Introduction
Strategic management is a pivotal issue in the business world since it predetermines the identification of the long- and short-term goals of a company. It justifies the choice of frameworks, tools, and practices for achieving those goals in an efficient and competitive manner. The understanding of some core concepts and tools applicable to strategic management allows managers to obtain a structured and integrative approach to business. Thus, this paper is aimed at exploring and explaining such elements of strategic management as strategy formulation, strategy implementation, corporate and business strategy, diversification, and SWOT analysis to clarify their role in company management.
Main body
Within the P-O-L-C framework, the difference between strategy formulation and strategy implementation is in the time when they are identified in the process of strategic development of a company. In particular, strategy formulation implies creating a strategy that a company is going to implement at a later stage of its development (Ropianto et al., 2017). Therefore, strategy formulation occurs at the initial stages of the P-O-L-C framework, namely at the planning stage (“Strategic management in the P-O-L-C framework,” n. d.). On the other hand, strategy implementation follows the strategy formulation stage and occurs at the later stages of the P-O-L-C framework; in particular, it takes place during organizing, leading, and controlling.
Another important issue to consider in strategic management is the differentiation between corporate strategy and business strategy. When strategizing, a prospective company is faced with a number of issues to resolve in terms of its strategy. Importantly, the strategy is two-fold, namely corporate and business, depending on the scope of application. Corporate strategy is larger in scope since it necessitates considering how different businesses should be developed and what industries they should represent to ensure competitiveness inside the corporation (“Strategic management in the P-O-L-C framework,” n. d.).
In this regard, synergic relations between several businesses within one corporation are taken into consideration. As for the business strategy, its scope involves only the strategic solutions within one business, which prioritizes the operational solutions that help a company understand how it should compete in the market (“Strategic management in the P-O-L-C framework,” n. d.). Thus, for a large corporation that has several brands or businesses, it is imperative to integrate both strategies, business and corporate, to ensure the consistency of its competitiveness.
When continuing the discussion of synergy that incorporates strategic management, one should identify the role of diversification. Diversification implies that a corporation has several businesses that are different in its operations and even industries (“Strategic management in the P-O-L-C framework,” n. d.). There are several forms of diversification, namely concentric, horizontal, and conglomerate diversification (Wanyonyi, 2018). These forms serve different purposes and might be used to meet several needs of companies.
Firstly, concentric diversification is used when a company searches to introduce new products that are similar to the ones it produces now. Secondly, horizontal diversification is used when a product is different from the range of currently produced products but has the same target audience. Finally, conglomerate diversification is a form that is used by a business that aims at launching a different product for a different group of customers. Each of these forms of diversification might be helpful in strategic management at particular stages of company growth.
When deciding on the path of strategic development, a company might refer to such a powerful and useful tool as SWOT analysis. This integrative approach to factor analysis allows for identifying and assessing determinants that are of positive and negative effects on a company within both internal and external environments. In particular, a SWOT framework incorporates the strengths and weaknesses of a business (which are identified within the internal factors) and threats and opportunities (found in external factors). The analysis of each factor within these four categories allows a company to use its strengths to minimize weaknesses, overcome threats, and enhance the usage of opportunities to build a strong and competitive business.
When identifying the particular factors within internal and external environments, it is vital to use appropriate tools. For internal analysis, such tools as VRIO (value, rare, inimitable, and organized) and value chain are used (Ariyani & Daryanto, 2018). They allow for a comprehensive investigation of a company’s strengths and weaknesses. As for the analysis of the external factors, such tools as PESTEL analysis and industry analysis might be useful (Koshesh & Jafari, 2019). These frameworks allow for an integrative view of the variety of external factors providing a company with a full vision of threats and opportunities.
Conclusion
In summation, in strategic management, several pivotal elements help companies plan and implement strong strategies and make informed decisions. Deliberate differentiation between corporate and business strategy and the distinction between strategy formulation and its implementation allows for an integrative and through-through action plan for a business seeking competitive advantage in a long-term perspective.
Among the tools available to managers when making a strategic decision, such as diversification and others, SWOT analysis with VRIO and value chain for internal analysis and PESTEL for external analysis might be used. Overall, the utilization of strategic management procedures and tools allows for effective and sustainable solutions that allow businesses to grow consistently and occupy solid leading positions in their respective markets and industries.
Reference
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Ropianto, M., Rukun, K., Hayadi, B. H., Utami, F. H., & Candra, O. (2017). Optimization of strategic planning organization in the framework of achievement objectives of education. Advances in Social Science, Education and Humanities Research, 149(2), 149-151.
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