STRATEGIC MANAGEMENT

Strategic Management



Strategic Situation of a Firm

Strategic Situation

"Strategic management is the process of decision making which have high medium term to long term impact on activities of the organization including the implementation of those decisions to create value for customers and key stakeholders and to outperform the competitors"(Hubbard, G., 2000, p-2).

Strategic management has three elements such as strategic analysis, strategic choice and strategic implementation. Strategic analysis gives the idea to understand the strategic position of the organization. It is an ongoing activity of organization. Strategic analysis gives the clear picture of the changes in the environment and how these changes affecting the organization and its activities. It gives idea about the resources and competencies present and their contribution to competitive advantage and development of new opportunities. Also it produces the idea about the people and groups such as manager, shareholders, union, stakeholder etc. associated with organization and their contribution for the development of organization.

Basically strategic analysis develops the relationship between different forces influencing the organization and its choice of strategies. These forces are environment, resource and competences etc.

Corporate level strategy

It is an overall strategy that the organizations are follow. Its development involves a grand strategy and using portfolio strategy approaches to determine the various businesses making up organizations. A grand strategy provides basic strategic direction at corporate level. There are several three basic categories: growth, stability and defensive. Growth strategy - these are the grand strategy which says organizational expansion as a major element. Basically organisation growth means more sales and earnings. Organizations grow in the term of revenue, clients, wider distribution network etc. the major growth strategies are concentration, vertical integration and diversification. Concentration focuses on growth of single product or service. Concentration occurs through market development, product development or horizontal integration (adding one more similar business). Vertical integration - this approach involves the growth through production of inputs previously provided by supplier or trough replacement of a customer role by disposing of its own output (Kumpech & Bolwijn, 1998). Diversification - this approach involves in the growth through development of new areas clearly distinct from current business (Bartol et al., 2001).



Macro environmental analysis

Political factors - The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. Political factors include government regulations and legal issues and define both formal and informal rules under which the firm must operate. Some other political factors are government policy which influences laws that regulate or tax on business, government's position on marketing ethics, the government's policy on the economy, and governments view on culture and religion. It is other wise known as political and legal factor((Johnson & Scholes, 2001).

Economic factor - Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. Economic factors affect the purchasing power of potential customers and the firm's cost of capital. The economic factors that affect the organization are Interest rates, ...