Strategic Management: Formulation and Implementation

The Nature And Value Of Strategic Management

This chapter will introduced us to the world of strategic management. Strategic management is a process which determine whether an organization excels, survives, or dies.

All organizations engage in the strategic management process either formally or informally. Strategic management is equally applicable to public, private, not-for-profit, and religious organizations. An attempt is made in this thesis to show the applicability of strategic management to all types of organizations, but the emphasis is on private-enterprise organizations.

Organizations usually employ one of the three general decision-making processes:

  1. Managers want to resolve current problems. Firms often face problems resulting from falling sales, low profit rates, or production inefficiencies. Managers try to identify the sources of those problems and resolve them as best they can.
  2. Managers want to solve current problems and prevent future problems. For example, faced with rising production costs, managers may apply statistical techniques to create an optimal solution.
  3. Managers want to design or create a better relationship between the firm and its operating and general environments. That involves the firm in strategic decision making.

Three factors distinguish strategic decisions from other business considerations:

  1. Strategic decisions deal with concerns that are central to the livelihood and survival of the entire organization and usually involve a large portion of the organization's resources.
  2. Strategic decisions represent new activities or areas of concern and typically address issues that are unusual for the organization rather than issues that lend themselves to routine decision making.
  3. Strategic decisions have repercussions for the way other, lower-level decisions in the organization are made.

To summarize, there are two essential areas of management tasks: strategic management and operating management. Operating management deals with the ongoing, day-to day "operations" of the business. However, my concern here is with the strategic management alone.