Strategic_Management

MGT 657/BM 220 EXERCISE 1 1. What is Strategic Management' The definition of strategic management is an art and science of formulating, implementing and evaluating, cross-functional decisions that enable an organization to achieve its objective. 2. Explain the formal strategic management process according to David (2011) According to Fred R David, the strategic management process can best be studied and applied using a model. Every model represents some kind of process. The Fred R avid model does not guarantee success but approach for formulating, implementing, and evaluating strategies. [pic] i) Identify existing vision and mission To make who read the vision and mission feel deep inside and feeling to implement the vision will arouse. At this process we must identify the strategy to be taken too. When any barriers come during the implementation of the vision, the company already have the action to take. ii) Audit external environment To develop a finite list of opportunities that could benefits a firm and threats that should be avoided. Firm should be able to respond either offensively of defensively to the factors by formulating the strategies that take advantage of external opportunities or that minimise the impact of potential threats. iii) Audit internal environment The audit happens to define the strength or weaknesses or opportunity and threats to have a clear statement of mission, provide the basis for establishing objectives and strategies. Objective and strategies establish from internal strength and overcoming weaknesses. iv) Establish long-term objectives It results from pushing certain strategies. The strategies will be implementing to achieve long-term objective. The time frame is between two to five years. v) Generate, evaluate and select strategies Strategy analysis must be performing to determine alternative courses of action that could best enable the firm to achieve its mission and objective. The firm strategies, objective and mission, external and internal audit information provide a basis for generating and evaluating feasible alternative strategies. Strategies can help the firm when confront any problems. vi) Implement selected strategies The implementation part is not easy like formulation. The all chosen strategies can be implementing to make the firm achieve the goal and objective. vii) Measure and evaluate performance After implementing the strategies, the company must evaluate to make sure whether the strategy is success or not. If the problems occurred, we must take corrective action. 3. List four financial and four nonfinancial benefits of a firm engaging in strategic planning Financial benefit i) Improvement in sales The sales will increase if we have strategic planning. It is because we plan the strategy step by step to make our product is selling and the demand is increase. ii) Improvement in profitability When sales increase automatically the profit will increase iii) Productivity improvement The supply chain will be short, so that we can minimise the cost and the profit will increase and increase the productivity too because the firm get a short time to produce the product. The cost will be cut and the firm also can produce more products using the saving budget. iv) Liquidity monitoring A company did not pay its vendors on time runs the risk of losing its preferential status from the suppliers. Strategic management will help to organize and monitor the cash balance. It also helps to ensure that the available cash is in line with long-term goals. Nonfinancial benefits i) Improved understanding of competitors strategy By having a good and strategic management we can observe from the competitor and study from them how to manage the firm properly and make them as guidance. ii) Enhanced awareness of threats In creating the strategic management we will be aware about threats because the forecast about what barriers to be coming and the way to overcome. iii) Reduced resistance to change If we have strategic management we will not do changing in our strategies every time new condition happen. It is because the company already predict what will happen in the future and take the action to solve the problems. iv) Enhanced problem – prevention capabilities The problem will be preventing because in strategic management process, the corrective action will be taken to make sure the activities implement are success. 4. Why some firms do no strategic planning' i) Lack of knowledge or experience - no training in strategic planning. ii) Poor reward structure – when organization assumes success, it often fails to reward success. Then failure occurs, then the firm may punish. iii) Firefighting – an organisation can be so deeply embroiled in resolving crises and firefighting that it reserve no time for planning. iv) Waste of time – some firm see planning as a waste of time because no marketable product is produced. Time spent on planning is an investment. v) Too expensive – some organisation see planning as too expensive in time and money. vi) Laziness – people may not want to put forth the effort needed to formulate the plan.