Strategic Management - An Introduction

Strategic Management is all about identification and description of the strategies that managers can carry so as to achieve better performance and a competitive advantage for their organization. An organization is said to have competitive advantage if its profitability is higher than the average profitability for all companies in its industry.

Strategic management can also be defined as a bundle of decisions and acts which a manager undertakes and which decides the result of the firms performance. The manager must have a thorough knowledge and analysis of the general and competitive organizational environment so as to take right decisions. They should conduct a SWOT Analysis (Strengths, Weaknesses, Opportunities, and Threats), i.e., they should make best possible utilization of strengths, minimize the organizational weaknesses, make use of arising opportunities from the business environment and shouldnt ignore the threats. Strategic management is nothing but planning for both predictable as well as unfeasible Contingencies. It is applicable to both small as well as large organizations as even the smallest organization face competition and, by formulating and implementing appropriate strategies, they can attain sustainable competitive advantage.

Strategic Management is a way in which strategists set the objectives and proceed about attaining them. It deals with making and implementing decisions about future direction of an organization. It helps us to identify the direction in which an organization is moving.

Strategic management is a continuous process that evaluates and controls the business and the industries in which an organization is involved; evaluates its competitors and sets goals and strategies to meet all existing and potential competitors; and then re-evaluates strategies on a

regular basis to determine how it has been implemented and whether it was successful or does it needs replacement.

Strategic Management gives a broader perspective to the employees of an organization and they can better understand how their job fits into the entire organizational plan and how it is co-related to other organizational members. It is nothing but the art of managing employees in a manner which maximizes the ability of achieving business objectives. The employees become more trustworthy, more committed and more satisfied as they can co-relate themselves very well with each organizational task. They can understand the reaction of environmental changes on the organization and the probable response of the organization with the help of strategic management. Thus the employees can judge the impact of such changes on their own job and can effectively face the changes. The managers and employees must do appropriate things in appropriate manner. They need to be both effective as well as efficient.

One of the major role of strategic management is to incorporate various functional areas of the organization completely, as well as, to ensure these functional areas harmonize and get together well. Another role of strategic management is to keep a continuous eye on the goals and objectives of the organization.

Strategy - Definition and Features

The word strategy is derived from the Greek word strategies; stratus (meaning army) and ago (meaning leading/moving). Strategy is an action that managers take to attain one or more of the organizations goals. Strategy can also be defined as A general direction set for the company and its various components to achieve a desired state in the future. Strategy results from the detailed strategic planning process.

A strategy is all about integrating organizational activities and utilizing and allocating the scarce resources within the organizational environment so as to meet the present objectives. While planning a strategy it is essential to consider that decisions are not taken in a vacuum and that any act taken by a firm is likely to be met by a reaction from those affected, competitors, customers, employees or suppliers.

Strategy can also be defined as knowledge of the goals, the uncertainty of events And the need to take into consideration the likely or actual behaviour of others. Strategy is the blueprint of decisions in an organization that shows its objectives and goals, reduces the key policies, and plans for achieving these goals, and defines the business the company is to carry on, the type of economic and human organization it wants to be, and the contribution it plans to make to its shareholders, customers and society at large.

Features of Strategy

1. Strategy is Significant because it is not possible to foresee the future. Without a perfect foresight, the firms must be ready to deal with the uncertain events which constitute the business environment. 2. Strategy deals with long term developments rather than routine operations, i.e. it deals with probability of innovations or new products, new methods of productions, or new markets to be developed in future. 3. Strategy is created to take into account the probable behaviour of customers and competitors. Strategies dealing with employees will predict the employee behaviour.

Strategy is a well defined roadmap of an organization. It defines the overall mission, vision and direction of an organization. The objective of a strategy is to maximize an organizations strengths and to minimize the strengths of the competitors. Strategy, in short, bridges the gap between where we are and where we want to be.

Components of a Strategy Statement

The strategy statement of a firm sets the firms long-term strategic direction and broad policy directions. It gives the firm a clear sense of direction and a blueprint for the firms activities for the upcoming years. The main constituents of a strategic statement are as follows:

1. Strategic Intent An organizations strategic intent is the purpose that it exists and why it will continue to exist, providing it maintains a competitive advantage. Strategic intent gives a picture about what an organization must get into immediately in order to achieve the companys vision. It motivates the people. It clarifies the vision of the vision of the company. Strategic intent helps management to emphasize and concentrate on the priorities. Strategic intent is nothing but, the influencing of an organizations resource potential and core competencies to achieve what at first may seem to be unachievable goals in the competitive environment. A well expressed strategic intent should guide/steer the development of strategic intent or the setting of goals and objectives that require that all of organizations competencies be controlled to maximum value. Strategic intent includes directing organizations attention on the need of winning; inspiring people by telling them that the targets are valuable; encouraging individual and team participation as well as contribution; and utilizing intent to direct allocation of resources. Strategic intent differs from strategic fit in a way that while strategic fit deals with harmonizing available resources and potentials to the external environment, strategic intent emphasizes on building new resources and potentials so

as to create and exploit future opportunities.

2. Mission Statement

Mission statement is the statement of the role by which an organization intends to serve its stakeholders. It describes why an organization is operating and thus provides a framework within which strategies are formulated. It describes what the organization does (i.e., present capabilities), who all it serves (i.e., stakeholders) and what makes an organization unique (i.e., reason for existence). A mission statement differentiates an organization from others by explaining its broad scope of activities, its products, and technologies it uses to achieve its goals and objectives. It talks about an organizations present (i.e., about where we are). For instance, Microsofts mission is to help people and businesses throughout the world to realize their full potential. Wal-Marts mission is To give ordinary folk the chance to buy the same thing as rich people. Mission statements always exist at top level of an organization, but may also be made for various organizational levels. Chief executive plays a significant role in formulation of mission statement. Once the mission statement is formulated, it serves the organization in long run, but it may become ambiguous with organizational growth and innovations. In todays dynamic and competitive environment, mission may need to be redefined. However, care must be taken that the redefined mission statement should have original fundamentals/components. Mission statement has three main components-a statement of mission or vision of the company, a statement of the core values that shape the acts and behaviour of the employees, and a statement of the goals and objectives.

Features of a Mission

a. Mission must be feasible and attainable. It should be possible to achieve it. b. Mission should be clear enough so that any action can be taken. c. It should be inspiring for the management, staff and society at large. d. It should be precise enough, i.e., it should be neither too broad nor too narrow. e. It should be unique and distinctive to leave an impact in everyones mind. f. It should be analytical, i.e., it should analyze the key components of the strategy. g. It should be credible, i.e., all stakeholders should be able to believe it. 3. Vision

A vision statement identifies where the organization wants or intends to be in future or where it should be to best meet the needs of the stakeholders. It describes dreams and aspirations for future. For instance, Microsofts vision is to empower people through great software, any time, any place, or any device. Wal-Marts vision is to become worldwide leader in retailing. A vision is the potential to view things ahead of themselves. It answers the question where we want to be. It gives us a reminder about what we attempt to develop. A vision statement is for the organization and its members, unlike the mission statement which is for the customers/clients. It contributes in effective decision making as well as effective business planning. It incorporates a shared understanding about the nature and aim of the organization and utilizes this understanding to direct and guide the organization towards a better purpose. It describes that on achieving the mission, how the organizational future would appear to be.

An effective vision statement must have following features-

a. It must be unambiguous. b. It must be clear. c. It must harmonize with organizations culture and values. d. The dreams and aspirations must be rational. e. Vision statements should be shorter so that they are easier to memorize.

In order to realize the vision, it must be deeply instilled in the organization, being owned and shared by everyone involved in the organization.

4. Goals and Objectives

A goal is a desired future state or objective that an organization tries to achieve. Goals specify in particular what must be done if an organization is to attain mission or vision. Goals make mission more prominent and concrete. They co-ordinate and integrate various functional and departmental areas in an organization. Well made goals have following features-

a. These are precise and measurable. b. These look after critical and significant issues. c. These are realistic and challenging. d. These must be achieved within a specific time frame. e. These include both financial as well as non-financial components.

Importance of Vision and Mission Statements

One of the first things that any observer of management thought and practice asks is whether a particular organization has a vision and mission statement. In addition, one of the first things that one learns in a business school is the importance of vision and mission statements.

This article is intended to elucidate on the reasons why vision and mission statements are important and the benefits that such statements provide to the organizations. It has been found in studies that organizations that have lucid, coherent, and meaningful vision and mission statements return more than double the numbers in shareholder benefits when compared to the organizations that do not have vision and mission statements. Indeed, the importance of vision and mission statements is such that it is the first thing that is discussed in management textbooks on strategy.

Some of the benefits of having a vision and mission statement are discussed below:

Above everything else, vision and mission statements provide unanimity of purpose to organizations and imbue the employees with a sense of belonging and identity. Indeed, vision and mission statements are embodiments of organizational identity and carry the organizations creed and motto. For this purpose, they are also called as statements of creed.

Vision and mission statements spell out the context in which the organization operates and provides the employees with a tone that is to be followed in the organizational climate. Since they define the reason for existence of the organization, they are indicators of the direction in which the organization must move to actualize the goals in the vision and mission statements.
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The vision and mission statements serve as focal points for individuals to identify themselves with the organizational processes and to give them a sense of direction while at the same time deterring those who do not wish to follow them from participating in the organizations activities.

The vision and mission statements help to translate the objectives of the organization into work structures and to assign tasks to the elements in the organization that are responsible for actualizing them in practice.

To specify the core structure on which the organizational edifice stands and to help in the translation of objectives into actionable cost, performance, and time related measures.

Finally, vision and mission statements provide a philosophy of existence to the employees, which is very crucial because as humans, we need meaning from the work to do and the vision and mission statements provide the necessary meaning for working in a particular organization.

As can be seen from the above, articulate, coherent, and meaningful vision and mission statements go a long way in setting the base performance and actionable parameters and embody the spirit of the organization. In other words, vision and mission statements are as important as the various identities that individuals have in their everyday lives.

It is for this reason that organizations spend a lot of time in defining their vision and mission statements and ensure that they come up with the statements that provide meaning instead of being mere sentences that are devoid of any meaning.

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Strategic Management Process - Meaning, Steps and Components

The strategic management process means defining the organizations strategy. It is also defined as the process by which managers make a choice of a set of strategies for the organization that will enable it to achieve better performance. Strategic management is a continuous process that appraises the business and industries in which the organization is involved; appraises its competitors; and fixes goals to meet the entire present and future competitors and then reassesses each strategy.

Strategic management process has following four steps:

1. Environmental Scanning- Environmental scanning refers to a process of collecting, scrutinizing and providing information for strategic purposes. It helps in analyzing the internal and external factors influencing an organization. After executing the environmental analysis process, management should evaluate it on a continuous basis and strive to improve it. 2. Strategy Formulation- Strategy formulation is the process of deciding best course of action for accomplishing organizational objectives and hence achieving organizational purpose. After conducting environment scanning, managers formulate corporate, business and functional strategies. 3. Strategy Implementation- Strategy implementation implies making the strategy work as intended or putting the organizations chosen strategy into action. Strategy implementation includes designing the organizations structure, distributing resources, developing decision making process, and managing human resources. 4. Strategy Evaluation- Strategy evaluation is the final step of strategy management

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process. The key strategy evaluation activities are: appraising internal and external factors that are the root of present strategies, measuring performance, and taking remedial / corrective actions. Evaluation makes sure that the organizational strategy as well as its implementation meets the organizational objectives.

These components are steps that are carried, in chronological order, when creating a new strategic management plan. Present businesses that have already created a strategic management plan will revert to these steps as per the situations requirement, so as to make essential changes.

Components of Strategic Management Process

Strategic management is an ongoing process. Therefore, it must be realized that each component interacts with the other components and that this interaction often happens in chorus.

Environmental Scanning - Internal & External Analysis of Environment

Organizational environment consists of both external and internal factors. Environment must be scanned so as to determine development and forecasts of factors that will influence organizational success. Environmental scanning refers to possession and utilization of information about occasions, patterns, trends, and relationships within an

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organizations internal and external environment. It helps the managers to decide the future path of the organization. Scanning must identify the threats and opportunities existing in the environment. While strategy formulation, an organization must take advantage of the opportunities and minimize the threats. A threat for one organization may be an opportunity for another.

Internal analysis of the environment is the first step of environment scanning. Organizations should observe the internal organizational environment. This includes employee interaction with other employees, employee interaction with management, manager interaction with other managers, and management interaction with shareholders, access to natural resources, brand awareness, organizational structure, main staff, operational potential, etc. Also, discussions, interviews, and surveys can be used to assess the internal environment. Analysis of internal environment helps in identifying strengths and weaknesses of an organization.

As business becomes more competitive, and there are rapid changes in the external environment, information from external environment adds crucial elements to the effectiveness of long-term plans. As environment is dynamic, it becomes essential to identify competitors moves and actions. Organizations have also to update the core competencies and internal environment as per external environment. Environmental factors are infinite, hence, organization should be agile and vigil to accept and adjust to the environmental changes. For instance - Monitoring might indicate that an original forecast of the prices of the raw materials that are involved in the product are no more credible, which could imply the requirement for more focused scanning, forecasting and analysis to create a more trustworthy

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prediction about the input costs. In a similar manner, there can be changes in factors such as competitors activities, technology, market tastes and preferences. While in external analysis, three correlated environment should be studied and analyzed

immediate / industry environment national environment broader socio-economic environment / macro-environment

Examining the industry environment needs an appraisal of the competitive structure of the organizations industry, including the competitive position of a particular organization and its main rivals. Also, an assessment of the nature, stage, dynamics and history of the industry is essential. It also implies evaluating the effect of globalization on competition within the industry. Analyzing the national environment needs an appraisal of whether the national framework helps in achieving competitive advantage in the globalized environment. Analysis of macro-environment includes exploring macro-economic, social, government, legal, technological and international factors that may influence the environment. The analysis of organizations external environment reveals opportunities and threats for an organization.

Strategic managers must not only recognize the present state of the environment and their industry but also be able to predict its future positions.

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Steps in Strategy Formulation Process

Strategy formulation refers to the process of choosing the most appropriate course of action for the realization of organizational goals and objectives and thereby achieving the organizational vision. The process of strategy formulation basically involves six main steps. Though these steps do not follow a rigid chronological order, however they are very rational and can be easily followed in this order. 1. Setting Organizations objectives - The key component of any strategy statement is to set the long-term objectives of the organization. It is known that strategy is generally a medium for realization of organizational objectives. Objectives stress the state of being there whereas Strategy stresses upon the process of reaching there. Strategy includes both the fixation of objectives as well the medium to be used to realize those objectives. Thus, strategy is a wider term which believes in the manner of deployment of resources so as to achieve the objectives.

While fixing the organizational objectives, it is essential that the factors which influence the selection of objectives must be analyzed before the selection of objectives. Once the objectives and the factors influencing strategic decisions have been determined, it is easy to take strategic decisions.

2. Evaluating the Organizational Environment - The next step is to evaluate the general economic and industrial environment in which the organization operates. This includes a review of the organizations competitive position. It is essential to conduct a qualitative and quantitative review of an organizations existing product line. The purpose of such a review is to make sure that the factors important for competitive

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success in the market can be discovered so that the management can identify their own strengths and weaknesses as well as their competitors strengths and weaknesses.

After identifying its strengths and weaknesses, an organization must keep a track of competitors moves and actions so as to discover probable opportunities of threats to its market or supply sources.

3. Setting Quantitative Targets - In this step, an organization must practically fix the quantitative target values for some of the organizational objectives. The idea behind this is to compare with long term customers, so as to evaluate the contribution that might be made by various product zones or operating departments. 4. Aiming in context with the divisional plans - In this step, the contributions made by each department or division or product category within the organization is identified and accordingly strategic planning is done for each sub-unit. This requires a careful analysis of macroeconomic trends. 5. Performance Analysis - Performance analysis includes discovering and analyzing the gap between the planned or desired performance. A critical evaluation of the organizations past performance, present condition and the desired future conditions must be done by the organization. This critical evaluation identifies the degree of gap that persists between the actual reality and the long-term aspirations of the organization. An attempt is made by the organization to estimate its probable future condition if the current trends persist. 6. Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course of action is actually chosen after considering organizational goals, organizational strengths, potential and limitations as well as the external opportunities.

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Strategy Implementation - Meaning and Steps in Implementing a Strategy

Strategy implementation is the translation of chosen strategy into organizational action so as to achieve strategic goals and objectives. Strategy implementation is also defined as the manner in which an organization should develop, utilize, and amalgamate organizational structure, control systems, and culture to follow strategies that lead to competitive advantage and a better performance. Organizational structure allocates special value developing tasks and roles to the employees and states how these tasks and roles can be correlated so as maximize efficiency, quality, and customer satisfaction-the pillars of competitive advantage. But, organizational structure is not sufficient in itself to motivate the employees.

An organizational control system is also required. This control system equips managers with motivational incentives for employees as well as feedback on employees and organizational performance. Organizational culture refers to the specialized collection of values, attitudes, norms and beliefs shared by organizational members and groups.

Following are the main steps in implementing a strategy:

Developing an organization having potential of carrying out strategy successfully. Disbursement of abundant resources to strategy-essential activities. Creating strategy-encouraging policies. Employing best policies and programs for constant improvement. Linking reward structure to accomplishment of results. Making use of strategic leadership.

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Strategy Formulation vs. Strategy Implementation

Strategy Formulation Strategy Formulation includes planning and decision-making involved in developing organizations strategic goals and plans. In short, Strategy Formulation is placing the Forces before the action. Strategy Formulation is an Entrepreneurial Activity based on strategic decision-making.

Strategy Implementation Strategy Implementation involves all those means related to executing the strategic plans. In short, Strategy Implementation is managing forces during the action. Strategic Implementation is mainly an Administrative Task based on strategic and operational decisions.

Strategy Formulation emphasizes on effectiveness. Strategy Formulation is a rational process.

Strategy Implementation emphasizes on efficiency. Strategy Implementation is basically an operational process.

Strategy Formulation requires co-ordination among few individuals. Strategy Formulation requires a great deal of initiative and logical skills. Strategic Formulation precedes Strategy Implementation.

Strategy Implementation requires coordination among many individuals. Strategy Implementation requires specific motivational and leadership traits. Strategy Implementation follows Strategy Formulation.

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Strategy Evaluation Process and its Significance

Strategy Evaluation is as significant as strategy formulation because it throws light on the efficiency and effectiveness of the comprehensive plans in achieving the desired results. The managers can also assess the appropriateness of the current strategy in todays dynamic world with socio-economic, political and technological innovations. Strategic Evaluation is the final phase of strategic management.

The significance of strategy evaluation lies in its capacity to co-ordinate the task performed by managers, groups, departments etc, through control of performance. Strategic Evaluation is significant because of various factors such as - developing inputs for new strategic planning, the urge for feedback, appraisal and reward, development of the strategic management process, judging the validity of strategic choice etc.

The process of Strategy Evaluation consists of following steps-

1. Fixing benchmark of performance - While fixing the benchmark, strategists encounter questions such as - what benchmarks to set, how to set them and how to express them. In order to determine the benchmark performance to be set, it is essential to discover the special requirements for performing the main task. The performance indicator that best identify and express the special requirements might then be determined to be used for evaluation. The organization can use both quantitative and qualitative criteria for comprehensive assessment of performance. Quantitative criteria include determination of net profit, ROI, earning per share, cost of production, rate of employee turnover etc. Among the Qualitative factors are subjective evaluation of factors such as - skills and competencies, risk taking potential, flexibility etc.
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2. Measurement of performance - The standard performance is a bench mark with which the actual performance is to be compared. The reporting and communication system help in measuring the performance. If appropriate means are available for measuring the performance and if the standards are set in the right manner, strategy evaluation becomes easier. But various factors such as managers contribution are difficult to measure. Similarly divisional performance is sometimes difficult to measure as compared to individual performance. Thus, variable objectives must be created against which measurement of performance can be done. The measurement must be done at right time else evaluation will not meet its purpose. For measuring the performance, financial statements like - balance sheet, profit and loss account must be prepared on an annual basis. 3. Analyzing Variance - While measuring the actual performance and comparing it with standard performance there may be variances which must be analyzed. The strategists must mention the degree of tolerance limits between which the variance between actual and standard performance may be accepted. The positive deviation indicates a better performance but it is quite unusual exceeding the target always. The negative deviation is an issue of concern because it indicates a shortfall in performance. Thus in this case the strategists must discover the causes of deviation and must take corrective action to overcome it.

4. Taking Corrective Action - Once the deviation in performance is identified, it is

essential to plan for a corrective action. If the performance is consistently less than the desired performance, the strategists must carry a detailed analysis of the factors responsible for such performance. If the strategists discover that the organizational potential does not match with the performance requirements, then the standards must be lowered.

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Strategic Decisions - Definition and Characteristics

Strategic decisions are the decisions that are concerned with whole environment in which the firm operates the entire resources and the people who form the company and the interface between the two.

Characteristics/Features of Strategic Decisions

a. Strategic decisions have major resource propositions for an organization. These decisions may be concerned with possessing new resources, organizing others or reallocating others. b. Strategic decisions deal with harmonizing organizational resource capabilities with the threats and opportunities. c. Strategic decisions deal with the range of organizational activities. It is all about what they want the organization to be like and to be about. d. Strategic decisions involve a change of major kind since an organization operates in ever-changing environment. e. Strategic decisions are complex in nature.

f. Strategic decisions are at the top most level, are uncertain as they deal with the future, and involve a lot of risk. g. Strategic decisions are different from administrative and operational decisions. Administrative decisions are routine decisions which help or rather facilitate strategic decisions or operational decisions. Operational decisions are technical decisions which help execution of strategic decisions. To reduce cost is a strategic decision

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which is achieved through operational decision of reducing the number of employees and how we carry out these reductions will be administrative decision.

The differences between Strategic, Administrative and Operational decisions can be summarized as follows-

Strategic Decisions

Administrative Decisions

Operational Decisions

Strategic decisions are longterm decisions.

Administrative decisions are taken daily.

Operational decisions are not frequently taken.

These are considered where The future planning is concerned.

These are short-term based Decisions.

These are medium-period based decisions.

Strategic decisions are taken in Accordance with organizational mission and vision.

These are taken according to strategic and operational Decisions.

These are taken in accordance with strategic and administrative decision.

These are related to overall Counter planning of all Organization.

These are related to working of employees in an Organization.

These are related to production.

These deal with organizational Growth.

These are in welfare of employees working in an organization.

These are related to production and factory growth.

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Benefits of Strategic Management

There are many benefits of strategic management and they include identification, prioritization, and exploration of opportunities. For instance, newer products, newer markets, and newer forays into business lines are only possible if firms indulge in strategic planning. Next, strategic management allows firms to take an objective view of the activities being done by it and do a cost benefit analysis as to whether the firm is profitable.

Just to differentiate, by this, we do not mean the financial benefits alone (which would be discussed below) but also the assessment of profitability that has to do with evaluating whether the business is strategically aligned to its goals and priorities.

The key point to be noted here is that strategic management allows a firm to orient itself to its market and consumers and ensure that it is actualizing the right strategy.

Financial Benefits

It has been shown in many studies that firms that engage in strategic management are more profitable and successful than those that do not have the benefit of strategic planning and strategic management. When firms engage in forward looking planning and careful evaluation of their priorities, they have control over the future, which is necessary in the fast changing business landscape of the 21st century. It has been estimated that more than 100,000 businesses fail in the US every year and most of these failures are to do with a lack of strategic focus and strategic direction. Further, high performing firms tend to make more informed decisions because they have considered both the short term and long-term consequences and hence, have oriented their strategies accordingly. In contrast, firms that do not engage themselves in meaningful strategic planning are often bogged down by internal problems and lack of focus that leads to failure.
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Non-Financial Benefits

The section above discussed some of the tangible benefits of strategic management. Apart from these benefits, firms that engage in strategic management are more aware of the external threats, an improved understanding of competitor strengths and weaknesses and increased employee productivity. They also have lesser resistance to change and a clear understanding of the link between performance and rewards. The key aspect of strategic management is that the problem solving and problem preventing capabilities of the firms are enhanced through strategic management. Strategic management is essential as it helps firms to rationalize change and actualize change and communicate the need to change better to its employees. Finally, strategic management helps in bringing order and discipline to the activities of the firm in its both internal processes and external activities.

Closing Thoughts

In recent years, virtually all firms have realized the importance of strategic management. However, the key difference between those who succeed and those who fail is that the way in which strategic management is done and strategic planning is carried out makes the difference between success and failure. Of course, there are still firms that do not engage in strategic planning or where the planners do not receive the support from management. These firms ought to realize the benefits of strategic management and ensure their longer-term viability and success in the marketplace.

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Strategic Leadership - Definition and Qualities of a Strategic Leader

Strategic leadership refers to a managers potential to express a strategic vision for the organization, or a part of the organization, and to motivate and persuade others to acquire that vision. Strategic leadership can also be defined as utilizing strategy in the management of employees. It is the potential to influence organizational members and to execute organizational change. Strategic leaders create organizational structure, allocate resources and express strategic vision. Strategic leaders work in an ambiguous environment on very difficult issues that influence and are influenced by occasions and organizations external to their own.

The main objective of strategic leadership is strategic productivity. Another aim of strategic leadership is to develop an environment in which employees forecast the organizations needs in context of their own job. Strategic leaders encourage the employees in an organization to follow their own ideas. Strategic leaders make greater use of reward and incentive system for encouraging productive and quality employees to show much better performance for their organization. Functional strategic leadership is about inventiveness, perception, and planning to assist an individual in realizing his objectives and goals.

Strategic leadership requires the potential to foresee and comprehend the work environment. It requires objectivity and potential to look at the broader picture.

A few main traits / characteristics / features / qualities of effective strategic leaders that do lead to superior performance are as follows:

Loyalty- Powerful and effective leaders demonstrate their loyalty to their vision by their words and actions.

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Keeping them updated- Efficient and effective leaders keep themselves updated about what is happening within their organization. They have various formal and informal sources of information in the organization. Judicious use of power- Strategic leaders makes a very wise use of their power. They must play the power game skillfully and try to develop consent for their ideas rather than forcing their ideas upon others. They must push their ideas gradually. Have wider perspective/outlook- Strategic leaders just dont have skills in their narrow specialty but they have a little knowledge about a lot of things. Motivation- Strategic leaders must have a zeal for work that goes beyond money and power and also they should have an inclination to achieve goals with energy and determination. Compassion- Strategic leaders must understand the views and feelings of their subordinates, and make decisions after considering them. Self-control- Strategic leaders must have the potential to control distracting/disturbing moods and desires, i.e., they must think before acting. Social skills- Strategic leaders must be friendly and social. Self-awareness- Strategic leaders must have the potential to understand their own moods and emotions, as well as their impact on others. Readiness to delegate and authorize- Effective leaders are proficient at delegation. They are well aware of the fact that delegation will avoid overloading of responsibilities on the leaders. They also recognize the fact that authorizing the subordinates to make decisions will motivate them a lot.

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Articulacy- Strong leaders are articulate enough to communicate the vision (vision of where the organization should head) to the organizational members in terms that boost those members. Constancy/ Reliability- Strategic leaders constantly convey their vision until it becomes a component of organizational culture.

To conclude, Strategic leaders can create vision, express vision, passionately possess vision and persistently drive it to accomplishment.

Some Pitfalls to be avoided in Strategic Management It needs to be remembered that strategic management and strategic planning are intricate and complex processes that take the organization into unchartered territories. Hence, they do not provide a readymade prescription for success nor do they promise instant solutions to all problems that the organization is facing. Instead, strategic management and strategic planning are processes that take the organization through a journey that involves providing a framework for solving problems and addressing questions.

Some of the pitfalls to be avoided in strategic management and strategic planning are listed below:

The first and foremost pitfall relates to using strategic management and strategic planning only to satisfy accreditation and regulatory requirements instead of adding value to the firms processes.

Getting into solution mode without thinking through the complex problems that 21st century organizations face. It needs to be remembered that many problems that businesses face need slow fixes rather than quick and easy solutions that are

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attractive at first glance but fail over the longer term.

When the top managers do not support the strategic management process because of intra organizational politics, any strategy however good would fail because of the lack of buy-in from key interests in the organization.

When the planning is delegated to a planner instead of all the managers getting involved, there are issues to do with lack of information and lack of execution, which results in the strategy going haywire.

When firms are bogged down by too many internal problems that sap the energies of the managers, strategic planning and strategic management become futile, as the managers are engrossed in fire fighting and solving the internal problems rather than focusing on the external aspects.

One of the pitfalls of strategic planning happens when organizations become so formal and structured in their approach that they neglect the creative and flexible aspects. The point to be noted here is that out of the box thinking and non-linearity are important for firms to succeed in todays business landscape.

On the other hand, too much reliance on intuition can cost firms dear as after all strategy is a series of steps that need to be actualized and hence, there is a need for a well thought out and detailed plan.

While these are the some of the pitfalls of strategic planning, there are other aspects like not working to a plan and being too much bureaucratic. Since the organizations of the future need to be agile and flexible with the ability to be malleable according to the changing market conditions and yet at the same time, have a core structure that is consistent with core competencies, a mix of formal and informal planning is needed for effective strategic management
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Strategic Management in the Hospitality Industry

Hotels and restaurants are among the most competitive businesses in the world. The hospitality industry primarily consists of businesses that provide accommodation, food and beverage, or some combination of these activities. Hospitality businesses provide services, which differ from tangible products because they are immediately consumed and require a people intensive creation process. They differ from other service establishments by providing for those who are in the process of travelling away from home in contrast to local residence, although restaurants often serve both travellers and local guests. The offering of an experience is also becoming an important component of hospitality. In addition, a wide range of business structures exist in hospitality, such as direct ownership by chains, franchising, asset management, and consortia. Today, the hospitality industry has become more complex and sophisticated, with a movement away from the mine host (i.e., a view of hospitality in which the host personally and socially entertains visiting guests) and the cost - control frameworks of the past to a more strategic view of the business, in both investment and operations domains. Travel and tourism is a broad term used to capture a variety of interrelated businesses That provides services to travellers. Tourism is the largest industry worldwide, the second largest services export industry, and the third largest retail sales industry in the United States. 64 It is the first, second, or third largest employer in 30 of the 50 states. Besides the traditional hospitality businesses of hotels and restaurants, the tourism industry includes a broad range of businesses, such as airlines, cruise lines, car rental firms, entertainment firms, travel agents, tour operators, and recreational enterprises. The focus of this textbook will be on those hospitality businesses primarily engaged in providing food and lodging to travelling guests. However, we will also include discussions of other travel - related businesses, such as

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casinos, airlines, cruise lines, timeshares, travel agents, tour operators, and governmental tourism institutions. The Foodservice Industry The Players

The foodservice industry consists of a wide variety of different businesses, including institutional providers and food contractors such as Aramark Corp., Sodexho Alliance, Autogrill SpA s, HMS Host, and Compass Group. Institutional foodservice and military foodservice are small segments of the industry and consist of non-commercial institutions that operate their own foodservice. Contractors operate for - profit t services to commercial, industrial, university, school, airline, hospital, nursing home, recreation, and sports centres. Management is provided by the contractor of restaurant services, but the institution may provide the facilities and personnel for these operations. Contract companies are highly consolidated after aggressive merger and acquisition activities that gave them strong positions in the various on - site segments (e.g., school, corporate, and health care). Compass Group s Americas Division, for example, is the largest contract foodservice company, with $ 7.5 billion in revenues. Its purchase of Bon Appetite Management Company, a $ 300 million provider of upscale foodservice for corporations and universities is one example of its expanded coverage in various key segments. 65 Its parent company, Compass Group PLC, has worldwide revenues of $ 21 billion, with more than 400,000 associates working in more than 90 countries. Sodexho Alliance is the second - largest provider of foodservice worldwide, with operations in 79 countries employing 324,500 people. 66 In the latest rankings, Aramark is the leading contract chain in U.S. system wide sales ($ 5.53 billion) and market share (28.8 percent share of aggregate sales of contract chains in top 100), followed by Canteen Services and Sodexho. 67 The restaurant industry is the largest private -

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sector employer in the United States, and consists of commercial dining and drinking establishments, such as restaurants, bars, cafeterias, Ice cream parlors and cafe s. It dominates the foodservice industry. Within foodservice, the Restaurant industry is by far the largest segment, with 935,000 restaurants in the United States, sales of around $ 537 billion in 2007, and an annual growth rate of around 8.4 percent. 68 Common conventions is to split the restaurant industry into two main segments: quick Service and full - service. Quick - service, commonly called fast - food or fast - service, restaurants are defined as eat - in or take - out operations with limited menus, low prices, and fast service. This segment of the industry is further broken down into sandwiches (e.g., hamburgers and tacos), pizza, and chicken. Leaders in market share in the sandwich segment are McDonald s, Burger King, Wendy s, Subway, and Taco Bell, while the chicken segment is led by KFC (Kentucky Fried Chicken), Chick - fil - A, and Popeye s Chicken and Biscuits. 69 The pizza segment is led by two strong players: Pizza Hut with 43 percent of the market and Domino s Pizza with a 27 percent market share. 70 Full - service restaurants offer eat - in service, with more expansive menus, and prices that range from low to high. In providing annual comparisons, Nation s Restaurant News divides full -service restaurants into family, grill - buffet, and dinner house segments. Family chains include players like Denny s and IHOP(International House of Pancakes), and grill - buffet segment leaders include Golden Corral, Ryan s Family Steak House, and Ponderosa Steakhouse. 71 Finally, the large dinner house segment is aggressively focusing on value - oriented menu items, advertising,and improved execution in operations, with several major players including Applebee s Neighborhood Grill and Bar, Chili s Grill and Bar, Outback Steakhouse, Olive Garden, Red Lobster, and T.G.I. Friday s. 72 Other key players in this segment are the multiconcept operators and franchisors like Darden and Brinker. Large companies in the restaurant industry, such as Yum! Brands (which owns many of the aforementioned brands

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such as Pizza Hut and Taco Bell), are aggressively developing portfolios of restaurants, and international expansion continues to serve as a viable growth strategy for fi rms like Starbucks. Small operators and independent restaurants compete with the large chains in an industry known for its low barriers to entry and entrepreneurial opportunities. The Lodging Industry The Players

Lodging in the United States is a $ 113.7 billion industry, with more than 47,000 hotels and around 4.4 million guest rooms. 73 Like the foodservice industry, consolidation has been a theme for the last decade, with most of the largest companies being publicly owned. Hyatt Hotels, owned by the Pritzker family, and Carlson Companies are exceptions to this rule, with Carlson being one of the largest privately held companies in the United States. (See the Hospitality Focus boxed section above.)

Segmentation

Providing a bed, bathroom, television, and phone are hotel basics, but additional amenities and services are common. Segmentation is a strategy that distinguishes properties on the basis of price, service, function, style, offerings, and type of guest served. Hotel chains have been utilizing segmentation, particularly since the 1980s, to enable growth, expand their customer base, and leverage corporate resources and expertise. A widely used approach to classifying segments of the lodging industry was devised by Smith Travel Research and Bear Stearns and includes five segments: luxury (upper upscale), upscale, midscale with food and beverage services, midscale without food and beverage services, and economy. Extended - stay hotels are also included in many classifi cations as either upper or lower tier, depending on the range of services they offer. Many of the largest hotel chains have developed brands in a

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variety of segments, from luxury to economy. Accor Hotels, for example, has the Sofi tel brand in the upper upscale segment; Novotel, Mercure, and Suitehotel in the upscale and midscale segments; Ibis in the economy segment; and Etap, Motel 6, and Formula 1 in the budget segment. 75

Ownership Structures

A hotel may be owned by one company, franchised by another, and operated by a third, or any combination of these situations. This complex web of business relationships often makes the question of business identity confusing for those who do not understand the structure of the industry. Companies that choose to own hotels can select from a variety of different forms, including corporations, partnerships, and real estate investment trusts (REITs). A company that owns hotels may also be part of a franchise. Management companies run the operation of a hotel and may also be franchisors. These companies may actually own the hotels they manage or operate hotels that others own. Table 1.4 lists the companies managing the most hotels worldwide based on a recent Hotels survey.

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As

the rankings in Table 1.4 suggest, Marriott Accor, InterContinental, and Starwood are also franchisors and owners of hotels. Based on Table 1.4, the top fi ve franchise hotels worldwide are Wyndham Worldwide, Choice Hotels International, InterContinental Hotels Group, Hilton Hotels Corporation, and Marriott International. 76 Overall, the top players based on the number of rooms they hold around the world are, in that order: InterContinental Hotels Group, Wyndham Worldwide (formerly Cendant Hotel Group), Marriott International, Hilton

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Hotels Corporation, Choice Hotels International, Accor, Best Western International, Starwood Hotels & Resorts Worldwide, Carlson Hospitality Worldwide, and Global Hyatt Corporation. As this list suggests, 80 percent of the largest chains are headquartered in North America, although this percentage drops to half when the list includes the top 50 corporations. Best Western International is the largest chain with independently owned and operated hotels, which explains why it has no managed or franchised hotels. Starwood also has 130 owned hotels and 19 vacation ownership resorts in addition to its managed and franchised hotels. As firms in the industry have evolved and transitioned into more consolidated international operations, so too has the mind - set of managers moved to a more strategic way of thinking about the business. Many of the assumed differences between hospitality firms and other businesses have disappeared, being replaced with a clear understanding of business practice. Although differences still exist between hospitality firms and firms of other types, in most ways hospitality firms are not that different. From one perspective, hotels and restaurants are a big assembly operation, much like a manufacturing operation. However, they are seldom studied in this manner. Also, all hospitality firms can be studied in terms of their cash flows, just like other types of firms. They also all rely on markets for capital, human resources, customers, and supplies. They are subject to economic, socio cultural, technological, and political influences and trends. They have competitors. In summary, there are more similarities than differences between hospitality firms and firms of other types. Consequently, the general strategic management process does not require substantial modifications to be applicable to hospitality firms. Similar to the manufacturing industry, the process begins with analysis of the firm and its environment, which forms the foundation for development of strategic direction, strategies, and implementation plans. The outcomes from this process are different for each hospitality firm, because results depend on

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the specifics of the situation. In addition, certain ideas require modification to understand their use and application in services. The most unique aspect of this book compared to general strategic management texts is the translation of these ideas into service contexts through the use of hospitality industry examples. These examples should help you as you learn the strategic management process. Also, they will help you become more aware of strategies and strategic issues in the industry. However, the most up - to - date theories and ideas of strategic management are also contained here. No hospitality examples will occasionally be used when they better illustrate a point. One of the most important strategic issues facing the hospitality industry today is the ability to leverage human capital. 77 In particular, managers are concerned about human resource activities, such as attracting, retaining, and developing the workforce. Although human resources are an area of concern in every business, the hospitality business faces particularly great challenges because of relatively low wage rates and a large percentage of routine jobs. Managers are also very interested in effective use of capital, aligning the interests of stakeholders such as employees, customers, and owners, understanding their customers better, and applying information technology. Because of their importance to the industry, these issues will receive special attention in this book.

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