Overview Of Strategic Management

1. Think about the courses you have taken in functional areas such as marketing, finance, production, human resources, and accounting. What is the importance of each of these areas to the strategic planning process?

Strategy is a broad action plan or means by which long term objectives will be achieved. Strategic management is defined as the set of decisions and actions that results in the formulation and implementation of plans designed to achieve a company’s objectives (Pearce II, J.A.,& Robinson, R.B., 2012, p. 3).  It is true that a strategic management is a blend of different functional areas such as marketing, finance, production, human resource, and accounting in a way that leads to achieve a competitive edge in the marketplace.

The courses taken in functional areas such as marketing, finance, production, human resource, and accounting will have a greater importance in formulating, implementing and controlling of different plans, policies, programs designed to accomplish a company’s objectives. The importance of each of these areas to strategic management is outlined as follows:

Marketing: Having the knowledge of marketing will help to understand the market and identify the potential customers strategically while formulating, implementing and controlling the different plans, policies and programs to offer the products or services what they want. The Four Ps of marketing would be helpful in setting these different strategic activities to cope with the market changes.

Finance: Knowledge regarding the finance provides the guidelines on how to allocate the financial resources for what purposes which can be much more beneficial for formulating, implementing and controlling financial activities such as budgeting, capital formation and allocation etc.  

Production: In setting the strategic planning process, production function plays a pivotal role for determining the level of production, and raw material requirements which are essential for providing the right product at the right time to right customers.

Human Resources: It is definitely true that HR activities such as hiring, training, and retaining motivated and efficient employees are essential to convert the strategic plans into action and then into a desirable results.  HR activities should be considered in all three components of strategic planning process so as to produce a better result.

Accounting: Accounting functional area helps to keep track of the business transaction, and forecasting the amount needed to formulate, implement and control the different sets of activities while setting up the strategic business planning process.

In summary, Strategic planning process comprised of three important steps-formulation, implementation and controlling which, in each of these stages, are greatly facilitated by these functional areas-Marketing, Finance, Production, Human resources and Accounting. Thus, it can be said that they play a significant role in achieving the company’s overall objectives in the competitive marketplace.

References

Pearce II, J.A.,& Robinson, R.B. (2012). Strategic Management: Formulation, Implementation, and Control. New York: McGraw-Hill Irwin.

1.2. Many successful individuals have single-handedly directed their companies to success. Is participative strategic management approach likely to stifle or suppress the contributions of such individuals?

While it is true that many successful individuals have single-handedly directed their companies to success, doing this, however, is not likely to succeed anymore in the competitive environment. Thus, the participative strategic management approach, I think, is not likely to stifle or suppress the contributions of such individuals but rather create a greater value in the organization.

It is evident that many successful individuals have single-handedly directed their companies to success. However, maintaining that success for prolonged period is surely challenging and tough job so that participative strategic management will create the open culture in the organization where many employees are likely to participate in decision making and innovative actions. Which, in turn, build a positive relationship among the employees and managers for achieving organizational goals. It is also undeniable fact that delegating decision-making responsibilities to the employees will make the employees more responsible and they feel they are the part of the organization which possibly will have a positive impact on their job performance.

To sum up, participative strategic management approach will create an open culture for greater involvement and decision making by employees which will improve the workers efficiency and productivity which is not possible when the organization is single-handedly. Having said this, participative strategic management approach is not likely to stifle or suppress the individual contributions but rather it will help to maintain the success of the company for a prolonged period of time.

References

Pearce II, J.A.,& Robinson, R.B. (2012). Strategic Management: Formulation, Implementation, and Control. New York: McGraw-Hill Irwin.

1.3. How can a mission statement be an enduring statement of values and simultaneously provide a basis of competitive advantage?

An organization’s mission states the purposes or the reason for the existence of the organization by performing some functions. Ideally it deals with a company’s present business scope and boundaries, and it also clarifies what the company is, what it does and why it is here. Broadly speaking, a company mission statement is the unique purpose that distinguishes a company from others in terms of scope and boundaries such as products, markets and technologies in the competitive marketplace.

It is obviously true that it can be an enduring statement that clearly helps to identify the goals, objectives and values of the mission for a particular company. Furthermore, it is assumed that the mission statement is likely to create a commitment of the organization for serving internal and external stakeholders such as customers, employees, shareholders, investors, governments and other publics as a strategic weapon. In addition, it will provide basis for the company to analyze a SWOT analysis, PEST analysis and other strategic benchmarking to achieve a competitive advantage over its rivals.

In a nutshell, a mission statement having characteristics such as precise, flexible, clear, motivating and distinctive, helps to apart the company itself from others and create a unique value in a turbulent marketplace so as to simultaneously provide a basis of competitive advantage through SWOT analysis, PEST analysis and benchmarking etc.   

References

Pearce II, J.A.,& Robinson, R.B. (2014). Strategic Management: Formulation, Implementation, and Control. New York: McGraw-Hill Irwin.

1.4. What is the agency theory? How do agency problems occur? How can a board of directors solve agency problems?

The agency theory:

In general, agency theory refers to the relationship between the (principal) shareholders/owners and the agent (managers). Here the principal hires the agent to perform the task on behalf of them. Agency theory explains the relationship between these parties and strives to solve the raised conflict between them while performing the given task. Agency issues happen basically when contrasts emerge between them or when an agent does not perform the task as desired by the principal or owners.

Agency problems occur due to following reasons:

1. Moral hazard issue: Moral hazards occur in the organization when agents design strategies that provide greatest possible benefits for themselves by keeping the organizational (owners) welfare as a second priority as they have high access to the information. Therefore, as an after effect of moral hazard, agent may be profited at the expense of the owners' benefits.

2. Adverse selection: Adverse selection refers to the process of selecting the wrong agent who is not fit for the owner’s tasks. It can occur when owners, in the organization, could not precisely determine the competencies and priorities of the executives (agents) at the time they are hired.

A broad of directors solve the agency problems in the following ways:

1. The agency problems can be solved by positive ways such as offering good payment or incentives to executives/agents to get things done. Providing additional benefits with a clearly defining the responsibilities of managers can mitigate the agency problem when managers can align their interest with the company's welfare.

2. The agency problem can be solved by negative ways such as threating of firing or take over from the respective jobs. However, this is a punishment which should be used only when above action does not work and should be often avoided to apply.

References

Pearce II, J.A.,& Robinson, R.B. (2012). Strategic Management: Formulation, Implementation, and Control. New York: McGraw-Hill Irwin.