Strategic management and policy making

Meaning of strategic management - Strategic management is the process of

setting goals, procedures, and objectives in order to make a company or
organization more competitive. Typically, strategic management looks at
effectively deploying staff and resources to achieve these goals. Often, strategic
management includes strategy evaluation, internal organization analysis, and
strategy execution throughout the company.
In business, strategic management is important because it allows a company to
analyze areas for operational improvement. In many cases, they can follow either
an analytical process, which identifies potential threats and opportunities, or
simply follow general guidelines. Given the structure of the organization, a
company may choose to follow either a prescriptive or descriptive approach to
strategic management. Under a prescriptive model, strategies are outlined for
development and execution. By contrast, a descriptive approach describes how a
company can develop these strategies.

NATURE AND SCOPE oF STRATEGIC MANAGEMENT

● Strategic management is both an Art and science of formulating,
implementing, and evaluating, cross-functional decisions that facilitate an
organization to accomplish its objectives.
● The purpose of strategic management is to use and create new and
different opportunities for future.
● The nature of Strategic Management is dissimilar form other facets of
management as it demands awareness to the "big picture" and a rational
assessment of the future options.
● It offers a strategic direction endorsed by the team and stakeholders, a
clear business strategy and vision for the future, a method for
accountability, and a structure for governance at the different levels, a
logical framework to handle risk in order to guarantee business continuity,
the capability to exploit opportunities and react to external change by
taking ongoing strategic decisions.
SCOPE OF STRATEGIC MANAGEMENT
*Management process. Management process as relate to how strategies are
created and changed.

* Management decisions. The decisions must relate clearly to a solution of

perceived problems (how to avoid a threat; how to capitalize on an opportunity).
* Time scales. The strategic time horizon is long. However, it for company in real
trouble can be very short.

* Structure of the organization. An organization is managed by people within a

structure. The decisions which result from the way that managers work together
within the structure can result in strategic change.

* Activities of the organization. This is a potentially limitless area of study and we

normally shall centre upon all activities which affect the organization.

Meaning of Strategy-Strategy is an action that managers take to attain one or

more of the organization's goals. Strategy can also be defined as “A general
direction set for the company and its various components to achieve a desired
state in the future. Strategy results from the detailed strategic planning process”.

Characteristics of strategic management

● Top management involvement
Strategic management relates to several areas of a firm’s operations. So, it
requires top management’s involvement.
Generally, only the top management has the perspective needed to
understand the broad implications of its decisions and the power to
authorise the necessary resource allocations
● Requirement of large amounts of resources
Strategic management requires the commitment of the firm to actions over
an extended period of time. So, they require substantial resources, such as
physical assets, 20 manpower etc.
Example: Decisions to expand geographically would have significant
financial implications in terms of the need to build and support a new
customer base.
● Affect the firms long-term prosperity
Once a firm has committed itself to a particular strategy, its image and
competitive advantage are tied to that strategy; its prosperity is dependent
upon such a strategy for a long time.
● Future-oriented
Strategic management encompasses forecasts, what is anticipated by the
managers. In such decisions, the emphasis is on the development of
 projections that will enable the firm to select the most promising strategic
options.
In the turbulent environment, a firm will succeed only if it takes a proactive
stance towards change.
● Multi-functional or multi-business consequences
Strategic management has complex implications for most areas of the firm.
They impact various strategic business units especially in areas relating to
customer-mix, competitive focus, organisational structure etc.
● All these areas will be affected by allocations or reallocations of
responsibilities and resources that result from these decisions.

APPROACHES TO STRATEGIC DECISION MAKING

● Rational-Analytical Approach:
Rational-analytical approach assumes that the decision maker is a ‘unique
actor who behaves intelligently and rationally’. He is fully aware of all
available feasible alternatives and considers all the alternatives as well as
the consequences and chooses the alternative that secures the maximum
gain. Most managers like to think of themselves as rational
decision-makers. And indeed, many experts argue that managers should
try to be as rational as possible in making decisions. It rests on the
assumption that managers are logical and rational and they make
decisions that are in the best interests of the organization.
● Intuitive approach- Intuition is an innate belief about something without
conscious consideration. Intuitive- emotional approach is opposed to
rational decision-making. Managers sometimes decide to do something
because it feels “right”. This feeling is not arbitrary but based on habit or
experience, gut feeling, reflective thinking, and instinct, using the
unconscious mental processes. An inner sense or emotion may help
managers make an occasional decision without going through a full- blown
rational-sequence of steps. Intuitive decision maker considers a number of
alternatives and options.
● Political behavioural approach- This approach suggests that real decision
makers must consider a variety of pressures from other people who are
affected by their decisions. An organization interacts with different
stakeholders in interdependent exchange relationships. A stakeholder is
any group or individual who can affect or is affected by the achievement of
an organization’s purpose.
 Unions exchange labour for decent wages and job security. Customers
exchange money for products and services. Owners exchange capital for
expressed returns on investment. Suppliers exchange inputs for money
and on-going business. Governments exchange protection and economic
security for taxes.
● Entrepreneurial Approach:
As the caption suggests, this approach is followed in strategic
decision-making by the organisations headed by family heads where by
the organisation is moulded to- face the environmental changes. In the
Indian context the business groups such as Reliance, Jyoti Udyog, Nirma,
Kothari Products, Mofatlal Group, Dabur Products, T.T.K. Group, and
Infosys Technologies are examples.
Elements of strategic management process
Situation Analysis
Situation analysis is the first step in the strategic management process. The
situation analysis provides the information necessary to create a company
mission statement. Situation analysis involves "scanning and evaluating the
organizational context, the external environment, and the organizational
environment" (Coulter, 2005, p. 6). This analysis can be performed using several
techniques. Observation and communication are two very effective methods.
To begin this process, organizations should observe the internal company
environment. This includes employee interaction with other employees,
employee interaction with management, manager interaction with other
managers, and management interaction with shareholders. In addition,
discussions, interviews, and surveys can be used to analyze the internal
environment.

Strategy Formulation-
Strategy formulation involves designing and developing the company strategies.
Determining company strengths aids in the formulation of strategies. Strategy
formulation is generally broken down into three organizational levels: operational,
competitive, and corporate. Operational strategies are short-term and are
associated with the various operational departments of the company, such as
human resources, finance, marketing, and production (Coulter, 2005, p. 7).
These strategies are department specific. For example, human resource
strategies would be concerned with the act of hiring and training employees with
the goal of increasing human capital.
Strategy Implementation
Strategy implementation involves putting the strategy into practice. This includes
developing steps, methods, and procedures to execute the strategy. It also
includes determining which strategies should be implemented first. The
strategies should be prioritized based on the seriousness of underlying issues.
The company should first focus on the worst problems, then move onto the other
problems once those have been addressed.

Strategy Evaluation
Strategy evaluation involves "examining how the strategy has been implemented
as well as the outcomes of the strategy" (Coulter, 2005, p. 8). This includes
determining whether deadlines have been met, whether the implementation
steps and processes are working correctly, and whether the expected results
have been achieved. If it is determined that deadlines are not being met,
processes are not working, or results are not in line with the actual goal, then the
strategy can and should be modified or reformulated.