Strategic management affects organizational performance and allows a company to create strategic short-and long-term plans. Following Dobson and Starkey (2004) “Governing the choice between strategic options should be the notion of competitive advantage. The firm has to identify unique opportunities for itself in its chosen area” (p. 9). Two functional areas, personal and accounting, determine the organizational success and performance of every company. Personal functional areas require flexibility and autonomy of decision-making. In this case, strategic management allows companies to determine long-term objectives and foreshadow possible short-term changes and cultural variations.
The business intelligence system is extremely important in providing the input for such an assessment. Position, environmental, and projected intelligence are the bases of determining planning constraints. All plans and corporate goals are fulfilled by personal, so it is crucial to take into account cultural and social variations, rewards, and promotions issues. A personal functional area guides directional and fundamental planning activities of the firm, and are concerned with such problems as to whether to diversify and, if so, into what lines; whether new products should be added; whether acquisitions should be undertaken; where marketing investments should be directed; and, in general, the future orientation of the company. To a very large extent, success in managing a marketing operation depends on combining, integrating, and coordinating human resources that will achieve company goals (Thompson and Martin 2005).
The accounting functional area helps a company to determine its performance and foreshadow strategic directions. Strategic decisions regarding major directions of an organization are contrasted with tactical decisions that carry out the strategies. Reciprocal decisions, in which one individual interacts with another and causes a reaction (such as competition), are distinguished from controlling decisions, in which one person’s actions control the actions of another without interaction. Sequential decisions involving multiple actions and reactions, like those in the marketplace, are differentiated from single decisions. Accounting is very important for strategic management because it determines possible threats and opportunities for investment and financial performance. The latter can be judged on the basis of efficiency; the former depends on normative values. Accounting involves such estimations as return on capital employed’ (RO(K:), ‘return on investment (ROI) or ‘economic profit’.
Using historical records and data analysis techniques, a company can choose the best possible direction for its strategic growth and development. Income cases, a number of subsequent plans and establish the limits and ranges of optional choices. They involve the greatest risk since they bound the decision and planning area and give direction to the total marketing effort. Strategic plans are broad and comprehensive; they are the master plans (Dobson and Starkey 2004). For global corporations, long-range planning and capital budgeting tend to center on the local host country. The corporate plan aggregates planning for individual host country operations. Local conditions on costs and other markets that can best be provided by local managers are needed so that global alternatives can be evaluated. Budgets offer another practical, although the possibly less effective, approach to the evaluation of managers and units of multinational corporations. It would seem that the profit plan should be constructed in a participative manner between different management levels. Budget variances for aspects that are under local control can then be the basis for performance evaluations (Drejer, 2002). Both personal and accounting functional areas help strategic planners to encompass the search for market opportunities, the development of general guiding directions, the scope of activities, and the goals to be achieved.
References
Dobson, P., Starkey, K. (2004). The Strategic Management: Issues and Cases. Blackwell Publishing.
Drejer, A. (2002). Strategic Management and Core Competencies: Theory and Application. Quorum Books.
Thompson, J. L., Martin, F. (2005). Strategic Management: Awareness, Analysis and Change. Thomson Learning.