How Strategic Management Evolves

How Strategic Management Evolves
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Abstract Strategic management is a vital tool in any corporation because there are so many factors in business which have to be considered before unveiling products and during the normal operations. Strategic management offers a broad picture of the corporation’s respective industry, the overlying factors such as the nature of the economy, consumer information, and also the competition’s strategies. In addition to these factors, strategic management also looks at a corporation’s short term and long term goals when deciding on making a comprehensive strategy. However, strategic management evolves due to the external factors which have a direct effect on a corporation’s ability to remain productive. This evolution is quite necessary because when it is completed, a corporation is able to act from an innovative stand point and not from a reactive position. 
Introduction  Strategic management entails formulating and implementing major objectives and schemes which are typically done by a corporation’s administrators. The process is carried out in consideration of the outcome of organizational assessments which are conducted on the external and internal atmosphere which the organization operates in. Strategic management is a continuous procedure done to combine the power of an organization’s efficient areas into a focused effort aimed at achieving greater performance. Furthermore, strategic management is not to be mistaken with strategic planning since strategic management entails knowing the steps the organization needs to take to implement its plan and attain a competitive advantage within an industry.  However, based on the external and internal factors which directly affect an organization, strategic management often goes through a process of evolution. The objective of this essay is to discuss how strategic management typically evolves in a corporation.  Basic Financial Planning Strategic management evolves due to external factors which make a corporation’s industry more complicated. Complexities can arise due to increased competition, changing trends, improving or worsening economic conditions and laws and regulations can also cause the need for evolved strategic management (Eden & Ackermann, 2013). However, strategic management initially evolves from basic financial planning. Financial planning entails making strategic decisions regarding maximizing opportunities to make as much profit as possible while remaining competitive within an industry (Freeman, 2010). Furthermore, competent financial planning gives a corporation more opportunities to take strategical steps particularly in expansion or diversifying. Corporations which are in this initial phase tend to place a lot of emphasis on preparing and achieving annual budgets. The annual budgets are also coupled with financial targets where organizational costs and revenues are monitored carefully. Basic financial planning emphasizes short term goals since the key focus is placed on the functional features of a corporation (Freeman, 2010).  Since in the introduction of modern corporations like DuPoint and General Motors during the 1920s, the bigger and grandly stretched out undertakings requires proper organization to effectively allocate resources (Hitt et al., 2012). Financial Planning allows for effective translation of sales forecast to the schedules of production, it allows for competent estimations of associated costs in production, and finally it also provides for a way to develop an accurate forecast of expected profits. Furthermore, in their appropriation of capital, corporations have to account for administrative operating costs, advertising, and research and development in order to simplify the projection of the available and expected dividends. Nevertheless, this step of strategic management is not quite effective in the long run because the whole process of projecting expected dividends acts on the assumption that the business environment will remain stable (Eden & Ackermann, 2013). In fact, the world economy has changed over time since the markets have become saturated to due to the onset of globalization and the economy has drastically slowed down leading to a limitation on the reliance of Basic Financial Planning. The biggest problem of Basic Financial Planning is that it treats a corporation’s departments (i.e. costs, financial results, and forecast of sales, manufacturing) as separate functions. With the changing times, this greatly limits an organization since a corporation is unable to account for the saturation of the global market and the shifting preferences in the consumer base (Eden & Ackermann, 2013).  Forecast Based Planning  The Forecast Based Planning phase of the evolution of strategic management gives more focus to external factors. In fact, Forecast Based Planning model was initially developed during the 1960s to deal with the more long term goals for corporations coupled with the ongoing changes in the global economy (Ambrosini & Bowman, 2009). In this phase of strategic planning, more effort is given to analyzing the business environment as managers begin to conduct research studies looking at buying behavior, consumer preference, conducting present value and discounted cash flow analyses, and product life cycles. The use of these concepts requires individuals with technical expertise such as consulting firms, graduates from business schools, strategic planners, and other technical experts who are necessary to implement Forecast Based Planning. In fact, during the 1960s to late 1970s there was significant growth in the consulting profession as new business schools were opened at an overwhelming rate (Ambrosini & Bowman, 2009). Forecast Based planning involves predicting what happens in the future and then coming up with strategies of how the corporation needs to react to the changing environment. However, Forecast Based Planning has some major flaws because it only accounts for the various economic factors which affect the company (Klein, 2009). In fact, the biggest flaw in Forecast Based Planning is that it gave too much attention to analyzing the consumer trends and the acceptance levels a product achieved and too often did not consider the competition. Consequently, the observations and strategic proposals made by the consultant and planners were largely not implemented by the executives since the consultants and strategic planners were not responsible for executing the proposed strategies. However,...