STRATEGIC MANAGEMENT Student No.

805

Table of Contents
1. Introduction..............................................................................................................................................2
2. Strategy Formulation................................................................................................................................3
2.1. Vision Statement..................................................................................................................................3
2.2. Mission Statement................................................................................................................................3
2.3. Values Statement..................................................................................................................................4
2.4. Situational Analysis..............................................................................................................................4
2.5. Objectives.............................................................................................................................................5
2.6. Strategy Creation..................................................................................................................................5
3. Strategy Implementation...........................................................................................................................6
4. Strategy Evaluation and Control...............................................................................................................7
4.1. Strategy Control....................................................................................................................................8
4.2. Strategy Evaluation.............................................................................................................................. 8
References:.................................................................................................................................................10
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Figure 1 – Strategic Management Process Components...................................................................................3
Figure 2 – The Components of a Company’s Macroenvironment....................................................................4

Assignment Question:
Define the term strategic management and explain the steps that are followed in the strategic
management process.

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1. Introduction
Strategy is a well-defined roadmap of an organization. It defines the overall mission, vision and
direction of an organization. The objective of a strategy is to maximize an organization’s strengths
and to minimize the strengths of the competitors. 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. Strategy is all about integrating
organizational activities and utilizing and allocating the scarce resources within the organizational
environment so as to meet the present objectives.

The strategic management process entails defining the organization’s strategy. It concerns itself
with the long-term survival of a business through strategy formulation, implementation and
evaluation and control. Strategic management is a process where managers follow a logical pattern
and set steps when making choices on strategies for the organization that will enable it to achieve
better performance. It is a continuous process that appraises the business and industries in which
the organization is involved, the environment in which it operates and the nature of competition that
it faces. This assists the organisation to understand its industry and hence develop strategies that
are relevant to or match the industry, the competition and the general environment.

There are several approaches which can be used when formulating strategies, depending on the size
of the organization and/or the leadership style. These include:
1. Master Strategist (Architect) Approach – where the owner, manager or CEO acts as chief
strategist and exercises great influence in the process.
2. Delegate-it-to-others Approach – where the task is delegated to a special committee.
3. Collaborative Approach – where the owner, manager or CEO enlists the help of key
subordinates in coming up with a consensus plan.
4. The Champion Approach. This is a bottom-up approach where the owner, manager or CEO is
not interested in leading the process or the detailed plan but encourages subordinate managers to
develop and implement sound strategies.

The strategic management process consists of several processes which must be followed when
creating a new strategy or making changes to an existing strategy, as depicted in Figure 1 below.

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Figure 1- Strategic Management Process Components

2. Strategy Formulation
Strategy formulation refers to the process of choosing the most appropriate course of action for
the realization of organizational goals and objectives and thereby achieving the organizational
vision. The starting point of the process is the initial assessment of the firm. At this phase
managers must clearly define the company’s vision, mission, values and set long-term
objectives.

2.1. Vision Statement

Vision statement is a statement of hopes, aspirations, and/or wishes of the organisation’s future
i.e. where the leadership would like the organisation to be in the future. Without visualizing the
company’s future, managers wouldn’t know where they want to go and what they have to
achieve. Vision is the ultimate goal for the firm and the direction for its employees. A business'
vision answers the questions:
 What does an organization want to become in five, ten or twenty years’ time?
 What do our capabilities lead us to be?
 What does our market want us to be?

2.2. Mission Statement

Mission statement describes company’s business. It is an enduring statement of purpose that
distinguishes an organisation from other similar organizations in the same industry. It informs
organization’s stakeholders about the products, customers, markets, values, concern for public
image and employees of the organization. A thorough mission statement acts as guidance for
managers in making appropriate daily decisions. A mission statement identifies the scope of an

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organisation’s operations in product/service and market terms. It focuses on “who we are; what
we do; and why we are here?”

2.3. Values Statement

Values are a firm’s beliefs, traits and behavioural norms that are expected to be upheld by
employees in executing their strategy and strategic vision. They are the firm’s genetic makeup.
Values must not be cosmetic/window dressing, but they must be linked to the firm’s vision and
mission.

2.4. Situational Analysis

Organizational environment consists of both external and internal factors. Key to strategic
management is understanding the environment in which the organisation is operating in, that is,
the general environment, the industry and the competition. Environment must be scanned in
order to determine development and forecasts of factors that will influence organizational
success. A situational analysis must be done to analyse the company’s macroenvironment
components shown in Figure 2. This entails understanding the firm’s industry, the nature of
competition it faces and the general environment that it operates in, in order to develop
strategies that are relevant to or that can match the situation. Thus, a situation analysis
identifies strengths, weaknesses, opportunities and threats for the organization and reveals a
clear picture of company’s situation in the market.

Figure 2 – The Components of a Company’s Macroenvironment

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There are several tools available for analysing the various components, some of which have been
discussed below.
2.4.1. PESTLE – PESTLE model can be used to analyse the Political, Economic, Social,
Technological, Legal and Ecological environmental factors that can impact the organisation’s
ability to achieve its objectives. These are factors which are outside the organisation’s control
and influence but must be known and managed.
2.4.2. Porter’s five forces model – An analysis of industry can be done using the Porte’s Five
Forces model which looks at the bargaining powers of buyers, bargaining powers of suppliers,
threats from new entrants, threats from substitutes and the competitive pressure from rivalry.
This analysis helps in putting in place strategies to ensure survival of the organisation.
2.4.3. SWOT Analysis – SWOT analysis may also be used to analyse the firm’s resource
strengths and weaknesses and external opportunities and threats. Assessment of the internal
environment must also assess core competencies and activities as well as the effectiveness of
the current strategy. When analysing the company’s activities, managers must look into the
value chain and the whole production process.
2.4.4. BCG Matrix or combinations – This is used to analyse the market position of the
organization and/or it’s products or services. The analysis must identify star performers, cash
cows, dogs and question marks. This helps the organization to put in place the necessary
strategies to either develop or retire the products/services or business units or the organization
itself.

2.5. Objectives
A successful situation analysis is followed by creation of long-term objectives. Long-term
objectives indicate goals that could improve the company’s competitive position in the long run.
They act as directions for the specific strategies selected. The objectives must be SMART and
must include both financial and non-financial objectives. Financial objectives have a short-term
focus and ensure availability of resources to drive growth while non-financial take a long-term
perspective and ensure the organisation’s long-term survival and competitiveness.

2.6. Strategy Creation

Strategy creation is the process of deciding best course of action for accomplishing
organizational objectives, hence achieving organizational purpose. Once objectives have been
set, management must develop alternative strategies, evaluate them and choose appropriate
strategies which drive the business towards the set objectives, which benefits the business. This

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process commits an organization to specific products, services, markets, resources and

technologies over an extended period of time. Strategists must go with the strategies which are
most feasible and beneficial for the business, that is, the most profitable course of action for
success.

Strategies maybe chosen at 3 different levels:

2.6.1. Business level strategy. This type of strategy is used when strategic business units (SBU),
divisions or small and medium enterprises select strategies for only one product that is sold in
only one market. Firms may select between Porter’s 3 generic strategies: cost leadership,
differentiation and focus strategies.
2.6.2. Corporate level strategy. At this level, executives at top parent companies choose which
products to sell, which market to enter and whether to acquire a competitor or merge with it.
They select between integration, intensive, diversification and defensive strategies.
2.6.3. Global/International strategy. The global/international strategies answer the following main
questions: Which new markets to develop and how to enter them? How far to diversify?

3. Strategy Implementation
Strategy implementation is the translation of the chosen strategy into organizational action in
order to achieve strategic goals and objectives. It is the execution of the necessary strategies to
meet the objectives that have been set. It is the stage that demands participation of the entire
organization. And to ensure success, all employees should understand their roles and
responsibilities in the implementation process. Managerial skills are more important than using
analysis. Communication is essential as new strategies must get support throughout the
organization for effective implementation.

The implementation stage breaks down the high-level plan into more operational steps and
action items in order to bring the intended strategies to reality. This can be achieved by
following the 6 steps below:
i. Setting annual objectives – breaking down the high-level objectives into smaller objectives
specifically designed to achieve financial, marketing, operational, human resources and
other functional goals.
ii. Revisiting and revising policies to meet the objectives – introduce new policies or amend
and align existing policies to act as the directions for successfully implementing objectives.
iii. Allocating resources to strategically important areas.

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iv. Changing organizational structure in line with new strategies. This may require
reallocation of resources and/or redistribution of responsibilities and power.
v. Managing resistance to change – Strategy implementation poses a threat to many managers
and employees in an organization. New power relationships/groups are formed whose
values, attitudes, beliefs and concerns may not be known. With the change in power and
status roles, the managers and employees may employ confrontation behaviour.
vi. Introducing organizational control systems which equips managers with motivational
incentives for employees as well as feedback on employees and organizational
performance.

There are tools which provide guidelines and pre-requisites for effective strategy
implementation like Mckinsey’s 7s Framework and The Eight Managerial Components to
Strategy Implementation.
McKinsey 7s model, for example, analyses a firm’s organizational design by looking at 7 key
internal elements, their alignment and effectiveness in achieving the organization’s objectives.
i. Strategy – Strategy is a plan developed by a firm to achieve sustained competitive
advantage and successfully compete in the market.
ii. Structure – the framework within which the strategy is going to be executed. Structure
represents the way business divisions and units are organized and includes the
information of who is accountable to whom.
iii. Systems – the procedures and processes that reflect how operations in the organisation
are to be executed and sustained.
iv. Style – the way the company is managed by top-level managers, how they interact, what
actions they take and their symbolic value.
v. Staff (adequacy) – concerned with what type and how many employees an organization
will need and how they will be recruited, trained, motivated and rewarded.
vi. Skills – Concerned with the capabilities that are required by the
intervention/organisation for effective execution of the strategies to deliver goals and
objectives.
vii. Shared Values – Concerned with the culture, values and beliefs that are to be cherished
and nurtured in the organisation.

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4. Strategy Evaluation and Control

Implementation must be monitored to be successful. The final phase of the strategy
management process, Strategy Evaluation and Control, is a process of determining the
effectiveness of a given strategy in achieving the organisational objectives and taking corrective
action whenever required. The managers can also assess the appropriateness of the current
strategy in today’s dynamic world with socio-economic, political and technological innovations.
Thus, managers must continuously review both the external and internal environments as new
strengths, weaknesses, opportunities and threats may arise.
4.1. Strategy Control
Control can be exercised through formulation of contingency strategies and a crisis
management team. Below are some of the types of control:
4.1.1. Operational control – aimed at allocation and use of organisational resources through
evaluation of performance of organisational units, divisions and business units to assess
their contribution in achieving organisational objectives.
4.1.2. Strategic control – takes into account the changing assumptions that determine a
strategy, continually evaluate the strategy as it is being implemented and take the
necessary steps to adjust to the new requirements. There are four basic types of strategic
control:
4.1.2.1. Premise control – identifies the key assumptions and keep track of any
change in them to assess their impact on strategy and implementation.
4.1.2.2. Implementation control – evaluating plans, programs and projects to see if
they guide the organisation to achieve predetermined organisational objectives or
not. Identifying and monitoring of strategic thrusts.
4.1.2.3. Strategic surveillance – designed to monitor a broad range of events in and
outside the organisation which are likely to threaten the course of the
organisation.
4.1.2.4. Special alert control – a rapid response or immediate reassessment of strategy
in the light of sudden and unexpected events.
4.2. Strategy Evaluation
The process of strategic evaluation is an on-going process which consists of the following
steps:
4.2.1. Setting standards of performance – identification of areas of operational efficiency in
terms of people, processes, productivity and pace, using quantitative or qualitative

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criterion. Factors such as capabilities of the organisation, core competencies, risk appetite,
strategic clarity and flexibility and workability must also be considered.
4.2.2. Measurement of performance – standards of performance act as a benchmark with
which the actual performance must be evaluated against. The accounting, reporting and
communication system help in measuring the performance. The measurement must be
done at the right time and must be consistent, e.g. monthly, or else evaluation will not
meet its purpose. There are appropriate means and tools available for measuring
performance, which makes strategy evaluation easier, such as the GAP Analysis or the
Balance Scorecard.
4.2.3. Analysing Variance – the key main tasks are noting the deviations and finding the
causes of the deviations. The strategists must define the degree of tolerance limits
between which the variance between actual and standard performance may be accepted.
When actual performance is greater than budgeted performance, then management must
check the validity of the standards and efficiency of management. When actual
performance is less than budgeted performance, then management must pinpoint the areas
where performance is low and the corrective action. When analysing the causes of
deviations, the following questions must be answered: Are the strategies still valid? Does
the organisation have the capacity to respond to the changes needed?
4.2.4. Taking Corrective Action – Once the deviation in performance is identified, it is
essential to plan for a corrective action. If the performance is consistently less than the
desired performance, the strategists must carry out the following:
4.2.4.1. Checking of performance – this consists of an in-depth analysis and diagnosis
of the factors that might be responsible for the bad performance.
4.2.4.2. Checking of standards – it may be necessary to lower or evaluate the
standards according to the prevailing conditions.
4.2.4.3. Reformulate strategies, plans or objectives – giving a fresh start to the
strategic management process.

Strategic evaluation and control is as significant as strategy formulation because it throws light on
the efficiency and effectiveness of the comprehensive plans in achieving the desired results and
provides the following:
 Means for feedback, appraisal and reward.
 Checking the validity of strategic choice

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 Congruence between decisions and intended strategy

 Creating inputs for new strategic planning.

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References:
1. https://pdfs.semanticscholar.org
2. https://www.slideshare.net/BandriNikhil/strategic-evaluation-control-46566188
3. https://www.strategicmanagementinsight.com/topics/strategic-planning-process.html
4. https://managementstudyguide.com/strategic-management-process.htm
5. https://thetrainingassociates.com/blog/5-stages-strategic-management-process/
6. https://www.stratadecision.com/blog/strategic-management-process-what-is-it/
7. https://bbamantra.com/strategic-evaluation-and-control/

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