STRATEGIC MANAGEMENT THEORY

Development of Strategic Management Theory

Development of Strategic Management Theory

Strategy (in organizations context)

A pre-planned response to changes in the organization may the change be in the external environment or the line of company's behaviour, chosen to achieve the desired results.

Strategic Management

The management that relies on human potential as the basis for the organization, directs production activities to customers requests quickly responds and conducts timely changes in the organization, meet the challenges of the environment and allows to achieve competitive advantage, which enables the organization to survive in the long term, while achieving their goals. The objects of strategic management are the organizations strategic business units and functional areas of the organization. Strategic management directly impacts the problems that are directly connected with the general objectives of the organization. Problems related to external factors that are out of control. "Problems of strategic management are most often arising as a result of numerous external factors. Therefore, to avoid mistakes in choosing a strategy, it is important to determine what economic, political, scientific, technical, social and other factors influence the organization's future. The core of strategic management is the system of strategies, including a number of interrelated specific entrepreneurial, organizational, and labour policies (Bourgeois, 1984, 96).

Concepts, tools and techniques

Three generic strategies

1. Cost Leadership Strategy

The concept is simple: to be the lowest cost producer in its industry. This can be achieved by seeking economies of scale (e.g. through technology) or through preferential access to raw materials. A successful strategy of cost leadership generates direct benefits for the company: high efficiency, low overhead, limited benefits, intolerance of waste, careful review of budget requests, awards related to the concentration of costs and an extensive employee participation in attempts to control costs. However, this approach has some risks: competitors may imitate the strategy, reducing the profits of the industry in general; the technological advancements in the industry may become ineffective strategy or buyer interest diverted to other features of differentiation other than price.

Economies of scale: Producing in high volumes lead to cost savings, which makes it very difficult for new entrants and others to compete (Miller, 1986, 61).

2. Differentiation Strategy

Giving the product or service an attribute that is perceived throughout the industry as unique. To do so, the company selects one or more attributes that many buyers in an industry perceive as important, and is set exclusively to meet those needs. Differentiation can be based on the product itself, the delivery system by means of which it is sold, the marketing approach and a wide range of other factors. However, it is essential that the company find sustainable sources of exclusivity that rival firms can not imitate quickly or at lower cost. A risk taken to pursue a strategy of differentiation is that customers may not value the product enough to warrant exclusive high price. When this happens, a cost leadership strategy easily overcomes a differentiation strategy (Miller, 1986, 61).

3. Focus Strategy

The focuser selects a group or segment of the ...