Free Custom «Importance of Strategic Management» Essay Paper

According to Scholes (2006), strategy refers to reviewing ‘what we have’, ‘which direction we are going’ and ‘how we are going to get there’. In order to understand and evaluate an organization’s future strategy, it is important to start with evaluating ‘what we have’ by analyzing its strategic position which includes internal and external environmental influences on the organization and its capabilities. After having known ‘what we have’, the analysis of strategic choice will answer the question of ‘which direction we are going’ and ‘how we are going to get there’.

Strategy Management Is Important In An Organization For Several Reasons:

Globalization

Global considerations have an impact on virtually all strategic decisions. For organizations to survive, appreciating the world from the perspective of others has become a necessity. The importance of strategic management is underpinned by the fact that managers need to gain an understanding of markets, suppliers, competitors, prices, creditors, governments, distributors, shareholders and customers worldwide. An organization is required to be competitive on a worldwide basis, not just a local basis (Macmillan, 2000).

 

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E-Commerce

Organizations are increasingly using the internet to gain competitive advantage by direct selling and communicating with customers, suppliers, creditors, shareholders, partners, clients and competitors around the world. The internet has become an essential tool in advertising, selling products, purchasing supplies, tracking inventory and sharing information (Scholes, 2006). To sum it all, the internet is minimizing the expenses, time, space and distance of doing business, yielding to efficient customer service, improved products and increased profitability.

Environment

The continuous exploitation and decimation of the natural environment is a great threat to business and society in this era. Resources are scarce while wants are unlimited, and in order to meet the needs of the world, these resources must be utilized efficiently (Macmillan, 2000). 

External Environment Evaluation

Dell has been facing a number of problems in the recent past. The company’s analysis of the external environment was not sufficient to avoid problems that the company has faced. By marketing directly, offering customized computers at friendly prices and fast delivery, the company had managed to stay a step ahead from its competitors for a long time. As the cost of computing fell, the company was able to lower prices and maintain an advantage over its competitors.

Unfortunately, the company’s rivals managed to attack and narrow price gaps.  Competitors have managed to match Dell’s prices, improved their marketing strategies and raised the standards of their services. Some rival companies have even reduced their workforce and taken after Dell on low-end machines. Retailers have also reduced prices relying on services for profits. Fluctuating global prices have also challenged the company greatly in the recent past. Dell has also been too focused on perfecting its existing models instead of adapting them to a changing environment (Macmillan & Tampoe, 2000).

Internal Environment Evaluation

BP operates in a very competitive industry which is closely regulated by government policies and international regulations. Though it has a strong internal base, the company faced challenges after the Gulf Mexico by overlooking their weaknesses. The Company failed to develop a proper risk management strategy, causing the company to pay for that weak point in its management. The company has an advantage of avoiding and overcoming its weaknesses by exploring new types of resources and expands in new markets, thus creating new opportunities in the long term (Macmillan, 2000).

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Reviewing Controls in an Organization

It is important to continually review controls in an organization to ensure that we achieve our goals and objectives. These are the means that guide the actions of individuals or groups within an organization to perform certain actions while avoiding others in an effort to achieve organizational goals (Barry, 2004).

Regulative Controls

These controls arise from the policies and standard operating procedures in organization. Individuals or teams in organization are bound by the organization’s policies and procedures to ensure that clients are content with the services of the organization.

Quality Control

It is important to evaluate whether the products that organization is offering to the customer are of the desired quality. By ensuring consistent quality products, the customers will rely on the firm’s products

Team Norms

These are norms that make individuals aware of their responsibilities in a team. Each member must play his role for the organization to achieve its goals. Since an organization is made up of different people, it is important to review to what extent the organizational culture, beliefs and values are shared among the employees.

Can A Company Follow A Cost Leadership Strategy And A Differentiation Strategy Simultaneously?

Cost leadership strategy and differentiation are not mutually exclusive, and companies have found integrating the two systems in their operations as an important asset (Porter, 1990). Most companies have preserved cost reduction and process efficiency, while shifting to product differentiation and innovation. Integrating these two strategies has helped Dell Company in its business, despite their challenges (Porter, 1990). The company was able to reduce the costs of its sales as well as the innovation of new services and products.

 Integrating both strategies challenges the notion of using one competitive advantage, and it reduces the dangers of placing a company’s resources and hope on one main ability. Employing both cost leadership and differentiation helps a company to realize the value for their money. Dell, therefore, is able to achieve low cost and differentiation simultaneously. According to Porter (1990), these two types of competitive advantages can be combined with a limited or broad competitive scope. Conducting these strategies in an efficient way generates profits despite the low costs of the products or services offered by the company.