The tactical position of a corporation will always has a propensity to worsen under the combined influences of strategic failure and market competition. The normative form of strategic management is a precise symbol of what planners consider to be the steps in the process at both the corporate and business levels. A corporation taking on a status quo approach will be subjected to a vibrant drift that will move it all the way through a field whirlpool leading to a black hole. And that black hole is the no-return zone.
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Thomas L. Wheelen and David L. Hunger (2008) in the 11th edition of their book, Strategic Management and Business Policy, present an attractive look into new and traditional strategic management themes. The book is very helping in developing an understanding of the wide range of theories and research in strategic management and business policy. It provides a through study from competitive strategy and industry analysis to environmental trends and moral principles and a necessary understanding of global economics and its impact on business activities.
Strategic management has four fundamental elements; i) environmental scanning, ii) strategic formulation, iii) strategic implementation and iv) evaluation and control. Strategic analysis provides the clear picture of the changes in the environment and how these changes affecting the corporation and its activities. It provides idea about the resources and competencies present and their contribution to competitive advantage and development of fresh opportunities.
Changes in the technology of the societal environment also have an impact on multiple industries. A technological breakthrough may generate new markets and products or considerably cut down the predictable life of a manufacturing facility. For instance, improvements in computer microprocessors have not only led to the extensive use of home computers, but also to better automobile engine performance in terms of power and fuel economy through the utilization of microprocessors to monitor fuel injection.
Developments in the political-legal part of the societal environment have an important impact not only on the level of competition within an organization, but also on which strategies might be successful. Socio-cultural issuesthat have an effect on the organization involve the beliefs, values, attitudes and opinions of people in the organization.
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Wheelen and Hunger (2008) explains that a organization’s scanning of environment will comprise analyses of all relevant elements in the task environment, which includes not only competitors but also suppliers,customers and other corporations with which the firm directly interacts. These analyses take the form of individual reports written by various people in different parts of the corporation. For instance at the Procter & Gamble, people from each of the brand management teams work with important people from the sales and market research departments to research and write a competitive activity report each quarter on each of the product categories.
According to Wheelen and Hunger (2008), analysts should also look within the organization itself to identify internal strategic factors. Internal environmental scanning is a strategic management procedure, serves to pinpoint the strengths and weaknesses of the organization. Management can determine whether the organization can take advantage of opportunities while avoiding threats.
The strategic planning model has an important role it has been characterized as an outward-in-approach. Managers believe that all the components of the strategic management process are important, and they do have to examine the external environment to categorize opportunities and threats.
The managers have to investigate the organization’s resources and capabilities to identify strengths and weaknesses, so that there is fit between the internal resources and capabilities of an organization, and external environmental opportunities, organization and external environment. Managers have to familiar with the range of functional level, business-level, global, and corporate-level strategies that are available to them and they also require having an appreciation for the structures required to implement different strategies.
Gary Hamel and C. K. Prahalad (1994, cited by Hill & Jones 1998) stress that weakness of formal strategic planning is mainly obvious in a dynamic competitive environment, in which new competitors are constantly arising and new ways of doing business are continuously being invented. Strategic management process should start with challenging goals, such as attaining global leadership, that stretch the organization. Throughout the development the emphasis should be on finding strategies to develop the resources and capabilities essential for achieving goals, building new resources and capabilities to create a exploit future opportunities, rather than on exploiting existing strengths to take advantage of existing opportunities.
Political analysis consists of evaluating the internal political systems, sources of power and influence, key individuals, key groups of staff, key departments, key managers and key executives; questions of management style, human resource management and industrial relations issues general levels of motivation and confidence.
Economic concerns relate to both the external and the internal financial position, such as level of profit and turnover. It also considers the market position, general levels of economic activity, the competition for the offerings made by the company and the commercial prospects and potential of the products and services offered. (Pearce and Robinson 2003)
Social aspects are to deal with the social systems in place at the workplace, departmental and functional arrangements, work culture, attitudes, organization and working methods. It also comprises both formal and informal aspects of the corporation. In external terms, this is the connection between the organization and its environment as regards the nature and social acceptability of its products and services and the ways in which it does business; consideration is also given to the impact of marketing, promotion and public relations activities; and the general regard with which the business is held in its markets, communities and the wider environment.
According to Wheelen and Hunger (2008), scenario analysis is usually used for long-term forecasting, all too often, the greater is the uncertainty and thus the reliability of the quantitative analysis, and the stronger is the need for the qualitative approach provided by scenario analysis. What defines long-term is in itself all too often a bone of contention. All too often, within a business planning perspective this is defined by the how far in the future the corporation is committing resources. Or a long range can be defined at the length of time in which large changes can be expected in the environment.
The number of scenarios to be included in the analysis differs. There seems to be agreement that three scenarios are best, however, there is a move towards the development of two scenarios – good-and-bad as being most cost effective. The basis for focusing on two is that it avoids having management being presented with three options which all too often favor the adoption of the middle of the road scenario. Two scenarios force the scenario writing to deal more directly with the critical assumptions and develop the positive and negative outcomes. This tends to fit in with many corporations’ requirement for strategic planning to face worst-case and most-likely scenarios.
Wheelen and Hunger (2008) describe a resource as an asset, competency, process, skill or knowledge controlled by the corporation. On the basis of this description, the task of defining organizational resources calls for an in-depth analysis of the very process by which the organization adds value to its customers. It calls for an understanding of the skill set and knowledge base which allows the individuals throughout the organization to understand the various information streams and contribute towards the value creation effort of the organization. Discovering and investing to develop the core resources into specific capabilities which can then be honed into core competencies is a vital process for the long-term prosperity of the organization.
A corporation’s resources and capabilities can be placed on a continuum to the extent they are durable and cannot be imitated by another organization. Effectual strategic management is process of external and internal analysis, to identify opportunities and threats. Strategic formulation is done to make sure that the fit of the existing resources and capabilities of the company and the environmental opportunities.
Hill, W.L. Charles and Jones, R. Gareth, (1998) Strategic Management and Integrated Approach, 4th Edition, Houghton Mifflin Company, Boston, New York
Pearce, John A. II, Robinson, Richard B. Jr., (2003) Formulation, Implementation and Control of Competitive Strategy, 8th Edition, McGraw-Hill Higher Education, New York
Wheelen, Thomas L. and Hunger, David L., (2008) Strategic Management and Business Policy, 11th EditionSee More on Business, Management