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Distinguish strategy and strategic management in business activities of some organizations/companies Background There is a story about an athlete who fails to evaluate his ability He does not know what competition to participate, what goal to achieve Despite his ability of running within 5,000m, he still participates in a 10,000 m competition Consequently, he invests all of his energy to the first 5,000m and then cannot finish the rest of the competition The failure of such athlete shows us that no strategy, tactics in the competition will lead to failure So any organizations or companies They should know what they are doing, their ability, objectives, what to and how to to reach their targets in the shortest time with least energy and other resources It is proven that no appropriate strategy shall lead to a weak, underdeveloped organization, or even lead to bankruptcy So what is the strategy? To fix such problem, organizations and companies should build suitable strategies and well manage such strategies I Definition of strategy Concepts and definitions of strategy - According to General Ailleret, strategy means “determination of ways and means used to reach targets through policies” - G Hissh defined “Strategy is the art of combining actions and control them in order to reach long-term targets” - Or McKinsey (1978) stated that "Strategy is a group of chains of activities designed to generate sustainable competitive advantages” There have been many definitions of strategy But it is summarized as the following: - Strategy is a logical process from conception to thinking and and setting of action plan - Strategy is the result from available information and strategic viewpoint in order to direct and plan long-term targets and build action plan - Strategy is a group of chains of activities designed to generate sustainable competitive advantages - Strategy is a procedure that gives answer to the following questions: “Where are we? What are our targets? Where and how will we go?” - Strategy is a combination between environmental values and resources of organizations in which strategy setting should be suitable with context, organization and generate new values Definitions of strategy by companies: As Alain Charlec Martinet defined “Strategy of any companies aims to outline quite stable and sustainable orbits of development, around which decisions and accurate actions of companies can be arranged.” Strategy is a system of viewpoints, objectives, basic targets, solutions, policies designed in order to make best use of resources, advantages and opportunities of companies to reach set targets in a certain period of time In operation environment of companies, including markets and competitors, strategy helps draw a way of consistent response to companies Strategy represents a selection, target of companies that is usually called strategic positioning by experts In markets or market segments in which Companies will run and business tactics applied, how can Companies take more advantages than their competitors with specific customers? What sources should be used (human, skill, asset, finance, knowhow etc.) to get such targets? What are external potential threats that can affect the implementation of strategy: environment, competition, politics, natural resources, etc and plan for response to risks? - Under a common approach, it can be stated that strategy is a system of long-term targets, policies and solutions mainly in production and business, in settlement of factors such as human, finance, etc in order to develop companies Contents of strategy: A proper and complete strategy should include the following contents: - Strategic vision: It is the image of companies, organizations in future – how will they be in future? Strategy makers should have a vision and combine lessons learnt from the past with current knowledge and predict future with sense, creation and opportunities - Strategic mission: It is what companies should including internal and external affairs and relations with authorities - Target of such strategy is the result in future, strategies to gets targets and action plans - Suitable organizational structure and management policies in which strategic target is very essential to concentrate and direct strategies - It is the determination of demands and resource distribution - It is to concentrate and mobilize all resources, to make better cooperation among sections, working teams and create high agreement in actions - It is to check, evaluate, adjust and motivate timely - It is required to analyze impacts of environment and strategy, including general environment, specific environment while recognize and predict opportunities and challenges - Strategy is established on the basis of analyzing impacts between environment and strategy General environment evenly affect all industries including culture, technology, economy, law, demography, nature and globalization It is called general environment The PEST(++) model is used to research general environment The PEST(++) model includes the following factors: - Economic factor: inflation rate, interest rate, deficit or surplus of state budget, trading, etc Then we analyze GDP trend, interest rate, inflation, unemployment and economic resources - Political factor: Political policies, political stability, laws, directions, policies If our industry is under direction, then we will receive support from the laws - Social factor: population, population characteristics, demography, national income, lifestyle, people’s education, culture, etc - Technological factor: scientific studies, speed of technology transfer, technological development, new equipment and State investment in technological research and development + Natural environment: Natural characteristics of regions, climate, weather, terrain, natural disasters, etc + Globalization: Significant political events, major markets of globalization * Industry environment: life cycle of the industry - life cycle of products: Analyzing life cycle of products, we will discover the following cycles in a product: - New emerge: At this stage, companies not have their trademarks, customers, markets and low income and they often suffer from loss - Development: At this stage, products are accepted in markets, leading to increase of demand, high price and increase of profit Many companies raise their investment at this stage to grow profits Competitors appear as profit grows Therefore, big companies should increase investment in their products - Saturation: At this stage, supply is equal to demand Price becomes the most concern of customers As a result, the weapon for competition is price To get advantages, it requires controlling costs and exploiting new markets - Decrease: Demand decreases at this stage Companies lower their price to compensate losses Investors withdraw from the industry Consequently, companies should consider to withdraw or to improve their products to make differences Researching fluctuations in cycles of products and of the industry, we see that life cycle is becoming shorter and shorter and generating more sub-industries Some industries overlap in a product or products Speed of diversification in the industry is very fast, which requires appropriate strategies - Market forces: In analysis of competitive environment, besides research of life cycle of products, environmental forces should be researched It is necessary to analyze power of customers, power of suppliers and threats from competitors, threats from new competitors, and threats from alternative products, opportunities and challenges, prospect of the industry, evaluation of the industry, comparison of competitive advantages * Internal analysis of companies: In Internal analysis of companies, it is necessary to analyze resources (visible , invisible) , abilities , capacities , competitive advantages and strategic competition II- Strategic management Definitions, concepts of strategic management - Strategic management is the process of determining strategic targets of organizations, making policies, plans to get such targets and allocate resources for implementation of such policies and plans - Strategic management is a set of strategic decisions and actions to determine long-term result - Strategic management is science and art in strategy in order to build directions and targets for actions, implement short-term and long-term plans based on available resources in order to help companies and organizations to get their long-term targets - Strategic management is the process of researching current and prospective environments, setting targets of the companies and organizations, implementing and checking the implementation of decisions in order to get such targets in current and prospective environments - Strategic management starts from the stage of setting targets and determining necessary resources, measures to implement set targets This stage also includes how to get such targets in the most efficient and fastest manner - Strategic management is a process of flexible arrangement of strategies, operations and performances, including evaluation of use of resources, human resources, leaders, materials, techniques and measures, new situations Effective combination of such factors will help better directions and strategies - Strategic management aims to generate strategic competition, competitive advantages of organizations, companies Therefore, the process of strategy requires commitments, decisions to bind implementation and clear actions Contents of strategic management Strategic management consists of three stages: setting, implementation and evaluation Besides, strategic management includes the checking and supervision of the implementation of such strategies Diagram of Strategic management Environment al analysis Opportunitie s, strategies, threats Strategic estimation (missions, targets) Missions, Implementation of strategies Evaluation of strategies Targets Strategies Internal analysis Strong points/advantages, weak points/ challenges Strategic control - Strategic estimation (missions, targets): This reflects objectives, strategies of strategy makers - Environmental analysis: This analyzes general environment, environment of the industry to check objectives, strategies and opportunities - Internal analysis: This analyzes Swot model, including strong points, weak points, advantages, difficulties, challenges, and opportunities - Setting strategies: from the above result, analysis, evaluation, the strategy makers transfer objectives in to missions, targets and strategies - Implementation of strategies: This requires the use of tools and equipment to implement strategies - The stage of setting strategy includes determination of missions, setting of targets, strategies and making of policies Determination of missions answers the question about survival objectives of companies, organizations Messages on missions should cover three main ideas: objectives, industry and benefits Setting of targets answers the questions about what organizations and companies get and at what period of time Targets should be coupled with missions and should be set on the basis of careful and scientific considerations as mentioned above Making of policies gives the answer on what way to get targets By setting strategies, companies determine directions for their operations, opportunities, external threats, point out internal strong points and weak points, build long-term targets, set strategies for alternation and select specific strategies to pursuit During the process of setting strategies, companies will decide to operate in what industry, to withdraw from what industry and whether or not to participate in markets - In the process of implementation, it requires companies to set their annual targets, make policies, encourage employees and allocate their resources for successful implementation of set targets - Evaluation of strategies: This process evaluates successful and unsuccessful points to adjust the whole process This is the process of supervising and checking results of operations, setting and implementation of strategies This process includes the measurement of results of companies and necessary adjustments to suit current situations - Control of strategies: Control of strategies in strategic management is carried out throughout three above processes It is controlled at the early time of setting, implementing and evaluating strategies The time from estimation to evaluation of strategies undergoes regular and strict control of a section called control of strategies This action is carried out regularly in order to evaluate and timely adjust steps of strategic management for highest performance By control, it helps companies to properly set, implement and evaluate strategies and perfectly allocate their resources during the implementation of strategies It also helps companies to defect any errors, mistakes or unusual events incurring during the process of setting, implementing and evaluating strategies for timely responses and adjustment This contributes to best implementation of strategies, to take companies to their targets and to comply with requirements of strategies III Similarities and differences between strategy and strategic management Similarities: - Strategy and strategic management are all sciences in management and products of humans - Strategy and strategic management aim to direct business activities, to reach new target and height in a scientific manner in a period of time - Both strategy and strategic management have contents that determine current positions (strong points, weak points, opportunities and challenges); targets in future of companies; measures, tools, resources for implementation; control, process of setting and implementing strategies; evaluation of strategies - Strategy and strategic management are both carried out based on careful and scientific analysis and considerations on markets, customers, consumption trends, competitors, technological changes, legal environment, socio-economic situation, internal strong points and weak points, external opportunities and threats Differences: - Strategy is a directive product that determines a target to reach including direction, measures of implementation It, however, stops in written form, direction of a company While strategic management means the management, setting and implementation of strategies in a scientific and effective manner Strategic management aims to set a most appropriate strategy, to exploit all potentials and advantages of companies in order to take companies to the highest targets in a period of time It also aims to proper implementation of such strategies to get targets in fastest, the most simply with least resources of companies - Strategy is a part of strategic management, a product of setting strategies process Strategic management includes the setting, implementation of strategies and evaluation of results and the control in all such processes IV Meanings of the concept and comparison of similarities and differences between strategies and strategic management to managers? As mentioned above, the definition of strategy and strategic management poses a significant meaning in management theory and science, in general, and in corporate management, in particular Good strategy and strategic management help companies to gain logical and scientific corporate management, to perfectly exploit their potentials and advantages and to limit their weak and inappropriate points in production and business activities for reaching the highest level in a period of time Thanks to business strategies, companies can determine their current positions (strong points, weak points, advantages, difficulties, etc), their targets and desires in a certain period of time, at the same time determine their ways and measures to go to set targets and to control the whole process for getting such targets Due to business strategies that were previously set and scientifically built on analysis of environment, industry, market forces, internal affairs, advantages, etc, companies can eliminate sentimental factors during the process of their building and development It helps companies to sustainably reach their targets, to maintain their stable production and business activities, to avoid external impacts, to keep their development despite difficulties and fluctuations On the contrary, companies without strategies always make inappropriate decisions that are based on sentiments and fortunes Strategic management proves significant effect to production and business activities of companies It helps companies to set their best strategy in order to maximize their strong points and advantages at the same time to limit weak points, difficulties to get highest position in a period of time It also helps companies to consistently implement their strategies This leads to necessary and timely adjustments for reaching targets in the shortest period of time with least efforts, energy and resources Strategy and strategic management have close relationship Companies with good strategies will succeed On the contrary, companies without good strategies (improper directions) will definitely fail despite their good strategic management; or companies with good strategies but without good strategic management cannot reach their targets properly The distinction of similarities and differences between strategy and strategic management helps corporate managers clearly determine contents, objectives, roles, 10 effects of each stage from setting, implementation to evaluation of strategies and control of processes in implementation This gives companies systematic and scientific management of strategies However, at present, many companies, particularly small companies, not have strategies or have strategies but neglect strategic management As a result, their operations often fall on the cycle of daily duties that relate to production or goods purchase, seeking customers, sales, delivery, cash management, inventory management, debts, etc Most of such duties are carried out instantly without logical strategies, logical management or scientific evaluation Involvement in such duties consumes time of leaders and embarrasses them Senior managers, particularly CEOs, are often misled by such duties unconsciously They act as in a jungle, without clear directions They just follow any paths they find The more they go, the more seriously they get lost Consequently, such companies vastly invest in and profitable fields without considering the fact that it is very difficult for them to become stable and sustainable companies in long time Examples of such companies include Vietnam Electricity (EVN), Vinashin, etc Besides, many companies have appropriate strategies and good strategic management This helps them clearly determine their targets, directions, find appropriate ways and optimally allocate their resources to ensure their targets in a permitted period of time Actually, the road to success of companies varies Vinaconex Corporation, for example, start as a small company But they have good strategies in labor export, which brings them foreign currency Then, they reinvest in trading and construction As a result, it soon becomes one of the biggest construction companies in Vietnam Conclusion Strategy and strategic management are very significant and decisive to long-term development of each company Good strategy and strategic management help companies to create scientific management of production and business activities Besides, thanks to good strategy and strategic management companies can determine their objectives in future to make them motivation for development and also to 11 maximize their strong points, advantages and limit weakness, difficulties Moreover, companies can optimally allocate their resources in production and business activities, remain stability in any difficulties and challenges to bring the companies to preset new height in a shortest period of time 12 ... and differences between strategy and strategic management helps corporate managers clearly determine contents, objectives, roles, 10 effects of each stage from setting, implementation to evaluation... similarities and differences between strategies and strategic management to managers? As mentioned above, the definition of strategy and strategic management poses a significant meaning in management... steps of strategic management for highest performance By control, it helps companies to properly set, implement and evaluate strategies and perfectly allocate their resources during the implementation