The word ‘strategy’, is derived from the Greek noun strategies, meaning ‘commander in chief’, was first used in the English language in 1656. The development and usage of the word suggests that it is composed of statios (army) and agent (to lead).
In a management context, the word ‘strategy’ has now replaced the more traditional term ‘long-term planning’ to denote a specific pattern of decisions and actions undertaken by the upper echelon of the organisation in order to accomplish performance goals. It is a pattern of actions and resource allocations designed to achieve the goals of an organisation.
Chandler (1962) made a comprehensive analysis of interrelationships among environment, strategy, and organisational structure. He analysed the history of organisational change in 70 manufacturing firms in the US. While doing so, Chandler defined strategy as: “The determination of the basic long term goals and objectives of an enterprise and the adoption of the courses of action and the allocation of resources necessary for carrying out this goal”.
Ansoff (1980) is a well-known authority in the field of strategic management and a prolific writer he explained the concept of strategy as “the common thread among the organisation’s activities and product markets that defines the essential nature of business that the organisation was or planned to be in the future”. Ansoff (1980) stressed on the commonality of approach that exists in diverse organizational activities including the products and markets that define the current and planned nature of business.
Andrews (1987) belongs to the group of professors at Harvard Business School who were responsible for developing the subject of business policy and its dissemination through the case study method.
Andrews (1987) defines strategy as the pattern of objectives, purpose, goals and the major policies and plans for achieving these goals stated in such a way so as to define what business the company is in or is to be and the kind of company it is or is to be.
This definition refers to the business definition, which is a way of stating the current and desired future position of company, and the objectives, purposes, goals, major policies and plans required to take the company from where it is to where it wants to be.
Porter (1984) opines that the core of general management is strategy, which he elaborates as developing and communicating the company’s unique position, making trade-offs, and forging fit among activities. Strategic position is based on customer’s needs, customer’s accessibility, or the variety of a company’s products and services.
A company’s unique position relates to choosing activities that are different from those of the rivals, or to performing similar activities in different ways. However, a sustainable strategic position requires a trade-off when the activities that a firm performs are incompatible. Creation of fit among the different activities is done to ensure that they relate to each other.
Johnson and Scholes (2001:10) note that “Strategy is the direction and scope of an organisation over the long term which achieves advantage for the organisation through its configuration of resources within a changing environment, to meet the needs of markets and to fulfil stakeholder expectations”. The emphasis on direction is important for organisations.
The need to know what the organisational objectives are and how they are to achieve them are fundamental to success. But success is based on some pre-determined measure in relation to others over time in a similar activity.
That is why the key word in the above statement by Johnson and Scholes (2001) is ‘advantage’ which really implies ‘competitive advantage’ (Porter, 1985). The emphasis is on strategic positioning so that an organisation outperform others operating in the same activity.
It must be noted that the different approaches referred to above to define strategy cover nearly a quarter of a century. This is an indication of what a complex concept strategy is and how various authors have attempted to define it. To put it in another way, there are as many definitions as there are experts.
The same authors may change the approach they had earlier adopted. Witness what Ansoff said later in 1984, Basically, a strategy is a set of decision making rules for the guidance of organisational behaviour.
Hill and Jones (2001) took a similar view when they defined strategy as ‘an action a company takes to
attain superior performance’. By means of the deeper insight that the authors have developed through years of experience and thinking, they have attempted to define the concept of strategy with greater clarity and precision.
This comment is valid for most of the concepts in strategic management since this discipline is in the process of evolution and a uniform terminology is still evolving.
Strategists are individuals who are most responsible for the success or failure of an organisation.
Strategists have various job titles, such as chief executive officer, president, chairman of the board,
executive director, chancellor, dean or entrepreneur. Strategists differ as much as organisation themselves and these differences must consider in the formulation, implementation, and evaluation of strategies.
Strategists differ in their attitudes, values, ethics, willingness to take risks, concern for social responsibility, concern for profitability, concern for short-run versus long-run aims, and management style. Some strategies will not consider some types of strategies due to their personal philosophy.
Strategic Management
Strategic management is the set of managerial decisions and actions that determines the long run
performance of an organisation that includes environmental scanning (both external and internal), strategy formulation, strategy implementation, evaluation and control (Wheeler and Hunger, 1995)
According to Kazmi (2008) strategic management is either decision making process and planning, or set
of activities related to the formulation and implementation of strategies to achieve organisational activities.
Strategic management determines how an organization would relate to, or exploit opportunities associated with, key entities in its environment – customers, suppliers, markets,
competitors, business processes, technology, government, etc., toward promoting the goals of the
organization.
The complexities of business environment today require that an organisation should continually monitor key internal and external events and trends. It must also purse strategies that capitalise on internal strengths, take advantage of opportunities, mitigate internal weaknesses and avoid or nullify the impact of external threats.
This process is thus seen as the whole essence of strategic management. (Qghgjafor, 2000) Strategic managers aim to optimize the relationship between the opportunities and risks inherent in the environment and the resources and skills possessed by the organisation.
Strategic managers seek to derive sustainable competitive and environmental control advantages by analysing the peculiarities of the organisation and its environment, and manipulating one or more organisational variables (Kettinger, Grover, Gulian, Segors, 1994).
Strategic Management Process
The strategic management process refers to the methods by which strategies are derived and consists of different phases or steps. The strategic management process is typically broken down into five steps:
1. Establishment of mission and goals
2. Environmental analysis
3. SWOT analysis and strategy formulation
4. Strategy implementation
5. Strategy control and evaluation.
Establishment of Mission and Goals
The first step in the strategic management model begins with senior managers evaluating their position in relation to the organisation’s current mission and goals. The mission describes the organisation’s values and aspirations; it is the organisation’s *raison d’être* and indicates the direction in which senior management is going. Goals are the desired ends sought through the actual operating procedures of the organisation and typically describe short-term measurable outcomes (Daft, 2001).
Environmental Analysis
This looks at the internal organisational strengths and weaknesses and the external environment for opportunities and threats. The factors that are most important to the organisation’s future are referred to as strategic factors and can be summarized by the acronym SWOT (Strengths, Weaknesses, Opportunities and Threats). According to Narayanan and Faley (1995:156), environmental analysis consists of four analytical stages:
1. Scanning to detect warning signals;
2. Monitoring to gather and interpret sufficient data on trends to discern patterns;
3. Forecasting future directions of changes; and
4. Assessing current and future changes with regard to their implications for the organisation.
Strategic Formulation
This involves senior managers evaluating the interaction between strategic factors and making strategic choices that guide managers to meet the organisation’s goals. Some strategies are formulated at the corporate, business and specific functional levels.
The term ‘strategic choice’ raises the question of who makes decisions and why they are made (McLoughlin and Clark, 1988). The notion of strategic choice also draws attention to strategic management as a ‘political process’ whereby decisions and actions on issues are taken by a ‘power-dominant’ group of managers within the organisation. In a political model of strategic management, it is necessary to consider the distribution of power within the organisation.
Strategy Implementation
In the implementation phase, the strategy is turned into reality by means of more detailed and shorter-term plans/schedules at progressively lower operating levels (Digman, 1990:54). Strategy implementation is often called the action stage of strategic management. Implementation means putting formulated strategies into action.
It is an area of activity that focuses on the techniques used by managers to implement their strategies. In particular, it refers to activities that deal with:
- Leadership style
- The structure of the organisation
- The information and control systems
- The management of human resources
Strategy-implementation activities affect all employees and managers in an organisation. Every division and department must decide on answers to questions such as: “What must we do to implement our part of the organization’s strategy?” and “How best can we get the job done?” The challenge of implementation is to stimulate managers and employees throughout an organisation to work with pride and enthusiasm towards achieving stated objectives.
Strategy Evaluation and Control
The final stage in strategic management is strategy evaluation. It is an activity that determines to what extent the actual change and performance match the desired change and performance. In the control phase, management seeks to ensure that the organisation stays on track and achieves its goals and strategies.
All strategies are subject to future modification because external and internal factors can be considered as a function of the overall business. The goal is to determine whether or not the organisation has a significant impact on the financial situation. This is achieved by setting the level of risk to the organisation.
The strategic management model depicts the five major activities as forming a rational and linear process. It is, however, important to note that it is a normative model, that is, it shows how strategic management should be done rather than describing what is actually done by senior managers (Wheeler and Hunger, 1995).
Identifying an organisation’s existing mission, objectives, and strategies is the logical starting point for strategic management because a firm’s present situation and condition may preclude certain strategies and may even dictate a particular course of action?
Every organisation has a mission, objectives, and strategy, even if these elements are not consciously designed, written, or communicated. The answer to where an organisation is going can be determined largely by where an organisation has been.
The strategic-management process is dynamic and continuous. A change in any one of the major components in the model can necessitate a change in any or all of the other components.
For instance, a shift in the economy could represent a major opportunity and requires a change in long-term objectives and strategies; or a failure to obtain annual objectives could require a change in policies; or a major competitor could announce a change in strategy that requires a change in the firm’s mission.
Therefore, strategy formulation, implementation, and evaluation activities should be performed on a continual basis, not just at the end of the year. The strategic-management process never really ends. Strategic management activities revolve around three levels; corporate, business and functional which include the strategic decision undertaken at these levels.