Strategic Management, Module 1 1

Describe Each of the Phases of the Strategic Management Process.

By: Charles Dallas McCarthy

MGT340 – Strategic Management

Aston American University

Instructor: Tim Johnson, M.S.S., M.A

November 27, 2017

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Introduction

For many years businesses religiously practiced the conventional way of future planning

to grow their profits. However as the world economy evolved it demanded such companies to

change the way they think and plan. It required a more aggressive approach to keep up with a

volatile and fast passed economy allowing excelling above their competitor set using technical

and marketing related innovations. Manager has become strategists analyzing both internal and

external environments to better understand their trading platform to drive strengths, improve on

weaknesses and capture new opportunities. According to Gluck, Kaufman, and Walleck (1980)

“Mere planning has lost its glamor; the planners have all turned into strategists” (p.1)
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The Four Phases which Exhibit the Evolution of the Strategic Management Process

A study was performed by Gluck, Kaufman and Walleck, of 120 multinational

corporations to understand why some companies excel in investment and market shares, and so

outperform their competitors who is using a more traditional approach in planning. The authors

also stated that “instead of behaving like large unwieldy bureaucracies, they have been nimbly

leap-frogging smaller competitors with technical or market innovations, in true entrepreneurial

style. They have been executing what appear to be well thought-out business strategies

coherently, consistently, and often with surprising speed. Repeatedly they have been winning

market shares away from more traditionally managed competitors” (p.2). They go on to say there

are “four phases exhibited during the evolution of their Strategic Management Processes” which

are;

1. Basic Financial Planning.

2. Forecast-Based Planning.

3. External Orientated Planning.

4. Strategic Management.

“The Corporations studied included General Electric, Northern Telecom, Mitsubishi Heavy

Industries and Siemens to only mention a few” Gluck, Kaufman, and Walleck (1980).

Phase I: Basic Financial Planning

Gluck, Kaufman, and Walleck explained that most of the companies who trade in using

more “traditional ways of basic financial planning”, strongly rely on annual budgeting,

controlling of costs, and successes are determined by the bottom line result. They are blinded by

Gross Operating Profits, Cost of Sales and Net Profits as their core focus is to solve this
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“financial problem”. Not only is basic financial planning short lived but these companies fail to

recognize what their products are about, nor understanding their client’s needs or who their

competitors are. It was found by the authors that this financial planning method depends “solely

on the Executive Committee of the corporation”, who lacks the knowledge or understanding of

“internal and external environments” (p.3)

Phase II: Forecast Based Planning

Within Forecast Based Planning they found as companies come to realize that financial

planning is insufficient, they change their focus to “forecast based models”. They start to analyze

past trends and possible future aspects which will impact their trading conditions, for example

politics, buying trends and economic changes. Although forecast-based planning is more long

term, corporations soon realize their forecasts are ineffective in an ever fast changing world.

“Very soon, however, the real world frustrates planners by perversely varying from their

forecasts” (p.4). Out of desperation they turn “to in-depth trend analysis, advance forecast

models and even computerized simulations”. Regrettably managers are overwhelmed by

enormous amounts of data, with no indication of the mission critical factor on how to improve

their businesses going forward. Gluck, Kaufman and Walleck.

Phase III: External Oriented Planning

In this phase Gluck, Kaufman, and Walleck say that corporations will reach out to define

and understand their customers’ needs. This solution is to rather focus on the clients as they

effect the ever rapid changes, and so align their strategy accordingly. They used the following

example to explain. “One heavy equipment manufacturer assigned a strategy team to reverse-

engineer the competitor’s product, reconstruct its manufacturing facilities on paper, and estimate

the manufacturing cost for the competitor’s product in the competitor’s plant. The team members
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discovered that design improvements had given the competitor such a commanding advantage in

production cost that there was no point in trying to compete on price. But they also found that

their own product’s lower maintenance and fuel costs offered customers clear savings on a life-

cycle cost basis. Accordingly, the sales force was trained to sell life-cycle cost advantages. Over

the next three years, the company increased its market share by 30% and doubled its net profit”

(p.5). For a corporation to increase their demand in sales they will have to understand what their

competitors are doing differently, in short why are customers buying the same product I sell,

from them? As this alternate strategy takes effect over time as competition is fears, it may

implicate certain challenges in providing substandard products, losing price integrity and

allowing line manager to make more important decisions. This may affect the company’s

wellbeing, and force top management to search for alternatives. Gluck, Kaufman and Walleck.

Phase IV: Strategic Management Planning

According to the authors, “Phase IV joins strategic planning and management in a single

process” .This way of thinking requires senior management to “integrate strategy with

operational decision making”. Within this process it consist of three mechanisms, pervasive

strategic thinking, also called “planning framework, comprehensive planning process and

supporting value system” (p.7).

A. Pervasive Strategic or Planned Framework Thinking

This strategy is to involve all managers across the organization and learning them to think

strategically. A framework within a strategically managed corporation may even extend beyond,

into a network of 5 planning levels according to the authors, which are “Product or market

planning, Business Unit Planning, Shared Resources Planning, Shared Concern Planning and

Corporate Level Planning” (p.8).

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B. Comprehensive Planning Process

Gluck, Kaufman and Walleck say that to the extent of planning within “Complex

Multinational Corporations, smaller groups of Strategic Business Units (SBU) are formed

throughout the organization. Distinguishing characteristic of Phase IV planning in diversified

companies is the formal grouping of related businesses into Strategic Business Units or

organizational entities large and homogeneous enough to exercise [effective] control over most

factors within their businesses” (p.6). This will ensure “corporations approach is comprehensive

and concise”, and not allowing for numerous time-consuming meetings. Feedback and progress

reports are normally communicated to Top Management quarterly or bi-annually or even every 3

years (p.9).

C. Supportive or Corporate Value System

“Supportive or Corporate Value System” involves building a stimulating working

environment and promoting a culture of care and belonging towards employees throughout the

organization. The practice of the Supportive Value System, as explained by Gluck, Kaufman,

and Walleck, can be identified within successful corporations by the “value of teamwork,

commitment to making things happen, open communication, and [share believe or common

goal], normally found in the mission and vision statement of such a corporation” (p.10).
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Conclusion

Business Success is not a destination as it will always demand your corporation to

continuously plan and evolve around people, product and services. However fast tracked within a

technological era it is made easier to understand the business phycology and makeup of our

primary clients, how they buy, what they buy, best price and who they meet with or influence.

Smart devices dictate people’s everyday lives and leave a clear data trail for others to take

advantage of and to upsell a product we like. By adding application based platforms like the

World Wide Web, Google, Facebook and LinkedIn, only to mention a few, we know exactly

how to capture the right audience. Time means money; therefore the convenience found in

technology has become the new commodity.

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References

Gluck, F. W., Kaufman, S. P., & Walleck, A. S. (1980, July 1). Strategic Management for

Competitive Advantage. Retrieved from https://hbr.org/1980/07/strategic-management-

for-competitive-advantage