Question

Please briefly describe the major steps of the Strategic Management Process and the key elements of strategy

Answer 1

MAJOR STEPS OF STRATEGIC MANAGEMENT PROCESS

To answer your question, let us first talk about what strategic management process really is.

It is the process of managing, planning, and analyzing what you are doing, in order to meet the organizational goals.

Strategic management helps you to analyse where you currently are as compared to where you really want to be. This, in turn, helps to set further goals and plans on how to overcome the gap between expectations and reality.

The process of strategic management includes 5 steps:-

1. Goal setting

2. Analysis

3. Strategy formation

4. Strategy implementation

5. Strategy monitoring.

Now let us see what each of these steps imply:-

Goal Setting

The first part of strategic management is to plan and set your goals. Know what is it that you want to achieve and accordingly set the short- and long-term goals of the organization. The goal should be relevant, precise and measurable.

Analysis

During this stage of the process, it is important to gather as much information and data as possible. This helps us find out what the strengths and weaknesses of the company are and also what threats and opportunities could come along the way.

Strategy Formation

In this strategic management step, we use the information that was gathered in the previous step. Identify useful resources you have, and also seek out other resources you will need to set up your strategy.

Strategy Implementation

At this point, each member of the team should have a clear understanding of the plan and should know how they play a part within it. This is the stage where your strategy is put into action. Additionally, any resources or funding for the venture must be secured at this point. Once the funding is in place and the employees are ready, execute the plan.

Strategy Monitoring

This point involves performance measurements, consistent review of internal and external issues and making corrective actions when necessary. Any successful evaluation of the strategy begins with defining the parameters to be measured. These parameters should mirror the goals set in Stage 1. Determine your progress by measuring the actual results versus the plan.

KEY ELEMENTS OF A STRATEGY

A strategy consists of an integrated set of choices.

These choices relate to five key elements that must be considered when making decisions:-

1. Area:  An area is the locations in which a firm will be active. Decisions about a firm’s area may encompass its products, services, distribution channels, market segments, geographic areas, technologies, and even stages of the value-creation process.

2. Product Differentiation: These are the features and attributes of a company’s product or service that help it beat its competitors in the marketplace. Firms can be successful in the marketplace along with a number of common dimensions, including image, customization, technical superiority, price, quality, and reliability.

3. Modes: These are the means for participating in targeted areas. For example, a firm that wants to expand can do so by going international and selling its product and services in different countries. Likewise, a firm that requires a new technology could develop it through investments in research and development (R&D).

4. Staging and Pacing: Staging and pacing refer to the timing and speed, or pace, of strategic moves. Staging choices typically reflect available resources, including cash, human capital, and knowledge.

5. Cost and Benefit Analysis: This refers to how the firm will earn a profit, that is, how the firm will generate positive returns over and above its cost of capital. The cost and benefit analysis is a key element added in a strategy formulation which helps in earning normal profits and requires a firm to meet all fixed, variable, and financing costs.