Strategic management system
| Strategic management system |
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Strategic management system is one of several management subsystems of company. It works in close integration with other subsystems in areas such as: financial management, personnel, production, sales, marketing, and others.
System diagnosis
In an attempt to diagnose the strategic management in the company, managers have to identify basic areas of a strategic management. Based on this, managers acquire knowledge of main elements of the system.
System identification
First managers have to determine strategy and the nature of the business. To do this they must answer the following questions:
- level of business diversity
- dependence of product portfolio on the nature of the individual sectors,
- the scope of business (local, national, global),
- nature of recent activities aimed at improving the effectiveness of key business units and strengthening the current market situation,
- activities involving adding new business units to a portfolio of activities,
- activities towards the weak and unappealing business units,
- activities to obtain a competitive advantage,
- the proportion of capital spending per individual business units.
System structure
Strategic Management System is a collection of closely related elements, which consist of people and information.
It consists of four constituent subsystems: observation system, early warning system, management information system, and steering system. Strategic management is closely integrated with the management at the operational and tactical levels, and cannot be seen in isolation from other enterprise management systems.
A variety of links and information processes that are present in enterprise strategic management causes high levels of complications of analytical work related to the development of strategic management system.
Strategic management system is presented in the five aspects formula for describing management systems. Each of the described aspects contains determinants i.e. methods, techniques and operations carried out within the framework of the various elements of the strategic management system.
Goal aspect of Strategic management system
Refers to the global activity of company and states formally adopted vision and mission.
Determinants: basic strategies, strategies for the management of SBUs (Strategic Business Unit), business plans, strategies and action plans (at the level of the entire company and SBU).
Object aspect of Strategic management system
Indicates the management, groups and units that perform the tasks of strategic management at all levels of the organizational structure.
Determinants: formalisation of organization, powers of the chief executive, professional specialization of SBU management, strategic management teams, management role in the development of the company, headquarters structure, pragmatic relation to management, efficiency management.
Structural aspect of Strategic management system
Refers to the structure of the management team, advisory teams and the units that make up the strategic management system of the company.
Determinants: hierarchical structure of strategic management, strategic management system organization,organization of strategic planning, strategic control system, SBU organizational structure.
Functional aspect of Strategic management system
Refers to all operations and activities in the strategic management system, and specifies it in procedural terms.
Determinants: principles of strategic management, range of activities, operational objectives of the enterprise, processes and procedures, strategic project management.
Instrumental aspect of Strategic management system
Indicates the set of tools and application used in the diagnostic, analysis, development and implementation of strategy.
Determinants: strategic analysis, economic and organisational diagnosis, rules for the allocation of financial resources, financial models, techniques and methods of economic forecasting, negotiation, decision-making, strategic planning methods, procedures, coordination of programmes, technology management, reengineering, strategic control methods.
See also:
Examples of Strategic management system
- Balanced Scorecard: The Balanced Scorecard is a strategic management system created by Harvard Business School professors Robert Kaplan and David Norton. It is a framework that helps organizations to track and measure their performance on four key areas: financial performance, customer value, internal processes, and organizational learning. The Balanced Scorecard provides companies with the ability to identify their current position and track the progress of their strategic initiatives.
- Strategic Planning: Strategic planning is a process of setting goals, analyzing current performance, identifying opportunities and threats, and creating a plan of action to achieve the desired objectives. It is used to identify what an organization wants to achieve and how to get there. Strategic planning involves setting goals, identifying strategies, analyzing the environment, and assessing the resources needed to execute the plan.
- SWOT Analysis: SWOT analysis is a management tool that helps organizations identify the strengths, weaknesses, opportunities, and threats that could impact their ability to achieve their desired objectives. It is a process of analyzing internal and external factors that could have an effect on the organization’s performance. SWOT analysis is used to evaluate the feasibility of a strategy before it is implemented.
- Porter’s Five Forces Model: Porter’s Five Forces Model is a strategic management system developed by Harvard Business School professor Michael Porter. It is a framework used to analyze the competitive forces that could have an effect on an organization’s ability to achieve its objectives. The model focuses on five factors: the threat of new entrants, the power of buyers, the power of suppliers, the threat of substitutes, and the rivalry among existing competitors.
Advantages of Strategic management system
A strategic management system is a tool used to manage the direction and operations of a business. This system is beneficial to any business because it allows the organization to create and implement strategies that will ensure the success of the business. Here are the advantages of implementing a strategic management system:
- It provides a clear direction for the organization by setting long-term objectives and strategies that align with the company’s mission and vision.
- It helps to create a culture of accountability, as it allows for management to measure and track performance against previously set objectives.
- It allows for the organization to plan for future competition and changing markets, by recognizing opportunities and threats and ensuring the organization is prepared to respond.
- It helps to create an environment of collaboration by encouraging different departments and staff to work together to achieve the same goals.
- It encourages innovation and creativity within the organization by allowing for new ideas and strategies to be developed and implemented.
- It helps to identify areas of improvement within the organization, by providing a transparent view of the organization and its performance.
Limitations of Strategic management system
The limitations of a strategic management system include:
- Lack of flexibility: Strategic management systems are often rigid and inflexible, leaving little room for adaptation to changing market conditions.
- Lack of innovation: Strategic management systems can become stagnant and predictable, leading to a lack of fresh ideas and creativity.
- Dependence on data: Strategic management systems rely heavily on data and analysis, which can be difficult to obtain in a timely manner.
- Cost: Strategic management systems can be expensive to implement, maintain, and update.
- Difficulty in implementation: Strategic management systems require a significant amount of time and effort to implement and become operational.
- Complexity: Strategic management systems can become complex due to their multiple components and interactions.
- User error: Strategic management systems can be susceptible to user error, which can lead to incorrect decisions being made.
Introduction: The following list provides an overview of other approaches related to strategic management system:
- Balanced Scorecard: The balanced scorecard is a tool used to organize and measure various components of an organization's performance, such as customer satisfaction, financial performance, internal processes, and learning and growth.
- SWOT Analysis: SWOT (Strengths, Weaknesses, Opportunities, and Threats) is a strategy tool used to evaluate the internal and external environment of an organization. It helps identify areas of strengths and weaknesses, as well as opportunities and threats in the organization's environment.
- Porter's Five Forces Model: Porter's five forces model is a tool used to evaluate the competitive environment of an industry. It assesses the bargaining power of suppliers, the bargaining power of buyers, the threat of substitute products, the threat of new entrants, and the rivalry among existing competitors.
- Corporate Social Responsibility (CSR): CSR is a way for organizations to be accountable to its stakeholders, such as employees, customers, suppliers, and the community. It involves creating and implementing social and environmental policies that will benefit all stakeholders.
- Strategic Marketing Planning: Strategic marketing planning involves using a combination of tools and techniques to identify target markets, develop effective marketing strategies, and assess the performance of marketing initiatives.
Summary: The strategic management system is closely integrated with other management subsystems and can be complemented by other approaches such as the balanced scorecard, SWOT analysis, Porter’s five forces model, corporate social responsibility, and strategic marketing planning. These approaches can help organizations identify strengths and weaknesses, assess the competitive environment, and develop effective strategies.
References
- David, F. R. (2001). Strategic management: Concepts and cases.
- Dess, G. G., Lumpkin, G. T., & Eisner, A. B. (2010). Strategic management: Text and cases.
Author: Krzysztof Wozniak
