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The Role and Importance of Strategic Management in Business

Introduction

Strategic management is one of the part of management. But today it is using as widely in place of general management. And it is used to describe the top management responsibility of an organization or a company. It is necessary to identify the levers that top managers can manipulate in order to influence the effectiveness with which organization function. According to David (1989), “[s]trategic management is the art and science of formulation, implementing and evaluating cross-function decisions that will enable an organization to achieve its objectives”. Strategic management gives overall direction to the company. And the low level and high level workers work as per the direction. In the strategic management the mission, vision and the target is properly adjusted. Which move the higher authority to move the company in the place of success.

Definition of management

In very easy word management means to manage men tactfully. So manage met tactfully is the very easy to describe management. But actually the matter is not so easy. It is most difficult to a organization to manage its staffs of men. Moreover it is a part of management and information systems. To achieve a desired goal management organize people and make them work together. And the people work like one unit to reach their organizational target. It is the process of planning, organizing, leading or directing and controlling an organization.

To explain management there comes many other terms that are related to the management. They are the theory of management, nature of management etc. But historical development is the base of it. Day by day it has been developed and makes it to the position it is standing.

Definition of Strategy

According to Oxford dictionary “Strategy” means ‘Long term plane or policy’. It also indicates the ‘fighting plan’. But for the study the appropriate meaning is long term plane. The long term plane which is taken for the management indicates the strategic management. It is little bit different from management. Today, in the corporate market the competition is high and normal management is not properly work for the companies. That is why the companies have to take long term decision. And for that reason the companies are taking the strategic management system to compete in the market. And it is a classified section of management. And it is little bit complex than management.

The Elements of Strategy

Strategy means the process or policy of future plane. There are some key elements which are linked with strategy. The elements that are related with the strategy are as below:

  • Purpose or Mission
  • Policies
  • Defining what business the company is in
  • Defining what kind of company it is
  • Objectives or goals
  • Strengths and weakness
  • Opportunities and threats
  • Key success factors
  • Key decision
  • Capabilities or competences
  • Planning and scheduling

Implementation

Sustainable competitive advantage

Cause of Accepting strategic management:

There are some causes of changing the management system to strategic management. The causes of accepting strategic management are the impact of New Economy, Globalization, Good communication systems, Spread of Multinational companies etc.

The Aspect of new economic environment: The power points of new economic aspects are as follows (Sadler, Ryall and Craig, 1993, p.29):

  • Globalization has increased in the business sector slowly
  • The invisibility and intangibility of an increasing proportion of economic activities
  • Effect of technology in the modern business.

Globalization

Globalization means the diversification of people, goods and services from one country to another in a very easy way. And the process will happen in a very low formality. And the situation will make easy the diversification. For globalization business are diverted from one country to another.

Related staffs

On the previous section it is directed that the strategic management works with the higher management. It provides the various works what helps the higher management to achieve the goal of the organization. The staffs who are included in this criteria are

  • The Board of Directors,
  • Chief executive Officers (CEO),
  • Corporate managers and
  • the executive teams.

The board of directors works as the controller of every works. And the CEOs evaluate the work performances.

The Strategic Planning Process

Today in this highly competitive market budget oriented planning or forecast based planning is not sufficient for the success. So the firms accept strategic planning. Specially the large companies and the firms who face high competition. The process of strategic planning is shown below with a diagram:

The Strategic Planning Process

Mission and objectives

Mission means the future plane for a company. And vision means the particular target of the firm. Actually vision is also included in the mission. By mission the firm indicates the forward looking visionary goals that guide the pursuit of future opportunities. Financial objectives are involved with the mission. Financial objectives involve measures sales targets and earning growth etc.

Environmental Scan

Analysis can show some new items in the old. By environmental scan a firm can find two type of things. From internal environment a company can find strength, weakness of a firm. By external scan a firm can be ensured of the opportunities and threats. Threat analysis is known as SWOT analysis. For performing industrial analysis, sometimes, Michael Porter’s frame work can be used. The frame work is known as Porter’s five forces. Following things are evaluate by this frame work-

  • Entry barriers
  • Suppliers
  • Customers
  • Substitute products and
  • Industry rivalry

Strategy Formulation

By the scanning system a firm can find out the opportunities and threats of it. It is also informed about its strength and weakness. To become a more profitable firm, the firm seeks to develop advantage over its rivals. Cost or differentiation is the base of comparative advantage.

Strategy Implementation

Strategy is implemented when the environment is ready to work. The organization behavior means organization’s budget, programs and producers. Implemented strategy should be taken in such a way, what will be proper for the workers, management and the related sections to make the strategy reach the goal.

Strategy evaluation

Evaluation is the process of measuring the works performance, whether the work is properly done or not. It measures the effectiveness of the organization. By strategy evaluation it can be measured the strengths, weaknesses, threats etc. By evaluating the strategy it can be realized whether the strategy would be changed or not.

For corporate strategy, a three point model is developed in which strategic options are evaluated. Three points are as follows:

  1. Suitability
  2. Feasibility
  3. Acceptability

On the following portion the description of the features are given and the tools use for them are given.

1. Suitability: It works with the rationale of the strategy. Tools that can be used to evaluate suitability include:

Feasibility

Feasibility is related with the resources (including include funding, people, time and information) required to execute the strategy are obtainable, can be developed or attained. Resources Tools used to evaluate feasibility:

Acceptability

Acceptability is related with the shareholders, employees and customers who are expected performance outcomes. Tools used to evaluate acceptability:

The performance outcomes, which are related with the expectations which can be return, risk and stakeholder reactions.

Case Study

Main target of management is to increase productivity which will increase the profit in result. What ever the approach is or whatever the procedure is the main target is the same in case of any profitable organization. To increase profit all the organization work properly. And it also fulfill their goal. Before switch the case study it is better to know the advantages and disadvantages lo case study.

Advantage and disadvantages of case study

Smith (2002) provides that “[l]ike any other research technique, case study has both advantages and disadvantages (p.282). In the advantage the following features are in it (Smith 2002, p.283):

  • It suggested for the future and help for decision making
  • And the staffs can learn to face the critical situation and they also can be prepared in the best way to face a new situation they never faced in the past.
  • It is such kind of document that can be readable when staffs want
  • University graduates and under graduates can learn about practical area and that is mostly helpful for their future career.

Now, the other side of the light- disadvantages of case study. Following are the disadvantages-

  • Case Study cannot be easily generalized
  • New passed students generally depend on the case studies. So they do not think about the brand new situation and that may a cause of great harm in future for them.
  • All the situation case study cannot give the proper answer. That may create harm to the novice to learn

History of Kronenbourg

Jerome Hatt obtained the Master Brewers certificate in 1664. Jerome Hatt’s son Claude started produce “Cronenbourg” in 1850. Tigre Bock is named as Hatt Brewery in the year 1922. After the second world war the name of the company has been changed to “Kronenbourg”. And after the second world war the company started its production internationally.

Kronenbourg is the leading brand of beer in France. And it has a 40% market share in 2004. BSN Group has taken it in the year 1970. Kronenbourg marged with Kanterbrau in the year 1986.

Market Forces: There are few strengths and weaknesses of Kronenbourg in considering the major market forces and comparison with its major competitors in Europe. In the following portion the strengths and the weakness of Kronenbourg are given:

Strengths: Following are the power points of strengths.

  • Brand Name: The name Kronenbourg has become a brand name and it help a business to grow up very easily. With the brand name it is very much known by the people. And brand shows the quality.
  • Very old company: Kronenbourg is a very old company as the history of it is telling so. The Master Brewer’s certificate was obtained by Jerome Hatt in the year 1664. And it was produced from then. Unofficially it can be said. So as a very old company it has a cool position on the mind of the people. And it makes the psychological help to the company to make place on the customers mind.
  • Multination company: Though it starts its business as a local business but after the second world war it start the business multi-nationally. It is now serving more than 70 countries. And by its this reputation it is just spreading its business perfectly.
  • Huge service providing : It is not limited in one business. It provided some beverage and like soft drink. In the year 1989. But the percentage was very scanty, it was only 0.5% of their total sales of product. But it is a sign of diversification of product production. It makes a chance of change of business strategy in future.
  • Multi purpose service: As this is a subsidiary company the main decision has come from the holding company BSN. From the view of BSN it has a lot of opportunity to serve multipurpose service.
  • Quality maintaining: As it has become a brand name. It has to maintain its quality to protect from defame. The company is very much successful it this criteria. They maintain their quality to serve their customers properly.
  • Environment care: Kronenbourg make all the environment right for them. It has made it’s business environment in Greece, Belgium, Spain, Italy and many other countries in the world.
  • Human resource development:
  • Public Commitment: It contains lot kind of bottles to sell to the consumers. So the company is committed to the public. And it take care of the consumers and fulfill their demand to take beer.
  • Prevention over-consumption: Kronenbourg is an active member of the enterprise of prevention association. The first objective of the association was formed to fight excess alcohol consumption and the second object is to ascertain the effects of excess alcohol consumption (Peter and Murphy 2004).

Weakness : weakness is very few for the company. But there are some weakness there. They are as below.

  • Not a local company: A multi national company is not always acceptable with the people of all countries of the world. Like India, a large country, cannot accept any foreign company as normal. They do not like to use the product or any other thing like their own product.
  • Problem of management: For a large company it is very difficult to maintain its management properly. More over it is using its brand name more than 70 countries. And It is very difficult to maintain such a huge type of company. More over, Kronenbourg is a subsidiary company of BSN. So maximum decision comes from the BSN. So, they have very small opportunity to maintain its management to its own.
  • Public Ethics: In some countries the habit of drinking is not so ethical. Alcohol is not seen good enough to these countries. In the Muslim countries it is not seen very well. So in some countries the business is little bit hampared with the ethics of the county people.
  • Diversification of business: Diversification of business is not always good for the business. It must be diversified when it will be profitable. But some times it is seems that the project faces loss enough. So that time the diversification is not proper option.

BSN was a glass producing company before 1973. They have changed their production from 1973. They diverted their production to food and drinks from the year. In the year 89-90, they have made the food and drink business as their core business. It can be determined as from their comparative balance sheet of year 1989 and 1990. The balance sheets show that, in 1990 the sales turn over of the group was Ffr 52,897 million and its consolidated net profit reached Ffr 3,091 million. Where there sales turn over was in year 1989 was Ffr 48,669 and net profit was Ffr 2,698.

Table: Sales Turn over of BSN (% of sales).

Name of the product 1990 1989 Example
Dairy Product 24.5 25.4 Gervais Danone
Epicerie, Pasta 19.6 20.1 Panzani
Biscuits 23.6 22.2 Lu and Beiin
Beer 12.2 12.4 Kronenbourg and Kanterbrau
Champagne and Water 9.2 8.7 Evian

From the table it is clear that a large number of profit has come from Kronenbourg. So it is clear to all that the management must work properly for the Beer sector of the group. A company is always run by the decision of its top level management. The top level management takes brewing as their main theme of business. And they take it as is the most profitable project. The management give emphasis on two things. They are as follows (Cotton 1990):

  • Capacity of production units increase and
  • Increasing capacity due to the development of automatic processing.

The top management of Kronenbourg believed that there are three key factor for the business:

  • Managing the high level of investments with light control of the debt/ equity ratio.
  • The achievements of economics of scale- the high level of fixed costs required a focus on lower production costs through larger units to cover bigger geographical areas
  • Improvements in productivity and quality through effective human resource management to keep up with new techniques

These are the quality they have achieved.

Strategic management for BSN Group for Kronenbourg

In the year 1973 the BSN Group has changed their business to food and drinks. Among their drink business they produce beer, what is famous and make an acceleration on the 70 countries in the entire world. The strategy they have taken is given in the following:

  • Fix the target for the next year, and worked properly to fulfill the target
  • Gathering the market situation to compete with other competitors
  • Taken the huge target
  • Extra ordinary forecast for future
  • Big plane for the whole worlds market
  • Increase the product to establish their product to the market
  • Stop old business to get the target fully in time
  • Stop of old business to concentrate in the new one

Goals of BSN Group

At the very beginning Antoine Riboud, the president director of the group, wanted to become the leader or no.2 in each area of business. From the beginning the company was too ambitious to their target. But actually they deserve it as for their work. Their first target was in the European level and then in the world level. 1990 BSN sold their champagne business at the cost of Ffr 3.1 billion. They want to focus on their work properly. They just want to reach the target they fixed and they kept the position of market (Ries and Jack 2003). The company got the third position in the year 1990, in the world. But it was in first position in European market. And it also got the second position in beer producing in the European market (Smoluk Kalinowski and Luczka 2004). Then by the above context it can be easily said that the company has a strong eagerness to their target. And from the second year of their working they have got the position they want to. The position they want is nearly achieved by them. That is the presentation of the work for the management team. Though Champagne and mineral product is taking very small place in the total business though they are included in the drink business. The beer production is 12.2% and Champagne and mineral waters is 9.2% in the year 1990.

Strategy of Heineken

Heineken is a competitor of Kronenbourg. It has some unique and basic strategy and goal to accelerate in the market. In the following the goals and strategies of Heineken are given:

  • By maintaining strong brand advantage they just want to establish the strong leadership in the market.
  • To establish a strong leadership they just want to make large their company as the company has become larger in future
  • To maintain their brand they want to introduce a new technology to increase their production and to get stronger position in the market of local beer.
  • They offer training to the employee. That may increase their skill, make themselves most productive. And that is the sign of a strategic management they are using.
  • All the management want to work together to take the market of other beer which are presently running in the market.
  • The members and workers will work for take the position high of the company as they can achieve the beer market.

Goals of Heineken

The Heineken has also some goals with keeping as strategy, so that, they can fulfill the target easily. The goals of Heineken are as below:

  • Maintain the top-line growth
  • Increase the efficiency of the management and the workers
  • With the help of modern technology the company want to reduce their cost (if possible)
  • In case of normal production they want to increase their productivity to accelerate the production line
  • Want to grow their implementation
  • Implementation make the board of directors to take decision easily and fastly
  • All their work are market based as this is the point for them to change and fulfill their target

Explain the organization design of the international operations of the beer branch of BSN.

Stanford (2004) states that “[w]hen you need to improve productivity, performance and profit you need to improve the relationships and interactions among one or more of the pairs of components”. This is most common words to the organization design. The basic element of a company is its design. And a proper design of an organization make the situation of work and it help the workers and management to take the work proper and easy. Basically all the organization of the world works in the same procedure. The basic procedure or the basic design of organization is as:

Goals of Heineken

Maximum time the above system is followed in the business organization. It is the basic formulation of the design of any organization. BSN Group followed the given formula to maintain their design. There was a balancing position of mechanism. The integration and differentiation situation was quite level. There was a nice combination among all the combination. BSN Group was not really designed only for beer of drink producing company. It established itself as the food and beverage producing company (Monster 2007). As from its financial statement it has been established that beer of drink is one of its great product but food sector is the dominant section for the business of the whole group. If the % turn over sales statistics is analyzed it is clearly seen that 67.7% of total product was food product in the year 1990 and it was 67.7% in the year 1989. In the year when they sell the champagne company the sells of champagne had been increased. But the sells of beer have been diminished in the preceding year.

So, the BSN Group should take the extra planning for the beer group. But due to their not taking of new design it has become face a 0.2% reduced sales in the year 1990. So it can be said that the BSN Group didn’t take the extra designed plan for the beer branch of group. BSN Group should change a little bit. As they are the largest company, to compete with more companies they should follow the changes given.

With the change of time the strategy of BSN Group has been changed. But it is nothing very basically change. This change is the change of formula and other structural situations. But there is some matter what should be changed to make the business more profitable.

  • Decentralization of power: In the year 1990 the president was Antonio Ribound. In this manner the power of making executive decision and other executive matter should be clarified by the vice executive. That situation must be changed. The power should be diversified. As this comes to the workers as the reward of their works.
  • Removal of Agency problem: Agency problem means the problem that creates among the zonal manager and the main manager. If the main and zonal manager is the same person then there is no problem. But if the managers are separate person than there occurs the agency problem. What ever diversification and good combination of managing body can easily remove the agency problem. That helps the organization to improve in future.
  • Motivation: Motivation is the best instrument to make one ma profitable. So higher motivation system must be applicable in the farm. And that makes the firm productive and makes the business as per the board of directors want.
  • Decision making manager: In many regions the board should give the power to the manager to take decision. As they know the situation there. So they are the best judge there. This process also works as the motivation of the managers.
  • Care about the new competitors as they can grab market easily and after a booming position a product comes to declining line. And many new products can capture the market in different way.
  • Control on the market: The group can see the market strategy of other companies and they also study it and survey the full situation of the market to make a control over it properly.

Conclusion

Strategic Management is known as the new version of management information systems. By its proper using one firm can be get the position where they want to reach. Work of management is to increase productivity which makes the profit maximum. So the use of strategic management can submit a company to its goal.

References

Cotton, Dorothy H. G. Stress Management: An Integrated Approach to Therapy. Routledge. 1990.

David, F. Strategic Management, Columbus: Merrill Publishing Company, 1989.

Monster. Job Search Results Food and Beverage Production Jobs in Colorado. Monster. (2007). Web.

Peter E. and Murphy, Ann E. Strategic Management for Tourism Communities: Bridging the Gaps. Multilingual Matters Limited. 2004.

Ries. Al and Jack. “Marketing is not a Post-Processing Step”. Eric Sink. Friday, 2003. Web.

Sadler, Philip., Ryall, M. J. and Craig, James C. “Strategic Management”. Kogan Page Publishers. 1993.

Smith Ronald D. “Strategic Planning for Public Relations”. Routledge Taylors & Francis Group. 2002.

Smoluk J. , Kalinowski S. , Łuczka-Bakuła W. The Globalisation In Brewery Industry, EJPAU (Electronic Journal of Polish Agricultural Universities). 7(2), #10. 2004. Web.

Stanford, Naomi. Organization Design: The Collaborative Approach. Butterworth-Heinemann. 2004.