Strategic Management: Formulation and Implementation

Developing The Strategic Management Process

Frederick W. Glueck, Stephan P. Kaufman, and A. Steven Walleck, studied the evolution of strategic management in 120 companies.

They suggested that strategic planning in most organizations must evolve through four sequential phases.

Phase 1 Basic financial planning. Organizations in phase 1 emphasize preparing and meeting annual budgets. Financial targets are established and revenues and costs are carefully monitored. The emphasis is short-term, and the primary focus is on the functional aspects of the organization. Most organizations in this phase exhibit few other characteristics relating to the future

Phase 2 Forecast-based planning. Organizations in phase 2 usually extend of the time frames covered by the budgeting process. Managers tend to seek more sophisticated forecasts and to become aware of their external environment and its effect on their organizations. Therefore, organization in phase 2 has more effective resource allocation and more timely decisions relating to organization's long-range competitive position.

Phase 3 Externally oriented planning. Phase 3 is characterized by the attempt to understand basic marketplace phenomena. Organization begin to search for new ways to define and satisfy customer needs. Moreover, phase 3 differs from the earlier phases that the corporate planners are expected to generate a number of alterative courses of action for top management. Top management begins to evaluate strategic alternatives in a formalized manner to planning and actions.

Phase 4 Strategic Management. Phase 4 is characterized by the merging of strategic planning and management into a single process. This integrated approach is accomplished through the presence of three elements: pervasive strategic thinking (managers all levels have learned to think strategically), comprehensive planning process, and supportive value system.

The evolution of strategic management from an historical perspective will be presented in the next section.