Strategic Management in The Public Sector

Introduction
Publicsector, including both public enterprises and public services such as public
goods and government provided service, must be able to answer the challenge of providing
high quality goods and services with the most-efficient resources. Publicsector strives to
make continuous improvements in its management so that it can respond to these
challenges and can compete in global conditions. Improvements in the public sector are also
supported by new paradigm on public sector management, New Public Management, that
has significant influence on public sector reform.

In order to achieve the objectives of provide high quality goods and services using
the most-efficient resources, it is important for public sector to use the most suitable strategic
management in its organization activities. This strategic management is related to how to
strengthen the viability and effectiveness of public sector organizations in terms of both
substantive policies and long-term management capacity. This strategic management
integrates all other management processes to provide a systematic, coherent and effective
approach to building, achieving, monitoring, and updating an agency's strategic objectives.
Strategic management is integrated with actions: (a) focusing on all functional divisions and
all levels of the organization on common goals, themes and problems, (b) internal
management processes binding and creating programs for desired outcomes in the external
environment, and (c) connecting operational, tactical, decision making for strategic long-term
goals (Poister&Streib, 1999).

Furthermore Poister&Streib explained that strategic management is a process of

planning, implementing and evaluating but more than that strategic management is the
process of managing the organization, in this case the public sector, through a strategic and
sustainable perspective to ensure that the strategic plan is always updated and able to drive
other management processes .

Public sector needs to apply strategic management because as an organization that

wants to achieve a goal, public sector organizations need a strategic plan to achieve these
objectives which are detailed in programs and activities that can synergize to realize these
goals (Joyce, 1999). Especially with its very large and complex organizational structure, by
using strategic management, policy makers can motivate and direct their employees better
which can further improve the performance of the organization's performance. The public
sector can also formulate strategies in the future and see the threat of opportunities and set
targets and clear direction for the future.
 There are two influential strategic management theories found in business
organization that may be applicable in public sector. First is Porter’s strategic positioning
model (Porter; 1980, 1985, 1996) model which focuses on choice of strategy and position in
the market, so as to exploit market imperfections, and second is the resource-based
view(RBV) of strategy (Barney 1991, 1995; Peteraf and Barney 2003) which focuses
ondeveloping and exploiting the organization’s resources (Hansen & Ferly 2014). This paper
presents the possibility of public sector to use those strategic management model. The
method used by author is through literature review from peer-review journals.

Literature Review
Porter’s Strategic Positioning Model

The strategic positioning model explores how to choose a clear strategy and position
in an industry to exploit market imperfections (Porter 1980, 1985, 1996). The main concept
of strategic positioning model is the theory has outside-in focus strategy, it means the
strategy is shaped by the external environment (especially the industry). Porter’s work on
strategic positioning asks: how can the organization best position itself in the industry to
achieve competitive advantage? The key idea is that the organization, compared to
competitors, constructs an advantage from which it can make a sustained profit (Hansen &
Ferly 2014). The way to achieve competitive advantage is through a clear strategy where
only a small number of generic strategies are viable. The low cost strategy focuses on
achieving cost advantage. The differentiation strategy focuses on offering different products
or services that customers are willing to pay for (Porter 1980) in return for high quality. An
organization should choose one clear strategy; otherwise it will be ‘stuck in the middle’
(Porter 1980). The strategic positioning model explores the effect of a given strategy across
the organization.
The overall goal of using a strategic positioning approach is to gain an advantage
over competitors and to maximize profit. But, public organizations have multiple stakeholder
to serve within a specific mandate and not a focus on profit for shareholder. Furthermore, it
can be said that public organizations tied to spesific market and spesific customer, the
citizens. On the other hand, strategic positioning model focuses on the choices of customers
or what markets to serve and which generic strategy to apply. So that, public organizations
often have no possible freedom of choice because of their specific mandate to be fulfilled.
However, some parts of Porter’s theory can be applied in traditional public
organizations–especially the value chain concept (Bryson 2004) which seeks to ensure
alignment between the various value creating activities (Hansen and Ferlie, 2016). And the
concept of environmental fit is equally important in public organizations and private
companies (Hansen and Ferlie, 2016).
Dalam melihat penerapan Porter’s stategic positioning model in public organizations,
Hansen dan Ferlie (2016) membedakan jenis public organizations berdasarkan penerapan
NPM dalam organisasi mereka, yaitu traditional public organization dan NPM-oriented public
organization. Hansen dan Ferlie mengasumsikan bahwa strategic management akan lebih
applicable pada public organization yang NPM-oriented. Traditional public organization dan
NPM-oriented organization dibedakan berdasarkan tiga dimensi, yaitu degree of
administrative autonomy, degree of performance-based budget, and degree of market-like
competition. Degree of administrative autonomy menggambarkan derajat keketatan
boundaries for strategic action in public organizations. NPM-oriented public organizations
have broader scope of autonomy to reach their goals than traditional public organizations
that seen as highly restricted organizations. The restricted in traditional public organizations
comes from politicians decision on the organization’s degree autonomy that influences the
public management of its.

References:

Jesper Rosenberg Hansen & Ewan Ferlie (2016) Applying StrategicManagement Theories in
Public Sector Organizations: Developing a typology, Public ManagementReview,
18:1, 1-19, DOI: 10.1080/14719037.2014.957339