Strategic management process is a process which companies use to plan for either short-term or long-term goals. It consists of three components – strategic analysis, strategic choice and strategic implementation. (Albert 2012, 1) It is also a tool which is used by management to make decisions for companies to have competitive advantage over their competitors. Strategic management is a continuous process which companies use to achieve more market shares to encounter all present and future competitions. (Management study guide 2012)
If use as business’s strategy, it will be a guide way for the company to influences their staff’s decisions, priorities and ways of working. It is believed that everyone in the company would like to work in a meaningful environment when they know why they are doing. Sometimes management may set their business’s strategy that they may have missed out unforeseen circumstances which require the contribution from their staffs’ commitment, engagement, productivity and creativity. Management needs to relate their strategy plan to their staffs to let them know the important of achieving their goals together is important. This will boost the self-confidence and increases self-awareness of their individual staffs towards company strategies. These are the two important qualities which require by company. (Jeremy 2009, 4) Strategy planning can also be used in everyone’s life as simple and as efficient as possible as anyone whom wishes to achieve their goals. (Richard 2009, 10)
Strategic analysis is the key component to be started before any strategy management process can be processed. During strategic analysis stage, the company needs to look into resources which they have. They need to concentrate on their resources which help the company to be focused on essential steps in order for them to achieve their strategic objectives. They should also look into conserving their resources by educating their staffs on the benefits of not wasting resources. This can cut down unnecessary costs incurred by wastage. Company must also have alternative plans on how they are going to recover resources. Recovery of resources may require a longer time and intensive resource commitment before they can expect any returns on it. In order for a company to achieve the best result, the company can give their staff training on how to identify products which they could reuse. With the help of increased self-awareness, the company will be able to recover resources more quickly and therefore they are able to increase their resource leverage faster. (Clive 1998, 96)
A company should be specific on their values, expectations and objectives so that they could relate it to their staff. After the company has decided on their objectives, they need to take measurement in order for them to realize whether it is achievable. If no, company will be able to make modification on their objectives to make it achievable. (Aaron 2012. 52) In order for a company to adapt to any changes in the market, the management needs to have their strategic analysis first before they can start any new strategic management process. SWOT and Porter’s competitive forces are commonly use as a tool by companies during their strategic analysis stage. SWOT is normally being combined with Porter’s competitive forces analysis to achieve the best results for the company.
SWOT analysis which helps companies realize their internal company’s strengths and weaknesses and at the same time it also helps them to analyze the external opportunities and threats in the environment. (Kevan 2009, 18-19) SWOT is a flexible analysis which can be used as individual or combined and all analysis depends on company requirement. For example a large international company which is well known for its brand name. This is their strength. They can concentrate on getting more market shares by finding opportunities in the market. At the same time, they can identify their threats which will help them to be well prepared against their competitors. For a newly set up company, their management may need to use each and every one of the analysis. They are required to find out their strengths. It could be from the knowledge and experiences of their staff when they find new opportunities from their customers. At the same time, they are able to identify the threat from their competitors and what are their customers’ requirements. The company can also find out about their weaknesses so that they could make improvement in their process.
Many a times, most companies may have underestimated how difficult it is to improve weaknesses. As their staff may be afraid of telling the truth to the management which may mislead the management team to make the wrong decisions. Therefore, sometimes it is difficult for companies to make improvement on their weaknesses. (Cyril 2003, 90-91)
Porter’s five forces involve the potential entrants, substitutes of product or service and power of both vendors and buyers toward competitive rivalry in the environment. (Kevan 2009, 22-23) It is always good to begin with the five-forces model with the industry rivalry segment and it will be helpful to find out their current competitors. A company should at the same time take into consideration the threat which is given by the new entrants and this will depend on the barriers to entry which have been erected by the environment. High entry barriers might restrict the number of new players in the environment due to high costs, or new technology, or a high use of patents within the environment or even by other unforeseen circumstances. On the other hand, low entry barriers could invite new competitors to join in the environment.
It is also important for a company to be aware of the relationship between the environment and vendors that may favor one or the other. When there is a high demand with low supplies, it will be favored to the vendors. When there is a low demand with high supplies, it will be in favored of the customers (buyers). (Neil 1997, 10)
The five forces model creates a better understanding of the environment in which a company competes in. Therefore this model enables a company to obtain and maintain their competitive advantage as compared to their competitors. It is achievable by using Porter’s five forces, either through cost leadership or by differentiation. (Neil 1997, 11) A company can purchase products in bulk in order to get a better price from their vendors. Competitive advantage is being achieved by giving customers equivalent benefits which have been given by their vendors. By applying more than one generic strategy, the company may end up being “stuck in the middle” and this may result in neither cost leadership nor differentiation. (Loizos 2003, 12)
It is useful for a company to use the result of Porter’s five-forces in SWOT analysis to replace the external opportunities and threats to combine with internal strengths and weakness. (Kevan 2009, 23) Besides the management team whose involvement in the strategic analysis process on finding out the external world of their competitors, sometimes it can also include their staff whom may not be the same hierarchy like them to input valuable information. (Cyril 2003, 8)
After a company has come out their strategic analysis, the next step is for their management to make the decision in the strategic choice stage. Even in this stage, the company can sometimes generate more options and make evaluation on their choices in order for them to ensure that it can give them the best result. As this is the stage where their management’s decision on their choice enables the company to fulfill their mission and achieve their objectives. (Tony 1999, 6)
The final step for strategic management process is strategic implementation. This stage is the most difficult as it requires management to measure their achieved results. (Albert 2012, 1) The management needs to have resources planned and at the same time need to consider about their company’s structure which sometimes when re-engineered may help to re-organize their system. Technology is another issue for their organization to achieve their objective. If their computer system is out-dated, they should try to upgrade it in order to get the best result. At the same time, they should convey messages to their staff on their company’s objective. Sometimes the company should consider sending their staff for training so that they can upgrade their skills and knowledge as and when the company progresses.
It is always a belief that company staffs are one of the assets of the company. (Cyril 2003, 281) Sometimes in the company, most of their leaders will only share their strategy with their shareholders, and even their competitors (by publishing it in the company’s annual report), but not their staff. Any company must always take note that in order for them to achieve optimal results during their implementation stage they should involve everyone in the company cohesively in the same direction of their company’s mission and objectives. (Cyril 2003, 9)
Strategic management process is a flexible process which allows company to go back to any stage where they may have faced problems or could not get the optimal results out of it. It is a useful tool which company can use to make improvements as and when it goes on with the process. Upon implementing the process, the company will be able to take measurements to achieve the most optimal results. It can be used in any company regardless of their size which they can apply in their organization. It is also useful for us to use as an individual. For example, we could use it when we are looking for job opportunities. Once we confirm which job to apply, we will try to analyze our threats like who will be our possible job candidates (competitors). We could get ourselves prepared for our interviews so that it enables us to realize our strengths and weaknesses since this is one of the popular questions which the interviewer will ask in order to find out whether we are the most suitable candidate for their company.