Strategic Management process
Strategic management process encompasses other planning processes such as the strategic planning as well as the human resources planning. In essence, strategic management processes necessitate all the tactical arrangements and the ability of the organization to execute the strategies (Aaker, 2001).
Specifically, strategic management process is the practice of making out and implementing the tactical policies of an organization. During the process, the company competencies and capabilities must correspond to the environmental needs.
The strategic management process begins from defining the current business and its mission to the evaluation process where the company performance is assessed against the strategies. Specifically, the strategic management process involves executing the plans and evaluating the performance or outcome against the planned strategies (Aaker, 2001).
In the planning cycle, strategic execution and strategic evaluation are always the last steps. Essentially, strategic management process involves the execution of strategic planning process and the evaluation of the strategic performance.
The role of the planning cycle
As indicated, the strategic management process encompasses various steps that involve the strategic planning process. Strategic planning process includes various steps ranging from defining the current situation of the business according to its mission to formulating the strategies to attain the strategic goals (Aaker, 2001). The strategic planning process involves five steps, which is referred to as the planning cycle.
As mentioned, the first step in the planning cycle is to identify the business and align it with its mission. The second step involves evaluating the business through the application of its internal strengths and weaknesses as well as the threats and opportunities that come from external sources.
The third process is devising the novel business statements. Fourth process involves transforming the business mission into tactical objectives. The last step in the planning process is the implementation of the tactical objectives. In the simplest sense, the planning cycle helps businesses or firms identify their current position and forecast achievable goals through formulated strategies.
Strategic management process and the way companies maintain sustainable competitive advantage
As mentioned, strategic management process involves tactical planning process, implementation of the strategies and the evaluation of the strategies. The company gauges these processes against environmental demands to achieve the competitive advantage (Aaker, 2001). In the first step of the planning process, firms have to choose the path on which it will compete.
In other words, the company has to decide the type of product or service it will bring into the market, how to differentiate its product or service and the place to sell the product. In essence, the company evaluates its current position and the kind of business to be involved in given their strengths, weaknesses and opportunities. Managers, through the application of the company mission, formulate the strategic actions that would enable the company attain its objectives.
In the second step of the planning process, the company performs detailed audit of its internal strengths and weaknesses, the threats that the firm faces from external environment and the opportunities the external environment brings to the firm. The strategic internal and external audit is facilitated by the application of SWOT analysis.
Based on this situation analysis, managers formulate novel business mission statement that capture the new form of business in terms of the type of product to sell, the geographical location in which it will sell the products and how the product will be differentiated.
The mission is transformed into strategic goals. In other words, the mission has to be translated into achievable objectives that all employees and various departments of the company understand. The mission statement has to be transformed into ways through which the products and services are made to satisfy the demands of the customers.
To sustain its competitive advantage, the company mission has to be translated into strategic goals that are geared towards creating and enhancing the shareholders value, sustaining the higher rate of returns through strong balance sheets and maintaining high quality products that satisfy the needs of the customers.
The final stage in the planning process is where the firms come up with strategies that will enable it attain the strategic goals. Based on the above processes, the strategy is the plans of action that will enable the business achieve the set objectives. The last step to attain the competitive advantage is the implementation of the strategies and evaluating the performance.
For instance, Ford Motor Company has been faced with huge losses and decreasing share in the market. The company has been losing market share to its rivals such as Toyota and Nissan. The reason is that its costs were higher than the competitors hence cannot stand the fierce competition in the market.
To overcome its problems, Ford Motor Company adopted a strategic plan that entailed cost reduction approaches such as closing some of its plants and terminating most of the employees. In the strategic plan, the company evaluated the internal strong points as well as limitations and matched them with corresponding external prospects and pressures to improve its competitiveness in the market.
The role of microeconomics in creating a sustainable competitive advantage
Companies use microeconomic concepts to evaluate the environmental needs (Pindyck & Rubinfeld, 2005). For instance, the concept of consumption is critical in evaluating the demand. The consumer theory is also important in examining the way consumers behave in the market. Understanding the behavior of consumers as well as other components of environment is important in sustaining competitive advantage.
References
Aaker, D. (2001). Developing business strategies. NY: John Wiley & Sons, Inc.
Pindyck, R. & Rubinfeld, D. (2005). Microeconomics. Web.