy for competitors to imitate.
• They can be leveraged widely to many products and markets.

 

2.   Synergy

Synergy refers to the  combined power of a group of things when they are working together that is greater than the total power achieved by each working separately

Synergy can arise from integration of time, space, etc, the tangible and intangible resources available to the firm:

Market : a mall offers collection of shopes for goods and services including recreation and child care at pooled convenience of parking, security, availability of staff, use of power, water, maintenance etc.. in a clean and safe environment. Mall creates synergy for fast paced city life.

Cost reduction : banks & Insurance companies sell financial planning products under same roof pooling staff well trained. Banks/FI sponsored MFs reduced banking and distribution  expenses for MF investors, Broker sponsored MFs reduced trading expenses and now in 2021, in India R&T service companies sponsored MFs attempt reducing services cost.

Technology: seamless transaction processing capabilities in secure environment is possible with development of internet and integration of Information Technology into stock trading, banking, servicing Mutual Funds , Insurance, NBFCs etc. multiple govt services are available at finger tip from Akshaya centres across Kerala. Airtel offers single billing for mobile, internet, payment services.

Management: Technology company weak in Training & Devpt  skills gets a CEO who is good in these aspects. 

3.  Value Creation

Value creation refers to exploiting core competencies and achieving synergy helps an organisation to create value for their cutomers. Value is the sum total of benefits received and costs paid by the customer, in a given situation. Ideally, the purpose of a strategy should be to create a lasting value that is greater than the cost of resources that are used to create it

Create new value - Creating new value is the most difficult approach because you are creating something from scratch. This strategy involves doing something entirely new, such as developing a new product or entering into a different market sector.

Create more value - Creating more value is an easier strategy because you are working with something you already have. One of the best examples of this approach would be making your processes more efficient so that you can deliver more for the same price.

Create better value - Creating better value is another easy strategy because it's focused on improving something that already exists. The best approach to this type of strategy is focusing on quality over quantity or delivering more power behind something that you already have. 

Such value creations are possible by following any of the actions given below:

1. Create intensity - This means that your business delivers a product or service—whether brand new or existing—with additional strength and power. In other words, you are going above and beyond what your competitors are doing and exceeding customer expectations. This is how you would increase the level of intensity that your business provides.
2. Value application - The value application refers to the means in which you use to deliver or provide value to your customer base and how an application can expand that customer base.
   
   For example, if your business is a small retail store, think about the impact of an eCommerce site. Expanding your customer base from local customers to worldwide customers, creating bigger, better value.
3. Tradition - One of the largest problems in business today is that many business owners and entrepreneurs find themselves getting “stuck” in their current strategies and struggle with creating new value creation strategies, ones that will take their businesses to the next level and expand their customer bases.
   
   However, many companies refrain from doing this for two main reasons:

1. Fear - Many businesses fear change, and often worry that change will hurt the business rather than help it.
2. Tradition - “If it ain’t broke, don’t fix it.” Many business owners don’t want to change the way they operate solely because “this is the way it’s worked for X number of years.”

However, this mindset can end up being the death of your business. Outlining a new value creation strategy can lead to innovations as well as improvements in customer engagement, which will propel a business rather than hold it back.

4. Customer engagement - Similar to what we mentioned above regarding tradition, companies who are “stuck in their ways” or that fear breaking out of their shells can easily improve value simply by paying more attention to their existing customers and to what they find compelling. Established businesses can easily apply this tactic simply by leveraging information they already have on their existing customer base to create new, better or improved value.
5. Value vs. Revenue - Most businesses confuse value with a start-up. The other struggle is that many companies are inconsistent with putting people first versus revenue first. Unfortunately, if your business puts revenue first, you will find out the hard way that you are struggling to survive. You must teach your sales teams to sell on value versus price. Putting the needs of the customers first is the only true way to create value while also keeping sales afloat.  Developing and building new value creation strategies is entirely possible regardless of business  stage. Whether you are a startup business or you have been in business for years, these value creation  strategies will help any business in any industry improve value, deliver better value, and drive customer engagement.

Having understood what is meant by Core competence, Synergy and Value Creation in a corporation, we are set to understand the Strategic Management Process 

The major steps in Strategic Management Process are discussed below:

 

1.    Defining strategic Intent . Strategic intent refers to the pre-defined future state that the organisation is planning to reach within a stipulated period of time. The term strategic intent was popularised by Gary Hamel and C.K Prahalad. They defined strategic intent as the reason of existence of an organisation and the ends it wants to achieve. It shows the beliefs and values of an organisation.

To achieve a certain future state and to achieve certain ends the organisation should take certain courses of action. These ends can be either long-term or short-term. While the long-term ends have broad focus, the short-term ends are narrow in nature. For an organisation to become effective, it is very important for every staff member to have an understanding of the strategic intent. Hence, the strategic intent should be achievable as well as understandable.

According to Prahalad and Doz :

"Intent is used here to describe long-term goals and aims, rather than detached plans. Strategic intent is crucial for a firm to aim for goals for which one cannot plan. It is important to separate that orientation (strategic intent) from strategic planning or strategies. Strategic intent allows for a firm to build layers of competitive advantage painstakingly, to accomplish long-term goals".

    The first step is to define the vision, mission, and values statements of the organization. This is done in combination with the external analysis of the business environment (PESTEL) and internal analysis of the organization (SWOT). An organization’s statements may evolve as information is discovered that affects a company’s ability to operate in the external environment.

2.      Strategic Formulation. The information from PESTEL and SWOT analyses should be used to set clear and realistic goals and objectives based on the strengths and weaknesses of the company. Identify if the organization needs to find additional resources and how to obtain them. Formulate targeted plans to achieve the goals. Prioritize the tactics most important to achieving the objectives. Continue to scan the external environment for changes that would affect the chances of achieving the strategic goals.

3.      Strategic Implementation. Sometimes referred to as strategic execution, this stage is when the planning stops and the action begins. The best plans won’t make up for sloppy implementation. Everyone in the organization should be aware of his or her particular assignments, responsibilities and authority. Management should provide additional employee training to meet plan objectives during this stage, as well. It should also allocate resources, including funding. Success in this stage depends upon employees being given the tools needed to implement the plan and being motivated to make it work.

4.      Strategic Evaluation and Control. Because external and internal conditions are always changing, this stage is extremely important. Performance measurements (determined by the nature of the goal) will help determine if key milestones are being met. If actual results vary from the strategic plan, corrective actions will need to be taken. If necessary, reexamine the goals or the measurement criteria. If it becomes apparent that the strategy is not working according to plan, then new plans need to be formulated (see Step 2) or organizational structures adjusted. Personnel may need to be retrained or shifted to other duties. You may even have to repeat the strategic management process from the beginning, including the information and knowledge gained from this first attempt.