Business 101: Principles of Management

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We will be reviewing the strategic management process, starting with the four main steps of the process. These steps provide the foundation for understanding strategic management as a whole and will serve you well as you deal with management decision-making situations.

The Planning Process

The strategic planning process is a lot like hopscotch. You have to hop (if you will) from one square to the next in order to get to where you want to go. You could skip some squares, but that's not in the rules. Well, those same rules apply to the strategic planning process. You have to start at the beginning and work your way through each step so you can get the results at the end that you want. Miss some steps (or cheat at hopscotch) and you might end up in a square you do not want to be in.

The planning process itself is not too complicated and consists of environmental scanning, strategy formulation, strategy implementation, and finally, strategy evaluation. What is complicated is making sure you understand what each step needs or what each step is supposed to do before you move on to get the best results we possibly can.

Environmental Scanning

Every business exists in an environment. When we say that, we don't mean weather - we mean a business environment. Think of it this way: if you could stand at a window and look out at your business world, you would be looking at your business environment. You would be seeing what is going on, what competitors are doing, what the economy is like, and any other aspect of business that makes up the environment. That is why the first step is called environmental scanning, as you are taking your time to look at the environment around you so you can understand, basically, what you're up against.

Environmental scanning consists of a number of areas to help a company or businessperson understand what they're dealing with out there in the real world. Typically when we talk about environmental scanning, we're looking at several general areas:

• Political factors
  • Taxation policy
  • Governmental stability
  • Unemployment policy
• Economical factors
  • Inflation rate
  • Growth in spending power
  • Disposable income standards
• Sociocultural factors
  • Age distribution
  • Education levels
  • Income levels
• Technological factors
  • Internet
  • E-commerce
  • Social media
• Environmental factors
  • Competitive advantage
  • Waste disposal
  • Pollution-monitoring
• Legal factors
  • Unemployment law
  • Health and safety
  • Product safety

All of these factors are looked at and reviewed so the business owner can get some idea of what the world outside that window really looks like. It is one thing to say 'Wow, the business market is tough right now,' but it's another thing to know why it's tough. That is what environmental scanning does for us. It helps us research specific areas of the business world to understand what they look like right now and what they might look like in the future.

Assemble a Strategy

From this point, a company can begin to assemble its strategy. It takes all the pieces of information it found during its environmental scan and begins to assemble a strategy that will help them go where they want to go. It is important to understand that there are two ways to look at developing strategy.

First, you can say 'We want to move our business to Baltimore,' look at the business world through environmental scanning, and then figure out how you're going to get there. The other way is to look at the information from the environmental scan and determine what you should do as a company, which might include going to Atlanta instead of Baltimore, as the market might not look good for you to actually be able to get to Baltimore.

No matter what you decide, you will have to come up with a strategy to go out there and accomplish what you want to accomplish. While there are general strategy types like growth strategy or retrenchment strategy, the fact is that each company will develop a strategy based on what is best for them, and they do not always fit into specific strategy sections.

Implement the Strategy

Once we know the steps, now we have to implement those steps. But let us take a second to step back and realize where we are so far. We looked outside our window and saw what the business market looked like, we researched the key areas of it to make sure we knew what we were dealing with, and then we developed a strategy of how to move to Baltimore. Now we have to implement those steps.

So, for example, we will pick the person who will manage the overall move. We will identify which employees will go to the new location and on what days and when. We will assign the person that will manage the budget for the move. If the formulation portion of the strategy is 'what we will do,' the implementation is the 'who will do it, with what, and by when' portion of the strategy.

Monitor and Evaluate the Strategy

Finally, we have to evaluate the strategy. The key aspect here is you can evaluate it before you actually undertake it, but it has been my experience that the proof is always in the pudding. You will not know how well the plan will work until you actually start to implement it. Thus, you need to identify key deliverables or key aspects of the plan that you want to keep an eye on to see if it stays on track.

For example, if you're going to move your business to Baltimore and you set a time date to be in your new building, there would be deliverables before that date that would be key to arriving on time (what day you pack up your old office, what date the movers come to pick up the items from your old office, etc.). If those key aspects are not done on time, then being in the new office when you need to be will suffer. Thus, keeping an eye on these deliverables will help you stay on course for your overall plan goal to move to Baltimore.

One key thing to remember: if you adjust the plan to get back on track and then end up off-track again, it is time to step back and reevaluate the entire plan. The goal of plan evaluation is to see if you are actually getting out of the plan what you expected, and if you are, great. But if you're not, you need to stop, look at the plan, and indeed potentially start all over again, as you must have missed something or made mistakes; you're not getting where you want to go.

Lesson Summary

So as you can see, strategic planning is not too difficult to understand. It is not something to be afraid of and is merely a process to help you think through what you want or need to do to accomplish your goal.

You need to scan your environment and see what is out there in the way of the six key areas we discussed.

• Economical factors
• Political factors
• Sociocultural factors
• Environmental factors
• Technological factors
• Legal factors

Once that is done, you will develop a strategy to help you achieve your goal, taking into account what your environmental scanning uncovered. Then all you have to do is implement the strategy and evaluate the strategy as it progresses and once it's completed. Just like riding a bike, the more you do it the better you will get at it.