Strategic Management Process

PART - II

If change is the order of the day, then two issues need to be addressed: environmental (external) analysis and organizational (internal) analysis (This is the ideal way of proceeding. In practice, managers may adopt only a partial solution and analyze only external or internal factors.). For a change of strategy to work there must be alignment between internal capability and external opportunity.

This is described as ‘strategic fit’. The ideal situation is where there is a fit between the environments, a business need arising out of that environment that is strongly felt by a firm that has the sense of purpose (mission) and a management system that enables it to respond to this need with a coherent and practicable strategy. The potential to act in this way depends upon managerial judgments, managerial skill to exploit windows of opportunity and management ability to motivate other employees to support and commit themselves to the firm’s new strategic objectives. 

The analysis of the environment can be segmented into four interactive elements. There is the issue of the firm’s general environment, the broad environment comprising a mix of general factors such as social and political issues. Then there is the firm’s operating environment, its more specific industry/business environment. What kind of industry is the firm competing in? What ‘forces’ make up its ‘industry structure’? Having examined its business environment, the issue then arises: how is the firm to compete in its industry? What is to be the unique source of its competitive positioning that will give it an edge over its competitors? Will it go for a broad market position, competing on a variety of fronts, or will it look for niches? Will it compete on the basis of cost or on the basis of added value, differentiating its products and charging a premium? What is the range of options that managers have to choose from? How are they to prioritize between these options? Does the company have strategic vision, a strong sense of mission, a ‘reason for being’ that distinguishes it from others? If change is necessary, what is to be the firm’s direction for development? Having identified the major forces affecting its environment, how is the firm to approach the future?

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