MICHAEL M.

MAUNDU D61/60723/13 DSM601: STRATEGIC MANAGEMENT

Assignment 1 Discuss the possible similarities and differences in the strategic management process in large and small enterprises.

TABLE OF CONTENTS

1.1

Introduction

Strategic management has gained acceptance as a systematic way of the long term desired state of large and small organisations as they attempt to build & sustain their competitive advantage in the twenty first century. The ever turbulent, interconnected, hyper competitive & dynamic environments within which large & small firms operate as open systems demands that strategists in those firms adopt a proactive approach in crafting strategies to seize opportunities. The increasing importance of strategic management may be attributed to several trends: Increasing competition in most industries has made it difficult for some companies to compete, Modern and cheaper transportation and communication have led to increasing global trade and awareness, Technological development has led to accelerated changes in the global economy, among other factors. It is widely acknowledged that large & small enterprises complement each other as engines of economic growth throughout the world.

Definitions 2.1 Strategic management

There are probably as many definitions on strategic management as there are writers on the subject. Different authors have defined strategic management in different ways contributing to a plethora of definitions.Below are a few examples: Johnson et al (2008) state that strategic management includes understanding the strategic position of an organisation,strategic choices for the future and managing strategy in action. Pearce & Robinson(2011) define Strategic management as the set of decisions and actions that result in the formulation and implementation of plans designed to achieve a companys objectives. A key theme from the above definitions is that strategic management provides the route map for the firms future desired state. This entails a iterative framework which can ensure that decisions concerning the future are taken in asystematic and purposeful way.Thus,strategic management also serves as a hedge against uncertainty, a hedge against totally unexpected developments on the business horizon. It lends a frame of reference for investment decisions. It aids the concentration of resources on vital areas of best potential. It offers a methodology by which the firm could anticipate and project the future and be internally equipped to face it. It helps to develop processes, systems,mechanisms and managerial attitude that are essential for this purpose. To put it precisely, strategic management is the set of managerial decisions and actions that determines the long run performance of an organisation that includes environmental scanning (both external and internal),strategy formulation, strategy implementation, evaluation and control. Strategic management takes a panoramic view of this changing corporate terrain and attempts to show how large and small firms can be more effective and efficient not only in today's world but tomorrow as well. Put in another way, strategic management is the set of managerial decisions and action that determines the way for the long-range performance of the company. It emphasizes the monitoring and evaluation of external opportunities and threats in light of corporations strength and weakness.

2.2 Small & large enterprises Mazzarol & Reboud(2009) differentiate small enterprises(firm) from large enterprises as follows: Unlike their larger counterparts, small firms employ fewer people,possess fewer assets,turnover less income & operate in fewer markets with a more limited range of products or services.While large corporations have become household names with products sold globally and carrying brannd names that are instantly recognised. The terms small enterprise & small firm are used intechangeably.Moreover,the small firm sector is highly important to most economies,since for many of the worlds nations the small business sector comprises the largest & most dynamic element of their economies(Mazzarol & Reboud) . Small enterprises constitute the backbone of economic activity and employment in most countries.Therefore, from a global perspective, small enterprises play a fundamental role in in global economy.

3. STRATEGIC MANAGEMENT PROCESS

Pearce & Robinson (2011) argue that strategic management process comprises nine critical tasks namely: 1. Formulate the companys mission, including broad statements about its purpose, philosophy, and goals. 2. Conduct an analysis that reflects the companys internal conditions and capabilities. 3. Assess the companys external environment, including both the competitive and the general contextual factors. 4.Analyze the companys options by matching its resources with the external environment. 5. Identify the most desirable options by evaluating each option in light of the companys mission. 6. Select a set of long-term objectives and grand strategies that will achieve the most desirable options. 7. Develop annual objectives and short-term strategies that are compatible with the selected set of long-term objectives and grand strategies. 8. Implement the strategic choices by means of budgeted resource allocations in which the matching of tasks, people, structures, technologies, and reward systems is emphasized. 9. Evaluate the success of the strategic process as an input for future decision making. According to Pearce & Robinson(2011), strategic management involves the planning, directing, organizing, and controlling of a companys strategy-related decisions and actions. By strategy, managers mean their largescale, future-oriented plans for interacting with the competitive environment to achieve company objectives. A strategy is a companys game plan. Although that plan does not precisely detail all future deployments (of people, finances, and material), it does provide a framework for managerial decisions. A strategy reflects a companys awareness of how, when, and where it should compete; against whom it should compete; and for what purposes it should compete.

Johnson et al(2008) advocate for the viewing strategic management process of any firm as an open system which is continuously impacted by the multiple interdependencies within the environments subsystems as well as the turbulence & dynamism of the environment. Thus, the strategic management process is a continuous process though not a mechanistic process but contextual based. 3.1 Differences & similarities in Strategic Management Process in large & small firms

Large and small enterprises utilise different approaches of the strategic management process though there are fundamental core commonalities. Indeed,both large &small firms appreciate & implement the strategic management process as as they craft their vision & mission(Johnson et al). Key similarities in issues pursued by both firms include: focus on building & sustaining a competitive advantage over rivals, adopting a learning& value innovation philosophy, embracing holistic stakeholder engagement,teamwork & collaboration, embedding the value of corporate culture & strategy fit, appreciating strategic management process as an emergent , continuous improvement way of adaptation as well as the value of strategic talent acquisition as well as retention through motivation & valuing people just to mention but a few. The strategic management process in large & small firms significantly differs in the following ways according to Pearce & Robinson(2011): a)Complexity versus Simplicity Large firms utilise sophisticated, rigorous & complex strategic management systems while small businesses rely on basic planning skills of an entrepreneur. Indeed,large firms face a multiplicity of complicated strategic management challenges including the following: i. ii. iii. Restriction to the selection of competitive strategies by various regional blocs & economic integrations, National sovereignty issues between the host & foreign environments, Handling multiple social, legal,economic,ecological,political,technological & cultural environments,

iv. v.

Differences in industry structures across countries, Communication & control issues due to geographical separation,cultural and national differences as well as variations in business practices.

b)Formality Formality refers to the degree to which participants, responsibilities, authority, and discretion in decision making are specified. It is widely recognised that greater formality is usually positively correlated with the cost, comprehensiveness, accuracy, and success of planning. In particular, formality is associated with the size of the firm and with its stage of development. Some firms, especially smaller ones, follow an entrepreneurial mode. They are basically under the control of a single individual, and they produce a limited number of products or services. In such firms, strategic evaluation is informal, intuitive, and limited. Very large firms, on the other hand, make strategic evaluation part of a comprehensive, formal planning system. C)Structure Large enterprises usually utilise a bureaucracy in strategic management process which is highly mechanistic in nature as opposed to small enterprises which embrace informal processes which are less rigid. Because of their size and their particular characteristicssmall resource base, flexible managerial style, informal organizational structure, and adaptability to changesmall businesses need a different approach to the strategic management process. The strategic management procedure for a small business should include the following features: _ Use a relatively short planning horizontwo years or less for most small companies. _ Be informal and not overly structured; a shirtsleeve approach is ideal. _ Encourage the participation of employees and outside parties to improve the reliability and creativity of the resulting plan. _ Do not begin with setting objectives because extensive objective setting early on may interfere with the creative process of strategic management. _ Maintain flexibility; competitive conditions change too rapidly for any plan to be considered permanent. _ Focus on strategic thinking, not just planning, by linking long-range goals to day -today operations. _ Let planning be an ongoing process because businesses and the competitive

environment in which they operate constantly change.

CONCLUSION Strategic management is the set of decisions and actions that result in the formulation and implementation of plans designed to achieve a companys objectives. Because it involves long-term, future-oriented, complex decision making and requires considerable resources, top-management participation & ownership is essential. The strategic management process is an ongoing activity that involves countinous adaptatation to environmental realities. The strategic management process needs to be as to be as simple as possible. No business should be burdened with an elaborate, detailed formal planning process that it cannot easily use to add value. The process helps firms to learn about their businesses ,their core competencies, their competitors, and, most important, their customers. Although strategic management process cannot guarantee success, it does dramatically increase a small or large companys chances of survival in a hostile business environment.