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    What is 'Strategic Management?'

    What is 'Strategic Management?'

    Strategic management is the management of an organization’s resources to achieve its goals and objectives. Strategic management involves setting objectives, analyzing the competitive environment,analyzing the internal organization, evaluating strategies and ensuring that management rolls out the strategies across the organization. 

    At its heart, strategic management involves identifying how the organization stacks up compared to its competitors and recognizing opportunities and threats facing an organization, whether they come from within the organization or from competitors.

    BREAKING DOWN 'Strategic Management'

    Strategic management is divided into several schools of thought. A prescriptive approach to strategic management outlines how strategies should be developed, while a descriptive approach focuses on how strategies should be put into practice. 

    These schools differ over whether strategies are developed through an analytic process in which all threats and opportunities are accounted for, or are more like general guiding principles to be applied.

    Business culture, the skills and competencies of employees, and organizational structure are important factors that influence how an organization can achieve its stated objectives. Inflexible companies may find it difficult to succeed in a changing business environment. 

    Creating a barrier between the development of strategies and their implementation can make it difficult for managers to determine whether objectives were efficiently met.

    While an organization’s upper management is ultimately responsible for its strategy, the strategies themselves are often sparked by actions and ideas from lower-level managers and employees.

     An organization may have several employees devoted to strategy rather than relying on the chief executive officer (CEO) for guidance. 

    Because of this reality, organization leaders focus on learning from past strategies and examining the environment at large. The collective knowledge is then used to develop future strategies and to guide the behavior of employees to ensure that the entire organization is moving forward. 

    For these reasons, effective strategic management requires both an inward and outward perspective.

    Strategic Management in Practice

    Making companies able to compete is the purpose of strategic management. To that end, putting strategic management plans into practice is the most important aspect of the planning itself. 

    Plans in practice involve identifying benchmarks, realigning resources – financial and human – and putting leadership resources in place to oversee the creation, sale, and deployment of products and services. Strategic management extends to internal and external communication practices as well as tracking to ensure that the company meets goals as defined in its strategic management plan.

    For example, a for-profit technical college wishes to increase enrollment of new students and graduation of enrolled students over the next three years.

     The purpose is to make the college known as the best buy for a student's money among five for-profit technical colleges in the region, with a goal of increasing revenue. 

    In this case, strategic management means ensuring that the school has funds to create high-tech classrooms and hire the most qualified instructors.

     The college also invests in marketing and recruitment and implements student retention strategies. The college’s leadership assesses whether its goals have been achieved on a periodic basis. 


    Features of Strategy
    1. Strategy is Significant because it is not possible to foresee the future. Without a perfect foresight, the firms must be ready to deal with the uncertain events which constitute the business environment.
    1. Strategy deals with long term developments rather than routine operations, i.e. it deals with probability of innovations or new products, new methods of productions, or new markets to be developed in future.
    1. Strategy is created to take into account the probable behavior of customers and competitors. Strategies dealing with employees will predict the employeebehavior.

    Strategic Management - Types

    In a stable and predictable environment, strategic planning can enable an organization to achieve, manage and maintain success. But in real-world situations, only a few organizations and their executives experience a perfectly stable and predictable situation. 

    That is why it is important to understand the concepts of intended, emergent, and realized strategies. Similarly, deliberate and non-realized strategies are important as well.

    Intended Strategy

    An intended strategy deals with the intentions of the organization. It is the strategy that an organization in the market hopes to execute. Therefore, intended strategies are often described in detail in the organization’s strategic plan.

     A strategic plan made for a new firm is known as a business plan. This plan is a rough strategy that intends to keep the organization on track. It is, therefore, an intended strategy.

    The FedEx Intended Strategy

    Frederick Smith, an undergraduate student at Yale in 1965, had the task to prepare a business plan for a company as an assignment.

     His plan was of a courier service. Smith had described a new delivery system made effective by shipping the packages via a central hub and then ship these packages to their destinations.

    Smith liked the idea so much that he started Federal Express (FedEx) that followed the business plan he had prepared as a project.

     Today, Frederick Smith has a wealth of over $2 billion, and FedEx is the eighth of World’s Most Admired Companies as described by Fortunemagazine. So, we can say that Smith’s intended strategy has worked out much effectively than even he could have dreamed.

    Emergent Strategy

    An emergent strategy is the one that emerges with time. It is an unplanned strategy that is created by an organization while acting in response to the various unexpected threats, opportunities and challenges. 

    Emergent strategies are also dynamic in nature. Emergent strategies may result in both success and failure depending on the effectiveness of the strategy. Following is an example of failed emergent strategies.

    Failure of FedEx’s ZapMail Emergent Strategy

    In the mid-1980s, FedEx drifted away from its intended strategy to focus on package delivery to monetize from a new and an emerging technology: the facsimile (fax) machines. 

    FedEx developed a new service, known as ZapMail, where documents were faxed between FedEx offices and then delivered to customers’ offices.

     The ZapMail system had been plagued by technical glitches that only frustrated the customers. ZapMail was discontinued before long, and the company lost hundreds of millions of dollars.

    Realized Strategy

    A realized strategy is a real and practical strategy. It is the strategy that a firm actually follows. Realized strategies are often a by-product of an organization’s intended strategy (i.e., the firm’s plans), the firm’s deliberate strategy (i.e., the portions of the intended strategy that an organization continues to pursue over time), and its emergent strategy (i.e., what the firm does in response to unexpected opportunities and challenges).

    In most other cases, however, firms’ original intended strategies are lost during its journey. The abandoned sections of the original and intended strategy are known as non-realized strategy.Following is an example of successful non-realized strategy.

    Success of Non-realized Strategy at Avon

    David McConnell was an aspiring and struggling author looking to sell his books. He decided to offer complimentary perfume with his books. McConnell’s books never tasted success, but his perfumes became popular. 

    The California Perfume Company was born, which is now known as Avon. For McConnell, a non-realized strategy to become a successful writer never took shape, but through Avon, a very successful realized strategy evolved.

    The Social Network

    Facebook owner Mark Zuckerberg’s original concept in 2003 was mediocre. He created the “FaceMash” where the attractiveness of young women could be voted on. Later on it became an online social network called The Facebook that was for Harvard students only.

    It had become surprisingly popular, and was transformed into Facebook, to be used by everyone. Facebook’s emphasis on building a friends’ circle is different from Zuckerberg’s original low-spirited concept. In fact, Zuckerberg’s emergent and realized strategies turned out to be far more effective than the intended strategy.


    The Five Steps of Strategic Management

    Strategic management is a very large, complicated, and always-evolving endeavor. Therefore, it is handy to group it into a set of solid steps to describe the process of strategic management. The most common and used frameworks of strategic management include five steps, grouped in two general stages − Formulation and Implementation.


          Analysis  Analysis involves comprehensive market, financial and business research on the external and competitive environments. The process includes conducting Porter's Five Forces, SWOT, PESTEL, and value chain management analyses and combining expertise in each industry that are part of the strategy.
          Strategy Formation  After analyzinginternal and external environments, the organization arrives at a generic strategy (for instance, low-cost, differentiation, etc.) that is based upon the value-chain implications. It is done for deriving and maximizing core competence and prospective competitive advantages.
          Goal Setting  Goal setting is the next step of strategy formation. As the defined strategy is in hand, management now tends to find out and communicates the goals and objectives of the company that are linked to the predicted results, strengths, and opportunities.


          Structure  The implementation phase has the basic function of structuring the management and operational processes. As there is a strategy in place, the business now wants to solidify the organizational structure and leadership patterns (making many changes if required).
          Feedback  Feedback is the final stage of strategic management process. In this final stage of strategy, all of the budgetary figures are collected and disseminated for evaluation. Financial ratios calculation and performance reviews are delivered to relevant managers, executives and concerned departments.

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