Table of Contents
- Price for an Essay
- Strategic Management in Small and Medium Enterprises
- Strategic Planning and Organisational Performance in Small Companies
- Strategic Analysis
- Strategy Formulation Process
- The Vision
- Strategic Implementation Process
- Common Pitfalls in Strategic Planning
- Discussion of Implementation Issues
- Factors Resulting To Implementation Failure
- Strategy Control and Evaluation
- Related Free Analytical Essays
The strategic management process means defining the strategy of the organization. This is also defined as the procedure in which executives make a decision of a set of strategies for the business, which may help it to attain superior performance. It is also worth noting that, strategic management is a continuous process that evaluates the industries and company in which the business is engaged, evaluates its competitors as well as fixing objectives to achieve all the present and future rival’s and then re-evaluate all strategies. Strategy is defined as a plan of actions for attaining organizational objectives, thus resulting to better long terms performance of the organization. Strategic thinking and planning are different, but interconnected and complementary procedures of thinking, which need to support each other in order to streamline the operational through investigative as well as convergent planning (Godet, 2000).
This paper will discuss the attributes of various forms of approach to strategic management process, which addresses how company environment is perceived, evaluated, and characteristic of making decision, discernments future of the business and maintaining control strategy (Rogers, Finley, & Galloway, 2001). The vibrant nature of the strategic management process is an essential procedure which involves a constantly changing environment, which needs an incessant adaptation and monitoring of challenges in environment that the organization is operating. For vibrant approach to strategy development procedure, it has to be viewed as part of responsibilities of individual in the business and not as a central part responsibility. Therefore, the quality of understanding applied in formulating the strategy may be significantly advanced and the period of implementation of the strategy may be much diminished. Strategy formulation and execution should be perceived as an incessant procedure of studying and the superiority of strategy depends on studying systems of the business. The model of vibrant strategic management process that entails four constituents, which includes the following: strategic analysis, strategic formulation, strategic implementation and strategic evaluation and control (Towers, & Burnes, 2008). On other hand, as noted from Towers, & Burnes (2008), the strategic analysis entails internal and external environmental analysis to establish strategic facets, which will persuade the future of the organization. The strategic formulation: it focuses on determining the mission, vision, long term goals, making and determining the strategic choices to reinforce the competitive edge of the organizations. The strategic implementation: This entails building a company competent of performing a triumphant strategy, coming up with budgets, improvement of administrative support teams, setting up performance rewards methods, organizational culture forms to align with the strategy. The strategic evaluation and control: it focuses on highlighting and generating solutions to make correction to divergences from standards, whereas, the evaluation is to assess the overall end products of the execution strategy as well as their compatibility with improvement goals of the organization (Wang, Walker, & Redmond, 2007).
There are many challenges that hinder effective achievement of the goals and vision of organization. Brigid, Lester & David (2008) indicate that, most of these challenges arise due to ineffective leadership and competencies model that has been adopted by a firm in most of its branches globally. In the recent past, there has been the need for leaders to emotional attach to their employees, hence improve their productivity. For instance, the rapid growth of Apple Inc., a global leader in consumer electronic products, can be attributed to the emotional attachment between the employee and the leaders. As a result of this, there is need for Google Inc. to adopt a contemporary leadership and competency model that will ensure the emotional attachment between the leaders and employees is enhanced (Brigid, Lester & David, 2008). It is worth noting that up to now, there has not been any generally agreed definition of leadership or the most effective leadership theory to be used in any organization for maximum output.
Brigid, Lester & David (2008) indicates that this has necessitated the need of coming up with contemporary leadership models that incorporates social, political, and economical, philosophical along with other virtues to help employees achieve their set goals. Most of the existing leadership and competencies theories are not able to accommodate the very dynamic working environments being faced by many organizations. Consequently, the contemporary leadership models have emerged to counter this problem. These contemporary leadership models includes people oriented and task oriented leadership models (Kouses and Posner, 2008). Task oriented model is where by the leaders is mandated to achieve a certain goal. The leaders allocate resources to workers to carry a certain job within a specified duration. One of the contemporary leadership and competencies model, which can be adopted by a firm is the people oriented leadership (Robert, Wolcott and Michael 2007). In this model, the leader is emotionally attached to the employee’s with the basic aim of increasing organization productivity. The emotional attachment brings job satisfaction, loyalty and working harmony.
However, leaderships, especially to the multinational companies have been highly affected by external factors such as corporate cultures, personal values and globalization (Robert, Wolcott and Michael, 2007). Earlier on company management only concentrated on the markets of country of origin. Further, international markets have opened up, forcing organizations leaders to possess knowledge and customs of different countries they do business with. Leadership is also affected by the corporate culture, as many companies have a certain culture that is followed right from inception. It is also worth noting that, leaders are required to change in order to fit the companies increased productivity culture form. Leaders are also affected by their personal believes, especially if they have an idea that they will positively change the society that they are working in. The table below shows the key drivers and the contemporary leadership trends.
Strategic Management in Small and Medium Enterprises
Small and medium-size enterprises have continually reported relatively low performance as compared to large enterprises. This rouses the question on the management and planning used by SMEs as compared to large organisations. Wang, Walker and Redmond (2007) express their views that, SMEs fail or perform under par due to poor strategic planning. Their thought is developed from past literature that indicates strategic planning leads to increased organizational performance. They say that, poor performance in SMEs is most common in family business or owner operated enterprises. This is because the management of such ventures is usually motivated by other factors other than performance. Wang, Walker and Redmond (2007) cite a number of authors who give a host of varied reasons as to why SMEs are poor in planning. Among them are internal implementation barriers, business uncertainty and business lifecycle issues.
Majority of Small and Medium Enterprises usually use informal plans to enforce their strategic decisions. This hampers the balance in management decisions. Karami (2007) notes a number of authors who hold the view that, business cycle and nature of business activity limit SME’s from following formal plans in enforcing their strategic decisions. Such claims are supported by a research conducted by Karami (2007), in one of the chapters of his book. In the research finding indicate that, majority of CEOs especially from high tech SMEs believed in formal planning. Out of the interviewed CEO’s, 74% thought that a strategic approach in running their firms improved the performance. Nonetheless, the stage of the business in the business lifecycle had a heavy influence on strategic planning. With time, SMEs move from informal strategic plans to formal plans as they experiment and gain knowledge about the whole process.
SMEs are likely to be involved in other forms of planning rather than business planning. Karami (2007) writes that, SMEs especially owner-operator businesses, the management is more concerned about short term goals and succession issues rather than management decisions. He writes that such firms tend to assume that market conditions will remain the same in the foreseeable future, hence no need to be speculative and plan ahead. Towers and Burnes (2008) note this common trend of short term plans by SMEs. In analysing supply chain management planning by SMEs, the authors note that enterprise planning activity for manufacturing SMEs is driven by customer’s demand schedule which is then translated into a realistic plan in the manufacturing plan. This is the accepted process in manufacturing firms only that, most SMEs make the mistake of deriving their strategic master-plan from such short term plans. This implies that the effectiveness of the organisation as a whole is essentially supported by the relationship between the firm and its customers. Towers and Burnes (2008) argue that, such a relationship is narrow and offers very little opportunities for growth for the SME.
Concerning the strategic management process in SMEs, author Analoui & Karami (2003) suggestion regarding the vibrant model of strategic management process which is centred around developing value for clientele consisting of four parts, which includes: Awareness- this is understanding the situation of the strategy, strategy formulating, entails preparing of suitable strategies, strategy implementation, application of chosen strategy while strategy control and evaluation is learning and revising for future improvement.
Strategic Planning and Organisational Performance in Small Companies
The failure to or inadequate strategic planning is the greatest hindrance to the growth of majority of SMEs. Mintzberg (1994) argues that small firms do very little planning, while Karami (2007) argues that SMEs use plan on the short term. Either way, the authors note that these are the greatest shortcomings in SMEs; failure to have long term and feasible strategic plans. Smit (2000) indicates that, understanding the business environment best such as the threats of new entrants and substitutes allows an organisation to plan ahead. Failure to recognise such simple dynamics of business management result in small companies failing to have to the strategic plans. Smit (2000) argues that by understanding the business environment well helps a firm to envision various responses to changes in the business environment, which should be incorporated in the organisations strategy. Smit (2000) adds that, intense competition in the industry from substitutes is not caused by bad timing, but luck of poor planning. To him, good strategic planning equates success in the market and enhanced organisational performance.
Strategic planning allows firms to see the bigger picture and understand their place in the industry. Therefore, failure to plan by SMEs leads to blind decisions that do not last long. Lack of a strategic plan denies the firm the opportunity to recognise the activities of competitors, and other market forces that impact on their business. In the long run, this leads to poor performance by SME’s. Rogers, Finley and Galloway (2001) put into perspective by saying that, 47% of all SME’s in the U.S. fall after five years in business. They attribute this to poor planning or lack of working strategic plans. This means that strategic planning is an integrals part of business performance, especially for SMEs that compete with larger organisations.
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This is committed to the analysis of the three constituents of external environment that is general environmental analysis, competitive analysis, and industry as well as its attractiveness analysis. Even though the external environment is vibrant and multifaceted, scrutinizing is crucial as it allows identification of threats and opportunities. An organization cannot be in charge of the external environment, but can employ information concerning the environment for selecting the most suitable strategic options.
Internal and external business environments play an important role in the development of strategy in an organisation and are the main motivators for strategic planning. Kraus (2009) slightly differs with Wang, Walker and Redmond (2007) on the development of strategy in SMEs. On the other hand, Wang, Walker and Redmond (2007) believe that, the source of motivation in business is external and shapes strategy. Kraus (2009), in one of the many schools of thoughts he proposes that, strategy is motivated by politics as well as internal power. Issues such as power, distance, and national culture among others influence the decision making process and the strategy adopted. Mintzberg (1994) addresses the congruence of strategy and planning by noting that, organisations should have planners who use strategic thinking to decide on the best way of programming activities contained in the strategy. He says that planners should be different from managers. Nonetheless, the planners should play an advisory role to the strategy development team, which is the management in order to enhance the overall organisational performance. In short, a formal analysis by planners or supplying hard data is vital in helping the management to come up with feasible strategies.
PEST analysis entails the following facets, Political, Economic, Socio-cultural and Technology environments in which the organization operates, being a comparatively uncomplicated means, simple to apply by SMEs also. By use of analysis, SMEs may establish a variety of opportunities and threats, which can particularly have an effect on the activities of the organization in the future, a crucial facet for these organizations which are susceptible to environmental changes because of their inadequate resources (Wang, Walker & Redmond, 2007).
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The industry analysis aims on many main issues such as the structure of the organization in terms of the strategies employed by the industries which populate it, motivating force, resulting to profound changes within the organization, determining methods for price tag and revenue, the determinants of achievement, challenges faced by prospects for improvement and evaluation of the organization attractiveness. The outcome of industry analysis entails in significance judgements on business position in the industry, the degree it incorporates within the trends established by industry explicit motivating forces, competitive strength of the organization, its capability to harness the extant or potential opportunities and able to face threats, the degree in which the organization has leading factors which make the organization unappealing (Mintzberg, 1994). Comprehending the functional environment can aid the organization manager to formulate an efficient strategy to position the organization for achievement and make efficient use of inadequate resources of SMEs organizations.
The five forces model by Michael Porter includes the following: threat of new entrants, bargaining power of buyers, threat of substitute products, bargaining power of suppliers, rivalry. Use of these five forces in the organization enables to identify a perfect position for the organization. Comparing the industry analysis with general environment, the industry analysis has many direct consequences on the strategic actions of the organization. Analysis of competitors is a vital part of the external environment analysis and offers organizations information on strategic plan, recent strategy, and the main one of strengths and weaknesses of rivals (Brigid, Lester & David 2008).
Strategy Formulation Process
Vibrant and uncertainty within the operating environment need organizations to formulate strategies to make sure that the future achievement of the organization that are the effect of a process of formulating strategy. A strategy is deemed excellent according to the outcomes it generates in the organization and not by the procedure which produced it. Successful organizations espouse a procedure, which suits its company, cultures as well as operational of the organization. A strategy formulation process has to be adapted to recent needs of the company. The roles of the manager are to comprehend the process which produced strategies before and discover means for improvement of the procedure in the future. At times, organization needs a new strategy improvement process to bring new standpoints on the future of organization and to distance the organization from acknowledged thinking patterns (Mintzberg, 2004).
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A successful procedure of formulating the strategy have to be based on a crucial analysis of the organization as well as the past experience and to facilitate a successful as well as adaptive process of making decisions in the organization. The strategy formulation process also needs to formulate goals, to make sure that their comprehending and of strategic main concerns at every level in the organization, to organize cascading goals, pointers and activities from top level to lower level, offering a wide-ranging consensus, stimulate workers as well as establishing confidence that the execution plans will results to better performance of the organization (Brigid, Lester & David 2008).
The first constituent of the strategy formulation procedure is establishing the vision and mission of the organization, which is a crucial step in the economy of strategic planning procedure, since these are the base on which the rest constituents or steps of strategic management process are being developed. The strategic vision is a representation of what the organization desires to be in the future and consists of a group of abstract information, which leads the future improvement of the company, while the strategic mission statement is a sole purpose of the actions of the company in terms of services, products and markets it will run on employing its main competencies (Brigid, Lester & David 2008).
Strategy formulation procedure again entails the establishment of the organizational goals. These convert the generalization of the content of the mission into a particular devotions, normally the mission will address what the organization should do and when to attain the goals. The last constituent of the strategy formulation procedure, with a main collision on the future of the organization is to establish strategic alternatives. On the degree in which the strategy selected make sure goals success and is suitable to functioning environment depends on the chances of the organization to cope with competition. A standard model of establishing the most suitable strategic alternatives suggests the evaluations of strategic options applying three criteria which are suitability, feasibility and acceptability (Robert, Wolcott & Michael, 2007). The strategy’s content is an outcome of the strategy formulation procedure as well as an input to execution process creating connection amid the two steps of strategic management process. A strategy of an organization has to be linked to its exact needs in order that for it to be valid and useful to the organization (Robert, Wolcott & Michael, 2007). The strategy can be determined in three main stages, in this case I propose this: functional strategies, firm strategies and business strategies. The business strategies are activity plans which explain the intention of organization on how the company will compete in a market segment, whereas the firm strategies focused on establishing the most suitable solutions to strategic issues caused by the all actions of the organization and its market presence. The SMEs have various strategic options. There is no perfect strategy to bring the anticipated outcomes in every situation and for any organization. Hence, I propose that SMEs to adapt suitable strategies according to the market situation, strategic capability the organization own so that to secure long term competitive gains (Robert, Wolcott & Michael, 2007).
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By changing the leadership and competencies used by organization, the firm will remain competitive and global leaders as the organization use the most suit strategic management process. The firm will also be able to encourage innovations and inventions in other notable fields of communication, thus continuing to change the livelihoods of many people across the globe
The firm will have to invest in modern strategic management process, which will enhance the growth of the firm in all its branches.
- By adopting and monitoring an effervescent strategic management process in organization, will improve leadership on all it branches by at least 35% in the next five years
- By adopting and monitoring dynamic strategic management process, the productivity of all employees will increase by 25% in the next three years.
- By adopting and monitoring a vibrant strategic management process, the profitability level of a firm will increase by at least 20% in the next three years.
- To strengthen the company and technology as well as creating new groups, where it is required in order to support diverse interests of all the employees
- To intensively develop innovative new services of products and services based on the web-based technologies (Brigid, Lester & David 2008).
Strategic Implementation Process
The implementation of the strategy is a significant part of strategic management process. A strategy which is well formulated can develop a sustainable value, if only effectively executed, so efficient execution has a vast impact on the success of an organization. Poor execution results to misuse of energy and time. Regarding the execution of the strategy, this step of strategic management process is the duty of the workforce, the engagement of workers and combined exertion are determinants of achievement or failure roles, and this is because the first step may be easier to infuse because formerly every organization associates had the chance to express discontent with the insertion of a particular constituent in the strategy. The process of implementation of the strategy is a duty which is hard and time consuming than developing strategy. What makes this implementation procedure hard is the broad range of management actions which need to be developed, differences in approaches by managers in diverse actions, abilities required to launch inventiveness and opposition to change to be exceeded (Brigid, Lester & David 2008)
To ensure there is a successful implementation of the strategy, there are four facets consider these are: Culture, Organization, Human Resources, Control methods and Instruments. The key challenge for top administration in terms of cultural framework is setting a rate, nature, and tone of culture in order to support strategic changes that executives have to execute. Referring to the company as a source of execution issues or failure of execution is that the conceding of duties is vague; additionally duties are categorized among many organizational units and the organization act just within its structure. Thus, the connections between roles are crucial in the execution process. Human Resource is an important intangible asset and current research illustrates that is turning out to be more important achievement facet in implementation process. This evaluation or control role is a main factor of the implementation process. To offer the top executives a satisfactory safety that strategic inventiveness can be implemented and are executed as intended, the top management need a control method to give essential information.
Strategy implementation process can be attained by a model which suggests four steps which includes: Pre-execution, Organization of the execution effort, incessant management of the procedure of execution, capitalization on Inter-functional Performance. Understanding the challenges and pitfall intrinsic as well in every step, top administrators can extensively advance the efficient of the execution process. BSC complements fiscal indicators of past activities as a future determinant of success of the organization. Indicators and goals of this method derive from the vision and strategy of the organization. The balance scorecard eradicates the lack of efficient procedure of execution and attaining feedback concerning strategy. Management procedures built around a Balance Scorecard facilitates alignment and focal point achievement on long terms strategy.
Common Pitfalls in Strategic Planning
Developing a strategic plan for a business is not a guarantee to enhanced business performance. Most firms may develop flawed strategic plans. Common pitfalls in strategic planning include:
- Lack of ownership of the plan- employees must be made to feel part and parcel of the strategic plan. They should be well informed about the strategic plan and understand their role.
- Failure to integrate planning at all levels
- Failure to separate planning from daily routine activities
- Poorly developed organisational values, vision and mission statement.
- Poor and ineffective implementation process
- Failure to consult widely with employees
- Failure to develop benchmarks or scoreboard
- Failure to separate planning process with management
- Poor or lack of follow up on plan
- Ambiguous or confusing terminology (Godet 2000; Wang, Walker, & Redmond 2007).
Planners and the management should thus be aware of making the listed mistakes if they wish to enhance organisational performance.
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Discussion of Implementation Issues
Implementation is the method in which, strategic plans are turned into actions, with the basic aim of accomplishing the strategic goals and objectives (Gulati, 2004). It is notable that the implementation of the strategic plan is crucial, or even more crucial, than the strategic plan. The critical actions shift the strategic plan from being just a mere document, which sits on the shelves, to actions resulting to business growth. However, there are many pitfalls that have for a long time hindered the attainment of an effective implementation plan, thus hindering business from attaining its goals.
Factors Resulting To Implementation Failure
There are many factors that can lead to failure of a firm and competencies plan. Some of them include lack of communication, drawing an overwhelming plan, reduced accountability, having no process report, lack of effective plan empowerment among others.
Strategy Control and Evaluation
Taking all necessary condition in making strategies options can evolve in diverse ways because the emergence of new opportunities and threats is an undeviating phenomenon, frequently at a swift pace. Therefore, advancement in executing the strategy normally has a diverse pace than those in the early strategic plan, optimistically or pessimistically. Given that strategies and processes designed to direct the execution of the strategy never ensures complete implementation of concrete outcomes by the set principles, the control and evaluation strategy is needed (Rogers, Finley & Galloway, 2001).
Exterior and interior situations vibrant and stability of strategy execution needs ongoing procedure of evaluation. Modifications produce a new strategy which is executed and in turn may be focus to a new procedure of evaluation and modification. The overall goal of strategy evaluation is to establish whether it achieves the strategic goals and mission of the organization, changes in the interior and exterior environment and organization available resources (Kraus, 2007). The quality of strategy evaluation it depends on the quality of consequent better performance and its competitive strength is identified by the methodology tools applied in the assessment procedure but mainly because of the ability of organization to auto evaluate and find out from their strategic experience.
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As noted from Rogers, Finley & Galloway (2001), control action is to make sure that the goals are attained efficiently. Control is required to anticipate issues which may happen to readjust the systems requirement for attaining the goals of the organization, to modernize the systems when necessary. A management instrument which brings advancement over the conventional management method of planning and control by which it includes other than financial tools is the balanced scorecard. Nowadays companies compete in a very competitive environment do multifaceted which understanding their objectives and systems employed to attain these objectives is very important to all organizations.
From the above study, one can clearly see that, it is crucial for all organizations to understand the importance of strategic management process because it is one of the most successful companies if necessary step are taken into account. This can be attributed to the firm’s ability to invest heavily on the area of research and development a key factor for ensuring innovation and inventions. However, for the firm to remain competitive there is need for the senior management to adopt the strategic management process and competency model that will ensure that it competes accordingly with other upcoming firms across the globe. In my own, opinion, Small and Medium Enterprise’s senior management should be aware of the need to effectively implementation plan, a factor that will ensure that the firm’s leadership can be deal with emerging issues; also the organization should involve its staff in strategic management process, hence the organization will have the capability to meet any challenge in the constantly changing environment.