There are some of basic strategic management key terms that need to be considered at the beginning in order to completely understand strategic management. These strategic management key terms are eight in numbers and are the base of strategic management.
- Vision & Mission Statement
- External Opportunities & Threats
- Internal Strengths & Weaknesses
- Long Term Objectives
- Annual Objectives
8 Important Strategic Management Key Terms
Below is the detail all the 8 important Strategic Management key terms, which are important to understand for developing a successful strategic plan in business.
Those people in the organization who are fully responsible for the failure r success of the organization are referred to as strategists. Strategies are formed by strategists. Examples of strategists include chief executive officer, chair of board, chief executive officer, president & owner, entrepreneur or dean etc.
The information is gathered, analyzed and organized with the help of strategists. They identify industry & competitive trends, establish scenario analysis & forecasting model, evaluate corporate & divisional performance, and point out new marketing opportunities, highlight new threats for the organization & preparation of potential action plans. They further assist in supporting or staffing role. The decision making at the top level of management in the organization is mostly taken by these strategists. The most crucial & visible strategic manager in the organization is the CEO. Moreover every manager in the organization who has the responsibility for profit or loss results, responsibility for division or unit, or having clear authority over some element of organization is said to be strategist or strategic manager.
Different organizations have different kinds of strategists whose working alter in the phase of formulation, implementation & evaluation of strategies. The personal philosophies of strategists also affect the selection of certain strategies. There are some other foundations that differentiate one strategist from other like attitudes, ethics, values, concern for social responsibility, willingness to take risks, management style, concern for profitability, concern for long term versus short term objectives etc.
- Vision & Mission Statement:
Vision statement is quite necessary for the operation of the organization as it provides answer to the question that should be the organization wants to become? The first step in the strategic planning is to develop the vision statement and after that mission statement is prepared. Mostly the organizations develop single sentence vision statements.
Mission statement is long lasting statement that differentiates one organization from other similar organization. The scope of the operations of the organization in terms of market & product is identified through mission statement. The basic question faced that is related to the activities of the business is cleared with the help of mission statement. It guides the nature & scope of current operations of the business as well as the future aspects of the market conditions & opportunities. The future direction of the organization is highlighted by the mission statement.
- External Opportunities & Threats:
External opportunities and threats are also one of the part of strategic management key terms. All those trends & events those are related to the social, economic, environmental, cultural, demographic, political, legal, technology & technology & competitive that can harm or benefit an organization constitute external opportunities & threats. One major fact about the opportunities & threats is that they are out of control of the organization to much extent and hence they are “external” for the organization. Following are some examples of external opportunities & threats.
- Computer revolution
- Population shifts
- Changing work values & attitudes
- Space exploration
- Increased competition from foreign companies
- Space exploration
- Recycle able packages etc
The external opportunities & threats are significant for the organization as opportunities need to be availed while threats should be avoided. For this purpose there is strong need to identify, monitor & evaluate external opportunities & threats so that the organization becomes successful in the long run.
- Internal Strengths & Weaknesses:
Those activities of the organization that are under control of the organization, and may show good and bad impact on the organization are known as internal strengths & weaknesses of organization. These are present in the marketing, management, production/operation, finance/accounting, and information technology & research & development activities of the organization. It is quite essential strategic activity for an organization to identify & evaluate organizational strengths & weaknesses. Organizations need to adopt those strategies that capitalize their strengths while improve their weaknesses. Moreover strengths & weaknesses of the organization can also be ascertained in relative to the competitors.
- Long Term Objectives:
Long term objectives are also from one of the important strategic management key terms. Long Term Objectives are referred to as particular results that organization wants to accomplish in targeting the mission. Expected results by targeting certain strategies are represented by long term objectives. Strategies include those actions that are executed for the accomplishment of the long term objectives. There should be consistent time frame for strategies & objectives which range from two to five years.
The objectives are important for the success of the organization because of the following reasons.
- Provide direction
- Helps in evaluation
- Create synergy
- Reveal priorities
- Focus coordination
- Assist in making plans, organizing data, motivating employee & controlling each and everything
There should be some objectives for overall organization & some for separate division. Moreover these should be measurable, challenging, realistic & understandable. There should be a time line associated with each objective. There may be different forms of objectives like growth in sales, growth in assets, market share, profitability etc. There are many benefits of clearly established objectives. Moreover the long term objectives considered as the necessity for the success of the organization because of the following reasons.
- The stakeholders of the organization see their future role through long term objectives of the organization.
- The managers with different attitudes & values are assisted in consistent decision making.
- The potential conflicts in the implementation stage can be eliminated by consensus on the long term objectives in formulation stage.
- The priorities of the organization are specified by the long term objectives which further stimulate the action & accomplishment.
In short, the organization moves towards unknown end when it lacks long term objectives.
The means through which allow us to achieved long term objectives. Following are included in the business strategies.
- Geographic Expansion
- Product development
- Market penetration
- Liquidation & Joint venture
Large amount of the resources of organization are required along with the decisions of top management for the application of strategies in the form of actions. Strategies are future oriented as these will affect the long term prosperity of the organization. Both internal as well as external factors should be considered and therefore the strategies are multi-divisional consequences for the organization.
- Annual Objectives:
Those short term targets that are helpful in achieving long term objectives of the organization are called annual objectives. The annual objectives must be quantitative, measurable, realistic, challenging, consistent & prioritized. These must be developed at functional, divisional & corporate levels in large organizations. These objective must be stated in terms of marketing, management, production/operations, finance/accounting and research & development. Each long term objective always demand a set of annual objectives for its successful accomplishment. The allocation of resources is represented by annual objectives. Annual objectives are significant for Strategy Implementation whereas Strategy Formulation phase contains long term objectives.
Annual objectives are accomplished by the means of policies. Policies contain rules, guidelines & procedures developed to assist efforts to accomplish stated objectives. Decision making is guided through policies & recurring and repetitive situations are also addressed through policies.
Policies are usually mentioned in terms of marketing, finance/accounting, management, and production/operation, activities related to information technology and Research and Development. Policies may also established at functional level for certain department or at divisional level or at corporate level for entire organization. Policies play an important role in the implementation phase because the expectations of organization about its managers & employees are specified through policies. The coordination & consistency between different departments & within the departments is ensured through policies. Remember that for developing a successful strategic management plan, these all above strategic management key terms are important to understand and you can’t develop a successful strategic management plan without learning all these strategic management key terms.