How to Apply Strategic Management Skills - Coursework Example

Running Head: How to Apply Strategic Management Skills? How to Apply Strategic Management Skills? Inserts His/her Introduction Strategic management involves better utilization of resources in order to enhance the performance of the organization in the external environment (Nag, Hambrick, & Chen, 2007). Strategic management skills can be applied to a firm by designing its goals and objectives, allocating resources, managing human resource, assessment of competitors, and assessment of economic and global environment. The aim of all these activities should be to enhance the performance of the firm with respect to the external environment. Strategic management aids a firm in assessing its own position vis-à-vis potential competitors of the firm. Evaluation of a strategy is also an inherent part of strategic management because without knowing whether the current strategy is working or not, no firm can set and achieve goals. In this essay we will discuss how strategic management skills can be applied by managers. Designing Vision and Objectives for the Firm It is important for managers to define the purpose of the organization. Vision of a firm informs the employees and the customers about the purpose and value of the firm (Mind Tools, 2011). It is an essential part of application of strategic management skills to design vision of a firm so as to guide employees regarding their behavior. Customers can also learn through vision of a firm about how can they be benefitted by the firm. Usually vision of a firm is defined in a sentence or a statement commonly known as the vision statement. It entails the long term purpose of the firm and how employees are supposed to operate in the company. Strategic management is all about taking strategic decisions and strategic decisions have certain characteristics. Strategic decisions are of high magnitude, they have a long term focus, and they require high level of commitment (Haberberg & Rieple, 2007). Vision statement is also a strategic decision because it has all above three characteristics. Objectives of the firm are more specific short term targets. Strategic management skills are applied to define short term targets for the firm and short term targets are important for a firm because they serve as steps that can lead the firm to the long term targets. Firms also require regular assessment of their position and for that short term targets serve useful. Vision of a firm is a broadly defined purpose of the organization, on the other hand objectives are short term targets that can be measured empirically and are specific. Managers should always check whether the firm is treading on the right path or not, and vision and objectives help managers in this regard. Allocation of Resources An important job of a manager is to allocate resources between different departments of the firm. Allocation of resources should be done in a way so as to maximize the profits of the firm at the lowest possible costs. In today’s dynamic business environment all the business functions have considerable importance and allocating resources between different function can be a daunting tasks. This is where strategic management skills come in play. It is vital that the resources are distributed in the best possible way so that the profits of the firm can be maximized. Allocation of resources should be done in such a way that objectives of the firms are achieved (Alkhafaji, 2003). Resources should be allocated keeping in mind the current standing of the firm in the market. For example a newly founded firm should allocate more resources to marketing and product development while a relatively old firm should focus on customer satisfaction and better financial performance. This is how decision of allocation of resources may differ in different types of firms. Today’s tough financial situations have made efficient allocation of resources essential for firms. Almost all firms have limited resources and it has to finance all its major operations in order to survive. Now it is difficult for managers to allocate resources among all functions of the company efficiently. All firms want to gain maximum by spending minimum amount of funds therefore allocation of resources becomes extremely important. Once the resources are allocated they cannot be reversed therefore importance of resource allocation increases. Resources should be distributed in a way that the long term objectives of the firms are achieved. All resource allocation decisions should aim at providing maximum value to the customers. Managing Human Resource Human resource is the most important capital a firm can have. Employees can play a major role in the success and failure of firms therefore they cannot be excluded from the strategic management process. Application of strategic management skills involve enhancement of performance of employees. Human resource related strategies are known to increase the productivity of the labor (Koch & McGrath, 1998). Therefore companies should attempt to formulate a human resource policy that can effectively enhance the quality and quantity of productivity of employees. Strategic management skills can be applied to human resource by finding out ways in which employee turnover can be reduced. This is a major problem in many industries and firms cannot use financial incentives to motivate employees to work for the company for a longer period of time. This increases the importance of strategic management with regards to shaping the human resource policy. Employee freedom to raise voice regarding dissatisfaction is inversely proportional to employee turnover (Spencer, 1986). This can help managers apply strategic management skills in order to increase employee retention. Employees need freedom to raise their concerns and a manager should grant them this freedom so that costs related to hiring can be avoided. Strategic management skills can also be applied to human resource policy by shaping policies that can enhance the productivity of employees. Monetary rewards are not cost effective for firms therefore ways should be identified that can increase productivity by not costing firm greatly. This can be done by using non monetary rewards. Non monetary rewards like recognition and training can increase the performance of employees considerably (Luthans & Stajkovic, 1999). Managers should use non monetary rewards to increase not only the quantity but the quality of performance of employees. This can help the firm by increasing business at lower costs. Human resource can also be used as a competitive edge because it is impossible for competitors to copy. Assessment of Competitors It is also important for managers to take into account performance of the competitors. An important application of strategic management skills is competitor analysis. A firm should know at all times about its competition so that it can react to any new product or service launched by the competitors. Competition can impact the market share of a company and can force the company to change its objectives. This is why assessment of competitors is extremely important. Assessment of competitors allows a firm to support its strategy effectively and efficiently (Fleisher & Bensoussan, 2003). Sometimes when a competitor acts the firm has to respond to those actions. It is vital to respond to the changing strategies of the competitors in order to compete with them. This will only be possible if assessment of the competitors is done frequently. There are also times when a competitor is facing a downturn. At those times a firm needs to capitalize on the opportunity by mending its strategy. This is why competitor analysis is a major part of strategic management. In today’s business environment the threat of competition has increased drastically due to the advent of internet. Any new business can be launched easily and customer attraction is no longer a problem. New firms are using internet to get their message across and customer now have many alternatives available. In such a business environment constant assessment of the external environment is a must. Strategic management skills can be applied by observing the moves of the competitors and staying ahead of them. Every move of the competitor should be dealt in a way that market share of the firm remains intact. Global Environment and Planning Analysis of global environment is also an important function of strategic management. Managers have to take into account the political and socio economic global environment in order to protect themselves or in order to avail opportunities. Global environment can sometimes cause problems for a firm for example a garments exporting firm will face problem if the political situation of the recipient country is not stable. Similarly global environment offers opportunity as well for example a country might suffer from shortage of food items. This can provide a firm to expand its business and make use of the opportunity. Managing relations, with customers and partners, in a global environment is essential in order to gain competitive edge (Beckett-Camarata, Camarata, & Barker, 1998). In a global environment managing relations is not an easy task because the diverse cultural orientation of different partners. There are many alternatives available for customers as well as suppliers therefore good relations can stop them from switching to other competitors. Outsourcing is another increasing trend in today’s business environment. Companies are now trying to avoid getting into activities that are not central to their core business. They are outsourcing them to experts all over the world. Offshore outsourcing is likely to create problems for managers (Doh, 2005) and strategic management skills can be applied to solve such problems. Global business environment has also increased competition between different industries (Hitt, Ireland, & Hoskisson, 2007). Firms are growing rapidly and now one firm is operating in different industries. This is has changed the dynamics of business and managers have to plan their strategies by taking into account the global environment. Strategic management skills are applied in planning strategies after assessing the global environment. The traditional business approach of industry assessment is not enough today. Assessment of Economic Environment Assessment of economic environment is also essential in today’s business environment because financial markets have become an integral part of a firm’s business. All firms now hold investments in different financial markets in order to earn returns on their income. Investment income constitutes a considerable portion of the firm’s income today. This is why assessment of economic environment is a must for managers. Companies now see investments in stocks a major source of income therefore risk analysis of different stocks are important (Hearn, Piesse, & Strange, 2010). Strategic management skills can be applied in risk analysis. The financial markets are also integrated therefore an earthquake in Japan will effect a firm in Australia. This is also a dimension of economic analysis within strategic management. The economic crisis of 2008 has taught the world important lessons (Soros, 2008). Financial bubble can affect all firms all over the world therefore companies have to assess the economic environment at all times. Crisis can cause problems and also provide opportunities for a firm therefore a manger should apply his or her skills to assess the global environment. Economic environment can also play a role in long term strategic plans of a company (Guy, 2009). Events like 2008 recession can affect long term goals of a company therefore assessment of economic situation of the world is essential for business managers. Long term strategic plans can also include smart investments that can yield considerable gains in long term future. Global economic environment can also hint a firm about its future operations. For example high production costs in India for example might force a company to shift its production base to a new country. This will be easy if managers have an avid eye on the global business environment. Conclusion Strategic management is all about better utilization of resources in order to enhance performance. All the functions that can increase the performance of a company are a part of strategic management. Designing vision and objectives of a firm is important in order to put the firm on the right track. Allocation of resources between different business functions should be done in a way as to maximize profits. Human resource is a major capital of any firm because employees can make or break any firm. Application of strategic management skills is also important when it comes to analysis of competitors, global environment, and economic environment. References Alkhafaji, Abbas. (2003). Strategic management: formulation, implementation, and control in a dynamic environment. New York: Routledge Beckett-Camarata, Camarata, & Barker. (1998). Integrating internal and external customer relationships through relationship management: A strategic response to a changing global environment. Journal of Business Research, 41(1): 71-81 Doh, J. (2005). Offshore Outsourcing: Implications for International Business and Strategic Management Theory and Practice. Journal of Management Studies, 42: 695–704 Fleisher & Bensoussan. (2003). Strategic and Competitive Analysis: Methods and Techniques for Analyzing Business Competition. London: Prentice Hall Guy, Frederick. (2009). The Global Environment of Business. Oxford: Oxford University Press Haberberg & Rieple. (2007). Strategic Management: Theory and Application. London: Oxford University Press Hearn, Piesse, & Strange. (2010). Market liquidity and stock size premia in emerging financial markets: The implications for foreign investment. International Business Review, 19(5): 489-501 Hitt, Ireland, & Hoskisson. (2007). Strategic management: Competitiveness and globalization. California: Cengage Learning Koch, Gunther, & McGrath. (1998). Improving Labor Productivity: Human resource policies do matter. Strategic Management Journal, 17(5): 335-354 Luthans & Stajkovic. (1999). Reinforce for Performance: The Need to Go beyond Pay and Even Rewards. The Academy of Management Executive, 13(2): 49-57 Mission Statements and Vision Statements. (2011). Mind Tools. Retrieved from http://www.mindtools.com/pages/article/newLDR_90.htm Nag, Hambrick, & Chen. (2007). What is strategic management, really? Inductive derivation of a consensus definition of the field. Strategic Management Journal. 28(9): 935–955 Soros, George. (2008). The new paradigm for financial markets: the credit crisis of 2008 and what it means. New York: Public Affairs Spencer, D. (1986). Employee Voice and Employee Retention. The Academy of Management Journal, 29(3): 488-502 Read More