Components of the Strategic Management Model

The fundamental goal of strategic management is to lead the organization towards the creation of enduring competitive advantages. While the creation of a winning strategy is not simple, and the business environment is complex and ever-changing, strategic management aims to create models and frameworks that can guide the decision process.

Environment

The structure and strategy of the organization must fit its environment. The external environment of the firm is made from all the actors and factors that can influence the organization but are out of its direct control, such as suppliers, customers, competitors. Further models can be used to guide the environment analysis. For example, Porter's five forces can aid the firm in determining its strategic position within the environment.

Resources

Strategic management seeks to maximize the utilization of the resources of the firm. Resources can be material, like physical assets, funds and infrastructure, or they can be intangibles like expertise and reputation. Analysis of the firm's resources is often combined with analysis of its environment in a SWOT, a study of the Strengths, Weaknesses, Opportunities and Threats the organization is facing.

Objectives

Awareness of the resources of the organization and its position within its environment will allow the creation of concrete and achievable goals that close the gap between where we are currently and where we would like to be .Those goals may be presented as vision and mission statements, financial and strategic corporate objectives, or even tactical and operational objectives.

Signals

Managers are not omniscient, and perfect knowledge of the organization and its environment is not possible. Moreover, the environment is changing constantly, and an organization with poor information processing capabilities may be acting on woefully outdated or incomplete information. The conjunction of environmental scanning, competitive intelligence and signal monitoring is required if the organization is to proactively adjust its strategy to respond to external and internal changes.

References

• Strategic Management Journal; Dynamic Capabilities and Strategic Management; David J. Teece et al 1997
• Strategic Management Journal; Strategic Management and Economics; Richard P. Rumelt et al 1991
• The Academy of Management Review; Adaptation- A Promising Metaphor for Strategic Management; Balaji S. Chakravarthy 1982
• The Academy of Management Review; The Historical Development of the Strategic Management Concept; Jeffrey Bracker 1980