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To help managers improve their planning and problems solving, a variety of techniques and
tools have been developed. The most important of these tools are management science
research techniques. The term management science (MS) and operations research (OR) are,
in general, used interchangeably. Management science is defined as "a set of quantitatively
based decision models used to assist management decisions makers" (Richard L. Daft). There
are three key components in this definition:
- management science is a set of quantitative tools;
- management science uses decision models;
- quantitative models assist decision makers; they cannot substitute for or replace a manager.
Management science research techniques help managers improve the quality of their problem
solving. These techniques seek to describe, understand, and predict the behaviour of complex
system of human being and equipment.
Types of Models and Science Techniques
There are the variety of management science models and techniques that are designed to
supplement managerial planning and decision making. Some writers consider forecasting to
be management science (although others do not). Forecasting is the process of using past and
current information to predict future events. It involves identifying opportunities and threats
in the firm 's external environment. Forecasts are an important aspect of planning and
decisions making process.
A management science also includes many quantitative techniques, and other
management science aids. Some of these are:
* The Program Evaluation and Review Technique (PERT). PERT is planning and control
technique that allows managers to decompose a project into specific activities and to plan far
in advance when its is to be completed. The main function PERT is to determine the time
required to complete a project.
* Breakeven Analysis. Breakeven analysis helps managers determine how many units must
be sold before a product is profitable.
* Linear Programming. Linear programming are used to determine the best way to allocate
resources to achieve some desired objectives.
* Game Theory. Game theory attempts to predict how rational people will behave in
competitive situation. For example, game theories attempt to describe how competitors will
respond to a price increase, the introduction of a new product, or a new advertising campaign.
* Simulation Models. Simulation models are mathematical representations of the
relationships among variables in real-life organizational situations. The try to replicate a part
of an organization's operations in order to see what will happen to that part over time, or to
experiment with that part by changing certain variables. For example, simulations are popular
for the risky business of new-product innovations.
The controlling function includes activities undertaken by managers to ensure that actual
results conform to planned results. Control tools and techniques help managers pinpoint the
organizational strengths and weaknesses on which useful control strategy must focus.
In order to simplify the discussion of the tools and control techniques, many authors divide
them into two categories: nonfinancial and financial. Nonfinancial control techniques do
not require financial data to be used, while financial control techniques require some form
of financial data such as profits, costs, or revenues. Each of the control techniques is intended
for a different purpose. Therefore, in order to make rational choices about which control
techniques to implement, managers must understand what a given control techniques can and
cannot do.
Nonfinancial control techniques. Nonfinancial control techniques include rewards and
punishments, selection procedures, socialization and training, the management hierarchy,
management by exception, inventory and quality control, and PERT.
Financial Control Techniques. Financial controls help managers to keep costs in line,
maintain a viable relationship between assets and liabilities, sustain adequate liquidity, and
achieve general operating efficiency. Some of the best-known and most commonly used
financial control techniques are: budgets, ratio analysis, break-even analysis, and accounting
audits
A number of reasons are given by authors to as why organizations should engage in strategic
management. Many research studies show both financial and nonfinancial benefits which can
be derived from a strategic-management approach to decision making.
Financial Benefits
The question "Why should an organization engage in strategic management?" must be
answered by looking at the relationship between strategic management and performance.
Research performed by Eastlack and McDonald (1970), Thune and House (1970), Ansoff et.
al. (1971), Karger and Malik (1975), and Hofer and Schendel (1978) indicate that formalized
strategic management (strategic planning) does result in superior performance by
organizations. Each of these studies was able to provide conceiving evidence of the
profitability of strategy formulation and implementation. The formalized strategic
management process does make a difference in the recorded measurements of profits, sales,
and return on assets. Organizations that adopt a strategic management approach can expect
that the news system will lead to improved financial performance.
Nonfinancial Benefits
Regardless of the profitability of strategic management, several behavioral effects can be
expected to improve the welfare of the firm.Yoo and Digman emphasize that strategic
management is needed to cope with and manage uncertainty in decision making. They
present several benefits of strategic management:
These and other research studies have concluded that strategic management is an integral and
important function of organization life. However, successful organizations are successful for
many reasons: adequate resources, good products and services, and so on. While not a
panaceas, the strategic management process is only a powerful tool. It value lies with
executive and the ability to use this strategic management tool in effectively managing the
enterprise.
Strategic management is a continuous process. There are three stages in this process: strategy
formulation, strategy implementation, and evaluation and control.
Strategy management is also viewed as series of steps. Therefore, the strategic- management
process can be best be studied and applied using the model. A review of the major strategic
management models indicates that they all include the following steps: performing an
environmental analysis, establishing organizational direction,formulating organizational
strategy, implementing organizational strategy, evaluating and controlling strategy.
The strategic management process mostly involves top management, board of directors, and
planning staff. In its final form, a strategic decisions is moulded from the streams of inputs,
decisions, and actions.
All organizations engage in the strategic management process. The success of an organization
is generally dependent upon the strategic management and organizational abilities of the
managers.
Many research studies show both financial and nonfinancial benefits which can be derived
from a strategic-management approach to decision making.
Moreover, the concept of strategic management is still involving and will continue to undergo
change. Therefore, understanding and following and complete process of strategic
management can be helpful to practicing managers to gain organizations' objectives.