Concepts, Models and Schools of Strategic management
One of the duties of the managers of a company is to engage in strategic decision making. Strategic management is a broad subject on its own that borrows from other social science disciplines. According to AllBusiness (2011), strategic management involves all the activities undertaken by management to better place the company in the industry it operates in. It is important for every manager to realize that his firm does not exist alone in the business environment. Its environment has parties like competitors and customers, both internal and external; suppliers and government authorities that must be analyzed and addressed appropriately. Laying down the best strategy will involve assessing the needs of the market and the firm’s capabilities, formulating its mission and vision and communicating the goals and objectives set down to the employees. Once all this is done, managers have to assess the tasks to be done and allocate resources in a manner that will avoid wastage.
The aim of strategic management is to enable a business to take advantage of opportunities and to act quickly in response to challenges in its environment. This in turn helps to meet the needs of the market effectively. It has a role of ensuring that a company profitably stays in business. In fact, companies that run at a loss continuously are those that fail to strategize (David, H. & Thomas, and L. W. 2011).
Strategic management is a combination of several interwoven concepts that assist managers in decision making. These concepts are: SWOT analysis, PEST analysis, Porters Five Forces, value chain analysis, levels of strategy, competitive advantage, and strategic planning (Quick MBA 2010).
SWOT analysis entails evaluating the strengths and weaknesses of the company and the threats and opportunities in its environment. A firm’s strengths can be its good location, a loyal customer base, competitive brands, efficient technological knowhow and patents and trademarks. Weaknesses are mainly what it lacks that its competitors have such as inefficient technology, bad reputation, poor quality products and high production costs. These are found in the internal environment of the organization.
The external environment offers opportunities and threats. If a new more efficient technology is introduced at the market, a rival firm exits in the industry, barriers to international trade are eased or the government offers incentives to produce, these are all opportunities the firm can take advantage to increase productivity and growth . On the other hand, if the government introduces restrictive laws and policies, trade barriers are raised, a rival firm starts to produce a better quality substitute or customers shift their tastes away from the products of a company, a threat exists and a strategy to defend itself is imminent. SWOT analysis thus involves evaluating the prevailing combination of the four elements and formulating the best...