Strategic Management: Meaning, Features and Strategy Formulation

What is Strategic Management?

Strategic Management is the process of setting long-term goals and developing, implementing, and evaluating strategies to accomplish those goals. Making strategic decisions and acting on them to adjust to evolving situations and environments is a continuous and ongoing activity.  

It involves examining an organization’s existing situation and analyzing opportunities and obstacles that are involved in creating a plan for the organization. By coordinating an organization’s goals, resources, and activities with its mission and vision, strategic planning aims to make sure that the plan succeeds in the future. A deep understanding of an organization’s SWOT analysis (strengths, weaknesses, opportunities, and threats) is necessary for effective strategic planning while keeping in mind the changes in the external environment and modifying the plan accordingly. The strategic plan that is designed should act as a guide for selecting priorities and allocating resources over a certain period of time, usually three to five years.

“Strategic management is a process that deals with the entrepreneurial work of the organization, with organizational renewal and growth, and, more particularly, with developing and utilizing the strategy which is to guide the organization’s operations.” – Schendel and Hofer  

“Strategic management entails the analysis of the internal and external environments of firms to maximize the utilization of resources in relation to objectives.” – Bracker

“The strategic management field can be conceptualized as one centered on problems relating to the creation and sustainability of competitive advantage, or the pursuit of rents.” – Bowman, Singh, and Thomas

Features/Nature of Strategic Management

The nature of strategic management can be characterized by the following key features:

1. Long-term perspective: Strategic management is concerned with accomplishing long-term goals that are consistent with the mission and vision of an organization. Making decisions that will affect the organization’s future for several years or more is a part of the process of strategic management.
2. Unified approach: An organization’s internal strengths and weaknesses, external opportunities and dangers, and the competitive environment are all taken into account by a strategic management method, which is an integrated approach.
3. Continuous process: Strategic management requires continuous monitoring and evaluation. It includes periodic strategy evaluation and revision in response to developments in the internal and external environment.
4. Holistic perspective: A holistic approach to strategic management acknowledges that an organization is a complex system of interconnected sections. It refers to taking into account how several functional areas, including marketing, finance, and operations, are interdependent and formulating plans that represent these areas.
5. Risk management: To implement strategies, risks, and uncertainties must be managed strategically. It involves finding possible threats, determining their probability and impact, and creating backup strategies that reduce them.

Strategy Formulation

This involves looking at possible opportunities and threats as well as the competitive environment’s strengths and weaknesses. Once this analysis is done, the next step in the strategic formulation is to set specific goals and objectives that will guide decision-making and resource allocation. These goals and objectives should be based on a detailed understanding of the organization’s capabilities and market position. Implementing the selected strategies is the last step in the strategic formulation process. There are a few key factors that affect strategic formulation. Some of these are as follows:

1.  Mission: Strategic formulation concerning mission refers to the process of creating a short and clear mission statement that guides an organization’s strategic planning and decision-making. A mission statement describes the organization’s purpose, guiding principles, and primary objectives. It serves as the framework for establishing strategic objectives and deciding the overall course of the organization. A well-defined mission statement makes strategic decisions that are consistent with an organization’s purpose and values. By clearly defining its mission, an organization can identify and prioritize its key objectives and goals. It assists the organization in developing a clear, coordinated plan that is based on its specific objective. A mission statement can assist an organization in communicating its goals and values to its many groups, such as partners, consumers, investors, and staff. This could make it easier for people to support, align, and participate in the organization’s strategic goals. Overall, a clear and meaningful mission statement is crucial for effective strategy formulation.

2. Vision: Planning of action that is compatible with the goals of the organization is a key component of strategic formulation. Vision, on the other hand, is the planned result that the organization intends to accomplish or produce. In strategic formulation, vision plays a critical role as it provides a guiding framework for all the actions and decisions made. A clear and well-defined vision has the capacity to identify and prioritize the current situation and the overall goal that an organization desires. 

A strategic formulation involving vision consists of a few steps. Some of them are: 

• Defining the organization’s vision: The first step is to define the desired future state that the organization seeks to achieve.
• Conducting a SWOT analysis: A SWOT analysis that involves evaluating the strengths, weaknesses, opportunities, and threats facing the organization should be performed.
• Setting strategic objectives: After SWOT analysis, the next step is to set strategic objectives that align with the organization’s vision.
• Developing strategies: Strategies are the action plans that will help the organization achieve its strategic objectives.
• Implementing the plan: The final step in strategic formulation involving vision is to implement the prepared plan. Therefore, strategic formulation involving vision refers to the process of formulating a plan of action that is based on the organization’s vision.

3. Values: Strategic formulation involving values is the process of defining the long-term goals and objectives of an organization while taking into consideration the values that the organization stands for. Values are the guiding principles that define an organization’s culture, behaviour, and decision-making process. It is essential to match its strategic goals with those of the organization so that the organization may accomplish its goals in a manner that is consistent with its values. To effectively formulate a strategic plan involving value, there are several steps that an organization can follow. These include:

• Defining the organization’s values: This requires determining the values and beliefs that are essential to the organization and help direct its actions and decision-making.
• Coordinating an organization’s values with its mission: To make sure that the organization is working towards achieving its goals in accordance with its principles, it is essential to make sure that the values are in line with the mission statement.
• Identifying strategic goals and objectives: These are the long-term goals that the organization wants to achieve. It is important to ensure that these goals are consistent with the organization’s values and mission statement.
• Developing strategies to achieve the goals: The organization’s beliefs and mission statement should be considered when developing strategies. The organization’s beliefs and mission statement should be considered when developing strategies.
• Implementation: This involves carrying out the plan and making sure the organization is pursuing its goals in a manner suitable to its values and mission statement.

4. Objectives: Strategic formulation involving objectives is the process of establishing goals and objectives that align with an organization’s overall vision and mission. In this process, the organization’s essential success factors are identified, and a strategy is created to attain those goals. The first step in strategic formulation is to define the organization’s mission and vision. This gives a framework for creating goals and establishes the organization’s general direction. 

After defining the mission and vision, the organization should determine the strengths, weaknesses, opportunities, and threats (SWOT analysis). Based on the SWOT analysis, the organization can then identify areas where it needs to improve and set objectives that will help achieve those goals. Once objectives are set, the organization must develop a plan to achieve them. This plan must define the specific steps that must be accomplished, the needed resources, and the completion dates. Objectives for evaluating performance and development should also be included in the strategy. Any organization that wants to accomplish its aims and succeed in a competitive marketplace must engage in the strategic formulation process that includes objectives. Finally, the organization must monitor progress and adjust the plan as needed. 

Therefore, Strategic formulation requires a deep understanding of the organization’s mission and vision, as well as the ability to identify key factors of success and develop a plan to achieve objectives.