THE STRATEGIC MANAGEMENT PROCESS
strategic management process
is an eight-step process that encompasses
implementation, and evaluation.
A. The first step is identifying the organization’s current mission,
objectives, and strategies.
1. Every organization needs a mission,
which defines the purpose of the
organization. What is the
organization’s reason for being in business?
2. It’s also important to identify the organization’s current objectives
and strategies, as well.
B. Step 2 is analyzing the external environment. It’s important to
analyze the environment because, to
a large degree, it defines management’s strategic options.
1. A successful strategy is one that aligns well with the environment.
2. This step is complete when managers have an accurate grasp of what is
taking place in the external
environment and are aware of important trends that might affect the
C. The third step is identifying opportunities and threats. After
analyzing the external environment,
managers need to assess what opportunities to exploit and what threats
are positive external environmental factors.
are negative external environmental factors.
D. Step 4 is analyzing the organization’s resources. In this internal
analysis, managers are looking at the
organization’s specific assets, skills, and work activities.
1. Managers look for
, which are an organization’s major
capabilities, and resources that determine its competitive advantage.
2. This step forces managers to realize that every organization, no
matter how large or powerful, is
constrained in some way by its resources and skills.
E. Step 5 is identifying strengths and weaknesses. The analysis in step
4 should lead to a clear
assessment of the organization’s internal resources.
are those activities the firm does well or the unique
resources it controls.
are those activities the firm doesn’t do well or the
resources it needs but doesn’t
3. One area that’s often overlooked in this step is an analysis of the
organization’s culture and its
strengths and weaknesses.
a. Remember that culture is the organization’s personality.
b. The strength of the culture is a result of how much employees
understand and support the shared
c. A strong culture should make it easy for managers to convey to
employees the organization’s
distinctive competencies. However, the strong culture will make it more
difficult to change, if
d. Strategic choices will also be influenced by the culture’s tolerance
of risk and innovation and how
performance is rewarded.
e. The culture can also promote or hinder an organization’s strategic
4. The merging of steps 3 and 5 results in a
which is an analysis of an organization’s
strengths, weaknesses, opportunities, and threats. It brings together
the internal and external
analyses in order to identify a strategic niche the organization might
5. In light of the SWOT analysis, managers need to reevaluate the
organization’s current mission and
F. Step 6 is formulating strategies.
Strategies need to be established for the corporate, business, and
functional levels of the organization. In formulating strategies,
managers hope to give the
organization a competitive advantage.
G. The next step is implementing strategies. The strategies must now be
put into action. Strategies are
only as good as their implementation.
H. The eighth (and final) step in the strategic management process is
evaluating results. Managers
must evaluate the results to determine how effective their strategies
have been and what
corrections are necessary.
The role of competitive analysis in strategy formulation
Before an effective strategy to gain a
competitive advantage can be formulated, the organization’s
competitive situation needs to be carefully analyzed.
A. A SWOT ANALYSIS is one method for doing so. The SWOT analysis
organization strengths (S) and weaknesses (W), as well as environmental
and threats (T).
1. Strengths and weaknesses apply to internal characteristics.
a. A strength is an internal characteristic that has the potential of
the organization’s competitive situation.
b. A weakness is an internal characteristic that leaves the organization
potentially vulnerable to strategic moves by competitors.
2. Opportunities and threats are found in the external environment.
a. An opportunity is an environmental condition that offers significant
prospects for improving an organization’s situation relative to
b. A threat is an environmental condition that offers significant
for undermining an organization’s competitive situation.