A Critical Review of Strategic Management Model

Abstract

In recent times world economy has witnessed a lot of dynamism and challenges. The success in corporate sector will depend on management’s recognition of the following functions: analyzing the environmental changes, selecting the strategists, helping them to think creatively, setting objectives, establishing strategies to achieve objectives, assign responsibilities and implementing the strategies, measuring success and evaluating results. Strategic management has been the subject of a substantial literature since the 1950s but has principally focused on the large corporation. By contrast the literature relating to strategic management within the small firms sector has remained limited. Much of the existing literature has dealt with business planning rather than strategic management. This paper outlines a proposed framework for understanding the strategic management of small entrepreneurial firms and draws upon the literature to illustrate aspects of the proposed model. Future directions for research using the framework are discussed.

Table of Contents

1. Introduction        6

1.1 Strategic Management Model        6

1.2 COMPETITIVE ADVANTAGE        6

1.3 Competitive Strategy        6

1.4 Sustainable Competitive Advantage        6

1.4.1 Creating Sustainable Competitive Advantage        6

1.5 Building Competitive Advantage        7

1.6 Five Major Competitive Strategies        7

1.7 Low-Cost Strategy        8

1.7.1 When to opt for Low-Cost Provider Strategy        8

1.7.2 How to Gain Competitive Advantage via Low-Cost Provider Strategy        8

1.7.3 Competitive Advantages        9

1.7.4 Cost Drivers        9

1.7.5 Pitfalls to Avoid in Pursuing Low-Cost Provider Strategy        10

1.7.6 Keys to Being a Successful Low-Cost Provider        10

1.8 Broad Differentiation Strategies        10

1.8.1 When a Differentiation Strategy works Best        11

1.8.2 Value Drivers        11

1.8.3 Cost-Efficient Management of Value Chain Activities        11

1.8.4 Managing the Value Chain Create the Differentiating Attributes        12

1.8.5 Pitfalls to Avoid in Pursuing a Differentiation Strategy        12

1.8.6 Delivering Superior Value via Broad Differentiation Strategy        12

1.9 Focused Low-Cost and Focused Differentiation Strategies        12

1.10 Best Cost Provider Strategies        13

1.10.1 Best-Cost Provider Strategy works Best        13

2. STRATEGIC MANAGEMENT PROCESS        14

2.1 Strategic Management        14

2.2 Strategy is About Competing Differently from Rivals        14

2.3 Strategic Management Process        14

2.4 Action Patterns for Strategies        15

2.5 A Company’s Strategy is Partly Proactive and Partly Reactive        16

2.6 Relationship between A Firm’s Strategy and Business Model        16

2.7 What Makes A Strategy Winner        17

3. VISION, MISSION AND OBJECTIVES        18

3.1 Why Vision Statement is Important        18

3.1.1 Dos and Don’ts of a Vision Statement        19

3.2 Developing a Company Mission Statement        19

3.3 Core Values        19

3.4 Objectives        19

3.4.1 Purposes of Setting Objectives        19

3.5 Classification of Objectives        19

3.5.1 Financial Objectives        19

3.5.2 Strategic Objectives        19

3.5.3 Short-Term Objectives        20

3.5.4 Long-Term Objectives        20

3.6 The Need for a Balanced Approach to Objective Setting        20

4. EXTERNAL ANALYSIS        20

4.1 PESTEL Analysis        20

4.2 Five Forces Model        21

4.2.1 Competitive Pressures Increase Rivalry among Competitive Sellers        22

4.2.2 Common “Weapons” for Competing with Rivals        23

4.3 The Threat of New Entrants        23

4.3.1 Market Entry Barriers for New Entrants        24

4.4 Competitive Pressures Stemming from Supplier Bargaining Power        24