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“Compare and contrast different perspectives of strategic management, and


how and why is ‘context’ important?”

1. Introduction

The assignment is written to provide argument over the statement mentioned above. To
understand this statement fully it is crucial to understand the meaning of strategic
management. Therefore, this assignment, first of all presented the definition of strategic
management and its elaboration. Later, different perspectives of strategic management
are discussed in the assignment. Final section elaborates on the importance of ‘Context’
for strategic management.

2. Strategic Management

Johnson and Scholes (2005) stated that strategic management is the set of decisions and
actions resulting in formulation and implementation of strategies designed to achieve the
objective of an organization. It involves attention to no less than nine critical areas:

1. Determining the mission of the company, including broad statements about its
purpose, philosophy, and goals.

2. Developing a company profile that reflects internal conditions and capabilities.

3. Assessment of the company’s external environment, in terms of both competitive


and general contextual factors.

4. Analysis of possible options uncovered in the matching of the company profile with
the external environment.

5. Identifying the desired options uncovered when possibilities are considered in light
of the company mission.

6. Strategic choice of a particular set of long-term objectives and grand strategic needed
to achieve the desired options.

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7. Development of annual objectives and short-term objectives and grand strategies


needed to achieve the desired options.

8. Implementing strategic choice decisions based on budgeted resource allocations and


emphasizing the matching of tasks, people, structures, technologies, and reward
systems.

Review and evaluation of the success of the strategic process to serve as a basis for
control and as input for future decision making.

As these nine areas indicate, strategic management involves the planning, directing,
organizing, and controlling of the strategy-related decisions and actions of the business.
According to Pearce & Robinson (1988) strategic management also means their large-
scale, future-oriented plans for interacting with the competitive environment to optimize
achievement of organization objectives. Thus, a strategy represents a firm’s “game plan.”
Although it does not precisely detail all future deployments (people, financial, and
material), it does provide a framework for managerial decisions. A strategy reflects a
company’s awareness of how to compete, against whom, when, where, and for what.

3. Importance of Strategic Management

It is important to understand the importance of strategic management. A variety of


reasons may be adduced to justify business policy or strategic planning. One justification
is that it has been found useful in practice. Research studies based on the experience of
companies and executive viewpoints, have indicated that strategic planning contributes
positively to the performance of enterprises. Studies made by Igor Ansoff and his
associates (Ansoff et al, 1971) have revealed that companies which had undertaken
formal strategic planning not only outperformed the non-planners on most measures of
success (return on equity, growth of sales, earning per share, and value of the firm), but
significantly outperformed their own past results as well; besides, the companies that
used strategic planning were able to predict the outcome of planning much better than
others.
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4. Perspective of Strategic Management

Each organization requires different strategic planning, as there is no single strategic


planning model that suits all organizations. Every organization has to develop model of
strategic planning according to its own development, its nature of business and as per
their own planning process. These models provide an extent of options on the basis of
which different organizations might be able to select an approach and initiate to grow
their own strategic planning process. Any organization might select to combine the
models suitable to their planning process, for example, they can use a Basic model to
recognize strategic issues and aims, and then they can select an issues-based model to
develop approach to initiate the issues and grasp the aims. Few prominent models are
explained as under.

i. Basic Strategic Planning/Model

According to O'Regan and Ghobadian, (2002) basic strategic planning process is


commonly adopted by the organizations which are very small, engaged, and those who
have not executed basic planning earlier. The process is suitable to equip the company in
initial years to get a reason of how planning is organized, and then geared up in
subsequent period with increased planning stages and activities to secure selective
direction. Top-level management usually carries out planning. The basic strategic
planning process includes:

a. Ascertain the identity of purpose (mission statement) – First of all the


purpose of existence of organisation is to be found out i.e. the basic purpose
of an organisation. It should be specified what types of customers are needed
to be contacted and with what type of services are to be rendered. The higher
management should grow and accede to the identification of purpose. Over
the years, however, the statements can be changed. (O'Regan and Ghobadian,
2002).

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b. Selecting the targets an organization should compete if they have to


achieve the mission - Targets are those goals that an organisation needs to
achieve to complete the purpose, or mission, and point out major issues,
which an organisation faces.

c. Identifying particular approaches and schemes that should be


implemented to complete the targets - The strategies are described as the
schemes which change the most in the organization to be conducted the more
robust strategic planning, specially by way of closely analyzing the internal
and external surroundings of the organization.

d. Make out action plans to execute each strategy - These are the necessary
activities to be performed by each major function (section, department) so as
to execute each strategy successfully. The objective should be clearly defined
to enable the people whether they have achieved it or not. The Top
Management should form specific committees having a separate work plan
and objectives. (O'Regan and Ghobadian, 2002).

e. Regular Monitoring and updating – Planners should regularly and


continuously monitor and see to what extent the goals are being met and
whether action plans are being implemented. The feedback from the
organization’s customers is the most reliable source for this. (O'Regan and
Ghobadian, 2002).

It may be noted that organizations following this planning method may like to conduct
step three above again to identify the additional goals for further developing and
strengthening financial management of the organization.

For example, if a company wants to expand its business in other country, the first aim
will be to decide on the entry mode and after successfully entering the market this
objective will be of no use. Then the company has to set another objective and work for
the same. Another example of this approach could be understood by taking an look of the
vision statement of Ford i.e. “To become the world’s leading Consumer Company for
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automotive products and services”. To achieve this Ford has acquired Aston Martin,
Jaguar, Volvo Cars and Land Rover, as well as a controlling share of Mazda, with which
it operates an American joint venture plant called Auto Alliance. It has spun off its parts
division under the name Visteon. Its prestige brands, with the exception of Lincoln, are
managed through its Premier Automotive Group (www.answers.com, 2005).

ii. Issue-Based (or Goal-Based) Planning/Model

As per Dobson et. al. (2004), those organizations that start with this “basic” planning
approach generally adapt to more thorough and more effective type of planning. The
planning process is as under:

a. “SWOT” analysis (Strengths and Weaknesses and Opportunities and Threats)


so as to measures the performance.

b. Strategic analysis to spot main objectives and goals

c. Devise major strategies (or plans) to achieve goals.

d. Design/update vision, missions and image of the organization.

e. Formulate action plans to achieve objectives. What resources are needed and
roles and responsibilities for implementation)

f. Account for issues, targets, strategies and programs, updated task and vision,
and plans of actions in a Strategic Plan document attaching SWOT, etc.

g. Make the yearly Operating Plan document (from year one of the multi-year
strategic plan)

h. Make and plan the Budget for year one (allocation of funds needed to fund
year one)

i. Manage the organization’s year-one operations

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j. Regular monitoring, evaluation, reviewing and updating of the Strategic Plan


document

For example, Nirula’s, a fast food chain of India, has high levels of international focus in
their current activities. Nirula’s wants to expand to other countries, for this purpose the
company has to conduct a more detailed study that will contain detailed analysis of the
target countries. This means that Nirula’s has to collect information related to the target
country’s economic conditions, the governments, the political conditions, state of foreign
trade, benefits given to the foreign investments and many more relevant issues. The
Nirula’s has to consider political stability, access to raw materials, and low production
costs as other major reasons for investing in the country
(www.nirula.com/hotels/index.html). This means if the stake is lager, the company has to
plan in a more organised manner. This model emphasizes on the external aspects.

iii. Alignment Model

The aim of the model is to have maximum coordination between the organization’s
mission and for successful functioning of the organization. According to Mintzberg and
Lampel (1999), Alignment Model is helpful for the organizations that require to modify
their strategies or to know the reasons for not performing well. Sometimes an
organization that is having a large number of problems concerning its internal issues may
also choose this model. The steps needed include:

a. The committee constituted for planning sketches the objectives & goals of the
organization and its various resources.

b. Finds those areas performing well and those that need some fine-tuning.

c. Finds ways to fine-tune those areas.

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For example, in case some conflict appears in an organisation it has to be resolved so that
the organisation could achieve its aim. The example of Cocoa Research Institute of
Savana (CRIS) helps in understanding this. In this case there was trouble between the
biochemistry and plant pathology departments, or rather between two senior scientists of
these departments. There had been several instances of conflicts between the scientists
and their divisions, but the conflicts had never reached boiling point. They were usually
resolved amicably, even before the executive director took note of them. Mostly the
conflicts arose over allocation of plots for experiments, budgetary allocations and
participation in international conferences. The case of Dr Agadir provides an opportunity
to understand causes of conflict situations in research organizations, and ways and means
of managing such situations. The conflict discussed in the case is not uncommon in a
research organization. Often such conflicts remain unresolved, creating adverse
organizational effects. They influence team-work and affect research outputs. While
management would like to resolve such conflicts, they are often difficult to resolve
(http://www.fao.org/docrep/W7504E/w7504e08.htm).

iv. Scenario Planning

This methodology might be used in combination with other models to ensure that the
planners rightly start strategic thinking. The strategic issues and goals are specially
identified with the help of this model.

a. Choose various external forces and think of the similar changes that might influence
the organization, e.g., change in rules & regulations, demographic changes, etc. It is
possible to find certain changes by minutely searching the headlines of the
newspaper changes that might effect the organization.

b. From the possible changes stress upon each change that may affect the organization
considering all the three situations (the best, the worst and not bad). Considering the
worst situation brings motivation for the change.

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c. Choose that the organization should do, or potential strategies, in each of the three
scenarios to respond to each change.

d. Planners then find that there are common solutions or strategies that should be
followed for external changes.

e. Choose those external changes that are expected to effect the organization in the next
five years and also look for the most realistic strategies the organization can have for
such changes.

For example, a top U.S. petroleum company is changing to a new SAP computerized
information system, which requires a completely new computer interface and new
standard operating procedures for every employee. This change demands that the
company simultaneously address the logistics of effective systems implementation and
the issues of staff demoralization and impaired productivity during the transition. The
company hired an external consultant to sort-out this. The solution suggested by them
are, involved a wide variety of representative stakeholders to develop a map of issues
related to the SAP implementation that would affect performance; Conducted a broad-
based internal web survey of stakeholders' importance ratings of all issues; Analyzed the
survey to identify consensus and disconnects in importance among subgroups of
stakeholders; and, Linked the importance ratings to specific phases of the implementation
to identify where change interventions might be introduced for best impact. This resulted
into the rapid surfacing of concerns and issues at all employee levels, the buy-in created
throughout the process within the organization, the comprehensive roadmap created for
planning interventions to support change and the ability to monitor change on an ongoing
basis (http://www.conceptsystems.com/Consult/CaseStudies/ChangeManagement.cfm)

Practical Limitations of the Models

The strategic management approach emphasizes interaction by managers at all levels of


the organizational hierarchy in planning and implementation. As a result, strategic
management has certain behavioral consequences that are also characteristic of

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participative decision making. Therefore, an accurate assessment of the impact of


strategy formulation on organizational performance also requires a set of non-financial
evaluation criteria measures of behavioral based effects. However, regardless of the
eventual profitability of particular strategic management models, several behavioral
effects can be expected to improve the welfare of the organisation.

Kotler (2003) stated that each strategic management model has its limitations and it is
very necessary to know how the model can be properly used. This knowledge will help in
effective strategic management. Thus, the main stress should be on three points: the
model is holistic, analytical, and non-political. Out of these the author focused on
analytical issue and it is more related to this assignment.

According to Johnson and Scholes (2005) a major issue of concern in using the strategic
management models is that it is analytical rather than prescriptive or procedural. The
models generally describe the logical or analytical steps many businesses actually use in
their strategic activities. However, it does not describe the procedures or routines
necessary to carry out each step. As a result, no model should be seen as providing a
prescription for the way strategic planning should be done. Therefore, when the strategic
management model is used it should be remembered that the model builders are
recommending the general approach they believe will provide a sound basis for strategic
planning, not a model they are certain will lead to the best results (Johnson and Scholes,
2005). The strategic management process undergoes continual assessment and subtle
updating. While elements in the basic model rarely change, the relative emphasis each
element receives varies with decision-makers and the environments of their companies.

5. Conclusion

The complexity and sophistication of business decision making requires strategic


management. Managing various internal activities according to the external environment
is only part of the modern executive’s responsibilities. Strategic management only helps
to achieve the goals of the business entity. Different strategic models discussed above are
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only the tools in the hands of the business executives to determine mission, vision, goals,
objectives and the ways to achieve these. No single model is completely suitable for a
particular business entity. To deal effectively with all decision making problems and to
affect the ability of a company to increase profitability, the executives design strategic
management processes that will facilitate the optimal positioning of the firm in its
competitive environment. Such positioning is possible because these strategic processes
allow more accurate anticipation of environmental changes. Different strategic
approaches are to be mixed to gain maximum.

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REFERENCES

1. Ansoff, H. I. et al., (1971), “Acquisition Behaviour of u.s. Manufacturing Firms


1946-65”, Vanderbilt University Press, Nashville, Tenn.
2. Dobson, P., Starkey, K., Richards, J., (2004), “Strategic Management: issues and
cases”, Blackwell Publishing.
3. Johnson and Scholes, (2005) Exploring Corporate Strategy 7th Edition London
Prentice hall
4. Kotler, P. (2002) Marketing Management the Millennium Edition Prentice-Hall New
Jersey, 2000.
5. Mintzberg, H., Lampel, J. (1999), "Reflecting on the strategy process", Sloan
Management Review, Vol. 40 No.3, pp.21-30.
6. O'Regan, N., Ghobadian, A. (2002), "Formal strategic planning: the key to effective
business process management?", Business Process Management Journal, Vol. 8 No.5,
pp.416-29.
7. Pearce, J. A. II & Robinson, R. B. (1988). Strategic Management – Strategy
Formulation and Implementation. Richard D. Irwin: Homewood, IL

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