Introduction to Strategic Management

 

The Foundation of Strategy

 

Before we understand what we mean by strategic management, let us first take a look at the term ‘strategy'. The term ‘strategy' is derived from the ancient Athenian position of ‘strategos'. ‘Strategos' was a compound of ‘stratos'; which meant ‘army' or more properly an encamped army spread out over ground and ‘agein', ‘to lead'. The emergence of the term paralleled increasing military decision-making complexity. The term ‘strategy' is defined in more detail by Frontinus in the first century AD, as ‘everything achieved by a commander, be it characterised by foresight, advantage, enterprise, or resolution'.

 

If military practice is taken as a metaphor for business competition, the strategic principles of the great strategoi still provide useful guides for those in the business of strategy formulation. Therefore it should not be surprising that many of the terms used in strategic management today originate from the military.

 

The academic origins of strategic management come from the fields of economics and company theory. Economics provided a way to begin exploring the role of management decisions and the possibility of strategic choices. In addition, early organisational theorists  (Frederick W. Taylor, Max Weber, and Chester Barnard, among others) provided knowledge about efficient and effective companies and the role that managers played.

 

During the 1960s, company theorists began questioning the "universalistic" principles and rules of management (that is, the assumption that there's one correct way to manage in all situations).  They started looking at contingency ideas, which proposed that each organisational situation was different and the best way of managing depended on the situation.

 

During the 1970s and 1980s, strategic management became more of a separate and distinct academic field as researchers began to empirically study companies, managers, and strategies. Strategic management researchers fell into one of two camps: those focused on the process of strategic management (understanding how strategies were formed and implemented) and those focused on the content of strategic management (understanding the relationship between strategic choice and performance).

 

So much so that in the eighties strategy was defined as a rendition of the CEO's personal mission statement, rationalised by the board and bought into by the chief shareholders. This simplistic and cynical approach to strategy failed to throw any insights into the process. Now that more and more line managers are becoming responsible for planning and strategies, and the sum of their increasingly fast-paced decisions may affect a company's strategy almost overnight or create a new implicit aspect of it, it's time to take a fresh look at what strategy really means.

 

Strategy could 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.” Strategy in this general sense should not be confused with general interpretation of the term strategies. When we use the term strategies in a general sense we are pointing towards the specific methods, processes, or steps used to accomplish Goals and Objectives. Strategies impact resources (Inputs) in some positive or negative way and they are executed in a tactical manner so as to link Goals and Objectives to day-to-day operations.