Strategic Management Concepts, Theories, and Elements

Subject: Strategic Management
Pages: 16
Words: 4401
Reading time:
17 min
Study level: Master

Introduction

Identifying, analyzing, and assessing the strategies that managers may employ to improve the firm’s performance lies in the core of the strategic management. The fight for competitive advantage is a constant throughout this process, especially when the sector is considered saturated. From the standpoint of long-term organizational goals, said advantage is assessed, analyzed, and compared, with the analysis favoring overall performance above specific components. The importance and conceptual richness of the strategic management field is arguably difficult to comprehend due to its arguably all-encompassing nature. Nevertheless, this paper attempts to list and examine the core concepts of the strategic management, review them as exemplified by two case studies and discuss the relevancy of said concepts in the modern business environment.

In only 3 hours we’ll deliver a custom Strategic Management Concepts, Theories, and Elements essay written 100% from scratch Get help

Concepts, Theories, and Elements: A Critical Analysis

According to experts, the approach is made up of four essential parts that work together to form a whole. The mission statement answers the question, “What is the purpose of this organization?” The firm’s industry is usually specified, as are the requirements that its goods and services address, and the organization’s public image. The vision is a response to the question of where we want the company to be in the next several years. The desired future scenario for the firm is determined (Bergh et al., 2017). The vision serves as a roadmap for the company to attain its goals, portraying the desired end state. The values concern internal beliefs, thought patterns and ideals that influence actions and goals of organization’s members. Global objectives concern the balance between outlined aims and a timeframe established for them.

An organizational strategy is an important contributing factor to the success of public and private organizations alike. It directs and describes the priorities and directions of an organization, allowing the key stakeholders to align its actions with them accordingly. When the team is introduced to the detailed strategy, they have the opportunity to identify the necessary areas of improvement and work in general. Additionally, as the business grows, the managerial team is likely to hire more employees, brining more people on board. To achieve internal conflict of interests and facilitate productive collaboration, those members of staff must be introduced to the overall direction of the firm.

A strategy cannot be created simply by the executives, including the cases of authoritarian leadership models being practiced within the firm. To launch and implement the strategy, everyone in the firm must be involved in creating and implementing new business techniques and procedures (head of business unit, heads of products, heads of functional areas within a business or division, administrators, and supervisors). Academics and professionals alike are increasingly focusing on integrated measures of financial, social, and environmental success. Strategic management nowadays is based on socially and environmentally sustainable strategy, one that creates both financial and societal benefit for the shareholder and for society as a whole. Its role increases in the success of an average project increases with the introduction of the new and more complex business management elements (Barbosa, Castañeda-Ayarza, and Ferreira, 2020). A sustainable strategy incorporates sustainability concepts naturally, as a conceptual aspect of the corporate policies, and the company’s activities have a direct impact on both the company’s business and financial performance.

The types of strategy commonly identified within the modern strategic management include corporative, business, and operational. Within the literature review different sources might provide conflicting or contradictory accounts on these concepts, which are by no means a fixed framework. Nevertheless, as every of the presented aspects possess a set of unique characteristics, they are presented in this paper with the originally presented characteristics attached. The goal of corporative strategy is to increase the value of a company’s business portfolio in order to outperform its competitors. The options that a business has to determine its future posture are referred to as corporative strategy. The methods for announcing this positioning range from basic motivational messages to rigorous corporate objectives and extensive detail, connecting business indicators and factors, and using stringent methodological methodologies (Bindra, Parameswar, and Dhir 2019). Competitive priorities are an example of this, which are formed from operational decisions drawn from this form of strategy and customer requirements. The corporative strategy is in charge of defining the essential data, and it is a critical component in making the best decisions.

The business-type strategy of the organization is usually designed with a more particular reference to ongoing operations of the company. A short-term plan generally applies to a single-industry company, or to a larger firm that is looking into branching out to new markets. Business strategies are often the tools involved in the risk management and are frequently a point of conflict between investors and entrepreneurs (Jabbar and Hussein, 2017). The major focus of the business strategy is on how to establish and maintain the company’s long-term competitive position in the market. Various writers offer typologies that define how businesses compete in their particular markets.

Porter’s five forces approach is extensively utilized by strategic managers throughout the world when dissecting the company’s surroundings. It describes corporate plans in terms of cost leadership and product differentiation. He designs and evaluates various action plans to improve competitive characteristics while consistently taking the owners’ preferences into account. (Bruijl, 2018). The five forces in question involve rivalry among existing competitors, threats of new entrants, bargaining power of buyers, bargaining power of suppliers, and substitute goods and services (Pádraig, 2017; Hitt and Duane, 2017). These factors shape the immediate surroundings of the company and the industry landscape it operates within, fusing the short-term and the long-term planning.

Academic experts
available
We will write a custom Strategic Management essay specifically for you for only $16.00 $11/page Learn more

The construction of a reference framework for planning, production control, and the fixing of rules to assess the contribution of operation management to the company’s overall objectives are included in the two roles. Operational strategy concerns with the step-by-step analysis of this management attributed to the long-term goals of an organization. The operation strategy is based on the detailed analysis of an organization’s surroundings, including competitors, partners, target markets and current aims (Ansoff et al., 2018). When developing the operating strategy, the corporate values serve as a guidance. The ultimate goal of the operating strategy is to identify competitive advantages that set the firm apart from its rivals. It is when the extra value to the product or service supplied justifies a higher end product price that the client is not only ready to pay, but also happy to do so. This edge must, among other things, be long-lasting and difficult to duplicate.

The director of the operations area has primary responsibility for this plan, which is subject to amendment and approval by higher-ranking administrators (general director or directive board). It is important to develop and implement operational strategies that are consistent with the company’s mission and that always support the company’s goals. This strategy must include production targets in order to create competitive advantages, with a consistent decision-making process within the category of essential production resources. Furthermore, to declare how the business divisions create and employ production resources. The realization of manufacturing strategies is emphasized by researchers, who focus on three parts of the process: design, development, and execution of the production plan. The literature study outlines three steps for developing this strategy: process development, testing, and modifications.

General overview of the stages and tools typical for the strategy implementation include six commonly introduced steps. The steps include defining the strategy framework, building a plan, defining key performance indicators, establishing a strategy rhythm, implementing a reporting mechanism, and linking strategy to a performance. Strategic framework outline involves the development of the long-term perspective focused on the general objective of the firm and the possible steps this objective may involve. The plan design elaborates on the steps in greater detail, focusing on the necessary chronological order to maximize efficiency. This plan must rely on the outlined and established organizational values in order to comply with the culture customary to the firm.

By defining the key performance indicators, strategy managers introduce the opportunity of successfully managing progress towards the outlined goals. These indicators differ depending on the organizational values, but general patterns may be established within the current business environment. Some of the common KPIs include total sales volume, contact abandonment rate, revenue per employee, and customer satisfaction. The strategy rhythm establishment allows the top stakeholders to facilitate the speed with which strategies are implemented to ensure successful change management. The report mechanisms and links to performance primarily exist to evaluate the successes and failures of the incorporated strategic solutions in the long-term perspective.

In strategic management, the SWOT matrix is universally used to separate external and internal factors that are likely to affect long-term performance of an organization. This matrix may be used to assess issues both within and outside the business (Vlados, 2019). The framework separates the internal factors, namely strengths and weaknesses, from the external factors of opportunities and threats. The strategists offer the following plans based on the variables in the SWOT matrix, focusing on the few possible combinations of priorities depending on the case:

  1. Strength-opportunity (SO) strategy: this method optimizes both internal and external strengths (a “maxi-maxi” strategy); it may be used when you have a lot of strengths and good external opportunities.
  2. Weakness-opportunity (WO) strategy: this opportunity-focused method eliminates weaknesses while maximizing opportunities (“mini-maxi” strategy); it may be utilized in a perilous scenario where strengths are limited and threads are growing.
  3. Strength-threat (ST) strategy: this strength-focused method optimizes own strengths while minimizing dangers (the “maxi-mini” strategy); it can be employed in rescue scenarios where maximizing own strengths is the only option to overcome significant risks.
  4. Weakness-threat (WT) strategy: this method reduces both weaknesses and threats (a “mini-mini” strategy); it may be used in a difficult scenario where strengths are few and threats are growing.

The primary flaw of SWOT in terms of use is its reliance on qualitative analysis, which merely categorised the value of individual elements without assessing them subjectively. The matrix utilizes generalization as one of its main tools in assessing and systemizing the complex business environments of today. As a result, certain factors may remain unnoticed due to their contradictory effects on certain businesses (Fuertes et al, 2019). An example of this would be a new price-regulating law that provides opportunities for new entrants into a previously rigid market but results in financial losses for the previous oligopoly members.

PESTLE analysis may be considered another important tool in modern strategic management, focused on the external factors’ influence of business. The titular abbreviation stands for Political, Economic, Social, Technological, Legal and Environmental, classifying the factors that affect the organizational activities. The PESTLE framework is used to assess and evaluate the existing risks typical for the environment the organization operates in. The insights gathered from these environments are then used to shape the short-term and long-term strategies around the realities in question. Legal and Economic factors in particular are primarily taken into consideration to ensure the business is sustainable and co-ordinated with the running state of the market.

15% OFF Get your very first custom-written academic paper with 15% off Get discount

Finally, a resource-based view of the firm might be introduced as a potential strategic management tool for public and private companies alike. Managers implement the strategies by organizing, bundling, and utilizing the firm’s resources (Fuertes et al, 2019). This paper builds on the RBV by defining management activities that assist companies arrange resources in ways that help them gain a competitive advantage. Essentially, this research is founded on the idea that “what a company does with its resources is at least as significant as what resources it has.

The literature review has established a paradigm that tackles the process-oriented management activities needed to build a competitive advantage and, as a result, contribute to the development of firm value. This concept argues that organizing the resource portfolio is an important part of resource management. This entails acquiring resources, developing them, and divesting those that are irrelevant to the firm’s goal. Holding valuable and uncommon resources, on the other hand, is a necessary but inadequate prerequisite for gaining a competitive edge, as stated above. To gain a competitive edge, these resources must be utilized effectively. To accomplish so, the resources must be pooled in order to develop the firm’s capabilities. And those skills must be put to good use in the marketplace to get the greatest return on investment.

Recent study backs up the significance of managerial activities in resource management for improving company performance. Researchers have discovered that in order to favourably impact performance, managers must deploy resources in cohesive ways. Other experts discovered that in order to get a competitive advantage, managers must address both capacity strengths and shortcomings at the same time. Because previous research on the RBV has mainly focused on resource and capability strengths, this adds to the body of strategic knowledge.

Case Studies Application

Modern strategic management, in comparison with the more strategical approaches, is operated within the age of sustainability, data protection and digitalization. These and other issues made it difficult to adapt New Public Management and related frameworks to government strategy ideas (Braun, Latham, and Cannatelli, 2019). Partly because of the development of network governance in the 1990s, the conventional private-sector emphasis on single organizations did not resonate. Overall, strategic management practices are implemented differently in public and in private firms. The Prince George’s Community College and British Petroleum were used as the examples.

To carry out strategic management, community colleges use a number of techniques, implementing SWOT, PESTLE and regular KPI assessments. The most popular approach is to create a written long-term plan on a regular basis, although there are many alternative options. One institution employs strategy position papers, which are publications created for a particular strategy area and disseminated across the college. Another utilizes president’s workshops, or strategy sessions, to bring together staff groupings to address strategic problems. College planning and development committees, made up of members from different staff groups, are the main deliberative and consultative body on strategic issues at many institutions (Seifzadeh and Rowe, 2019). Many schools hold strategy workshops or retreats including different staff groups on a monthly, quarterly, or yearly basis. Several colleges establish “future of the college” committees, which are made up of citizens and employees (Kapinos, 2020). Other collaborative methods bring together staff unions and management to address strategic issues in the most innovative manner.

Historically, the community college was led by an entrepreneur who has operated mainly as an individual, despite the fact that he or she has often had enthusiastic support from other staff members. Staff employees at all community colleges have instances of their own work bringing a new student population into the institution, creating a big new program, or establishing a large new community connection (Leiber, Stensaker & Harvey, 2018). Conditions both within and outside the college have only recently prompted methodical approaches to the search for new possibilities, the development of internal procedures to encourage future-oriented discussion, and the integration of the many promises made to define the perspectives of the institution.

Several factors, both external and internal, have aided in the development of more coherent, future-oriented procedures. First, at a time of financial constraint, the gradual approach to establishing the institutional future is no longer viable. Horizontal expansion is required in innovative methods, in which high-priority programs are introduced, altered, or extended while lower-priority programs are removed or decreased (Drobyazko, 2019). Most community colleges are likely to have reached the end of their era of vertical or gradual expansion.

Get your customised and 100% plagiarism-free paper on any subject done for only $16.00 $11/page Let us help you

Further issue has originated as a direct consequence of the niche occupied by community colleges in public sector. Recent changes in income levels of the population, the demand for certain areas of education, digitalization of the work market and growing inequalities increase the uncertainty in question. Colleges must organize and handle a plethora of contradictory signals from the outside world. Recent economic and political developments have helped to remind community colleges of their reliance on external circumstances and trends for their future success. Clearly, community colleges need an integrated, systematic strategy-making process, but creating such a process is never simple. The creation of a strategic management process at a community college will be opposed because it costs time and energy, necessitates new skills and insights, and may reveal the flaws in current plans.

In contrast, as a private industry representative, British Petroleum is less concerned with politics and unconventional profit-sourcing activities. Let’s start with the most basic scenario: individual insurance purchases. Individuals may shift their risks to insurance firms, lowering their uncertainty about their net worth and quality of life. The insurance provider charges a premium in exchange for assuming the risk of losses. The difference between the premium and the current value of anticipated losses is known as the “premium loading,” which is the estimated cost of insurance.

It is easy to see how, in comparison to insurance firms’ risk-bearing capacity, most people’s ability to self-insure against big risks is severely restricted. The “limited liability” clause that protects other assets of corporate shareholders does not apply to private assets. Individuals’ decisions to pay premiums to cover their physical assets and human capital are therefore economically reasonable decisions based mainly on the benefits of insurance firms in pooling such risks (Makadok, Burton and Rainey, 2018). Private or tightly owned businesses are more likely to get insurance for the same reason: their restricted ability to handle specific risks in comparison to insurance companies’ risk-bearing capability. Owners of such businesses often have a significant part of their money invested in the company, and they prefer not to diversify their own assets completely, whether for reasons of control or another.

There are four operational companies that make up the British Petrolium corporation: one of the largest national natural fuel extraction firms. The upstream business, BP Discovery, is responsible for the exploration and development of new oil and gas resources. The downstream business, BP Oil, is responsible for refining, distributing, and retailing petroleum products. BP Chemicals, which specializes in petrochemicals, acetyl, and nitrates, and BP Nutrition, a very modest animal-feed firm, are the remaining two businesses.

The immensity of BP is perhaps its most noticeable characteristic. It is the biggest business in the United Kingdom and Europe’s second largest. The stock capital of BP is about $35 billion, while its debt is around $15 billion. Over the preceding five years, after-tax profit has averaged $1.9 billion, with a standard deviation of $1.1 billion (Doherty and Smith, 2020). Exploration and extraction permits, as well as scientific and technological capital unique to the oil business in the form of rigs, pipelines, refineries, ships, road tankers, and filling stations, are among BP’s main assets. While the business has activities all over the globe (it has 13,000 service stations in 50 countries, for example), its wealth is concentrated in two areas: production licenses and infrastructure in the North Sea and on the Alaska North Slope (Doherty and Smith, 2020). Because of this concentration of value, as well as the company’s restricted range of operations, key elements of its business risk are highly undiversified.

Underinvestment (and the resulting illiquidity) may be avoided and this is the case for British Petrolium who prefer to reinvest a fixed part of their yearly process back into the business. Although well-diversified shareholders and bondholders may not be worried about the possibility of uninsured losses in and of themselves, they will be if such losses significantly increase the likelihood of financial bankruptcy. In this perspective, there are two key points to remember regarding a company’s operational cash flows (Varadarajan, 2019). The significant uninsured losses should be viewed of as one-time decreases in a company’s equity, or stock of capital.

Even though shareholders share part of the advantages of reinvestment, a severe liquidity issue may encourage management to postpone raising money until the company’s stock price rises. However, delaying the investment would result in a substantial loss of operational value in this instance. Within the SWOT framework, the company’s reliance on shareholders and investor partnerships is a mixed factor, contributing to both strengths and weaknesses of the firm (Wang et al., 2020). Such can be used as a parallel to the Prince George’s College case, highlighting potential similarities.

Relevance Discussion

Fundamentally, the strategic management theories operate as environment assessment tools that the companies use to obtain the information about their market and their consumers. Strategic management is an important aspect of every company, as no firm operates in isolation. It refers to the development and execution of the objectives and activities outlined in an organization’s strategy by its stakeholders. To put it another way, it is critical to have strategies in place to support company activities and operations in order to guarantee smart decision-making processes. As a result, strategic management involves assessing corporate objectives, the organization’s vision and objectives, as well as future plans (Reutskaya et al., 2017). In addition, to guarantee that the company operates successfully and efficiently, a strategic management approach is used. Internal and external communication of this strategy is critical for success, as it allows both employees and the organization to comprehend the strategy’s goal and direction, as well as external parties to understand what you stand for as an organization.

Strategic management entails that change and change must be compatible with the company’s culture. The strength of the company culture will checkmate the transformation if the required assistance is not given throughout the transition from old to new. Culture is the glue that holds the company together. Before senior management’s change extends the company, it is filtered by cultural factors. There is no such thing as a permeable culture, which prevents any changes and creates friction in the workplace. And this results in a lack of energy as well as unpleasant feelings.

Organizational strategies that are compatible with business culture aid in the development of an understanding of certain principles such as developing long-term forward policies, being powerful, uniting forces, providing aim and tool suitability, realizing efficient power usage, and being flexible and cautious. Management strategies are designed to keep companies aware of economic, social, and administrative trends in a competitive environment, and to help them comply with the environment by monitoring current trends (Teece, 2019). The mission, which is a wider notion than strategy, makes the connection between strategy and organizational culture tangible in operations (Doherty and Smith, 2020; Bryson and George, 2020). Culture and strategy must be in sync in order for a mission to be effective. Otherwise, the mission’s power and efficacy may be harmed. Businesses that define their objectives and successfully support their goals via their organizational culture and tactics outperform their competitors. The majority of strategy research in management literature focuses on strategy and its substance. The strategy’s content focuses on how companies compete in certain marketplaces. The strategy process entails putting actions and processes in place while the plan is being developed.

The implementation-related contradictions embodied by private and public firms in the case studies remain continuously relevant in the modern business landscape. The different stakeholders involved in the two cases imply variations in strategic goals between the two types of firms. Generally, private companies are built with the purpose of profit generation, and thus their approach to operations management prioritizes high financial outputs, low costs, and the maximum production efficiency possible. Public organizations, however, typically exist to fulfill a socially beneficial purpose, and are sponsored by the government, a group of benefactors or a combination of both. Their financial objectives tend to lean towards self-sufficiency and sustainability rather then profitability, which affects business and functionate strategies significantly. Consecutively, the strategic innovations implementation processes and the change management entailed by them is conducted under different slogans in the two types of organizations (Makadok, Burton & Barney, 2018). Private company stakeholders are generally assured that the changes will contribute to the financial prosperity of the organization, while public company stakeholders may be pursued through the exploration of the role said changes may play in the organization’s mission.

Furthermore, the case studies demonstrate both importance of operational consensus among shareholders and the difficulties such arrangement frequently entails. In modern corporate environments, medium and large organizations are comprised of multiple groups of people with hypothetically overlapping interests. In practice, frequently the organization’s prosperity may be identified as their only active point of agreement. Strategical management ensures these groups are able to work together despite their differences in interests for the consistent organizational success. Mediation practices and negotiation techniques are consistently practiced throughout the operations process to avoid harmful and unfortunate misunderstandings. From the perspective of relevancy and evolution, it is evident that both the number and the function of stakeholders in the modern organizations evolves consistently. As the relationship between the businesses and the society transforms into one of mutual benefit and collaboration, strategy managers must ensure the long-term interests of the environment, ecological and social, are not compromised by the outlined operations. Finally, stakeholders may perform multiple roles within the firm, with investors overlapping with entrepreneurs or employees with increasing frequently.

Conclusion

In conclusion, strategic management is an incredibly diverse and theoretically rich field of managerial practice that affects the majority of areas of a firm’s performance. From financial and marketing decisions to organizational culture, strategic management aims to account for all of the current facts and characteristics about the company to avoid any future drawbacks. The tools such as SWOT analysis, Porter’s Five Forces and RVB are used by private and public companies and organizations to navigate the challenging environments of modern business (Brulil, 2018). They allow the management of said organizations to research and understand their competitors and potential allies, as well as to outline the nature of the services they provide in the most marketable way. The sectors differ substantially in their approaches to strategic management, but their need in this practice remains identically strong especially in the modern transformational era.

The nature of the differences between public and private sector strategic management concerns the contrast in the goals integral to those respective groups of firms. The tools used for the strategy design, implementation, and evaluation, however, remain largely consistent in both sectors, as do the reasons behind the importance of strategic management. Different operational frameworks for the environmental assessment and internal evaluation assist every company in developing a deeper understanding of its unique selling point and plausible value proposition. Overall, within the increasingly complex modern business management, organizational strategies remain integral to a firm’s ability to follow its long-term outline.

Reference List

Ansoff, H.I et al.(2018). Implanting strategic management. Springer.

Barbosa, M., Castañeda-Ayarza, J.A. and Ferreira, D.H.L., (2020). Sustainable strategic management (GES): Sustainability in small business. Journal of Cleaner Production, 258, p.120880.

Bergh, D.D., Sharp B., Aguinis H. and Li M. (2017, p. 470). Is there a credibility crisis in strategic management research? Evidence on the reproducibility of study findings. Strategic Organization, 15(3), pp.423-436.

Bindra, S., Parameswar, N. and Dhir, S., 2019. Strategic management: The evolution of the field. Strategic Change, 28(6), pp.469-478.

Braun, M., Latham, S. and Cannatelli, B., 2019. Strategy and business models: why winning companies need both. Journal of Business Strategy., 40(5), pp. 39-45, Web.

Bruijl, G.H.T., (2018). The relevance of Porter’s five forces in today’s innovative and changing business environment. Available at SSRN 3192207.

Bryson, J. and George, B., (2020). Strategic management in public administration. In Oxford Research Encyclopedia of Politics.

Doherty, N.A. and Smith, C., (2020). Corporate insurance strategy: the case of British petroleum. Journal of Applied Corporate Finance, 32(1), pp.48-57.

Drobyazko, S. et al., (2019). Factors of influence on the sustainable development in the strategy management of corporations. Academy of Strategic Management Journal, 18, pp.1-5.

Fuertes, G.et al., 2020. Conceptual framework for the strategic management: a literature review—descriptive. Journal of Engineering, 2020.

Hitt, M. and Duane Ireland, R., (2017). The intersection of entrepreneurship and strategic management research. The Blackwell handbook of entrepreneurship, pp.45-63.

Jabbar, A.A. and Hussein, A.M., (2017). The role of leadership in strategic management. International Journal of Research-Granthaalayah, 5(5), pp.99-106.

Kapinos, B., (2020). Community College Advising Coordinators: A Perspective from Middle Management. Community College Enterprise, 26(2), pp.46-67.

Leiber, T., Stensaker, B. and Harvey, L.C., 2018. Bridging theory and practice of impact evaluation of quality management in higher education institutions: a SWOT analysis. European Journal of Higher Education, 8(3), pp.351-365.

Makadok, R., Burton, R. and Barney, J., 2018. A practical guide for making theory contributions in strategic management, Strategic Management Journal, 39(6), pp. 1530-1545, Web.

Pádraig, B., (2017). An Analysis of Michael E. Porter’s Competitive Strategy: Techniques for Analyzing Industries and Competitors. Macat Library.

Reutskaya, I. et al., (2017). Technologies of company’s internal management. International Journal of Applied Business and Economic Research, 15(11), p.255.

Seifzadeh, P. and Rowe, W.G., (2019). The role of corporate controls and business-level strategy in business unit performance. Journal of Strategy and Management, 12(1), pp. 364-378

Teece, D.J., (2019). A capability theory of the firm: an economics and (strategic) management perspective. New Zealand Economic Papers, 53(1), pp.1-43.

Varadarajan, R., (2020). Customer information resources advantage, marketing strategy and business performance: A market resources-based view. Industrial Marketing Management, 89, pp.89-97.

Vlados, C., (2019). On a correlative and evolutionary SWOT analysis. Journal of Strategy and Management.

Wang, Z. et al., (2020). Strategic management of product recovery and its environmental impact. International Journal of Production Research, pp.1-21.