Strategic Management & its evolution

Define Strategic Management. Explain its evolution.

Strategic management is the set of managerial decision and action that determines the long-run performance of a corporation. It includes environmental scanning (both external and internal), strategy formulation (strategic or long range planning), strategy implementation, and evaluation and control. The study of strategic management therefore emphasizes the monitoring and evaluating of external opportunities and threats in lights of a corporation’s strengths and weaknesses.

Evolution of strategic management

 From his extensive work in the field, Bruce Henderson of the Boston Consulting Group concluded that intuitive strategies cannot be continued successfully if

(1) The corporation becomes large, (2) the layers of management increase, or (3) the environment changes substantially.

Phase 1 - Basic financial planning: Seek better operational control by trying to meet budgets.

Phase 2 - Fore-cast based planning: Seeking more effective planning for growth by trying to predict the future beyond next year.

Phase 3. Externally oriented planning (strategic planning): Seeking increasing responsiveness to markets and competition by trying to think strategically.

Phase 4. Strategic management: Seeking a competitive advantage and a successful future by managing all resources.

 Phase 4 in the evolution of the strategic management includes a consideration of strategy implementation and evaluation and control, in addition to the emphasis on the strategic planning in Phase 3.

 General Electric, one of the pioneers of the strategic planning, led the transition from the strategic planning to strategic management during the 1980s. By the 1990s, most corporations around the world had also begun the conversion to strategic management.

Strategic management has now evolved to the point that it is primary value is to help the organization operate successfully in dynamic, complex environment. To be competitive in dynamic environment, corporations have to become less bureaucratic and more flexible. In stable environments such as those that have existed in the past, a competitive strategy simply involved defining a competitive position and then defending it. Because it takes less and less time for one product or technology to replace another, companies are finding that there are no such thing as

competitive advantage.

Corporations must develop strategic flexibility: the ability to shift from one dominant strategy to another. Strategic flexibility demands a long term commitment to the development and nurturing of critical resources. It also demands that the company become a learning organization: an organization skilled at creating, acquiring, and transferring knowledge and at modifying its behavior to reflect new knowledge and insights. Learning organizations avoid stability through continuous self-examinations and experimentation. People at all levels, not just top the management, need to be involved in strategic management: scanning the environment for critical information, suggesting changes to strategies and programs to take advantage of environmental

shifts, and working with others to continuously improve work methods, procedures and  evaluation techniques. At Xerox, for example, all employees have been trained in small-group activities and problem solving techniques. They are expected to use the techniques at all meetings and at all levels, with no topic being off-limits.