Strategic Management Process and Components
Strategic management involves the choices a firm makes in terms of what the organization will do and will not do to achieve specific objectives in realizing its mission and vision. The strategic management process is a continuous, systematic process that contains several steps: developing a strategic vision and mission, analysis of the business environment, strategy formulation, implementation of the strategy, evaluation, and control. Thus, analysis as part of the strategic management process is the study and understanding of many different layers and aspects of a firm’s competitive environment. It entails conducting PESTEL, SWOT, Porter’s five forces, and value chain analyses to identify its competitive position. The next step is strategy formulation, which comprises creating strategic objectives, identifying strategies, and selecting a grand strategy. The selection of a grand strategy is where a firm decides whether its preferred strategy is growth or maintaining its current market share. Lastly, implementation includes making necessary organizational changes, such as structure, and then allocating the necessary resources to the preferred projects central to the new strategy. The last step of the strategic management process is evaluating the projects and using the feedback to make necessary adjustments.
Furthermore, in a short YouTube video uploaded by the Harvard Business Review, Professor Michael E. Porter of Harvard University talks about the practical application of the five competitive forces that shape strategy. The five competitive forces are threats of new entrants, buyers’ bargaining power, suppliers’ bargaining power, threats of substitute products, and rivalry among existing competitors. Porter claims that these forces give a holistic framework of looking at an industry’s profitability and constraints. He also points out that understanding this framework enables managers to know the position of their companies in the industry, and managers should use this knowledge to balance the constraints to their advantage. This video was enlightening because Porter uses practical examples to explain the concept of the five forces of competitive advantage, thus enabling his viewers to understand the reasons behind some business practices and decisions.