Importance of Strategic Management to Ensure Organization's Achieving Its Goals and Objectives - Essay Example

Strategic Management Name Institution Name Date Word count: 2,296 Introduction Strategic management is a process that is used to strength the operations of an organization with the aim of becoming competitive with other companies. Strategic management is important and central to the advancement of an organization, and the aspect of strategic management is complex and brings together numerous aspects of management. The internal and external environment defines the success of an organization: it also determines the strategies an organization should implement. Mintzberg’s provides five aspects of a strategy, which are plan, ploy, pattern, position and perspective. In addition, Whittington presents four distinct perspectives, which are classical, evolutionary, processual and systematic. Each of these perspectives is aimed at advancing the requirements of an organization, but the success of some of the approaches is debatable. These numerous theories and perspectives are aimed at advancing the requirements of an organization through creating a distinctive image about competitors. It also defines the process of collection of information, which is used in decision-making processes. Through strategic management, an organization can achieve competitive advantage and sustainable competitive advantage, which enables an organization to outperform the competitors. Corporate Governance and Sustainability Corporate governance is the way an organization is managed by employing strategic decisions (Payne & Frow 2005). It defines the strategic efficiency in advancing the requirements of the organization while also balancing the requirements of different stakeholders: some of the stakeholders include the management and shareholders. In some instances, the ideas and perspectives of the stakeholders differ, and corporate governance provides mechanisms to iron the differences. Sustainability and corporate governance are important and are linked to each other (Doh 2005). Moreover, clear boundaries exist between these different stakeholders; for example, the corporate management has a role to advance the interest of shareholders while also addressing the regulations and legislations in place. Therefore, corporate governance introduces an aspect of corporate social responsibility to create a positive relationship with some of the stakeholders; for example, the community is an important stakeholder. Through corporate social responsibility, an organization shows its adherence to ethics and moral requirements (McWilliams, Siegel & Wright 2006). Organizations aim to advance the requirements of ethics and moral requirements rather than merely on financial perspectives. The financial perspective cannot be achieved without considering the aspects of social and ethical perspectives. Therefore, the corporate governance enhances CSR through protecting the community, recognizing the ethical behavior, environmental sustainability, and equity in the distribution of resources to fulfill the requirements of the organization and stakeholders (Doh 2005). Organizations also create the separation between management and ownership of an organization. To understand the different stakeholders, stakeholder analysis is important (Peng, Wang & Jiang 2008). Some of the stakeholders include the employees, customers, the government, and shareholders. Understanding the requirements and expectations of these different stakeholders enables creating and implementing measures to advance the respective requirements of the stakeholders. For example, management is after generating profits that should be reflected in their salaries while the shareholders are after getting returns on their investments. Goals, Values, and Performance Organizational goals are the targets, which an organization aims to achieve. The values are the characteristics of actions, which an organization considers in achieving the goals. Ethical position is the variables, which helps an organization to determine the appropriate actions that are acceptable to the different stakeholders (Doh 2005). Debates exist on the angle of values, but it is important for the values to be viewed from the perspective of shareholders and stakeholders. Strategic management enables an organization to determine the values and goals and create environment and frameworks to achieve the goals and values. Numerous theorists have presented their views including Milton Friedman and C Handy on the aspect of strategic management about the expectations of the organization. The functions of profitability goals include corporate control, survival, ease and simplicity, and convergence of stakeholder interest (Furrer, Thomas & Goussevskaia 2008). The strategies that an organization implement is based on organizational culture. For example, if an organization has a culture of championing quality, the organization will continue producing quality products and services (Doh 2005). The goals and values are completed with CSR and philanthropy in making other stakeholders value the organization. For example, supplying a hospital with equipment can a positive image of an organization and can contribute to the improvement of the corporate identity of an organization. The performance of an organization depends on the goals and the resources assigned to achieving the goals (Chrisman, Chua & Sharma 2005). The appropriate resources results in achievement of goals provided strategic directives are in place. For example, a corporate organization that considers the requirements of a community will have great performance because minimal conflicts or absence of conflicts (Zott & Amit 2008). The organization through employing the people from the community reduces chances of misunderstanding because the organization contributes to the development of the community through employment opportunities. The performance is dependent on the data, and reviewing the efficiency of an organization is possible through analyzing the available and expected data. For example, the financial outcome is reviewed using accounting ratios while survey and loyalty determine customer satisfaction. Industry Analysis It is important for an organization to study the environment it is operating. An organization has to understand the external environment, which is commonly referred to as macro environment in advancing its operations. One of the commonly used tools is the PESTEL analysis in reviewing the external factors. PESTEL stands for political, economic, social, technological, and legal environments of an organization. Through the use of PESTEL analysis, it is possible for an organization to determine the threats and challenges affecting an organization. PESTEL analysis translates into Key Success Factors (KSFs), which an organization can capitalize and improve revenue generation processes. The use of PESTEL analysis results in national competitive advantage. The national competitive advantage brings into consideration the factor conditions, demand conditions, related and supporting industries, and strategy, structure and rivalry. In understanding the industry, Porter’s five forces can be used to study the competition framework. It includes suppliers, potential entrants, substitutes, and buyers. Numerous variables originating from the framework determines the way an organization employs strategic initiatives. The strategic management enables an organization to study an environment and determine the appropriate strategies for addressing the challenges or complexities. For example, the easiness of market entry requires an organization to champion differentiation in providing the services. In addition, the services should address the environmental factors including the prospective strategies of the competitors. Analyzing Resources and Capabilities An organization should aim for a competitive advantage. Competitive advantage is the feature, characteristic or opportunity that an organization has but the competitors do not have. The organization then capitalizes on the competitive advantage in creating a sustainable organization. The competitive advantage should be sustainable and can be associated with the superior performance of an organization. Development of competitive advantage is based on the inputs, throughputs, and outputs in creating value for customers. The competitive advantage incorporates the value chain in which determines the efficiency of an organization. The supply chain includes the primary and support activities (Doh 2005). The primary activities include service, marketing and sales, outbound logistics, operations and inbound logistics while the support activities include procurement, technology development, human resource management and organizational infrastructure. An organization can capitalize on these capabilities in achieving the organizational goals and objectives. In addition, it creates the competitive advantage to an organization. For example, Apple and Samsung Companies have continued to fund research and development because these companies rely on R&D for it successes. The role of the resources and capabilities is to balance the requirements of the organization and the environment. The organization has to study the environment and use internal capabilities in advancing the requirements of the organization. The different resources and capabilities are aimed at ensuring an organization generates revenue, which fulfills strategic obligations. The Nature and Source of Competitive Advantage The source of competitive advantage is achieved through different angles. For example, the internal capability of an organization produces high-quality products, which creates a competitive advantage; an organization can see the weakness in the market and create a product that capitalizes on the weaknesses resulting in competitive advantage. Innovation and creativity are important in sustaining competitive advantage. An organization can operate effectively at different market depending on the nature of competitors operations. For example, first movers can improve the product offering resulting in loyalty. In addition, first movers benefit from the challenges associated with entering a market such as the cost of substitutes and change. The trading markets and production markets accesses competitive advantage differently. For example, the uniqueness of the product and requirements the product addresses are important in creating a sustainable competitive advantage. The industries and products have a lifecycle that sometimes influences the competitive advantage and strategic management. The lifecycle of a product or company is viewed in phases, which are an introduction, growth, maturity, and decline. Understanding the requirements of each phase and cycle are important in determining the appropriate strategy. The strategy should reflect the requirements of the organization, and incorporate the variables, which shape the market. Business Level Strategies Competitive advantage can be obtained through differentiation and cost advantage. Cost advantage is providing a product/service at a lower cost while differentiation is creating and positioning a product with the way in which a customer is willing to pay a price premium. Some sources of cost advantage include economies of learning, economies of scale, process technology and design (Doh 2005). These processes including the value chain can be used to advance the requirements of an organization. For example, effective supply chain reduces the cost of production while the economies of scale reduce the costs of acquiring the inputs. The management of an organization should employ business level strategy in advancing the requirements of the customers and fulfilling the objectives of an organization (Misangyi et al. 2006). For example, an organization can purchase in bulk meaning the cost is lower because of the discounts. It will translate into lower prices of product produced. Advancement and embracement of new technologies improve the efficiency of production resulting in lowering the cost. In addition, allocating the appropriate resources including human personnel ensure the quality of the products and services is championed. These are examples of business level strategies, which can be used to advance the requirements of an organization. Corporate Level Strategy In fulfilling the requirements of corporate strategy, some influencing factors include geographical scope, vertical scope and product scope (Doh 2005). Product scope incorporates the diversification of the company; the vertical scope determines the vertically linked objectives while the geographical scope is determining the spread of activities of the organization. It is further divided into corporate strategy, corporate parenting, and business portfolios. The corporate strategy includes retrenchment, integration, merge, and diversification. The corporate parenting includes value destroying synergy, value-creating synergy, and adding value. The business portfolios include industry attractiveness and size of the market. The changes in the environment and the objectives of an organization determine the effectiveness of the corporate level strategy. For example, diversification can improve the market share and market power of an organization. The mechanisms include reciprocal dealing, bundling, predatory pricing and mutual forbearance. However, it is important for an organization to understand the limits of corporate strategies, and utilization of corporate strategies in fulfilling the requirements of the organization. An organization should review the goals and objectives before determining the corporate strategy to be implemented. For example, reducing the cost of a product for a new entrant can be disastrous because the developed companies have resources to counter price reduction. Therefore, choosing the appropriate strategic approach is important in determining the success of an organization. Networks, Partnerships, and Alliances Alliances, partnerships, and networks are important in a competitive business environment (Olson, Slater & Hult 2005). Organizations entering into such relationships improve the product offering including seeking for information to advance the requirements of the organization. It is important to create beneficial and lasting relationship among the different stakeholders including the customers, the government, and the suppliers. These stakeholders have the information, which can easily benefit the organization and address some of the important organizational requirements. The alliances and partnerships are aimed at accessing contemporary resources, which are integral to the success of an organization. Alliances assist in entering a new market and sharing of resources, which are important to the success of an organization. It is imperative to note challenges exist in such relationships exist and clear conflict resolution mechanisms should be available to address the challenges and complexities. Organizational Structure and Strategic Control The success of strategic management depends on the role and responsibilities of different employees (Doh 2005). An organization employed employees with different qualifications and structured in a manner that improves the operation of the organization. Different forms of organization exist, and these firms depend on the industry and fundamentals associated with the industry. For example, the structural design and control of a manufacturing firm is different from an auditing firm (Burgelman & Grove 2007). The organizational structure and the movement of commands and directives also differ depending on the culture of the organization and forces that an organization experiences. For example, governmental institutions follow a specific command, which is different from private organizations. Therefore, the success of any organization depends on the organization and designing of the employee and personnel requirements. It most involves the contribution of human resource in the success of an organization Conclusion In conclusion, strategic management is important in ensuring an organization achieves its goals and objectives. It provides mechanism and frameworks in which an organization can capitalize based on the industry it operates. The business level and corporate level strategies determine the approaches in which an organization can employ in achieving sustainable competitive advantage. Therefore, a successful organization should employ strategic management in its operations. 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