UNIT 3

STRATEGIC MANAGEMENT PROCESS

STRATEGIC AUDIT

A strategic audit is a comprehensive and systematic analysis of an organization's overall

strategic position. It involves evaluating an organization's mission, vision, goals, strategies, and
performance in relation to its external environment, industry, competition, and internal
resources and capabilities. The purpose of a strategic audit is to identify areas where the
organization can improve its strategic position and enhance its competitiveness.

The following are some of the key steps involved in a strategic audit:

1. Review the organization's mission, vision, and values

2. Analyze the external environment, including the industry and competition
3. Evaluate the internal resources and capabilities of the organization
4. Assess the organization's strategic goals and objectives
5. Review the organization's strategic plans and initiatives
6. Evaluate the organization's performance and results
7. Identify strategic issues and challenges facing the organization
8. Develop recommendations for improving the organization's strategic position

A strategic audit is an important tool for organizations to ensure that they are aligning their
strategies with their mission and vision and are able to adapt to changes in the external
environment. It can help organizations identify areas where they need to improve and make
changes to enhance their competitive advantage.

Importance of strategic audit:

1. Helps to identify strengths and weaknesses: A strategic audit helps an organization

identify its strengths and weaknesses. By analyzing its internal operations, an
organization can determine where it is excelling and where it needs to improve. This
knowledge can then be used to develop strategies that capitalize on strengths and
address weaknesses.
2. Facilitates planning: A strategic audit is an important tool for planning. By reviewing
an organization's current position, it helps identify the direction that the organization
needs to take to achieve its goals. It also helps to develop strategies that align with the
organization's overall mission and objectives.
3. Enhances decision-making: A strategic audit provides management with the necessary
information to make informed decisions. By analyzing an organization's internal and
external environments, it helps to identify opportunities and threats, which can then be
used to make strategic decisions.
4. Increases accountability: A strategic audit increases accountability by identifying the
key performance indicators that an organization needs to monitor. This helps to ensure
that the organization is meeting its goals and objectives and that everyone is held
accountable for their performance.

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 5. Improves performance: A strategic audit helps to improve an organization's
performance by identifying areas where it can improve its operations. By implementing
the recommendations that come out of the audit, an organization can increase
efficiency, productivity, and profitability.

Strategic Information System

Strategic information systems (SIS) are information systems that are developed in response to
corporate business initiative. They are intended to give companies a competitive advantage by
providing them with the information they need to make strategic decisions. In strategic
management, SIS can be used to support decision-making processes, gain insights into market
trends, and streamline business processes.

Here are some key notes on the use of strategic information systems in strategic management:

1. SIS are designed to provide information that supports strategic decision-making: SIS
are developed specifically to help companies make strategic decisions that will give
them a competitive advantage. These systems are often used to provide information on
market trends, customer behavior, and other key factors that can impact a company's
success.
2. SIS can help companies gain insights into market trends: By collecting and analyzing
data on market trends, SIS can provide companies with valuable insights into how their
industry is evolving. This can help companies anticipate changes and adapt their
strategies accordingly.
3. SIS can streamline business processes: By automating routine tasks and providing real-
time data on business operations, SIS can help companies streamline their processes
and reduce costs. This can lead to increased efficiency and competitiveness.
4. SIS can improve communication and collaboration: SIS can facilitate communication
and collaboration among employees, departments, and even across geographies. This
can improve decision-making processes and foster innovation within the company.
5. SIS require careful planning and implementation: Developing and implementing an SIS
requires careful planning and coordination. It is important to ensure that the system is
aligned with the company's overall strategy and goals, and that it is implemented in a
way that minimizes disruptions to business operations.

Overall, SIS can be a valuable tool for companies looking to gain a competitive advantage in
their industry. By providing real-time information on market trends, customer behavior, and
business operations, SIS can help companies make more informed strategic decisions and
streamline their processes for increased efficiency and productivity.

Role of Strategist
A strategist plays a crucial role in strategic management, which is the process of formulating
and implementing a company's long-term goals and objectives. Here are some key notes on the
role of a strategist in strategic management:

1. Identifying the Company's Strengths and Weaknesses: The strategist is responsible for
analyzing the company's internal strengths and weaknesses to determine the

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 organization's resources, capabilities, and limitations. This information is then used to
formulate a strategic plan.
2. Analyzing External Factors: In addition to internal factors, a strategist also considers
external factors, such as market trends, competitive landscape, economic conditions,
technological advancements, and regulatory changes. The strategist then uses this
information to identify opportunities and threats that could impact the company's future
success.
3. Setting Goals and Objectives: Based on the analysis of internal and external factors, the
strategist sets goals and objectives that align with the company's overall mission and
vision.
4. Developing a Strategic Plan: The strategist develops a strategic plan that outlines the
steps the company needs to take to achieve its goals and objectives. The plan includes
the allocation of resources, timelines, and milestones to track progress.
5. Communicating the Plan: The strategist communicates the strategic plan to the
leadership team and other stakeholders to ensure alignment and buy-in. They also
ensure that the plan is communicated clearly and effectively to all employees to ensure
that everyone understands their role in achieving the company's goals.
6. Monitoring Progress: The strategist monitors progress against the strategic plan and
adjusts the plan as needed. This includes analyzing data, gathering feedback, and
making strategic decisions based on that information.

Measuring performance

Measuring performance is an essential component of strategic evaluation and control. It helps

organizations to monitor their progress, identify areas for improvement, and make necessary
adjustments to their strategies. Here are some notes on measuring performance in strategic
evaluation and control:

1. Set clear objectives: Before measuring performance, it's important to establish clear
objectives. These objectives should be specific, measurable, achievable, relevant, and
time-bound (SMART).
2. Use Key Performance Indicators (KPIs): KPIs are quantitative measures that reflect the
performance of an organization or a particular aspect of its operations. They should be
aligned with the organization's objectives and provide insight into whether or not those
objectives are being achieved.
3. Use a balanced scorecard approach: The balanced scorecard approach is a popular
method for measuring performance that takes into account multiple perspectives,
including financial, customer, internal processes, and learning and growth. It provides
a comprehensive view of an organization's performance.
4. Benchmark against competitors: Benchmarking is a process of comparing an
organization's performance against that of its competitors. This can help identify areas
where the organization is performing well and areas where it needs improvement.
5. Regularly review and adjust performance measures: Measuring performance is an
ongoing process. It's important to regularly review and adjust performance measures to
ensure they remain relevant and useful in evaluating an organization's progress.
6. Communicate results: The results of performance measurements should be
communicated to all relevant stakeholders, including employees, management, and
shareholders. This helps to build buy-in and support for the organization's strategies.

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Overall, measuring performance is a critical component of strategic evaluation and control. By
setting clear objectives, using KPIs, using a balanced scorecard approach, benchmarking
against competitors, regularly reviewing and adjusting performance measures, and
communicating results, organizations can monitor their progress and make necessary
adjustments to achieve their strategic goals.

Appropriate Measures for Measuring Performance

Measuring performance is an essential aspect of strategic evaluation and control. It allows

organizations to assess whether their strategies are effective in achieving their goals and
objectives. Below are some appropriate measures that can be used for measuring performance
in strategic evaluation and control:

1. Financial measures: Financial measures such as revenue growth, profitability, return on

investment (ROI), and cash flow can provide insights into the financial performance of
the organization. These measures are particularly useful in evaluating the effectiveness
of strategies related to cost reduction, revenue generation, and financial management.
2. Customer satisfaction: Customer satisfaction measures such as customer retention rates,
customer loyalty, and Net Promoter Score (NPS) can help assess the success of
strategies related to customer service, product development, and marketing.
3. Employee engagement: Employee engagement measures such as employee
satisfaction, employee turnover rates, and employee productivity can help assess the
effectiveness of strategies related to human resource management, employee
development, and organizational culture.
4. Operational efficiency: Operational efficiency measures such as cycle time, inventory
turnover, and defect rates can help assess the effectiveness of strategies related to
process improvement, supply chain management, and quality control.
5. Environmental and social impact: Measures related to environmental and social impact
such as carbon footprint, waste reduction, and community engagement can help assess
the effectiveness of strategies related to sustainability, corporate social responsibility,
and stakeholder engagement.

It is important to note that different measures may be more relevant for different organizations
and industries. Additionally, it is important to choose measures that are aligned with the
organization's goals and objectives, and that provide meaningful insights into the effectiveness
of its strategies. Regularly monitoring and evaluating performance using these measures can
help organizations make data-driven decisions and continuously improve their strategies.

Qualitative And Quantitative Benchmarking To Evaluate Performance

Benchmarking is an important tool for evaluating the performance of a company or

organization. It is a process of comparing the performance of one company or organization
with that of others in the same industry. There are two main types of benchmarking: qualitative
and quantitative.

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Qualitative benchmarking involves evaluating the quality of a company's products, services,
and processes. This type of benchmarking involves evaluating the company's performance
against industry standards, best practices, and customer expectations. Qualitative
benchmarking can be done through surveys, customer feedback, and expert opinions.

Quantitative benchmarking involves evaluating the performance of a company or organization

using numerical data. This type of benchmarking involves comparing key performance
indicators (KPIs) such as revenue, profitability, market share, and customer satisfaction.
Quantitative benchmarking can be done using financial ratios, market research data, and
customer satisfaction surveys.

When it comes to strategic evaluation and control, both qualitative and quantitative
benchmarking can be useful tools. Qualitative benchmarking can help identify areas where the
company is not meeting industry standards or customer expectations. For example, if a
company's customer service ratings are lower than its competitors, qualitative benchmarking
can help identify best practices that the company can adopt to improve its customer service.

Quantitative benchmarking can help track the company's performance over time and compare
it with industry averages. For example, if a company's revenue growth is lower than the
industry average, quantitative benchmarking can help identify areas where the company can
improve its revenue growth.

Overall, both qualitative and quantitative benchmarking can be useful tools for evaluating the
performance of a company or organization in strategic evaluation and control. By using these
tools, companies can identify areas for improvement and take steps to improve their
performance and competitiveness in the market.

Problems In Measuring Performance

Measuring performance in strategic evaluation and control can be challenging and complex, as
it involves evaluating the effectiveness of strategic plans and making adjustments if necessary.
Here are some problems that can arise when measuring performance in this context:

1. Difficulty in defining and measuring performance metrics: Defining the right metrics
to measure the success of a strategy is crucial. However, identifying the right metrics
can be challenging as strategic objectives can be vague and difficult to quantify.
2. Time frame mismatch: Strategic plans typically have a long-term focus, whereas
performance evaluations often take place on a short-term basis. This time frame
mismatch can result in an inaccurate assessment of the strategy's effectiveness.
3. External factors: External factors such as changes in the market or industry dynamics,
technological advancements, and global events can have a significant impact on the
effectiveness of a strategy. Evaluating the performance of a strategy without
considering these external factors can lead to inaccurate conclusions.
4. Incentives and biases: Incentives and biases can affect the measurement of performance
in strategic evaluation and control. For example, managers may be incentivized to
achieve short-term goals at the expense of long-term objectives. Similarly, confirmation
bias can lead to the selective use of data that supports preconceived notions.
5. Lack of communication and collaboration: Measuring performance in strategic
evaluation and control requires effective communication and collaboration between

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different departments and stakeholders. However, this can be challenging, especially in
large organizations where different departments may have conflicting priorities and
goals.