Tutorial 1 (page 78)
Why has strategic management become so important to today's corporations? Strategic management is a set of managerial decisions and actions that determines the long-run performance of a corporation.
Importances of strategic management include:
1) Strategic management develops and provides a clear direction, guideline towards the corporations’ goals in an effective and efficient manner. It takes consideration between vision and mission of the corporation. Defining focused, quantifiable outcomes measures of success. 2) Sharper focus on what is strategically important.
3) Improved understanding of a rapidly changing environment. As market environment change rapidly and become globalization, strategic management is a must to achieve sustainable competitive advantages which include innovation, quality, cost competitiveness, speed and services among the markets.
How does strategic management typically evolve in a corporation? In order to deal with their changing world, a firm generally evolves through the following four phases of strategic management.
Phase 1 – Basic financial planning: Managers initiate serious planning when they are requested to propose the following year’s budget. Projects are proposed on the basis of very little analysis, with most information coming from within the firm. The sales force usually provides the small amount of environment information. Such simplistic operational planning only pretends to be strategic management, yet it is quite time consuming. Normal company activities are often suspended for weeks while managers try to cram ideas into the proposed budget. The time horizon is usually one year.
Phase 2 – Forecast based planning: As annual budgets become less useful at stimulating long term planning, managers attempt to propose five-year plans. At this point they consider projects that may take more than one year. In addition to internal information, managers...
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