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Strategic management

Strategic management is the process of development of strategies  and management of organization  for its successful realization. Strategic management shall be performed  in the context of the mission of the organization, and its fundamental task  consists in ensuring  interrelation of the mission with principal goals  of the organization in conditions of fast-changing environment.

Strategic management is considered as a dynamic totality of five interrelated management processes.

Environmental analysis (strategic analysis) is considered to be the first  process of strategic management, as it provides the basis for both  definition of the mission and goals of the organization, and for the strategy development.

One of the key tasks of any management is  keeping the balance in cooperation of the organization with its environment. Each organization is involved into  three commutative processes:

• obtaining resources from the environment (input);
• processing of resources into a product (transformation);
• transfer of the product to the environment (output).

Management should provide balance of input and output. As soon as this balance is broken,  the organization is in crisis. The modern market has considerably  increased the meaning of the output process in keeping this balance. It is reflected in that  the first block in the scheme of strategic management structure  is the block of environment analysis.

Environmental analysis  provides for  studying both macro-environment and the immediate surrounding of the company. The analysis of macro-environment is the examination of the influence of economic, legal regulation and management, political processes, natural environment and resources, social and cultural components of society, scientific – technical and technological development, infrastructure, etc.

The immediate surrounding is analyzed, as a rule, by such components as buyers, suppliers, competitors, and labour market. It is necessary to pass from studying the external environment  to analysis of  the firm’s internal environment (personnel, management organization, production, finances, marketing, corporate culture, etc.).

It is very important for the company to maintain not only the balance between the output and input  in the process of creation of the value, but also the balance of interests of various social institutions  and groups of people interested in company operation and have an influence on it. The balance of interests is defined by the direction of  the organization which is formally represented as a mission  and  strategic targets (contemplated in more detail in the following topic).

After the mission and targets are defined, it is time to chose a strategy. This process is central in the strategic management  and consists not only in defining the general plan of actions for a long period of time. Determination of the strategy as a process means making a decision on how to develop business as a whole  and its separate lines, how to withstand competitors, what place to take on the market etc.

The process of the strategy realization is the next one in the process of  strategic management. Realization of the strategy is introducing  strategic changes (improvements) in the company which bring it to a state of readiness to turn the strategy into reality. Quite often companies cannot realize the strategy they chose. It happens because the strategic analysis was carried out and opinions were given incorrectly, or unforeseen changes took place in the external environment which were not timely revealed  and taken into consideration  in the adaptive part of the strategy. Often it happens that the management  is not able to use available resources (especially human resources) timely and properly for the strategy realization.

Therefore, the process of strategy realization requires an extraordinary attention and control. This functions perform an appropriate process  – valuation and control over the strategy realization which provides for:

• definition of what needs to be controlled and  according to what parameters;
• assessment of the state of controlled objects  in accordance with the adopted standards  or other  normative parameters;
• finding out the reasons for deviations, if any;
• adjustment.

In case of exercising control over  realization of strategies, these tasks  acquire certain specific character conditioned by the fact that strategic control  is directed at  finding out the  level of achievement of strategic targets of the company with the help of the chosen strategy. Strategic control is focused on solving the questions whether  it will be possible to realize in future a certain strategy  or whether the process of its realization will lead to  intended final results.