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Distinguish similarities and differences between strategy and strategic management in business activities of an organization / enterprise ANSWER: FOREWORD In fact, many businesses, especially small and medium enterprises, pay very little attention to strategic issues and strategic management; they are even unable to determine their own strategy The primary reason is that they have not been aware of the role of strategy and strategic management The problem is that not only big businesses need to have a strategy, but also small businesses We need to affirm that all organization and businesses need to have a strategy The presence of a formal strategy in business is no longer the desire of having or not having a strategy, instead, it depends solely on the perception and the role of strategy as well as scientific knowledge about the strategy of the business managers I/ DEFINITIONS ABOUT STRATEGY: Strategy definition: Currently there are many different definitions of strategy, the underlying cause of this difference is due to the different system concepts about the organization in general and the different approaches of the organization's strategy in particular In terms of ontology, depending on the perspective of positivism or constructivism, the nature of strategy is determined by the law of nature or by the significant impact of subject In fact, the strategy is usually defined towards reality in order to make the process of practice within the organization easier According to Johnson and Scholes, strategy is defined as follow: "Strategy is the determination of the direction and scope of an organization over the long term, in which the organization must gain the advantage through a combination of resources in a challenging environment, to best meet the needs of the market and satisfy the desire of the agents related to the organization” According to this definition, a business strategy is formed to answer the following questions: - Where will business activities take place in the long term? (orientation) - In which market that there will be competing business activities, what is the scope of activities? (markets, operation scale) - In what way that the business activities can be carried out better compared to the competitors in the market? (advantages) - Which resource (skills, assets, finance, human resources, technology, brands…) is necessary to create competitive advantages? (resources) - What are the external factors which affect the competitiveness of the company? (environment) According to Michael Porter (1996), "Strategy is the creation of a balance between the activities of a company The success of the strategy is mainly based on the good operations and the combinations between them the core of the strategy is “choose what hasn’t been done” Under this approach, the strategy is to create a difference in the competition, find and what hasn’t been done (what not to do) The nature of the strategy is to build competitive advantages, the strategy only exists in unique activities The strategy is to build a unique position and create an impact on a group of different activities In order to have strategies as well as to create competitive advantages, there are three types of basic positioning: - Positioning based on the varieties of activities (varieties based): It is a choice of one or a group of activities in a business segment based on the business activities - Positioning based on needs (needs based): It is the choice of customers who have heterogeneous needs, based on market segmentation - Positioning based on customer’s ability to access a product or a business field (access based): That is the type of positioning which based on geographic criteria or clients’ ability to pay The harmonious combination of activities allows the creation of competitive advantage and the ability to protect this advantage in the long term There are three types of basic links: - The simple link between each single operation with the overall strategy - The link when the activities are strengthened and enhanced - The link when optimizing efforts The strategic position can only be protected in long-term if there’s a difference created: the difference in the activity, in meeting the demand or in approaching customers, which allow companies to always find new positioning In sum, we can generalize the definition of strategy as followed: “Strategy is the direction and scope of an organization over the long term: Strategies will bring strategic advantage for the organization through the optimal arrangement of resources in a competitive environment in order to meet the market demand and expectations of the capital contributor”… Characteristics of strategies in the company’s business operation: To better understand the concept of business strategy, we need to consider its characteristics from which, we can distinguish it from the relevant concepts and categories Business strategy has the following basic characteristics: - Business strategy often defines basic goals, the business orientation of each enterprise in each period, and is thoroughly applied in all business activities of the enterprise in order to ensure business continuity and sustainable development (greater than year) - The business strategy ensures maximum mobilization and exploitation of resources in the present and the future, promote the advantages and seize the opportunity to gain advantage in the business market - Business strategy must be reflected throughout a continuous process from strategy formulation, implementation, testing, evaluation and adjustment - Business strategy must be created to have an aggressive trend to win business in the market (to take full advantage of the advantages to win) - Business strategies are usually built for a relatively long period (3 to years); the trend of shorting depends on the characteristics of each business From the above characteristics, we can easily distinguish the concept of strategy from the related concepts The closest concept to strategy is "plan", in fact, many people confuse these two concepts together By order, the business strategy is formulated on the basis of the environment analysis and diagnostics; in turn, the strategy acts as a basis for the strategic plan implementation The outstanding feature of the strategy is the nature of being orienting and solution identifying among major objectives; when in plans, the balance-orienting nature of plans is the key; all targets are quantified and linked together into a comprehensive system of indicators reflecting production activity of the business II/ DEFINITION OF STRATEGIC MANAGEMENT: The definition of strategic management: Currently, there is no uniform definition of "Strategic Management", but the current definitions all have theoretical and practical foundations, such as: Firstly, “Strategic Management” is a science and an art about Strategies to build the business direction and targets, implement and carry out the long and short term plans based on the available resources to help each Company/Organization to reach their long term goals” Secondly, “Strategic Management” is a process of studying the current as well as future environments, which plans the targets of the enterprise, carry out and monitor the implementation of decisions to reach those targets in current as well as future environments” Thirdly, “Strategic Management” is an art and a of the creation, implementation and evaluation of the comprehensive decisions to help each Company/Organization reach its goals” So, we can understand the concept of Strategic Management in the most general way as follows: Strategic management is the process of determining the organization's strategic goals, develop policies and plans to achieve the objectives and allocate the resources of the organization for the implementation of these policies and plans Strategy in management: Strategic management is the direction and scope of an organization in the long term to aim to achieve business advantage through the identification of resources that can be used in a specific business environment in order to satisfy the needs of the market and ensure benefits for all factors involved (stakeholders) Under the view of Win-Win strategy consultancy and support company, the deep target of strategic management is to position the business in the best place on the target market, to maximize long-term values of the business More specifically, strategic management is to: - Achieve long-term business goals (business & social responsibility) in a sustainable way (sustainable) - In the market or market segment that the company will operate, the trading tactics will be applied - How to help the company dominate the competitors in the market with the specific customer? - Which resources that we need to use (human, skills, assets, finance, technical know-how, ) in order to achieve these goals - The external potential risks which can affect the implementation of the strategy: the environment, competition, politics, resources and risk prevention plans? - The values that will be brought to the business owners and the society in which the company is a member III/ THE SIMILARITIES AND DIFFERENCES BETWEEN STRATEGY DEFINITION AND STRATEGIC MANAGEMENT DEFINITION: The similarities between strategy and strategic management: - When companies manage to create strategies and strategic management, it is the shared vision of business leaders with the management units under the relevant authorities Through that, it demonstrates the consistency and concentration in the line of business of the company, to avoid wasting resources on inessential activities - These are management tools to assess the feasibility / priorities / resource allocation for the business activities of the enterprise towards the strategic objectives set out - Strategy and strategic management are the "compasses" of every business in the course of its existence and development It exists in parallel, closely related to each other since the time that the strategy was created until the end of the strategy It helps enterprises to survive and develop in the fierce competitive environment today - Strategy and strategic management are both carried out in a long time - Strategic Management helps organizations clearly define business goals, direction, and point out the way to appropriately allocate resources to ensure that they can reach the objectives specified in the time allowed which was expressed in the strategy of the business - Strategy and management strategy of the company are derived on the basis of careful and logical analysis about the market, customer, consumer trends, competition, changes in technology, the legal environment, the socio-economic situation, internal weaknesses, strengths, potential external opportunities and threats … The differences between strategy and strategic management: - The strategy is to plan, develop strategic vision and goal setting mission, while strategic management is the implementation of the operating plan and selected strategies, evaluate the performance, monitor and adjust to improve / change if needed, improve, change, restore - Strategy can be seen as a set of decisions and actions set so that the capacity and resources of the organization meet the opportunities and challenges from outside So, first of all, strategy is related to the business objectives Second, corporate strategy includes not only what businesses want to do, but also how to perform a series of actions and decisions closely related to each other and selection of methods to coordinate actions and decisions Business strategies need to be able to exploit its fundamental strengths (resources and capabilities) and to take into account the opportunities and challenges of the environment - Strategic management is a series of steps that businesses must carry out: Analysis of the current situation; decisions to put the strategies into implementation, performance evaluation, adjustment and changes when necessary It covers all the basic functions of management: planning, organizing, directing and controlling Thus, the strategic management process includes strategy formulation, strategy implementation and strategy evaluation - Strategic Management is a process of flexible arrangement of the strategies, operational situation and business results; it includes human resources, leadership, technology and dealing methods This is a continuous activity to establish and maintain strategic direction and operations of an organization; daily decision-making process to address changing circumstances and challenges in the environment IV/ THE MEANING FOR MANAGERS FROM THE DEFINITIONS AND THE COMPARISON OF THE STRATEGY AND STRATEGIC MANAGEMENT DEFINITIONS: The meaning for managers, from the above comparison, includes: - The company which have a wise competition strategy will bring profit for its own and also meet the current market demand since the market competition is extremely tough now - The current market is continuously changing; the business strategies are designed to help company adapts to changes in the long term Strategic management acts as an approach to help these organizations overcome the changes in the market, reaching out to the future by their own efforts and abilities - Strategic management enables an organization to be more active rather than passive to define their future, it can allow an organization to lead and influence the environment in which it operates and so, using the best of its ability to control what beyond natural variables - Help to make it so that even the Board of Directors or employees both understand and are committed to achieve the objective of the business Once people understand what the business is doing and why the company is doing that, they will feel that they are a part of the business, they will commit to support all activities of the enterprise - Prove that the business have a clear vision for the future, create confidence for partners, customers and people who contribute capital - Ability to exploit opportunities and response to external changes (volatility) by implementing strategic decisions - Unique strategies and proposals will create a value chain different from competitors - Positioning the brand of the business in the market - Help businesses assess their true power and have plans to effectively respond to the emerging challenges, including the difficulties and opportunities The company is able to determine what should be done and what is not need to be done The example about strategies and strategic management of companies: * Example 1: Strategic management lessons seen from Mai Linh Group (MLG) According to the report of MLG to 06.30.2012, the total debt is up to 4690 billion while the equity of the entire group is 887 billion Thus, the debt-to-equity ratio is up to 5.28 times, too high of an indicator for a business operating in the transport sector In particular, the short-term debt is 1178 billion while the long-term debt is 1576 billion The president of MLG has acknowledged that "the loss is due to our mistake" In it, he refers to the cause that the company has used the short-term loans from people with an interest rate of 18-25% / year for long-term investment into the taxi which will take 5-7 years to cover the investment; spreading investment poured into 60 subsidiaries around the country, totaling thousands of billion years but only received dividends for the company at 3-5% / year; Meanwhile, in the potential marketplace such as Hanoi and Ho Chi Minh City, Mai Linh let the competitors such as Taxigroup and Vinasun outperform ; those above mistakes have made Mai Linh fall Those mistakes can be seen for a long time but Mai Linh did not manage to avoid them The root cause stems from the ambition in the context of limited long-term strategic vision of the board Maybe this is a lesson for businesses in strategic management and corporate governance * Example 2: Strategies need to be successful in each link of the value creation chain Zara company – which had captured the market in a short time - is a good example of successful strategy and strategic management at each link of the value creation chain Zara believe in frequent changes of its collection - 15 times / year (while other clothing manufacturers just change their collection once in a season) The company also believes that their difference is the belief in fashion trends at affordable prices, the origin of goods should be European rather than from Hong Kong or China, the location of the store is where there are many passers-by and Zara have succeeded Competitors can not imitate one of the many strategic chains of Zara's Therefore, the competitive advantage of the enterprise can not be focused on one or some of the value creation chain links * Example 3: The failure of Neutrogena Soap Company due to choosing the wrong strategy Neutrogena Soap Company has achieved success in the 1990s when selecting soft soap for sensitive skin and get rid of all kinds of detergents The brand has captured the top position with the refers of dermatologists and gain the trust of consumers, regardless of the fact that the market segment for this product is relatively narrow But then, when rebuilding and re-orientating the strategy on the company's growth as well as the strategy of using mass advertising on television, with the participation of the stars, the company lost its consumer confidence and as a result the market share of the company disappeared This example shows us that Neutrogena Soap Company has chosen the wrong strategy and its strategic management is not good for not making timely adjustments CONCLUSIONS In 1947, only 20% of U.S firms has business strategy In 1970, this number was up to 100% Many American businesses consider that building business strategy is the steps taking up the most time, is the most important and the most difficult Mr Wilson, GE President of the United States once said: "Every day I not much work, but there’s one thing that I can never ever complete, which is to plan the future." This shows that firms in the country in general and the U.S in particular attaches great importance to the development of strategy and strategic management of the business, which is the foundation for success and the factor to help companies become large, world's leading corporations as the current ... strategies need to be able to exploit its fundamental strengths (resources and capabilities) and to take into account the opportunities and challenges of the environment - Strategic management is a... link between each single operation with the overall strategy - The link when the activities are strengthened and enhanced - The link when optimizing efforts The strategic position can only be protected... changes in technology, the legal environment, the socio-economic situation, internal weaknesses, strengths, potential external opportunities and threats … The differences between strategy and strategic
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