FROM MANAGEMENT TO STRATEGIC MANAGEMENT

FROM MANAGEMENT TO STRATEGIC MANAGEMENT

Student: Dumitrescu Livia

Supervising Professor: Constantin Fota

University of Craiova, IBA MASTER, 2^nd year, 2009

The first chapter of the handbook called “International Strategic Management, Concepts and Cases”, explains the concept of strategic management.

As an academic field, strategic management is young and emerging. The best two terms to describe this new fiels would be “mission” and “environment”. Organizations try to make long-term, strategic decisions that keep harmony with their environments to achieve their mission.

Among many organizations that exist in the world, some organizations thrive, whereas the others, small or large, do not survive long enough to remain in memory. The successful ones are often considered pillars of the society. But in fact even large, successful companies hadly hold out longer than 40 years, as this is the life expectancy of a companies with a  substantial size. Whereas some companies persist hundreds of years, others exist only as part of history with their names, brands, or memory of a past, only a small number of companies survive their first 10 years of a high “mortality” period. These statistics are not encouraging, as they suggest that many companies will disappear within few decades. Even companies with great potential may not survive before the next generation. What makes these companies disappear so early?

Many companies seem to be unsuccessful because of the narrowness of the management perspectives; they vanish because their management fail to see companies as living organizations, but they focus on manufacturing and turning profit. Most organizations transform only when they see  some changes are already happening in the outside world.

On the other hand the companies that survive longer are those that have a clear vision, that are open and try to perceive what is happening or what is going to happen outside earlier, thus companies whose management can predict certain events. Forward-looking managers should seek answers to inportant questions such as “What will happen to the business if a certain event happens?”. Moreover, managers and organizations should be prepared to make fundamental and painful changes to match the outside world.

Strategic management is the process by which an organization manages relationships with its external environment while following its organizational mission.

Strategic management is the process whereby managers establish an organization’s long-term direction, set specific performance objectives, develop strategies to achieve these objectives in the light of all relevant  internal and external circumstances, and undertake to execute the chosen action plans.

Three Approaches in Strategic Management

Over the years, strategic management has developed into several schools of thoughts. Among them, three have emerged as influential in interpreting the way managers and organizations deal with their business. These three approaches have have different ways of understanding organizations:

-          rational approach

-          evolutionary approach

-          processual approach

Rational Approach

Rationalists, such as Porter (1980, 1985) attempt to find the optimal strategy that separates thought and action. From the simplest and most fundamental point of view, this approach is based on the assumption that there exists one best solution and the task is to find it (Van der Heijden, 1996). The purpose of strategy is to get as close as possible to the best one that optimizes the use of resources. If there is only one right answer, anyone with appropriate resources will be able to find it.

Rationalists believe strategy begins with the definition and purpose of an organization, or the mission, because the task of the strategists is to derive strategic objectives based on the mission and ultimately achieve those objectives. The goal of this approach is finding out what is best to match what the world wants and needs in order to capture success. Key words would be competence, competitive advantage, strengths and weaknesses.

Until the 1960s, planning for the future was based on prediction and control; forecasts assume that the past can be expanded into the future; in other words, forecasters assume managers in planning know what they need to do. However, Wack demonstrated that even large companies are in danger of strategic failure in a time of rapid changes as crises change the whole well-predicted picture of the future.

Evolutionary Approach

Evolutionalists believe that some strategies emerge within certain environments and can only be comprehended retrospectively. Scholars like Mintzberg maintain that decision making is not always a rational process, rather managers often avoid facing difficult situations or constraints. Managers often find they have multiple strategies which accompany continuous changes. From this perspective, a strategy is a viewpoint on developing behaviour, thus whether a strategy is good or bad can only be evaluated in retrospect. High value is placed on consensus-seeking behaviour (Mintzberg). When people talk about strategy, the stategy is usually based on what happened in the past or patterns recognized from a series of previous events. He also pointed out that most managers do not believe in the grand strategy that solves every problem.

Evolutionists advocate that managers can improve the chances of success by thinking though the situation. They assert the idea that developing an optimal strategy is illusionary.

Processual Approach

In between the rational and the evolutionary approach, there is the processual approach. Processualists believe that managers should pay more attention to the “strategy process”; because of uncertainty in the environment, the key to success was changed from the “optimal strategy” to the “most skillful strategy process” (van der Heijden). His idea is that an organization’s most precious resource is the brain power of its employees and their networking skills. Processualists suggest that managers can create processes in organizations that make strategies more flexible through learning, although managers cannot obtain optimal strategies through rational thinking only. Rationalists and evolutionists pay less attention to what happens inside organizations; they need not look at the inside because there is only one right solution or even no answer. The strategy process has a formal part designed by the managers and an informal part based on casual conversation regarding the future, which sometimes emerges unexpectedly in organizations.

Questions and answers:

Q1. Name the definion of strategic management.

A1. Strategic management is the process by which an organization manages relationships with its external environment while following its organizational mission.

Q2. What are the three approaches in strategic management?

A2. Rational, evolutionary and processual approach.

Q3. What is the main feature of the rational approach in strategic management?

A3. Rationalists believe there is only one best solution and the task is to find it.

Q4. What is most valued attitude within the evolutionary approach?

A4. Consensus seeking attitude is the most valued.

Q5. What is an organization’s most precious resource according to the processual approach?

A5. The brain power of its employees and their networking skills represent the essential resource within the processual approach.

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