If you've ever been a member of a club or professional organization, particularly one that's encountering some difficulties, chances are you've witnessed strategic management in action. Perhaps membership is down, or the financial situation is shaky, or each member sees the role of the group differently. Some people could leave the main group and start one with others having similar outlooks on what the organization should stand for or do. This second group competes with the first for membership -- upping the ante, in a way.
Some groups turn themselves around. Others succumb. The same goes for the business world. And any manager worth his salt will strive to keep his organization alive among its competitors. Some may even lock onto an idea that catapults the company into new arenas where it thrives. Or spin off a portion of the company to allow it the liberation it needs to compete outside the corporate structure.
Strategic management examines the elements in the internal as well as the external environment that can have an impact on an organization and then looks to develop a way to capitalize on those elements. The goal is to gain a competitive advantage.
Since all companies must make profits to remain in businesses, it's important to succeed in these endeavors. The question is how. And that question, some maintain, is increasingly difficult to answer in the global markets and speedy communication that have become the norm in the 1990s.
The American Heritage Dictionary defines strategy as "the science and art of military command as applied to the overall planning and conduct of large-scale combat operations." The military connection should not be overlooked. In many markets, it's all-out war among competitors.
Some textbooks define strategic management "as the set of decisions and actions that result in the formulation and implementation of plans designed to achieve a company's objectives."
However, the emphasis in both definitions on planning or a plan should bear a warning. While some businesses, such as Honda did, may find success through a planned strategy [intended strategies], just as many success stories have come from an unanticipated change in course [emergent strategies] . An example of intended and emergent strategies can be seen in the Honda mini-case.
In analyzing such examples, the strategist should pluck out SWOT.
The first two components (Strengths and Weaknesses) generally deal with elements found within the company, and the last two (Opportunities and Threats) examine the environment outside the company. SWOT profiles, along with a corporation's mission and major goals, make up the tools you'll need to develop and form strategies. They are the components of the Strategic Management Model. These game plans reflect in broad terms how, where and why it should compete as well as against whom. After narrowing down the alternatives and communicating those ideas, implementation follows.
Whether the supporting data is compiled at the same time or in some sequence, decisions on strategies to pursue should be anchored by the mission. Without some framework of what your club stands for and hopes to achieve, how can it court potential members (consumers)?
The (inter)national headquarters of your group or company probably has a broad, grayish outline of what your organization is, with some wiggle room to expand. A banking firm is a financial institution in its mission statement, a food and cigarette manufacturing conglomerate is a multinational consumer goods provider, a Save the Bay group is an environmental watchdog. The mission defines the unique purpose that makes the company different from others of its type.
Top-level managers often make the strategic decisions and develop the mission that drives the corporation. These decision-makers may consist of the board of directors, the chief executive officer and top administrative officials.
This is not to say that business unit managers or line managers can't make strategic decisions. In fact, they generally are involved in the process to the extent of providing business unit and operational data used to develop and support an obtainable corporate strategy.
Once the umbrella strategy is set, these lower-level managers effect business objectives and operating efficiencies that fall within the shadow of that umbrella. Communication of the corporate mission, strategies and capabilities throughout the workforce is imperative.
Traditionally, the top-level strategies were aimed five years into the future, and the time span of strategies or tactics for each step down in management group grew shorter. Now, some businesspeople question the wisdom of trying to project from today's world what the company will look like in five years. The world may be changing too quickly for such long-term vistas, particularly in rapidly developing industries and services or in areas in which government regulation is being added or removed.
Would you trust yourself to develop a strategy for Microsoft Inc. today that you believe would be valid five years from now? Can you see the dilemma electric utilities (traditionally a monopoly) face as private businesses enter their markets and force them into becoming competitive?
The strategy selected receives its first test after implementation. Competitors may react, and the firm may have to evaluate its strategy in terms of the new "playing field." Functional- and business unit-level plans and directives also must be monitored to ensure they follow the strategic vision. Feedback is always important. Remember, this is a dynamic system. The strategic decisions were made at a fixed point in time, but their implementation occurs in real time, in an uncertain future.
Using a Web browser, such as Netscape, and a search tool, such as InfoSeek by clicking on the Net Search button above this home screen, seek out the term "mission statement" on the Internet. See what companies have posted their mission statements and what those statements include. Try this now by following this link, and come back to this page by clicking on BIZStrat Chapter 1 Summary in the pull-down menu under GO on the tool bar:
Quick assignment on "mission statements"
As suggested before, not everyone agrees on one best form of the strategic management process. The model to fit a company's abilities to the demands of the environment, using SWOT, rose out of the Harvard Business School during the 1960s. Research into the usefulness of formal planning has found mixed results, and history has shown major missteps by corporations that acted on extensive strategic planning, but read the tea leaves of the future wrong.
Tom Peters and Robert Waterman, authors of In Search of Excellence, question the value of formal planning in strategic decision making. And Henry Mintzberg of McGill University proposes that emergent strategies may be as successful as intended strategies (remember the Honda case?).
C.K. Prahalad of the University of Michigan and Gary Hamel of London Business School say the strategic fit model of planning focuses too much on current resources and environment and not enough on future opportunities. They prefer a strategic intent model, the setting of ambitious goals that force a company to stretch beyond its current abilities, with a focus on finding ways to develop the capability to achieve those goals. Their model is still hinged, however, on the mission statement and the SWOT analysis of the strategic fit model.
No magic bullet has been found that will produce successful strategies every time.
Your assignmentYou should now go to the Assignments page to find out what research related to this chapter will be expected of you.
Copyright © Marilyn Shaw and Merri Incitti
This page last updated November 1995
The text of this chapter summary is original, but based loosely on introductory chapters in "Strategic Management An Integrated Approach," Third Edition, by Charles W. L. Hill and Gareth R. Jones, published by Houghton Mifflin, 1995, and in "Strategic Management: Formulation, Implementation & Control,'' by John A. Pearce II and Richard B. Robinson Jr., published by Irwin, 1995.
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