It isn't easy to imagine an efficient company without a well-developed strategy. Not everything works flawlessly in a dynamically changing environment, but it is easier for the company to adapt to changes thanks to strategic management. Please find out more about it!
Strategic management is an element that active companies cannot function without it. Thanks to strategy, the company can constantly develop and stay ahead of the competition. An excellent strategy is a complete plan without which an organisation can quickly sink into the high seas of other companies.
Creating a professional and compelling business plan is related to understanding what strategic management is, which is the key to the company's success—increasing the company's value results in guaranteeing its stable development. The main goal of strategic management is to reduce the uncertainty surrounding the organisation. The decisions made by the top management are most often based on the methods and techniques supporting management used in conscious planning.
Strategic management - key aspects
Among the many different definitions of strategic management, certain aspects most often define what it is. By the KJB International Aid experts particular, it is:
planning horizon - a definition of long-term directions of continuous development of the company, reaching even from a few to several years. It depends on the industry and market dynamics;
goal thread - a set of values, mission, a vision of the company in the future, as well as strategic goals are the elements by which appropriate tactical actions are taken;
subject of management - the company is treated as a coherent whole, where strategic management integrates organisational functions and processes into one strategy, coordinating its operation;
management entity is a group or organisational unit dealing with strategic management, the so-called strategic top - supervisory board or management board.
Strategic management is a specific set of processes that allow you to react quickly to changes in the environment while creating and maintaining appropriate relationships between the company's strategic goals and the resources it has. In practice, managers use a set of guidelines when making decisions or specific actions in specific areas of the organisation. Among the distinguished regions, there are three levels of strategy development:
corporate-level - key decision-makers of the company are looking for methods to increase the value of the organisation through, among other things, diversification, acquisitions (mergers) or investments;
business (company) level - formulation of a strategy in this area consists mainly in selecting an attractive market offer, also a management method to achieve a competitive advantage in a specific industry;
functional level is a strategy implemented by managers of individual departments to optimise the company's operations.
Every manager dealing with defining the company's or department's strategy should answer three basic questions: where is the company at the moment, where it would be (what it wants to achieve), and how it wants to be there.
The process of formulating a strategy
Strategic management is, in a sense, an organisational cycle, and as you know, each process consists of several successive stages. When formulating the strategy, the following can be distinguished:
the stage of strategic planning in which strategic goals are set, supported by an earlier analysis of the present and future state of the enterprise. Then, an action plan is executed, based on which managers aim to achieve the target state. It is part of the management for which some formal techniques and methodologies have been developed to help.
the implementation phase of the strategy is the process of implementing the strategy. It is necessary to adjust the resources and operating conditions of the organisation to the guidelines set out in the action plan. It would be best if you did not stick too rigidly defined and planned implementation steps because it is necessary to refer to the actual conditions of the company, which can change relatively quickly. Often, higher-order goals may turn out to be less critical than assumed. During this stage, the organisational structure, management system and budget planning are selected.
the strategy supervision and control phase is an integral part of strategic management. Monitoring of current changes allows ensuring their compliance with the adopted assumptions as to the target state. Any deviation can be successfully corrected. Thanks to advanced supervision, it is possible to detect situations that may constitute opportunities or threats to achieve the assumed goals further.
Optimal shaping of the strategy depends mainly on the company's attitude (managers 'commitment, risk acceptance, reactions to competitors' actions) and the market situation, which may affect the implementation of the various stages.
Key Success Factors
Sources of the benefits mentioned above may be varied, and they depend, among others, on the sector in which the organisation operates, reputation or owned innovative solutions. The so-called key success factors representing the resources and skills that can lead to the desired success. In general, among the types of the competitive position held, experts of KJB International Aid can mention the following:
competing with a product - that is, a market offer addressed to a group of recipients, i.e. determining the physical characteristics of a product, the scope of its applications, orientation towards satisfying consumer needs, packaging, brand, product differentiation (multi-assortment production);
competing with price - in terms of unit costs, distribution, terms of sale, but also competing with the quality level and marketing activities;
competing with resources - that is, with everything that is the company's strength. They should be valuable and rare, hard to come by competitors now and in the future.
Company business identification
An entrepreneur who already has an idea for a business must thoroughly understand the rules prevailing in a given industry and define a detailed picture of its own business. Such action identifies the company's business, without which a business plan practically cannot exist. An adequately created business plan must not fail to include important issues related to:
the company's products and their profitability - a concise description of the products offered by the company, production plans and selected distribution channels;
the company's customers and their profitability - defining the target group of customers to whom its offer will be addressed. The success of any promotional and advertising campaigns will depend on the correctness of this position;
meeting customer needs - in this case, you should conduct a customer survey and find out about their needs. It is then easier to adjust the offer so that it becomes attractive to recipients;
company structure - a properly selected organisation structure will undoubtedly optimise the functioning of a given company. Appropriate relationships at the rank of supervisor-subordinate and structured channels of information transfer between departments favour not only an excellent working atmosphere but also quick response to changes in the environment;
employment structures - divided into blue-collar and non-blue-collar positions;
organisational culture and management style - social norms and value systems that create the right atmosphere in the organisation constitute a specific management system that defines behaviour requirements.
The mission and vision of the company
Formulating the company's mission allows for defining the company's identity and its identification in the environment. It is a formalisation of values essential for the organisation and a vision for the future. Thanks to a properly defined mission, it is easier to assess the correctness of implemented strategies, but it has no direct impact on decisions and actions taken.
The mission determines the sense of the company's existence, the main assumptions and the most critical tasks and values offered to customers. Its task is to distinguish the company from other companies of the same industry and characterise the scope of its operation. On the other hand, the vision is a concept of the model and image of the organisation in the future, assuming favourable conditions. A vision is a bundle of future desired states or results of the company's activity, possible to be achieved in the long term. It manifests itself as a source of employee motivation and allows them to achieve the company's goals. Integration around a common goal positively influences the atmosphere in the company.
Strategy monitoring
The final stage is the monitoring of the strategy. The strategy includes actions that the company takes to achieve its goals. Activities of this kind and the goals themselves are decomposed into functional processes that constitute the tactical level of the enterprise. The method used in decomposition and the tool for monitoring the implementation of the strategy is the scorecard, which considers four perspectives - financial, customer, internal processes and development). From an economic standpoint, the measures relate to growth and structure of revenues, reduction of costs and increase in efficiency and use of assets.
Within each group, goals and financial measures can be formulated according to the company's life cycle phase. From the customer's point of view, the company segments its customers and defines the markets in which it intends to compete. The measures here are satisfaction, retention, acquisition and profitability obtained from sales to individual customer groups. For the adopted goals and measures defined in the customer and financial perspective, goals and measures are established corresponding to the main processes designed to achieve market and financial goals. These processes form internal value chains, constituting sequences of cause-and-effect activities; as a result, the customer gains an increase in the value of purchased products. In the development perspective, goals and measures are formulated that are directly related to the long-term intentions of the enterprise, i.e. those whose time horizon is long and the material horizon is vast.
In this regard, three sections are distinguished:
human resources potential (e.g. employee satisfaction, rotation and efficiency),
capabilities of information systems (e.g. timeliness and availability of information needed by employees),
the level of motivation, decentralisation and convergence of goals (e.g. measures of reported and implemented initiatives, the effectiveness of improvements, the point of teams).
The goals and measures included in the strategic scorecard enable assessing the company's progress in implementing the adopted strategy, achieving strategic goals and fulfilling its mission. Suppose the condition in this respect is not satisfactory, or there have been significant changes in the environment or inside the company that did not fit into the company's foresight scenarios. In that case, regulatory actions should be taken by modifying functional strategies, business units' strategies, corporate strategy, at least some strategic goals or ultimately the company's mission.
Therefore, if you need someone to take care of your business - you are in the right place. We provide the best solutions. Please call our experts at 01733 752295 or email us info@kjbinternationalaid.com to discuss your problems and work out solutions.
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