Understanding The Concept Of Strategic Management Is Crucial For Effective Essay.

Strategic management has multidimensional definitions and it is relevant to many areas of research. Concepts from various fields such as economics, psychology, sociology, political science, system science, evolutionary biology, and ecology and philosophy. The term “strategy” has many meanings that are relevant to the people engaging in the strategic decision-making, thinking, planning, and implementation of strategic plans for their organizational development. According to some authors, strategy is the process of determination of the long-term goals of an organization and implementing proper action and resources management to fulfill these goals (Nickols, 2016). 

Strategic management comes up with an association between the challenges and opportunities faced by an enterprise in the external environment and the performance capacity of the same. Apart from deciding the actions of the organization in advance and resources allocation according to the goals set by the organization it also focuses on control and evaluation that is overseeing and enhancing the effectiveness of ongoing operations and activities to ensure the implementation of the strategic plan remains on the right track. Thompson and Strickland have shown that strategic management is consists of five tasks: formulation of a strategic vision, conversion of the strategic vision into measurable goals, identification of continuous testing strategies to achieve the results, efficient implementation and execution of the strategies chosen, evaluation of performance (Steiss 2019). According to Omalaja and Eruola (2011), strategic management is the approach that is used to specify the objective of an organization, programs, Development Policies, And Plans to ensure reach these goals by efficient allocation of the resources required for the implementation of the policies, plans, programs, and paradigms. 

Strategic management is a wide concept and can be completed through several steps. There are five steps of strategic management that are practiced by the enterprises within which, the first and the most important step is deciding on the strategic vision of the enterprise that is, in which direction the company wants to proceed and what position it wants to see itself in the future. A general strategy approach is for directing the global direction of the enterprise. A complement of the above strategy is the company strategy. Company strategy should have the following characteristics: 1) clarity in the objectives, 2) measurable, 3) resource allocation, 4) assignment of responsibility, and 5) that the application of the strategy can be checked (Hubbard, Rice, and Galvin 2015). 

The next step is to gather information and assess the internal and external environment so that the strategies can be formed based on the upcoming threats and opportunities identified. This assessment is required to decide how to utilize the opportunities, available resources, what are the alternative actions that can be taken, and the risks and challenges related to the implementation of the actions. The internal assessment can be started by deciding on the organizational structure (a group of specified responsibilities that establish the functions of the different units in the organization) so that the company can gain a competitive advantage over its competitors. Internal factors evaluation (IFE) is another tool for assessing the internal environmental factors that is the strengths and weaknesses of the organizational culture, operations, and units. External factors evaluation (EFE) is a tool through which the organization can do an external environmental audit so that the external factors (threats and opportunities can be identified. The competitive Profile Matrix (CPM) is a tool to identify the main competitors of the company along with identifying the strengths and weaknesses of the competitors of the enterprises (David, and David, 2016).  

Five Tasks of Strategic Management

Strategy formulation is the third step of the whole big process after gathering information by doing the internal and external audit (SWOT matrix). The strategies are designed differently in different situations: 

1. Maxi-maxi strategy for the strengths and opportunities identified from the external and internal environment 
2. Mini-maxi strategy for the weaknesses and opportunities is a strategy designed to minimize the weaknesses and maximize the opportunities. In a situation, where it’s difficult to find the strengths it is better to minimize the weaknesses and properly utilize the opportunities. 
3. Maxi-mini strategy for the strengths and threats is essential in a situation where the threats are increasing.
4. Mini-Mini strategy for the weakness and threat in the face of rising threats and reducing strengths (Fuertes et al 2020). 

The four criteria to evaluate the strategies are as follows: 1)  strategies should be aligned with the objectives of the enterprise, 2) strategies must include the responses to the internal and external environmental factors identified during the second stage of strategic management, 3) the strategy should be formed keeping in mind the feasibility of its implementation, 4) strategy must be focused on the creation and/or maintenance of the existing competitive advantage of the organization (Morden 2016).

The fourth stage is the strategic implementation of the strategies. Strategic implementation needs cooperation and active joint participation from all the members of the organization. The leadership style of that organization has a huge impact on the efficient implementation of strategic actions. Along with the leadership style, the dedication of the management team is highly required for the same. Three main components of the strategic implementation are: organizational guarantee, strategic publicity, and mechanism guarantee (Zhang et al 2018). The last stage is the evaluation and control that helps to understand that the strategic actions are taking the enterprise in the right direction. For this evaluation purpose, quantitative and qualitative data are analyzed. The Key performance indicators are analyzed, and the growth forecasts and the number of investments are checked as a part of the quantitative approach (Steiss 2019). 

A significant volume of literature can be found on the issue of external and internal environmental impact on the organizational strategic planning and implementation. It is an unambiguous fact that different external and internal factors can positively or negatively affect the strategic management process of the organization. Different theories identify different factors that can affect organizational strategies. The external factors that can affect are political factors, economic factors, sociological factors, technological factors, legal factors, and environmental factors. The resource-based theories show that resource abundance or constraints can affect the implementation of strategic plans. Resource constraints can be of many types: financial constraints, constraints related to human resources (such as required skills in a particular field), unavailability of required technology, and others. An extensive volume of literature claims that the results of the strategic actions taken by a company depend on the company’s own actions as well as the actions of its rival organizations. For example, the marketing strategies of a company depend on the competitive response elasticities, and its marketing mix is affected by the operations of its competitors (Ibrahim, and Harrison 2020). 

Based on the environmental factors, the organizations use different approaches to strategic management. Prescriptive approaches and emergent approaches are two types of strategic approaches (Shah et al 2015). The prescriptive approach is a step-by-step top-down procedure that starts with the realization of the firm’s mission statement, its goals, and objectives, and strategy formulation after an external and internal audit. This approach is an intended approach where people know what they do (Lynch 2018). The emergent strategy approach is a bottom-up procedure where the strategies are gradually developed during the whole process. The difference between these two approaches is that the first one is direction-focused and the second one is learning-focused. The basic notion of this emergent approach is the future is unknown and unpredictable and hence flexibility in the strategies is important that is this approach gives them the freedom the enterprises to update and develop the strategies according to the changing circumstances (James 2018).

Steps of Strategic Management

The problem with the prescriptive approach is as it is a top-down procedure, the strategies are required to be approved by the top-level managers even if the idea is from the low-level manager. The strategies formulated in the prescriptive approach are assumed to be the ultimate tools to achieve the objectives of the organization and thus may introduce rigidity in the phase of strategic implementation because during the time of strategic implementation the environment may change. If the strategies are not formulated and evolved or updated according to the changing situations then it may affect the progress and implementation of the same (Asif, and Searcy 2014). An emergent strategy can be the best fit as a compliment to an intended strategy. The disadvantage of the emergent strategy is the strategies formed by this approach are predictable and thus it is hard to plan and implement. Emergent strategy evolves during the process of ongoing organizational operations. As it is difficult to predict the future it is better to employ a combination of both approaches instead of relying on only one approach. The emergent approach is too much unclear at the beginning of the process whereas the strategies that are already formed based on the prescriptive approach cannot exhibit the same level of relevance if the situation changes in the future (Božac et al 2017). According to Mintzberg, and Waters (1985), the real-world strategic approaches apply a combination of both the intended and emergent approaches. In this case, the intended approach is used to make a clear vision statement and strategy formulation and the emergent approach helps the organization to introduce flexibility in the strategic formulation, implementation, and evaluation in the phase of changing circumstances. 

The following part provides an example of how the organizations changed their business strategies during the phase of COVID 19. COVID 19 forced businesses to rely more on digital technologies and operations. Studies have shown that a significant portion of the respondents confirmed that they had started using AI technologies and big data in the face of Covid 19 (see appendix A2). Use of digital devices and platforms such as video conference apps like Google meet, zoom, and Microsoft teams. In the post-COVID situation also the companies are allowing work from home which can be considered a major shift from the traditional strategic behavior of the company (Statista, 2022).  To provide a more specific idea about the above-mentioned issues the example of Tesco can be seen below:

Tesco is a UK-based supermarket chain. It was established in 1919 and within some years this company took the position of the largest retailer in the United Kingdom and made a place among the 5 largest retailers in the world. The supply-side partners of their business are suppliers of the products and raw materials (for selling and production purposes) along with 100 strategic partners. It is a business-to-consumer business that is the products are directly sold to the consumers. The company focuses on making its business cost-effective in order to sell the products cheaper and maintain the cost advantage over others. Tesco started self-producing to become even more cost-effective. Rapid expansion is another important feature of their business model. Four components of Tesco’s business model are: Products (offers a wide range of high-quality products), channels (physical stores and online business), Customers (taking feedback to understand the requirement of the customers), Reinvest (Reinvest for being more efficient).

Strategy Formulation and Criteria for Evaluation

The strengths of Tesco are its leading market position, diversified market operations (it operates in 14 markets with more than 4500 stores), diversified product basket, and online operations.  It could not continue its operation in several international markets, falling operating profits which can be considered as the weaknesses of this company.  Tesco sells a variety of products from groceries to clothing and beauty products, food and beverages to home appliances including its own branded products. It also provides financial services. A different positioning strategy is used to target different segments of the market. For example, price positioning (that is charging a premium value) is used to target the richer segments of the customers. Product-based positioning is done for targeting different people with different requirements and expectations. Psychographic segmentation is done in the case of beauty products (Tesco PLC 2022).

Once the COVID 19 hits the economy, the government-mandated stay-at-home order started to affect the activities of the general people and the operations of the businesses. People started preferring online orderings and getting their orders to get delivered to their door. Even Tesco also got hit by this pandemic as its profit fell in 2021 from 2020 (see appendix A3). At this point, the importance of e-commerce and effective digital operations of the organizations became very important. The problem continues to affect the operations of the organizations till now. As people are increasingly preferring online purchases it is creating a distance between the customers and the physical store where the staff and customers could engage in one-to-one interaction. Thus it is important to recognize the gaps in the customer service activities of this organization. 

The objective of this business plan is to upgrade Tesco’s marketing especially digital marketing strategies in the phase of COVID 19 to generate more customer satisfaction as retaining customers is as important as attracting new customers. The KPI for evaluating the outcome of this strategy is the ratings provided by the customers on their website, and mobile application. 

Aligning with the objectives of this business plan there are two prescribed strategies. 

1. To train the employees in the customer service department in better communication skills as well as the proper procedure to solve the customers’ problems online or via phone call. The role of communication skills is important when businesses operate through online platforms as any negative reply in a written form (suppose an email reply) or verbal form (a phone call recording) from the company’s part can get viral which can ruin its public image. 
2. To increase the information flow to the customers through better digital marketing operations.  

The following action plan is made according to the strategy:

• The customers’ problems should be solved both via phone calls and via written mediums such as emails or reviews. The FAQs provided on the website should be relevant to the customers’ usual queries and should be updated over time. Employees should be trained to properly acknowledge the emails and reviews of the customers. 
• The algorithm of the mobile app should be in such a way so that more personalized recommendations can be sent. AI or big data should be used to provide more personalized recommendations to the customers via emails and mobile application notifications. Adding users’ names while sending personalized emails and mobile notifications can raise customers’ satisfaction. The notifications should contain all the relevant information for their targeted segment such as big sales or discounts on some particular days, and the availability of a new or high-demanding product. 
• The ads on the social media platforms should also be personalized based on the data of the customers' past browsing history. 
• Continuous evaluation of the reviews, ratings, and feedback from the customers should be done to understand whether the actions are being effectively implemented or not. 

Conclusion

To conclude it can be said that, different internal and external factors can affect the strategic planning and management of the enterprises significantly (see appendix). Thus, it is important to assess the situation at first and gather information about the available resources and the possible effective allocation of the same before starting planning. Even throughout the process of implementation of the strategic plan, the situation can change, and thus the organization should allow a certain degree of flexibility in the process of strategic management to update the strategic planning and implementation according to the changed situation.  

Reference

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