What is strategic management? Why is it important?
Strategic management gives direction through plans and policies designed specifically to fulfil objectives and allocating resources for implementing the strategies. Strategic management gives an edge over competitors.
The process to Strategise:
- External Analysis + Internal Analysis => Robust Situation Analysis → Strategy diamond → Strategy Formulation
- Internal Analysis: considers Strengths and Weaknesses.
- Internal Analysis: Resources, Capabilities, and Competencies.
- Strategy Design:
- Resources: Tangible and Intangible
- Tangible Resources: Physical Resources, Financial Resources, Technological Resources, and organisational Resources.
- Intangible Resources: Human Resource, Innovation, and Reputation.
- Coordinating resources via the skills residing in organisational rules, routines, and product leads to better capabilities. Various specific abilities lead to distinctive competencies, which are precise and complex to imitate, that helps to give the company a competitive advantage.
- Capabilities: firm’s capacity to deploy resources that have been purposely integrated to achieve the desired end state. It emerges over time through complex interaction among tangible and intangible resources.
- Unique skills and knowledge related to a specific area become a source of competitive advantage.
- E.g. distribution: Walmart; RND: Apple, BM; Marketing: Amul, HUL, etc.
- Competency Analysis Framework:
- Core competency: the combination of individual technical resources and production skills.
- Distinctive competency: a unique capability that others cannot copy that easy, which gives the company the competitive advantage
- Strategic competencies: level required to formulate and produce results with a particular strategy.
- Threshold competencies: level required for survival in the market.
- Internal Factor Evaluation Matrix (IFEM): Considering strengths and weaknesses, weighing them and rating them. Multiplying both gives a weighted score.