Strategic management

University AKADEEMIValev Kondratyuk The second year, stationary training Strategic management and planning at a level of firm The abstract Subject Strategic Management The teacher Dr. David Jones Tallinn 2004 The PLAN INTRODUCTION

Page II. MANAGEMENT. KINDS OF THE PURPOSES Page III. STRATEGIC PLANNING Page 1. Essence, functions of strategic planning Page 7 2. The purposes of the organization Page 8 3. An estimation and the analysis of an environment Page 4. Administrative research of internal factors of firm

Page 5. Studying strategic alternatives and a choice of strategy Page 12 IV. THE CONCLUSION Page 13 V. The LIST of the USED LITERATURE Page INTRODUCTION The problem of the enterprise will be to master the new markets, to satisfy needs of clients. Simultaneously she is also a problem of a management, management. Successes and failures of the enterprise is first of all successes and failures of management.

If the enterprise works badly, unprofitably, his new owner changes not workers, and a management. Management means the organization of work of collective. Work at the enterprise should be organized so that she in the maximal degree corresponded to needs of employees and allowed to speed up their work and to raise its efficiency. Making of any decisions, managers should mean constantly not only high profitability of firm, but also

a problem of existence of the employees, and also consumers for the sake of which the firm exists also which satisfaction of needs really is caused with necessity of functioning of firm and work of its managers. Any accepted decision should testify in long prospect to economic advantage of the enterprise. Well, and that yields good results only at present time and for the near future, and in the separate period threatens existence of the enterprise, it is necessary to regard as erroneous.

Maintenance of existence of firm in the market can be counted the main task of management. In this connection to strategic management in his work is attached great importance. II. MANAGEMENT. KINDS OF THE PURPOSES Management is an independent kind of professionally carried out activity directed on achievement during any economic activities of firm, working in the market conditions, the certain planned purposes by rational use material and a manpower.

Here the firm is guided by demand and needs of the market constantly aspires to increase of a production efficiency, i.e. to reception of optimum results with smaller expenses, aspires to the economic independence providing freedom of decision-making by that who bears the responsibility for an end result of activity of firm. The concept of management as includes constant updating of the purposes and programs depending on a condition of the market and results of this activity are shown already in the market during an

exchange and necessity of use of modern information system with computer technics. Management - as assumes an independent kind of professional work, that the manager is independent of the property on the capital of firm in which it works. Work of the manager is the productive work arising in conditions of a combination of hi-tech manufacture with a high level of specialization of workers, providing communication and unity of all production.

Any situation arising in managerial process, is a problem for the manager and demands from him decision-making and, in particular, concerning change of the purposes and the program of actions. It concerns both intrafirm manufacture, and production management and management of the personnel. Any administrative decision grows out a feedback with the market and other elements of an environment. Administrative decisions are accepted on the basis of the information received and processable during

preparation of decisions. The administrative decision is subject to realization and the control over his execution. The manager should not only choose measures of influence and means of the control, but also to consider variants of decisions concerning their practical practicability in given concrete conditions. Process of functioning of a control system includes work on its perfection and rationalization as modern management is based on rational ways of decision-making.

To the problems decided in management, concern 1 definition of specific goals of development of firm 2 revealing of a priority of the purposes, their sequences and sequence of the decision that is development of strategy of development of firm economic problems and ways of their decision 3 development of system of actions for the decision of planned problems for the various time periods definition of necessary resources and sources of their maintenance 4 an establishment of the control over performance of problems.

Management depending on kinds and can be divided sequences of activity into 3 stages 1 strategic management includes development of the purpose of management, forecasting as a prediction of results of development, forward planning as system of the measures necessary for overcoming of a deviation of predicted results from the established purpose 2 operative management activity on realization of the above-stated measures 3 the control includes the analysis of the achieved results - a feedback - and acts as a starting point

of a new cycle of management. Development of economic policy of firm assumes definition of the purposes of activity of firm and strategy of its development on the nearest and distant prospect, proceeding from potential opportunities of firm and security its corresponding resources. By development of strategic positions of firm usually use the certain parameters, as qualitative - reference points - more remote purpose, and quantitative - tasks.

Between these parameters there is an interrelation strategy, developed top-level, becomes the purpose and a reference point in local control links. In this connection it is necessary to distinguish. The PURPOSES the GENERAL. Reflect the concept of development of firm and are developed on long prospect and define the basic directions of the program of development of firm. Here there is a ranging by a principle of a priority under the following scheme а

Maintenance of the maximal profitability at an available set of kinds of the activity, determined by the following parameters a sales volume, a level and rate of return, rates of an annual gain of a sales volume and the profit, the income on one action, a share in the market, structure of the capital, a level of the dividend, the sum of the paid salary, a degree of quality of production b Maintenance of stability of position of firm as the purposes of a global policy on the following directions

charges on research and development of new products potential of competitiveness an investment policy personnel selection the decision of social questions c Development of new directions of the development, new kinds of activity of firm that assumes development of a structural policy, vertical integration, purchases and merges development of information systems definition of concrete firms which actions are subject to purchase development of new kinds of products.

The SPECIFIC PURPOSES. Are developed within the framework of overall aims by the basic kinds of activity in each industrial branch of firm and can be expressed in quantitative and quality indicators a Definition of profitability on each separate division acting as the center of the profit. The profit level can be established in absolute parameters usually in currency of the country of basing and as planned targets on every year or on the end of the scheduled period.

Paramount value is given to rate of return. At calculation of this parameter on the invested capital last is defined differently 1 own capital minus obligations 2 own means plus long-term a duty 3 the basic means minus amortization. b Other specific purposes. Are characterized under the purposes and are usually established not only in absolute planned targets, but also by definition of directions of development in functional areas on marketing, in the field

of scientific researches and development, on manufacture, in the field of the finance c The purposes of branches and the affiliated companies, formed by usually parent company, are reduced to the following increase in sales and rates of growth of the company increase of a share of the company in the market growth of the profit the contribution of branch to development of economy of a host country growth of export, growth of a share of the local market in supply of branch by raw material and semifinished

items. At the present stage of development growing value gets perfection of economic methods of management. In this connection the increasing value is given to development of global strategy of the firm based on long-term and stable orientation of manufacture of concrete kinds of production on the certain markets, i.e. strategic planning. III. STRATEGIC PLANNING The concept planning includes definition of the purposes and ways of their achievement. In the West planning of activity of the enterprises is carried out on

such important directions, as selling, the finance, manufacture and purchases. Thus, certainly, all private plans are interconnected among themselves. Process of planning passes four stages development of overall aims definition of the concrete, detailed purposes for set, rather short period of time 2,5,10 years definition of ways and means of their achievement the control over achievement of objects in view by comparison of planned targets with actual.

Planning always is guided by the data of the past, but aspires to define and supervise development of the enterprise in the long term. Therefore reliability of planning depends on accuracy and correctness of accounting calculations of the past. Any planning of the enterprise is based on the incomplete data. Quality of planning in the greater degree depends on an intellectual level of competent employees, managers. All plans should be made so that it was possible to make changes to them, and plans were interconnected

with available conditions. Therefore plans comprise the so-called reserves differently called extra charges of safety , however too big reserves do plans inexact, and small entail often changes of the plan. In a basis of scheduling on concrete directions of industrial sites of the enterprise separate problems which are defined both in monetary, and in quantity indicators are put. Thus planning should make a start from so-called bottlenecks recently it is selling, the finance or

a labour. Strategic planning represents a set of actions and the decisions undertaken by a management which conduct to development of specific strategy. These strategy are intended to help the organizations to reach the purposes. Process of strategic planning is the tool, assisting to provide a basis for operation of business. His problem will be, that in a sufficient measure to provide innovations and changes in the organization

of the enterprise. So, allocate four basic kinds of administrative activity within the framework of process of strategic planning distribution of resources, basically limited, such as funds, administrative talents, technological experience adaptation to an environment all actions of strategic character which improve attitudes of the company with its environment. Here it is necessary to reveal possible variants and to provide the effective adaptation of strategy

to surrounding conditions. Such activity can pass by perfection of industrial systems, interaction with the government and a society as a whole, etc. internal coordination coordination of strategic activity for display strong and weaknesses of firm with the purpose of achievement of effective integration of internal operations comprehension of organizational strategy realization of regular development of thinking of managers by formation of the organization which can study on the last strategic mistakes, i.e. ability

to study on experience. 1. Essence, functions of strategic planning. Strategy represents a detailed all-round comprehensive plan. It should be developed more likely from the point of view of prospect of all corporation, instead of the concrete individual. Seldom when the founder of firm presumes to combine personal plans from strategy of the organization. Strategy assumes development of the proved measures and plans of achievement of

the planned purposes in which the scientific and technical potential of firm and its industrial-marketing needs should be taken into account. The strategic plan should be proved by extensive researches and the fact sheet. Therefore it is necessary to be engaged constantly in gathering and the analysis of huge quantity of the information on branches of a national economy, the market, a competition, etc. Besides the strategic plan gives to firm definiteness, individuality which allow it to involve the

certain types of workers and help to sell products or services. Strategic plans should be developed so that they remained not only complete during long time, but also kept flexibility. The general strategic plan should be considered as the program directing activity of firm during the long period of time, in view of constant updatings in connection with constantly varying business and social conditions. Strategic planning in itself does not guarantee success, and

the organization creating strategic plans, can fail because of mistakes in the organization, motivation and the control. Nevertheless formal planning can create a number of essential favorable factors for the organization of activity of the enterprise. The knowledge of that the organization wants to reach, helps to specify the most suitable ways of action. Making of the proved and systematized scheduled decisions, the management reduces risk of acceptance

of the wrong decision because of erroneous or a unreliable information about opportunities of the organization or about an external situation. Planning helps to create unity of an overall aim inside the organization. Formation of the strategic plan represents careful, regular preparation for the future, carried out by the top management 1. the Choice of mission. Formation of the purposes long-term, intermediate term, short-term. 2. Development of providing plans a policy, strategy, procedures, rules, budgets.

2. The purposes of the organization One of the most essential decisions at planning is the choice of the purpose of the organization. The basic overall aim of the organization is designated as mission, and all other purposes are developed for its realization. Value of mission cannot be exaggerated. The produced purposes serve as criteria for all subsequent process of acceptance of administrative decisions.

If heads do not know the basic purpose of the organization they will not have a logic reference point for a choice of the best alternative. As a basis only individual values of the head that would lead to disorder of efforts and an illegibility of the purposes could serve. Mission details the status of firm and provides a direction and reference points for definition of the purposes and strategy on various levels of development.

Formation of mission includes finding-out by what enterprise activity is engaged firm definition of working principles of firm under pressure of an environment revealing of culture of firm. In mission of firm for creation of clientele the problem of definition of basic needs of consumers and their effective satisfaction also enters into support of firm in the future. Frequently heads of firms consider, that their basic mission - reception of the profit.

Really, satisfying any internal need, the firm finally can survive. But, to earn profit, it is necessary for firm to watch Wednesday of the activity, taking into account thus valuable approaches to concept of the market. Mission represents extreme value for the organization, it is impossible to forget about values and the purposes of the top management. The general firm purposes are formed and established on the basis

of the general mission of the organization and the certain values and the purposes by which the top management is guided. the Concrete and measurable purposes it allows to create precise base of readout for the subsequent decisions and estimations of a course of work. Orientation of the purposes in time here it is necessary to understand not only, that the firm wants to carry out but also when the result should be achieved.

Achievement of the purpose serves increase of efficiency of the organization the establishment of difficultly achievable purpose can lead to catastrophic results. The supporting mutually purposes actions and the decisions necessary for achievement of one purpose, should not prevent achievement of other purposes. The purposes will be a significant part of process of strategic management only in the event that the

top management correctly will formulate them, is effective institutsionaliziruet, will inform on them and stimulates their realization in all organization. 3. An estimation and the analysis of an environment After an establishment of the mission and the purposes the administration begins a diagnostic stage of process of strategic planning. On this way a first step is research of an environment an estimation

of the changes influencing various aspects of the current strategy definition of the factors representing threat for the current strategy of firm the control and the analysis of activity of competitors definition of the factors representing more of an opportunity for achievement of the general firm purposes by updating of plans. The analysis of an environment helps to supervise external in relation to firm factors, to receive the important results time for system engineering the early prevention on a case of possible

threats, time for forecasting opportunities, time for scheduling on a case of unforeseen circumstances and time for development of strategy. For this purpose it is necessary to find out, where there is an organization where she should be in the future and that for this purpose should make a management. And opportunities with which the firm collides, it is possible to allocate threats into seven areas 1. Economic forces. Some factors in an economic environment should be diagnosed and estimated constantly

since the condition of economy influences the purposes of firm. These are rates of inflation, the international balance of payments, occupation levels, etc. Each of them can represent either threat, or a new opportunity for the enterprise. 2. Political factors. Active participation of enterprise firms in political process is the instruction on importance of a state policy for the organization hence, the state should watch normative documents

of local bodies, authorities of subjects of the state and the Federal Government. 3. Market factors. The market environment represents constant danger to firm. To the factors influencing successes and failures of the organization, distribution of incomes of the population, a level of a competition in the branches, changing demographic conditions, ease of penetration on the market concern. 4. Technology factors. The analysis of the technological environment can take

into account at least changes in know-how, application of the COMPUTER in designing and granting of the goods and services or successes in technology of a communication facility. The head of any firm should watch not undergoing to a shock of the future , destroying the organization. 5. Factors of a competition. Any organization should investigate actions of the competitors the analysis of the future purposes and an estimation of the current strategy of competitors, the review

of preconditions concerning competitors and branches in which the given companies function, the profound studying strong and weaknesses of competitors. 6. Factors of social behaviour. These factors include varying attitudes, expectations and customs of a society a role of business, a role of women and national minorities in a society, movement in protection of interests of consumers. 7. The international factors. The management of the firms working in the international market, should

estimate and supervise constantly changes in this wide environment. The analysis of an environment allows the organization to create the list of dangers and opportunities with which she collides this Wednesday. For successful planning the management should have full representation not only about essential external problems, but also about internal potential opportunities and lacks of the organization. 4. Administrative research of internal factors of firm

The management of the firm should find out, whether the firm possesses internal forces to take advantage of external opportunities, and whether there are at it weaknesses which can complicate the problems connected to external dangers. This process refers to as administrative inspection. It represents a methodical estimation of functional zones of the firm, intended for its revealing strategically strong and weaknesses. Inspection includes such functions, as marketing, book keeping, operations manufacture,

human resources, culture and an image of corporation. At inspection of function of marketing it is necessary to pay attention to seven areas of the analysis 1 competitiveness and a desirable share of the market in percentage to his general capacity, being the essential purpose for the company 2 variety and quality of assortment of products which are constantly supervised and estimated by the top management 3 market demographic statistics, the control over changes

in the markets and in interests of consumers 4 market researches and development of the new goods and services 5 preselling and after the selling servicing being one weak places in business 6 effective selling, advertising and promotion of the goods the aggressive, competent group of people which market the goods, can appear the most valuable condition of firm creatively directed advertising and promotion of the goods serves as good addition to assortment of products 7 profit anything, even the best, does

not appear worth if in result there is no profit. The analysis of a financial condition can benefit to firm to reveal already available potential internal weaknesses of the organization in comparison with its competitors. For a long survival of firm the continuous analysis of management of operations is rather important. During inspection strong and weaknesses of function of management of operations it is necessary to pay attention to the following questions whether 1.

The firm can sell the goods or services under lower price, than its competitors If is not present, why 2. The firm has what access to new materials On how many suppliers she is fastened 3. What equipment in firm 4. Whether purchases are designed for decrease in size of material stocks and time of realization of the order Whether there are adequate mechanisms of the control over entering materials and leaving products 5.

Whether production of firm is subject to seasonal fluctuations of demand If so as it is possible to correct an existing situation 6. Whether the firm can serve those markets which its competitors cannot serve 7. Whether the firm possesses the effective and productive monitoring system of quality As far as process of manufacture is effectively planned

Sources of the majority of problems in the organization are covered in human resources. Here it is necessary to take into account type of employees, competence and preparation of a management, system of compensations, continuity of supervising posts, preparation and improvement of professional skill of employees, losses of leading experts and their reasons, quality of products and work of employees. The culture of firm an atmosphere or a climate in the organization is used for attraction of workers

of separate types and for stimulation of the certain types of behaviour. Image of corporation is created with the help of employees, clients and public opinion. The culture and an image of firm are supported or weaken under action of reputation of the company. Having resulted internal forces and weaknesses in conformity with external threats and opportunities, the management is ready to a choice of corresponding strategic alternative.

5. Studying strategic alternatives and a choice of strategy Development of strategy is carried out top-level managements and based on the decision of the above described problems. At this stage of decision-making it is necessary for manager to estimate alternative ways of activity of firm and to choose optimum variants for achievement of objects in view. On the basis of the lead analysis during development of strategy there is a formation of strategic

thinking by discussion and coordination with the administrative linear device of the concept of development of firm as a whole, the recommendation of new strategy of development, a formulation of projects of the purposes, preparation of instructions for long-term planning, development of strategic plans and their control. Strategic management assumes, that the firm defines the key positions on prospect depending on prioritetnosti the purposes. Before firm four basic strategic alternatives cost the limited growth,

growth, reduction and a combination of these strategy. To the limited growth adhere the majority of the organization in the advanced countries. The establishment of the purposes is typical of him from achieved, the corrected associations of firms in in any way not connected branches. Most less often heads choose strategy of reduction. In it the level of the pursued purposes is established below achieved in the past.

For many firms reduction can mean a way of rationalization and reorientation of operations. In this case some variants are possible liquidation full sale of material stocks and actives of the organization deduction superfluous branch firms of some divisions or kinds of activity reduction and reorientation reduction of a part of the activity in attempt to increase the profit. To strategy of reduction resort more often in that case when parameters of activity of the company

continue to worsen, at economic recession or it is simple for rescue of the organization. Strategy of a combination of all alternatives will be the large firms actively working in several branches adhere. Having chosen the certain strategic alternative, the management should address to concrete strategy. An overall objective - a choice of strategic alternative which will as much as possible raise long-term efficiency of the organization. For this purpose heads should have the precise concept of firm

divided by all and its future. Adherence to a concrete choice frequently limits the future strategy, therefore the decision should be exposed to careful research and an estimation. The strategic choice is influenced with various factors risk the factor of a life of firm knowledge of the last strategy reaction of owners of actions which frequently limit flexibility of managements at a choice of strategy the factor of time dependent on a choice of the necessary moment.

Decision-making on strategic questions can be carried out on different directions from below upwards , from top to down , in interaction of two above-named directions strategy is developed during interaction between the top management, scheduled service and operative divisions. Formation of strategy of firm as a whole gets the increasing value. It concerns prioritetnosti decided problems, definition of structure of firm, validity of capital investments,

coordination and integration of strategy. IV. THE CONCLUSION For the enterprise of any pattern of ownership and any scales of economic activities management of economic activities, definition of strategy, and as planning is essential. Now heads of the enterprises are compelled to make economic decisions in conditions of uncertainty of consequences of such decisions, besides at lack of economic, commercial knowledge and a practical

operational experience of new conditions. Many economic zones in which the enterprises work, are characterized by the raised risk since there is no sufficient knowledge of behaviour of consumers, positions of competitors, about a correct choice of partners, there are no reliable sources of reception of commercial and other information. Except for that many managers do not have experience in management of firms in market conditions. In marketing activity of the enterprises there is a set of problems.

Heads of the enterprises making final or intermediate production, feel restrictions on the part of solvent demand of the population and enterprises-consumers. The question of selling has come in sphere of the direct control of a management of the enterprises. As a rule, state enterprises had no and have no qualified employees of service of selling. Now almost all the enterprises have realized importance of the marketing program.

The majority of them should solve tactical questions since many have already faced a problem of overstocking of warehouses the production and sharp falling of demand for it. Has remained strategy of selling of production in the market is not clear. Trying to change the assortment, many enterprises making products of industrial purpose, start to pass to consumer goods. If production of industrial purpose in some cases of the enterprise develop also

the divisions consuming this production is issued. Reconstructing assortment, the enterprises began to predict beforehand selling and to find consumers of production. Heads at a choice of consumers take into account direct contact, communication with the end user, solvency of the customer. For the enterprise search of new consumers, development of the new markets the part of heads searches new consumers independently became rather actual.

Also the new phenomenon - mutual relations of the enterprises with new commercial structures which frequently are engaged in realization of a part of production of the enterprise is noticed, and other part comes true on old channels. Besides the enterprise can address to firm on all complicated questions of maintenance of manufacture. Thus, management and strategic management of activity of the enterprise are necessary in any sphere of economic activities.

V. The LIST of the USED LITERATURE 1. Parkinson, S.Nortkog, Rustomzhi M.K. Art of management. Lenizdat, 1992. 2. Gerchikova, I.N.management the textbook for high schools. M. Banks and stock exchanges, 1994. 3. Kohno P.A Mikrjukov V.A Komorov S.E. Management. M. the Finance and statistics,

1993. 4. Ljubinova N.G. Management - a way to success. M. IN Agropromizdat, 1992. 5. V.Hojer. How to do business in Europe. M. Publishing house Progress , 1990. 6. Modern management Principles and rules. N.Novgorod, IKCHP, 1992. 7. The organization, planning, management of activity of the industrial enterprises the textbook for high schools.

S.E.Kamenipera, F.M.Rusinova - M. the Higher school, 1984, page 335.