The word ‘strategy’ comes from the Greek word ‘Strategos’ which means a general. In the military science, strategy literally means the art and science of directing military forces in a war or battle. Today, the term strategy is used in organizations to describe how an organization is going to achieve its overall objectives. Majority of the organizations have several alternatives for achieving its objectives. Strategy is concerned with deciding which alternative is to be adopted to achieve the overall objectives of the organization.
Strategy is a comprehensive long-term plan. It tries to cover three main issues namely (i) the present position of the organization, (ii) the future position of the organization, and (iii) actions to be taken to achieve the future position. All the organizations have a strategy, even if it is informal, unstructured, and irregular.
The term ‘strategy’ is very common in organizations in discussions regarding sales and marketing. There are several models and frameworks available for analyzing strategic choices. However, the key issue which unites all discussions on strategy is a clear sense of the organizational objectives and a sense of how it achieves these objectives. It is also important that the organization has a clear sense of its distinctiveness. Michael Porter has stated that ‘strategy is about achieving competitive advantage through being different – delivering a unique value added to the customer, having a clear and enactable view of how to position yourself uniquely in your industry’.
Defining strategy is not simple. Strategy is a complex concept which involves several different processes and activities within the organization. It involves goals and objectives which the organization needs to achieve to be successful in the market-place. The development of these goals, however, needs a strategic management process to be done correctly and thoroughly.
A strategy is typically a higher level, broad goal, without a lot of specifics. It is long-term in nature. It provides the direction in which the organization wants to move toward to be more successful. New or revised strategies can be developed as a result of changes in the organizational environment.
Organizations also routinely revise or create new strategies, frequently annually, by assessing and reacting to external and competitive forces and to maximize organizational performance. By identifying the resources and capabilities, organizations attempt to deploy these through strategies which give them a competitive advantage, so that the customers can buy their products or services instead of the products or services of the competitors.
Strategy formation goes back to ancient times, particularly used in warfare. Although not perfect, the strategic management process creates a frame-work for the organization to look outside of itself and set a course for success.
Historically, views of strategy fall into two camps. There are those who equate strategy with planning. According to this perspective, information is gathered, examined, and analyzed, forecasts are made, management go through the work of the planning department and decide what is the best course for the organization. This is a top-down approach to strategy. Others have a less structured view of strategy as being more about the process of management. As per this second perspective, the key strategic issue is to put in place a system of management which facilitates the capability of the organization to respond to an environment which is essentially not known, unpredictable and, hence, not amenable to a planning approach. A good strategic management actually encompasses elements of both the perspectives.
There is no one best way of strategy. The planning approach can work in a stable, and predictable environment. Its critics argue that such environments are becoming increasingly scarce, events make the plan redundant, and creativity is buried below the weight and protocols of planning and communication rules. Also, those not involved in devising the plan are never committed to its implementation. The second approach emphasizes speed of action and flexibility to enable the organization to function best in an environment which is fast-changing and basically unpredictable. The essence of strategy, as per this view, is adaptability and incrementalism. This approach has been criticized for failing to give an adequate sense of where the organization is going and what its mission is. Critics speak critically of the ‘mushroom’ approach to management.
There are a variety of definitions for ‘management’. The one which is normally used is defines it as the activity of maximizing the input-output relation regarding resources, and performing activities to achieve the best results, and achieve the organizational mission and objectives. Management is defined both in terms of its function as those activities which serve for ensuring that the basic objectives of the organization, as set by the strategy, are achieved, and as a group of senior employees responsible for performing this function. Hence, the working definition of strategic management is ‘all which is necessary to position the organization in a position which assures its long-term survival in a competitive environment’. A strategy is the organization’s way of saying how it creates unique value and hence attracts the customers which are its life-blood.
Strategic management is defined today as the art and science of formulating, implementing, and evaluating cross-functional decisions which enable the organization to achieve its objectives. As this definition implies, strategic management focuses on integrating management, marketing, finance, accounting, production, operations, research and development, and information systems for achieving the organizational success. The term strategic management is used sometimes synonymously with the term strategic planning. The latter term is more frequently used in the commercial organizations, whereas the former is frequently used in the corporate organizations. Sometimes the term strategic management is used to refer to strategy formulation, implementation, and evaluation, with strategic planning referring only to strategy formulation. There are several definitions of strategic management which have evolved over the time. Some of the important definitions are given below.
‘Strategic management is concerned with the determination of the basic long-term goals and the objectives of an enterprise, and the adoption of courses of action and allocation of resources necessary for carrying out these goals’ by Alfred Chandler.
It has been defined as a ‘. . . management . . . system . . . that links strategic planning and decision making with the day-to-day business of operational management’ by Gluck, Kaufman, and Walleck.
‘Strategic management is a stream of decisions and actions which lead to the development of an effective strategy or strategies to help achieve corporate objectives’ by Glueck and Jauch.
‘Strategic management is a process of formulating, implementing and evaluating cross-functional decisions that enable an organisation to achieve its objective’ by Fed R David.
‘Strategic management is the set of decisions and actions resulting in the formulation and implementation of plans designed to achieve a company’s objectives’ by Pearce and Robinson.
‘Strategic management includes understanding the strategic position of an organisation, making strategic choices for the future and turning strategy into action’ by Johnson and Sholes.
‘Strategic management consists of the analysis, decisions, and actions an organisation undertakes in order to create and sustain competitive advantages’ by Dess, Lumpkin and Taylor.
It can be observed from the above definitions that different authors have defined strategic management in different ways. The definition of Chandler is from the early 1960s, the period when strategic management was being recognized as a separate discipline. This definition consists of three basic elements (i) determination of long-term goals, (ii) adoption of courses of action, and (iii) allocation of resources to achieve those goals.
Taken together, these definitions capture three main elements which go to the heart of strategic management. The three on-going processes are (i) strategic analysis, (ii) strategic formulation, and (iii) strategic implementation. These three components parallel the processes of analysis, decisions, and actions. That is, strategic management is basically concerned with (i) analysis of strategic goals (vision, mission and objectives) along with the analysis of the external and internal environment of the organization (ii) decisions about two basic issues namely which areas the organization compete in, and how the organization competes in those areas to implement strategies, and (iii) actions to implement strategies. This needs management to allocate the necessary resources and to design the organization to bring the intended strategies to reality. This also involves evaluation and control for ensuring that the strategies are effectively implemented.
In short, strategic management is defined as the process of evaluation, planning, and implementation designed to maintain or improve competitive advantage. The process of evaluation is concerned with the external and internal environments.
All the organizations are heading towards somewhere, but unfortunately some organizations do not know where they are going. The old saying ‘If you do not know where you are going, then any road will lead you there’, emphasizes the need for organizations to use strategic-management concepts and techniques. The strategic-management process is becoming more widely used by small organizations, large organizations, non-profit institutions, governmental organizations, and multi-national corporations alike. The process of empowering the employees has almost limit-less benefits.
Organizations take a pro-active rather than a reactive approach as they strive to influence, anticipate, and initiate rather than just respond to events. The strategic-management process embodies this approach to decision making. It represents a logical, systematic, and objective approach for determining the future direction of the organization. The stakes are normally very high for strategists to use intuition alone in choosing among alternative courses of action. Successful strategists take the time to think about their organizations, where they believe their organizations is at present, and what they want the organization to be in future, and then they implement programmes and policies to get from where they are to where they what to be in a reasonable period of time.
There is an important difference now between changes which happen as a result of uncontrollable factors, and changes which are the result of explicit and intended actions of the organizational management and the employees. The former is the reactive action, while the latter constitute pro-active steps to influence the future state of the organization.
Organizations are seen to use two perspectives when going through the strategic management process of analysis while planning and implementation. These two perspectives are (i) resource- based view, and (ii) industrial organization.
The perspective ‘resource-based view’ suggests that the organization’s unique internal resources are the critical determinant of strategic competitiveness. If the organizational resources are unique, difficult to imitate, and without close substitutes which the competitors can adopt, they create competitive advantage. When these conditions are maintained over time, the organizational resources create the foundations for sustainable long-term competitive advantage. On the other hand, the ’industrial organization perspective assumes that the external environment determines the strategic actions which the organization can deploy. The corollary of this concept is that the organization identifies and seeks to operate in environments which allow strategic activity creating competitiveness and profitability.
Successful organizations have found that a strategic management process helps them achieve their goals within a dynamic and competitive environment. Strategic management is a comprehensive process designed for organizations to best use their resources and capabilities for providing superior organizational performance. Analysis of the external, competitive, and internal environments help shape the strategies which the organization pursues to be successful. Strategies are broad goals which, when accomplished, help the organization to move forward towards its vision.
Strategic management now is about being pro-active. It is about developing goals for the organization, as well as the strategy to get there. Strategic management is concerned with planning and predicting the future of the organization, accounting for the present and future of the surroundings of the organization. Once the organizational management has an idea of how the future can look like and what the position of the organization is going to have within that future, then the management can establish concrete objectives, as well as the road to follow for each these objectives These objectives and the strategy to achieve them are set in such a way so that, they lead to maximum return on investment.
Strategic management is concerned with the character and direction of the organization as a whole. It is concerned with basic decisions about what the organization is now, and what it is going to be in the future. It determines the purpose of the organization. It provides the frame-work for decisions about people, leadership, customers, suppliers, risk, finance, resources, products, systems, technologies, location, competition, and time. It determines what the organization is be capable of achieving, and what it does not choose to do. It determines whether and how the organization adds value, and what form to take the that added value.
Strategic management is not a clean, step by step process. It is not linear, but a ‘messy’, repetitive process which needs hard work and dedication from the majority of the employees in the organization to move it toward the future. It represents a new focus for the organization, which is a focus on a compelling vision of the future.
The purpose of strategic management is to exploit and create new and different opportunities for tomorrow, long-range planning, in contrast, tries to optimize for tomorrow the trends of today. The term strategic planning originated in the 1950s and was very popular between the mid-1960s and the mid-1970s. During these years, strategic planning was widely believed to be the answer for all problems. At the time, much of corporate world was ‘obsessed’ with strategic planning. Following that ‘boom’, however, strategic planning was cast aside during the 1980s as different planning models did not yield higher returns. The 1990s, however, brought the revival of strategic planning, and the process is widely practiced today in the corporate world.
Key terms in strategic management – There are nine key terms which are used in strategic management. These nine key terms are (i) competitive advantage, (ii) strategists, (iii) vision and mission statements, (iv) external opportunities and threats, (v) internal strengths and weaknesses, (vi) long-term objectives, (vii) strategies, (viii) annual objectives, and (ix) policies.
Competitive advantage – Strategic management is all about gaining and maintaining competitive advantage. This term can be defined as ‘anything which the organization does especially well compared to rival organizations’. When an organization can do something which the rival organizations cannot do, or owns something which the rival organizations desire, that can represent a competitive advantage. As an example, in a global economic recession, simply having ample cash on the organizational balance sheet can provide a major competitive advantage. Some cash-rich organization can buy distressed rivals. This can be an excellent strategy in a global economic recession. Having less fixed assets than the rival organizations can also provide major competitive advantages in a global recession
One chief executive of an organization has said, ‘where it used to be a polite war, it is now a 21st-century bar fight, where everybody is competing with everyone else for the customers’ money’. Getting and keeping competitive advantage is necessary for the long-term success of the organization. The ‘industrial / organizational (I/O)’ and the ‘resource-based view (RBV)’ theories of organization present different perspectives on how best to capture and keep competitive advantage, i.e., how best to manage strategically. Pursuit of competitive advantage leads to organizational success or failure.
Normally, an organization can sustain a competitive advantage for only a certain period because of the rival organizations imitating and undermining that advantage. Hence, it is not adequate to simply get the competitive advantage. The organization is required to strive to achieve sustained competitive advantage (i) by continually adapting to changes in external trends and events and internal capabilities, competencies, and resources, and (ii) by effectively formulating, implementing, and evaluating strategies which capitalize upon those factors.
An increasing number of organizations are gaining a competitive advantage by using the Internet for direct selling and for communication with suppliers, customers, creditors, partners, share-holders, and competitors who can be dispersed globally. E-commerce allows the organizations to sell products, advertise, purchase supplies, by-pass intermediaries, track inventory, eliminate paper-work, and share information. In total, e-commerce is minimizing the expense and unwieldiness of time, distance, and space in doing business, hence yielding better customer service, higher efficiency, improved products, and higher profitability.
The Internet has changed the way people organize their lives, inhabit their homes, and relate to and interact with family, friends, neighbours, and even themselves. The Internet promotes endless comparison shopping, which hence enables consumers worldwide to band together to demand discounts. The Internet has transferred power from organizations to individuals. Buyers used to face big obstacles when attempting to get the best price and service, such as limited time and data to compare, but now they can quickly scan hundreds of supplier offerings. Both the number of people shopping online and the average quantity they spend is increasing dramatically. Digital communication has become the name of the game in marketing.
Strategists – Strategists are the individuals who are most responsible for the success or failure of the organization. Strategists can have different job titles, such as chief executive officer, president, owner, chairman of the board, managing director, executive director, or simply director etc. Jay Conger has said that ‘all strategists have to be chief learning officers. We are in an extended period of change. If our leaders are not highly adaptive and great models during this period, then our companies will not adapt either, because ultimately leadership is about being a role model’.
Strategists help the organization gather, analyze, and organize information. They track industry and competitive trends, develop fore-casting models and scenario analyses, evaluate corporate and divisional performance, spot emerging market opportunities, identify threats, and develop creative action plans. Strategic planners normally serve in a support or operational role. Normally found in higher levels of management, they typically have considerable authority for decision making in the organization. The CEO (chief executive officer) is the most visible and critical strategic manager.
Any manager who has responsibility for a unit or division, responsibility for profit and loss outcomes, or direct authority over a major piece of the organization is a strategic manager (strategist). In the last few years, the position of chief strategy officer (CSO) has emerged as a new addition to the top management ranks of several organizations. This new corporate officer title represents recognition of the growing importance of strategic planning in the corporate world.
Strategists differ as much as organizations themselves, and these differences are to be considered in the formulation, implementation, and evaluation of strategies. Some strategists do not consider some types of strategies because of their personal philosophies. Strategists differ in their attitudes, values, ethics, willingness to take risks, concern for social responsibility, concern for profitability, concern for short-run versus long-run aims, and management style.
Vision and mission statements – Several organizations today develop a vision statement which determines, ‘what the organization want to become’. Developing a vision statement is frequently considered as the first step in strategic planning, preceding even development of a mission statement. Several vision statements are a single sentence. As an example, the vision statement of an organization can be ‘the organizational vision is to delight the customer with its product’.
Mission statements are ‘enduring statements of purpose which distinguish one organization from other similar organizations. A mission statement identifies the scope of the organizational operations in product and market terms. It addresses the basic issue faces all strategists, i.e., ‘what are the products and services of the organization’. A clear mission statement describes the values and priorities of the organization. Developing a mission statement compels strategists to think about the nature and scope of present operations and to assess the potential attractiveness of future markets and activities. A mission statement broadly charts the future direction of the organization. It is a constant reminder to its employees of why the organization exists and what the founders of the organization have envisioned when they put their fame and fortune at risk to breathe life into their dreams.
Here is an example of a mission statement, ‘our mission is to operate the steel plant in a manner best in the country, regardless of the product we sell. Since the product we sell is wire rods and merchant products, our aspirations must be consistent with the promise and the ideals of the consistency and qualities of steels we produce. To say that our mission exists independent of the product we sell is to demean the importance and the distinction of being steel producer. As steel producer we are determined to be the very best in our products, regardless of the size, pedigree, or inclinations of our competitors. We will continue to bring our industry nuances of style and approaches to steel marketing which are consistent with our evolving aspirations. Above all, we expect to be a credit to the communities we serve, a valuable resource to our customers, and a place where our dedicated steel production can grow and prosper. Toward this end we will not only listen to our customers and consumers but embrace the idea that the organization is at their service’.
External opportunities and threats – External opportunities and external threats refer to economic, social, cultural, demographic, environmental, political, legal, governmental, technological, and competitive trends and events which can considerably benefit or harm the organization in the future. Opportunities and threats are largely beyond the control of a single organization, hence the word external.
In a global economic recession, a few opportunities and threats which face several organizations are (i) availability of capital can no longer be taken for granted, (ii) customers expect green operations and products, (iii) marketing is moving rapidly to the Internet, (iv) customers see value in all that they buy, (v) global markets offer the highest growth in revenues, (vi) as the price of oil continues to fluctuate, oil rich countries are focused on supporting their own economies, rather than seeking out investments in other countries, (vii) a high debt can crush even the best organizations, (viii) layoffs are rampant among several organizations as revenues and profits fall and credit sources dry up, (ix) project and real estate market is depressed, (x) demand for health services does not change much in a recession, (xi) dramatic slow-downs in consumer spending are apparent in virtually all sectors, (xii) emerging economies can manage to grow much lower than expected, (xiii) unemployment rates continue to rise, (xiv) borrowers are faced with much bigger security requirements than in years past, (xv) equity lines of credit frequently now are not being extended, (xvi) organizations which have cash or access to credit have a competitive advantage over debt-laden organizations, (xvii) discretionary spending has fallen dramatically with consumers buying only the essential items which has crippled several luxury and recreational businesses such as boating and cycling, (xviii) the stock market crash leads to millions of people cut back on spending to the bare essentials, (xix) the double curse of falling demand and intense price competition is plaguing majority of the organizations, especially those with high fixed costs, (xx) the corporate world moves from a credit-based economy to a cash-based economy, and (xxi) there is reduced capital spending in response to reduced consumer spending.
The types of changes mentioned above are creating a different type of consumer and consequently a need for different types of products, services, and strategies. Several organizations face the severe external threat of on-line sales capturing increasing market share. Other opportunities and threats can include the passage of a law, the introduction of a new product by a competitor, a national catastrophe, or the declining value of the money.
The strength of a competitor can be a threat. Unrest in some countries, rising energy costs, or the war against terrorism can represent an opportunity or a threat. A basic principle of strategic management is that organizations need to formulate strategies to take advantage of external opportunities and to avoid or reduce the impact of external threats. For this reason, identifying, monitoring, and evaluating external opportunities and threats are necessary for success. This process of conducting studies and gathering and assimilating external information is sometimes called environmental scanning or industry analysis. Lobbying is one activity which some organizations utilize to influence external opportunities and threats.
Internal strengths and weaknesses – Internal strengths and internal weaknesses are the organization’s controllable activities which are performed especially well or poorly. They arise in the management, marketing, finance / accounting, production / operations, research and development, and management information systems activities of an organization. Identifying and evaluating organizational strengths and weaknesses in the functional areas of the organization is a necessary strategic management activity.
Organizations strive to pursue strategies which capitalize on internal strengths and eliminate internal weaknesses. Strengths and weaknesses are determined relative to the competitors’ strength and weaknesses. Relative deficiency or superiority is important information. Also, strengths and weaknesses can be determined by elements of being rather than performance. As an example, a strength can involve ownership of natural resources or a historic reputation for quality.
Strengths and weaknesses can be determined relative to the own objectives of the organization. For example, high levels of inventory turnover cannot be a strength for an organization which seeks never to stock-out.
Internal factors can be determined in a number of ways, including computing ratios, measuring performance, and comparing to past periods and industry averages. Different types of surveys can also be developed and administered to examine internal factors such as employee morale, production efficiency, advertising effectiveness, and customer loyalty.
Long-term objectives – Objectives can be defined as specific results which the organization seeks to achieve in pursuing its basic mission. Long-term means a time period of more than one year. Objectives are necessary for organizational success since they state direction, aid in evaluation, create synergy, reveal priorities, focus coordination, and provide a basis for effective planning, organizing, motivating, and controlling activities. Objectives are to be challenging, measurable, consistent, reasonable, and clear. In a multi-dimensional organization, objectives are established for the overall organization and for each division / department.
Strategies – Strategies are the means by which long-term objectives are achieved. Organizational strategies include geographical expansion, diversification, acquisition, product development, market penetration, retrenchment, divestiture, liquidation, and joint ventures.
Strategies are potential actions which need the decisions of the management and large quantities of the organizational resources. In addition, strategies affect the organizational long-term prosperity, typically for at least five years, and hence are future-oriented. Strategies have multi-functional or multi-divisional consequences and need consideration of both the external and internal factors facing the organization.
Annual objectives – Annual objectives are short-term mile-stones which the organization is to achieve to reach its long-term objectives. Like long-term objectives, annual objectives are to be measurable, quantitative, challenging, realistic, consistent, and prioritized. They are to be established at the corporate, divisional, and functional levels in a large organization. Annual objectives are to be stated in terms of management, marketing, finance / accounting, production / operations, research and development, and management information systems (MIS) accomplishments. A set of annual objectives is needed for each long-term objective.
Annual objectives are especially important in strategy implementation, whereas long-term objectives are particularly important in strategy formulation. Annual objectives represent the basis for allocating resources.
Policies – Policies are the means by which annual objectives are achieved. Policies include guidelines, rules, and procedures established to support efforts for achieving stated objectives. Policies are guides to decision making and address repetitive or recurring situations. Policies are most frequently stated in terms of management, marketing, finance / accounting, production / operations, research and development, and computer information systems activities. Policies can be established at the corporate level and apply to the entire organization at the divisional level and apply to a single division, or at the functional level and apply to particular operational activities or departments.
Policies, like annual objectives, are especially important in strategy implementation since they outline an organization’s expectations of its employees. Policies allow consistency and coordination within and between organizational departments. A number of studies suggest that a healthier work-force can more effectively and efficiently implement strategies.
Adapting to change – The strategic-management process is based on the belief that the organization is to continually monitor internal and external events and trends so that timely changes can be made as needed. The rate and magnitude of changes which affects the organization are increasing dramatically as seen how the global economic recession has caught several organizations by surprise. Organizations like organisms, are to be ‘skillful at adapting’ or they do not survive.
For their survival, all organizations are to shrewdly identify and adapt to change. The strategic management process is aimed at allowing the organizations to adapt effectively to change over the long run. As Waterman has noted, ‘In today’s business environment, more than in any preceding era, the only constant is change. Successful organizations effectively manage change, continuously adapting their bureaucracies, strategies, systems, products, and cultures to survive the shocks and prosper from the forces that decimate the competition’.
E-commerce and globalization are external changes which are transforming organizations and society today. On a political map, the boundaries between countries can be clear, but on a competitive map showing the real flow of financial and industrial activity, the boundaries have largely disappeared. The speedy flow of information has eaten away at national boundaries so that people world-wide readily see for themselves how other people live and work. The environment has become a border-less world with global citizens, global competitors, global customers, global suppliers, and global distributors.
Organizations are challenged by large rival organizations. This situation is true in several industries. The need to adapt to change leads organizations to key strategic-management issues, such as ‘what kind of business the organization needs to become’, ‘whether the organization is in the right field(s)’, ‘whether it needs business reshape’, ‘what new competitors are entering in the industry’, ‘what strategies the organization is to pursue’, ‘how the customers are changing’, and ‘whether new technologies being developed can put the organization out of its market’.
Role of planning – Strategic management is also concerned with management planning and decision-making for the medium to long-term future. It is concerned with the anticipation of that future, and with the establishment of a vision or view of how the organization develop into the future which it is going to face. It is a systems approach to identifying and making the necessary changes and measuring the organizational performance as it moves toward its vision.
Planning involves developing business models, corporate direction, competitive tactics, international strategy, acquisitions, and collaborative action. The implementation phase needs leadership to build the appropriate organizational structure, develop management culture, control the strategic processes, and steer the organization through corporate governance.
Studies indicate that organizations using strategic-management concepts are more profitable and successful than those which do not use. Organizations using strategic-management concepts show considerable improvement in sales, profitability, and productivity compared to the organizations without systematic planning activities. High-performing organizations tend to do systematic planning to prepare for future fluctuations in their external and internal environments. Organizations with planning systems more closely resembling strategic-management theory normally show superior long-term financial performance relative to their industry.
Some organizations do not engage in strategic planning, and some organizations carry out strategic planning but receive no support from the employees. Some of the reasons for poor or no strategic planning are (i) lack of knowledge or experience in strategic planning because of no training in strategic planning, (ii) inadequate reward structures, i.e., when the organization gets success, it frequently fails to reward success, but on the contrary, when failure occurs, then the organization punishes, (iii) fire-fighting, i.e., the organization can be so deeply involved in resolving crises and fire-fighting that it has no time for planning, (iv) waste of time, i.e., some organizations see planning as a waste of time since no marketable product is produced while actually time spent on planning is an investment, (v) too expensive, i.e., some organizations see planning as very expensive in time and money, (vi) laziness, i.e., people do not want to put forth the effort needed to formulate a plan, (vii) content with success as when particularly if the organization is successful, employees can feel there is no need to plan since things are fine as they stand and they forget that the present success does not guarantee future success, (viii) fear of failure, i.e., by not taking action, there is little risk of failure unless a problem is urgent and pressing, since people think that whenever something worthwhile is attempted, there is some risk of failure, (ix) over-confidence. i.e., as employees accumulate experience, they normally rely less on formalized planning, which is, however, rarely appropriate, since being over-confident or over-estimating experience can bring deterioration, (in fact, fore-thought is rarely wasted and is frequently the mark of professionalism), (x) prior bad experience, i.e., people can have a previous bad experience with planning, and have cases in which plans have been long, cumbersome, impractical, or inflexible, (planning, like anything else, can be done badly, (xi) self-interest, i.e., when people have achieved status, privilege, or self-esteem through effectively using an old system, they frequently sees a new plan as a threat, (xii) fear of the unknown, i.e., people can be uncertain of their abilities to learn new skills, of their aptitude with new systems, or of their ability to take on new roles, (xiii) honest difference of opinion, i.e., people can sincerely believe the plan is wrong, or they can view the situation from a different viewpoint, or they can have aspirations for themselves or the organization which are different from the plan since different people in different jobs have different perceptions of a situation, and (xiv) suspicion, i.e., employees have no trust in the management.
There are also draw-backs in strategic planning. Strategic planning is an involved, intricate, and complex process which takes the organization into uncharted territory. It does not provide a ready-to-use prescription for success. Instead, it takes the organization through a journey and offers a frame-work for addressing questions and solving problems. Being aware of potential draw-backs and being prepared to address them is essential to success.
Some draw-backs to watch for and avoid in strategic planning are (i) using strategic planning to gain control over decisions and resources, (ii) doing strategic planning only to satisfy accreditation or regulatory requirements, (iii) very hastily moving from mission development to strategy formulation, (iv) failing to communicate the plan to the employees, who continue to work in the dark, (v) management making several intuitive decisions which conflict with the formal plan, (vi) management not actively supporting the strategic-planning process, (vii) failing to use plans as a standard for measuring performance, (viii) delegating planning to a ‘planner’ rather than involving all employees, (ix) failing to involve key employees in all phases of planning, (x) failing to create a collaborative climate supportive of change, (xi) viewing planning as unnecessary or unimportant, (xii) becoming so engrossed in present issues that insufficient or no planning is done, and (xiii) being so formal in planning that flexibility and creativity are lost.
Guide-lines for strategic management – There are certain guide-lines for effective strategic management. Failing to follow the guidelines in conducting strategic management can cause criticisms of the process and create problems for the organization. Issues such as ‘whether the strategic management in the organization is a people process or a paper process’ is to be addressed. Even the most technically perfect strategic plan serves little purpose if it is not implemented. Several organizations tend to spend an inordinate quantity of time, money, and effort on developing the strategic plan, treating the means and circumstances under which it is implemented as after-thoughts. Change comes through implementation and evaluation, not through the plannig. A technically imperfect plan which is implemented well achieves more than the perfect plan which never gets off the paper on which it is typed.
T. Lenz has offered some important guidelines for effective strategic management for keeping the strategic-management process as simple and non-routine as possible. It is necessary to eliminate jargon and formal planning language. It is to be remembered that the strategic management is a process for fostering learning and action, not merely a formal system for control. For avoiding routinized behaviour, assignments, team membership, meeting formats, and the planning calendar are to be diverse. The process is not to be totally predictable, and settings are to be changed to stimulate creativity. Emphasis is to be given to word-oriented plans with numbers as back-up material.
If employees cannot express their strategy in a paragraph or so, they either do not have one or do not understand it. Thinking and action are to be stimulated which challenge the assumptions underlying present corporate strategy. Bad news is to be welcomed. If strategy is not working, employees desperately need to know it. Further, no pertinent information is to be classified as inadmissible merely because it cannot be quantified. A corporate culture in which the role of strategic management and its essential purposes are understood is to be built in the organization. ‘Technicians’ to co-opt the process is not to be permitted. It is ultimately a process for learning and action and hence, the process is spoken in these terms. The psychological, social, and political dimensions, as well as the information infra-structure and administrative procedures supporting it are to be attended.
An important guideline for effective strategic management is open-mindedness. A willingness and eagerness to consider new information, new viewpoints, new ideas, and new possibilities is necessary. All the employees are to share a spirit of inquiry and learning. Strategists such as CEOs, presidents, owners of small organizations, and heads of government agencies are to commit themselves to listen to and understand employees’ positions well enough to be able to restate those positions to the their satisfaction. In addition, employees throughout the organization are to be able to describe the strategists’ positions to the satisfaction of the strategists. This degree of discipline promotes under-standing and learning.
There are seventeen guidelines for the strategic-planning process to be effective. These guidelines are (i) it is to be a people process more than a paper process, (ii) it is to be a learning process for all the employees, (iii) it is to be words supported by numbers rather than numbers supported by words, (iv) it is to be simple and non-routine, (v) it is to differ assignments, team memberships, meeting formats, and even the planning calendar, (vi) it is to challenge the assumptions underlying the present corporate strategy, (vii) it is to welcome bad news, (viii) it is to welcome open-mindedness and a spirit of inquiry and learning, (ix) it is not to be a bureaucratic mechanism, (x) it is not to become ritualistic, affected, or arranged, (xi) it is not to be too formal, predictable, or rigid, (xii) it is not to have jargon or words with hidden meaning in the planning language, (xiii) it is not to be a formal system for control, (xiv) it is not to disregard qualitative information, (xv) it is not to be controlled by ‘technicians’. (xvi) several strategies are not to be pursued at the same time, and (xvii) it is to continually strengthen the axiom ‘good ethics is good business’ policy. Fig 1 shows plans, factors, and implementation process of strategic management.
Fig 1 Plans, factors, and implementation process of strategic management
Stages of strategic management – The strategic-management process consists of three stages namely (i) strategy formulation, (ii) strategy implementation, and (iii) strategy evaluation. Strategy formulation includes developing a vision and mission, identifying the organization’s external opportunities and threats, determining internal strengths and weaknesses, establishing long-term objectives, generating alternative strategies, and choosing particular strategies to pursue. Strategy-formulation issues include deciding what new markets or products to enter, what new markets or products to abandon, how to allocate resources, whether to expand operations or diversify, whether to enter international markets, whether to merge or form a joint venture, and how to avoid a hostile take-over.
Since no organization has unlimited resources, strategists are to decide which alternative strategies are going to benefit the organization most. Strategy-formulation decisions commit the organization to specific products, markets, resources, and technologies over an extended period of time. Strategies determine long-term competitive advantages. For better or worse, strategic decisions have major multi-functional consequences and lasting effects on the organization. Organizational management has the best perspective to understand fully the ramifications of strategy-formulation decisions. It has the authority to commit the resources necessary for implementation.
Strategy implementation needs the organization to establish annual objectives, devise policies, motivate employees, and allocate resources so that formulated strategies can be executed. Strategy implementation includes developing a strategy-supportive culture, creating an effective organizational structure, redirecting marketing efforts, preparing budgets, developing and utilizing information systems, and linking employee compensation to the organizational performance.
Strategy implementation is frequently called the ‘action stage’ of the strategic management. Implementing strategy means mobilizing employees to put formulated strategies into action. Frequently considered to be the most difficult stage in strategic management, strategy implementation needs personal discipline, commitment, and sacrifice. Successful strategy implementation hinges upon the ability of the management to motivate employees, which is more of an art than a science. Strategies formulated but not implemented serve no useful purpose.
Inter-personal skills are especially critical for successful strategy implementation. Strategy implementation activities affect all employees in the organization. Every division and department are to decide on such issues as (i) what is to be done to implement its part of the organizational strategy, and (ii) how best to get the job done. The challenge of implementation is to stimulate the employees through-out the organization to work with pride and enthusiasm toward achieving stated objectives.
Strategy evaluation is the final stage in strategic management. Management desperately needs to know when particular strategies are not working well. Strategy evaluation is the primary means for getting this information. All strategies are subject to future modification since external and internal factors are constantly changing. Three fundamental strategy-evaluation activities are (i) reviewing external and internal factors which are the bases for current strategies, (ii) measuring performance, and (iii) taking corrective actions. Strategy evaluation is needed since success today is no guarantee for success tomorrow. Success always creates new and different issues with complacent organizations experience death.
Strategy formulation, implementation, and evaluation activities occur at three hierarchical levels in a large organization, (ii) corporate, (ii) divisional or department, and (iii) and functional. By nurturing communication and interaction among employees across hierarchical levels, strategic management helps the management as a competitive team. Majority of the small organizations and some large organizations do not have divisions or departments, they have only the corporate and functional levels. However, employees at these two levels are to be actively involved in strategic-management activities.
As per Peter Drucker, the prime task of strategic management is thinking through the overall mission of the organization, i.e., to know what is the purpose of the organization. This leads to the setting of objectives, the development of strategies, and the making of present decisions for future results. This is clearly be done by a part of the organization which can see the entire organization and which can balance objectives and the needs of today against the needs of tomorrow, and which can allocate resources of men and money to key results.
Edward Deming once said, ‘in God we trust. all others bring data’. The strategic management process can be described as an objective, logical, systematic approach for taking major decisions in the organization. It attempts to organize qualitative and quantitative information in a way which allows effective decisions to be made under conditions of uncertainty. Yet, strategic management is not a pure science which lends itself to a nice, neat, one-two-three approach.
Based on past experiences, judgment, and feelings, majority of people recognize that intuition is necessary for taking good strategic decisions. Intuition is particularly useful for taking decisions in situations of high uncertainty or little precedent. It is also helpful when highly inter-related variables exist or when it is necessary to choose from several plausible alternatives. Some organizational managements admit to have extraordinary abilities for using intuition alone in devising brilliant strategies. For example, some employees are described as ‘persons who proceeds on a course of action guided solely by some intuitive flash of brilliance’. They never feel obliged to make an engineering hunt for the facts. Yet at times, they are remarkably correct in their judgment. Albert Einstein acknowledged the importance of intuition when he said, ‘I believe in intuition and inspiration. At times, I feel certain that I am right while not knowing the reason. Imagination is more important than knowledge, since knowledge is limited, whereas imagination embraces the entire world’.
Although some organizations today can survive and prosper since they have intuitive geniuses managing them, but the majority are not so fortunate. Majority of the organizations can benefit from strategic management, which is based upon integrating intuition and analysis in decision making. Choosing an intuitive or analytic approach to decision making is not an either / or proposition. People at all the levels in the organization inject their intuition and judgment into strategic-management analyses. Analytical thinking and intuitive thinking complement each other. Operating from the ‘I have already made-up my mind, do not bother me with the facts, mode is not management by intuition. It is management by ignorance’.
Drucker has said ‘I believe in intuition only if you discipline it. Hunch artists, who make a diagnosis but do not check it out with the facts, are the ones in medicine who kill people, and in management kill businesses’.
As Henderson notes ‘the accelerating rate of change today is producing a business world in which customary managerial habits in organizations are increasingly inadequate. Experience alone was an adequate guide when changes could be made in small increments. But intuitive and experience-based management philosophies are grossly inadequate when decisions are strategic and have major, irreversible consequences’. In a sense, the strategic-management process is an attempt both to duplicate what goes on in the mind of a brilliant, intuitive person who knows the organization and to couple it with analysis.
The concept of strategic management process – The concept of strategic management process is shown in Fig 2. It has four component processes. These are (i) strategic analysis and planning, (ii) strategy formulation and strategic decision-making, (iii) strategic choice, and (iv) strategy implementation.
Fig 2 The strategic management process
Strategy formulation is the process of deciding best course of action for accomplishing organizational objectives and hence achieving organizational purpose. It refers to the process of choosing the most appropriate course of action for the realization of organizational goals and objectives and thereby achieving the organizational vision. It basically involves following six steps not necessarily in a rigid chronological order.
The first step is the setting of the objectives. The key component of strategy formulation is to set the long-term objectives for the organization. Strategy is normally a medium for realization of these objectives. Through strategy, resources are deployed so as to achieve the objectives. While fixing the organizational objectives, it is necessary that the factors influencing the selection of the objectives are analyzed. Once the objectives and the factors influencing their selection have been determined, it is easy to take strategic decisions.
The second step is to evaluate the general economic and industrial environment in which the organization operates. This includes a review of the organizations competitive position so as to ensure that the factors important for competitive success of the organization can be discovered by identifying the strengths and weaknesses of the organization as well as its competitors. At this stage SWOT (strengths, weaknesses, opportunities and threats) analysis is required to be done.
The third step is the setting of the quantitative targets. For the achievements of the organizational objectives, it is necessary that the quantitative target values for the objectives are fixed.
The fourth step is the development of plan. The plan for achievement of the targets is developed after carrying out the trend and capability analysis.
The fifth step is the performance analysis. Performance analysis includes discovering and analyzing the gap between the planned and actual performance. A critical evaluation of the organizational performance helps in identifying the gaps which exists between the reality and the desired objectives.
The sixth step is decision making regarding the strategy. This is the last step in the process of strategy formulation. The strategy is made based on the analysis feed-back to achieve the desired objectives of the organization.
Strategy implementation implies making the strategy work as intended or putting the chosen strategy of the organization into action. Strategy implementation includes designing the structure of the organization, distributing resources, developing decision making process, and managing human resources. Strategy implementation is the translation of chosen strategy into organizational action so as to achieve strategic goals and objectives.
Strategy implementation is also defined as the manner in which the organization is to develop, utilize, and merge organizational structure, control systems, and culture to follow strategies which lead to competitive advantage and a better performance. Organizational structure allocates special value developing tasks and roles to the employees and states how these tasks and roles can be correlated so as maximize efficiency, quality, and customer satisfaction which are the pillars of competitive advantage.
The important steps during strategy implementation are (i) forming policies which are necessary for strategy implementation, (ii) modifications and development of organizational systems and procedures for carrying out the strategy, (iii) allocation of necessary resources to the activities which are necessary for strategy formulation, (iv) management is to show appropriate leadership and commitment for strategy implementation, and (v) organization to have necessary external and internal communication channel to assist strategy implementation.
The strategic-management model – The strategic-management process can best be studied and applied using a model. Every model represents some kind of process. The strategic-management model shown in Fig 3 depicts the five processes of strategic management which are pre-planning, strategic planning, deployment, implementation, and measurement and evaluation.
Fig 3 The strategic-management model
The framework of strategic-management model shown in Fig 4 which is an accepted, comprehensive model of the strategic-management process. This model does not guarantee success, but it does represent a clear and practical approach for formulating, implementing, and evaluating strategies. Relationships among major components of the strategic-management process are also shown in the model.
Fig 4 A comprehensive strategic-management model
There are three important issues in the development of a strategic plan. These are (i) where the organization is now, (ii) where the management want it to go, and (iii) how the organization can get there. Identification of the organizational existing vision, mission, objectives, and strategies is the logical starting point for strategic management since the present situation and condition of the organization can prevent certain strategies and can even dictate a particular course of action.
Every organization has a vision, mission, objectives, and strategy, even if these elements are not consciously designed, written, or communicated, then the issue where the organization is to go can be determined largely by where the organization is at present. The strategic-management process is dynamic and continuous. A change in any one of the major components in the model can necessitate a change in any or all of the other components. For example, a shift in the economy can represent a major opportunity and need a change in long-term objectives and strategies. A failure to accomplish annual objectives can need a change in policy, or a major change in the competitor’s strategy can need a change in the mission of the organization.
Hence, strategy formulation, implementation, and evaluation activities are to be performed on a continual basis, not just at the end of the year or half-yearly. The strategic-management process never really ends. It is to be noted that in the strategic-management model, the business ethics / social responsibility / environmental sustainability issues impact all activities in the model. Also, it can be seen in the model that global / international issues also impact virtually all the present strategic decisions.
The strategic-management process is not as cleanly divided and neatly performed in practice as the strategic-management model suggests. Strategists do not go through the process in lock-step fashion. Normally, there is give-and-take among hierarchical levels of the organization. Several organizations conduct half-yearly formal meetings to discuss and update the vision / mission, opportunities / threats, strengths / weaknesses, strategies, objectives, policies, and performance of the organization. These meetings are normally held off-premises and are called retreats. The rationale for periodically conducting strategic-management meetings away from the work-site is to encourage more creativity and openness from the participants.
Good communication and feed-back are needed through-out the strategic-management process. Application of the strategic-management process is typically more formal in larger and well-established organizations. Formality refers to the extent that participants, responsibilities, authority, duties, and approach are specified. Smaller organizations tend to be less formal. Organizations which compete in complex, rapidly changing environments, such as technological environment, tend to be more formal in strategic planning. Organizations which have several divisions, products, markets, and technologies also tend to be more formal in applying strategic-management concepts. A high level of formality in applying the strategic-management process is normally positively associated with the cost, comprehensiveness, accuracy, and success of planning across all types and sizes of the organizations.
Communication is a key to successful strategic management. Through involvement in the process, in other words, through dialogue and participation, employees become committed to supporting the organization. The organization needs that all the employees are to be on a mission to help the organization succeed. Fig 5 shows the effect of communication on strategic management.
Fig 5 Effect of communication on strategic management
The manner in which strategic management is carried out is hence exceptionally important. A major aim of the process is to achieve the understanding of, and commitment from, all the employees. Understanding is the most important benefit of strategic management, followed by commitment. When the employees understand what the organization is doing and why, they frequently feel that they are a part of the organization and become committed to assisting it. This is especially true when the employees also understand linkages between their own compensation and organizational performance.
Employees become surprisingly creative and innovative when they understand and support the mission, objectives, and strategies of the organization. Hence, the strategic management brings the opportunity of empowering the employees. Empowerment is the act of strengthening the sense of effectiveness of the employees by encouraging them to participate in decision making and to exercise their initiative and imagination, and rewarding them for doing so.
A large number of organizations are decentralizing the strategic-management process, recognizing that planning requires to involve lower-level of employees. The notion of centralized planning is being replaced in organizations by decentralized line-manager planning. The process is a learning, helping, educating, and supporting activity, not merely a paper activity among senior executives. Strategic-management dialogue is more important than a nicely bound strategic-management document.
The worst thing strategists can do is to develop strategic plans themselves and then present them to operating personnel to execute. Through involvement in the process, line managers become ‘owners’ of the strategy. Ownership of strategies by the people who have to execute them is a key to success. Although making good strategic decisions is the major responsibility of the management of the organization, employees are also to be involved in strategy formulation, implementation, and evaluation activities. Participation is a key to gaining commitment for needed changes. An increasing number of organizations are using strategic management to make effective decisions. But strategic management is not a guarantee for success. It can be poor-functional if conducted haphazardly.
High-performing organizations normally seem to make more informed decisions with good anticipation of both short-term and long-term consequences. In contrast, organizations which perform poorly frequently engage in activities which are short-sighted and do not reflect good forecasting of future conditions. Strategists of low-performing organizations are frequently pre-occupied with solving internal problems and meeting paper-work dead-lines. They typically under-estimate the strength of their competitors and over-estimate the strength of their own organization. They frequently attribute weak performance to uncontrollable factors such as a poor economy, technological change, or international competition.
Besides helping the organization to avoid financial loss, strategic management offers other tangible benefits, such as an improved awareness of external threats, an improved understanding of the strategies of the competitor, increased employee productivity, reduced resistance to change, and a clearer understanding of performance–reward relationships. Strategic management improves the problem-prevention capabilities of the organization since it promotes interaction among the employees at all divisional and functional levels. Organizations which have nurtured their employees, shared organizational objectives with them, empowered them to help improve the product or service, and recognized their contributions can turn to them for help in trouble times because of this interaction.
In addition to empowering employees, strategic management frequently brings order and discipline to an otherwise struggling organization. It can be the beginning of an efficient and effective managerial system. Strategic management renews confidence in the present organizational strategy or point to the need for corrective actions. It provides a basis for identifying and rationalizing the need for change to all the employees of the organization. It helps them view change as an opportunity rather than as a threat.
Strategic management is not to become a self-perpetuating bureaucratic mechanism. Rather, it is to be a self-reflective learning process which familiarizes employees in the organization with key strategic issues and feasible alternatives for resolving those issues. Strategic management is not to become ritualistic, relaxed, arranged, or too formal, predictable, and rigid. Words supported by numbers, rather than numbers supported by words, are to represent the medium for explaining strategic issues and organizational responses. One of the key roles of the strategists is to facilitate continuous organizational learning and change.
No organization has unlimited resources. No organization can take on an unlimited quantity of debt or issue an unlimited quantity of stock to raise capital. Hence, no organization can pursue all the strategies which potentially can benefit the organization. Strategic decisions hence always have to be made to eliminate some courses of action and to allocate organizational resources among others. Majority of the organizations can afford to pursue only a few corporate-level strategies at any given time. It is a critical mistake for the managements to pursue a large number of strategies at the same time, thereby spreading the organizational resources so thin that all strategies get jeopardized.
Strategic decisions need trade-offs such as long-range versus short-range considerations or maximizing profits versus increasing wealth of the shareholders. There are also ethics issues. Strategy trade-offs need subjective judgments and preferences. In several cases, a lack of objectivity in formulating strategy results in a loss of competitive posture and profitability. Majority of the organizations today recognize that strategic-management concepts and techniques can improve the effectiveness of decisions. Subjective factors such as attitudes toward risk, concern for social responsibility, and organizational culture always affect strategy-formulation decisions, but organizations need to be as objective as possible in considering qualitative factors.
Comparison of organization and military strategy – A strong military heritage underlies the study of strategic management. Terms such as objectives, mission, strengths, and weaknesses first were formulated to address problems on the battlefield. As per the Webster’s new world dictionary, strategy is ‘the science of planning and directing large-scale military operations, of maneuvering forces into the most advantageous position prior to actual engagement with the enemy’. The word strategy comes from the Greek ‘Strategos’, which refers to a military general and combines ‘Stratos’ (the army) and ‘Ago’ (to lead). The history of strategic planning began in the military.
A key aim of both organizational and military strategy is ‘to gain competitive advantage’. In several respects, organizational strategy is like military strategy, and military strategists have learned much over the centuries which can benefit organizational strategists today. Both industrial and military organizations try to use their own strengths to exploit weaknesses of the competitors. If the overall strategy of the organization is wrong (ineffective), then all the efficiency in the world cannot be enough to allow success.
Organizational or military success is normally not the happy result of accidental strategies. Rather, success is the product of both continuous attentions to changing external and internal conditions and the formulation and implementation of insightful adaptations to those conditions. The element of surprise provides great competitive advantages in both military and organizational strategies. Information systems which provide data on the strategies and the resources of the opponents or the competitors are also vitally important. Of course, a fundamental difference between military and organizational strategies is that the organizational strategy is formulated, implemented, and evaluated with an assumption of competition, whereas military strategy is based on an assumption of conflict. However, military conflict and organizational competition are so similar that several strategic-management techniques apply equally to both. Organizational strategists have access to valuable insights which military thinkers have refined over time.
Superior strategy formulation and implementation can overcome the superiority in numbers and resources of the opponent . Both the organizational and military organizations are to adapt to change and constantly improve to be successful. Very frequently, organizations do not change their strategies when their environment and competitive conditions dictate the need to change. Gluck offered a classic military example of this. When Napoleon won, it was since his opponents were committed to the strategy, tactics, and organization of earlier wars. When he lost (against Wellington, the Russians, and the Spaniards), it was since he, in turn, used tried-and-true strategies against enemies who thought afresh, who were developing the strategies not of the last war but of the next.
Benefits of strategic management – Strategic management allows the organization to be more pro-active than reactive in shaping its own future. It allows the organization to initiate and influence (rather than just respond to) the activities, and hence to exert control over its own future. Several organizational managements have recognized and realized the benefits of strategic management. Historically, the principal benefit of strategic management has been to help the organizations to formulate better strategies through the use of a more systematic, logical, and rational approach to strategic choice. This certainly continues to be a major benefit of strategic management, but studies now indicate that the process, rather than the decision or document, is the more important contribution of strategic management.
Greenley stated that strategic management offers several benefits namely (i) it allows for identification, prioritization, and exploitation of opportunities, (ii) it provides an objective view of management issues, (iii) it represents a frame-work for improved co-ordination and control of activities, (iv) it minimizes the effects of adverse conditions and changes, (v) it allows major decisions to better support established objectives, (vi) it allows more effective allocation of time and resources to the identified opportunities, (vii) it allows fewer resources and less time to be devoted to correcting erroneous or ad-hoc decisions, (viii) it creates a framework for internal communication among employees, (ix) it helps integrate the behaviour of employees into a total effort, (x) it provides a basis for clarifying individual responsibilities, (xi) it encourages forward thinking, (xii) it provides a cooperative, integrated, and enthusiastic approach to tackling problems and opportunities, (xiii) it encourages a favourable attitude toward change, and (xiv) it gives a degree of discipline and formality to the management of the organization.
Benefits of the strategic management to growth-oriented organizations include (i) better guidance to the entire organization on the crucial issue, ‘what it is which the organization is trying to do and to achieve’, (ii) direction to improve the financial and management performance, (iii) readiness to face the winds of change, new opportunities, and threatening developments, (iv) rationalization to evaluate competing budgets for investment and new capital, (v) integration of the several strategies-related decisions in the areas of finance, human resources, marketing, and production, (vi) building a more proactive management posture, and (vii) stronger employees’ commitment to attaining long-term goals.