Stages of Strategic Management Process
The strategic management process consists of three stages: strategy formulation, strategy
implementation, and strategy evaluation.
Strategy formulation includes developing a vision and mission, identifying an 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 implementation requires a firm to establish annual objectives, devise policies, motivate
employees, and allocate resources to execute formulated strategies. 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 organizational performance.
Strategy evaluation is the final stage in strategic management. Managers desperately need to know
when particular strategies are not working well; strategy evaluation is the primary means for obtaining
this information.
Stages in Strategic Management Model
1. Develop Vision and Mission Statements
2. Perform External Audit
3. Perform Internal Audit
4. Establish Long-Term Objectives
5. Generate, Evaluate, and Select Strategies
6. Implement Strategies— Management Issues
7. Implement Strategies— Marketing, Finance, Accounting, R&D, and MIS Issues
8. Measure and Evaluate Performance
9. Business Ethics, Social Responsibility, and Environmental Sustainability
10. Global/International Issue
Benefits of Strategic Management
1. Enhanced Communication
a. Dialogue
b. Participation
2. Deeper/Improved Understanding
a. of others’ views
b. of what the firm is doing/planning and why
3. Greater Commitment
a. To achieve objectives
b. To implement strategies
c. To work hard
4. THE RESULT
All Managers and Employees on a Mission to Help the Firm Succeed
Financial Benefits
Businesses using strategic-management concepts show significant improvement in sales, profitability,
and productivity compared to firms without systematic planning activities. Firms with planning systems
more closely resembling strategic-management theory generally exhibit superior long-term financial
performance relative to their industry
Nonfinancial Benefits
Besides helping firms avoid financial demise, strategic management offers other tangible benefits, such
as an enhanced awareness of external threats, an improved understanding of competitors’ strategies,
increased employee productivity, reduced resistance to change, and a clearer understanding of
performance–reward relationships. Strategic management enhances the problem-prevention
capabilities of organizations because it promotes interaction among managers at all divisional and
functional levels.
Greenley stated that strategic management offers the following benefits:
1. It allows for identification, prioritization, and exploitation of opportunities.
2. It provides an objective view of management problems.
3. It represents a framework for improved coordination and control of activities.
4. It minimizes the effects of adverse conditions and changes.
5. It allows major decisions to better support established objectives.
6. It allows more effective allocation of time and resources to identified opportunities.
7. It allows fewer resources and less time to be devoted to correcting erroneous or ad hoc
decisions.
8. It creates a framework for internal communication among personnel.
9. It helps integrate the behavior of individuals into a total effort.
10. It provides a basis for clarifying individual responsibilities.
11. It encourages forward thinking.
12. It provides a cooperative, integrated, and enthusiastic approach to tackling problems and
opportunities.
13. It encourages a favorable attitude toward change.
14. It gives a degree of discipline and formality to the management of a business.
Why some firms do no strategic planning?
Lack of knowledge or experience in strategic planning—No training in strategic planning.
• Poor reward structures—When an organization assumes success, it often fails to reward success.
When failure occurs, then the firm may punish.
• Firefighting—An organization can be so deeply embroiled in resolving crises and firefighting that
it reserves no time for planning.
• Waste of time—Some firms see planning as a waste of time because no marketable product is
produced. Time spent on planning is an investment.
• Too expensive—Some organizations see planning as too expensive in time and money.
• Laziness—People may not want to put forth the effort needed to formulate a plan.
• Content with success—Particularly if a firm is successful, individuals may feel there is no need to
plan because things are fine as they stand. But success today does not guarantee success
tomorrow.
• Fear of failure—By not taking action, there is little risk of failure unless a problem is urgent and
pressing. Whenever something worthwhile is attempted, there is some risk of failure.
• Overconfidence—As managers amass experience, they may rely less on formalized planning.
Rarely, however, is this appropriate. Being overconfident or overestimating experience can bring
demise. Forethought is rarely wasted and is often the mark of professionalism.
• Prior bad experience—People may have had a previous bad experience with planning, that is,
cases in which plans have been long, cumbersome, impractical, or inflexible. Planning, like
anything else, can be done badly.
• Self-interest—When someone has achieved status, privilege, or self-esteem through effectively
using an old system, he or she often sees a new plan as a threat.
• Fear of the unknown—People may be uncertain of their abilities to learn new skills, of their
aptitude with new systems, or of their ability to take on new roles.
• Honest difference of opinion—People may sincerely believe the plan is wrong. They may view
the situation from a different viewpoint, or they may have aspirations for themselves or the
organization that are different from the plan. Different people in different jobs have different
perceptions of a situation.
• Suspicion—Employees may not trust management
