Strategic management is an emerging issue in the field of management. It incorporates science into the management of the firm. It is essential in the contemporary dynamic environment of the organization. Failure to incorporate it in the management of the firm can adversely affect the firm. Globalization is rapidly affecting the environment in which businesses operate in. As such, due to the globalization, survival of the business organization is essential. This can effectively be achieved through strategic management. As such failure to incorporate strategic management in the organization will lead to a failure of the business.
Dynamism in the business environment is so rapid that if management of an organization fail to design adequate strategic plans, the business will be fetched out of the market. The dynamism in the environment enhancing the competition. As such to remain competitive, the organization will need to adequately plan and incorporate strategic management. Technology is rapidly changing. Consequently, business technological environment is changing. Businesses are adopting E-commerce for their survival in the technological world. Electronic commerce has become vita toll in management. Use of internet has overtaken direct selling. Strategic management has come up to ensure that management in the era of E-commerce is proper so that the market share and returns of a business entity are maintained. Inadequacy strategic management as such will lead to grave effects on the business returns.
During the development of the strategic plan, the ‘buy in’ from employees is essential. This is part of strategic management: Management by objectives.
Environmental Scanning/Industrial analysis is continuous to the organization and is key to the success of the strategic management. This scanning or analysis provides the organization with key information regarding to strengths, weakness, opportunities and threats. This is famously known as the SWOT analysis. It is essential as it shows the organization the environmental forces that are its strengths such as the brand name, weakness like technology, opportunities that the market is presenting and even possible threats posed by the environment.
The formulation of the strategy is key to the success of a strategic plan. It is concerned with the future prospects of the business (mission and vision) the strengths and opportunities mentioned above and even the weaknesses and threats. Strategy formulation is also concerned with the long-term objectives and goals setting, the generation of the alternative strategies for attaining the long term goals afore mentioned and then choosing the best strategy to be implemented. Strategy implementation follows the strategy formulation. It requires the firm to devise objectives and policies and allocate the required resources for implementing the strategy in question. It is the action state in the process of strategic management. It is at this stage where mobilization of resources is done so as to put the strategies into action. Control and Evaluation is the final stage in implementing strategies. It is through this strategy that the management can know if different strategies are working.
A growing business may employ strategies such as expansion, diversification and acquisition. The expansion strategy can be adopted in the form of geographic development, product line development among others. It needs a lot of resources for its implementation. Diversification involves spreading investments. For instance an Audit firm can start to offer consultancy services in management. Mergers and acquisition though an expansion plan, involves the acquiring an already running business as a subsidiary or venture.
Competitive rivalry in an industry is a major concern to new entrants in the industry. Where Competitive rivalry is high entry to the industry is easy. On the other hand rivalry will be high where competitions are equally of the same size. As such, a new firm in the market will not face a lot of rivalry as such its operations in the market will not be derailed by rivalry. When the entry to an organization is easy, the threat to new entrants is as well high. For instance, where barriers to entry are less. A small firm will enjoy no economies of scale and as such its threat is low. In case where no differention exists in the market, customers are price sensitive, the price of product switching is low then the bargaining power of buyers can be exerted to the market. This helps small firms to prevail the large firms products are similar to those of the small firms and hence none enjoys superiority in production. The power of supplies helps small firms to acquire raw materials at same prices as the big firms as such none will enjoy production economies of large scale. Where substituting is not possible all the firms in the industry will enjoy a good share of the market as this all are selling at similar prices. To ensure competitive advantage, a firm can lower prices, attain the best technology in production and motivate its staff well. By reducing its prices through lowering production cost or using the revenue maximization strategy, a firm will attain market command.
Technology of production helps in reducing production costs and having the best products in the market. Employees who are motivated perform their jobs well and to the fullest as such production is maximized.
Whenever unused capacity exists in the market, a growth of expansion strategy is essential. This is implemented through horizontal growth where the company pursues new products, markets or even customers. Vertical integration where the company integrates along its supply chain. For instance a retailer starts to manufacture the goods it sells. Diversification is done to lower relative risk or increase the economies to scale. Stability is stagnation. The management decides to pause or to continue with caution. This is done when the product is at its peak. For i9nstance the Coca-Cola Brand. Retrenchment is withdrawal of resources and cutting down of sales. It can take the form of Turn around where the company is steadily making losses, bankruptcy, captive company where company’s competitive position is weak, divestment or even liquidation.
As much as domestic business, export business will need a comprehensive plan to help identify the steps to marketing abroad. A business plan should be put in place that will also help to highlight on the legal requirements for getting a product into a new market. Besides it will identify the expenses associated with exporting which return will help provide the much information that offers an overall strategy for this new venture. Through the foreign department and international trade information on market research hence ability to screening potential markets which will provide information on export statistic, identify potential markets locations and target the most promising markets. There is need to asses target markets in order to examine product trends, research the level of competition in your desired area market so as to determine foreign and local competitors. Analyze the market and factors like language, acceptable size of the product since this may affect marketing such. Both import and export barriers need be identified so as to avoid ignorance of export controls against the product. Import barriers will help provide information on import duty and or regulations for the goods traded in. Then choose market based on the assessment. As an international organization the firm should formulate and respond to unique needs and demands in their organizations when administering their workforce. Besides they need to take into account the divers needs of its populace and should thus practice with flexibility so as to offer considerable positive impacts.