Basic Elements of Strategic Management

The first step in strategic management procedure is goal setting. After goal setting, strategic
management includes four basic elements:
a) Environmental Scanning
b) Strategy Formulation
c) Strategy Implementation and
d) Evaluation and control

a) Environmental Scanning:
Environmental scanning includes the comparison of the threats and opportunities of the organization in
the external business environment. Environmental scanning can be affected by factors like government
rules and regulations, the economy, social changes, changes in customer preferences, technological
advancement, competition and other environmental factors. At this stage, a SWOT (i.e. Strengths,
Weaknesses, Opportunities, and Threats) analysis is performed to contrast the internal assets and flaws
of the trade with the external prospects and dangers.

b) Strategy Formulation:
Strategy formulation is the generation of long-term plans for the proper management of environmental
openings and fears considering the fortes and faintness of the business or the company. It consists of
defining the mission, attainable objectives, forming strategies and setting policies.

Mission: An organization’s purpose or the reason for its survival is called mission. It mentions how it
is serving the society. An ideal mission statement specifies the unique purpose that differs the company
from other similar companies and defines the scope of its functions in the form of the products and
services served to the market.

Objectives: The outcomes of the planned functions are called objectives. Objectives mention what is
to be attained by when. The attainment of the objectives should lead to the fulfillment of the company’s
mission.

Strategies: A strategy is a broad master plan expressing how a company will accomplish its mission
and objectives, maximizing competitive advantages and minimizing competitive disadvantages.
Generally, a company or business takes into consideration three kinds of strategy: corporate, business
and functional.

Policies: A policy is a comprehensive guideline for making decisions linking the formation and
implementation of a strategy. Companies set policies to ensure that its employees’ decisions and actions
support the company’s mission, its objectives, and strategies.
 c) Strategy Implementation:
Strategy implementation is taking action in order to attain the goals of the organization. It requires
organizing all the available and necessary resources to put the strategy into action. The higher
management will pass the strategy to the managers and they will communicate the roles and
responsibilities of their team members to implement the strategy. There are contributions of different
members of different departments in the implementation of a strategy. A perfect coordination and
cooperation between the management and other departments are absolutely necessary to implement a
strategy successfully.

d) Evaluation and control:

The fourth and final basic element of the strategic management is evaluation and control. It requires an
evaluation of the strategy to ascertain whether the actual outcome matches the expected outcome of the
organizational goals. At this stage, the organization decides which area of planning should be evaluated
and the method of evaluation to be used and after the evaluation makes a comparison between the
expected result and the existing result.
Through this evaluation, the company can decide to take different corrective actions to control the
shortcomings (if any) and help the strategy to meet the desired organizational goals and objectives. For
example, if a company fails to achieve the desired sales target, it can take many corrective actions such
as providing discounts, adding extra attractive features to the product or service, giving attractive gifts
with the product or service, etc.

Managers should have a complete understanding of strategic management to set the organizational goals
properly and develop and implement effective strategies to achieve those goals increasing profitability
and competitive advantage of the business or organization.

The Role of Management Accountants In Strategic Management

I. Setting financial goals.

Management Accountants’ deep knowledge of the numbers – and the ability to use data
to make financial projections – can help executives in planning future moves.

II. Acquisitions.
Management Accountants bring exactly the right skills to the table when it comes to
checking out other companies for potential mergers and acquisitions, spotting both
areas of concern and potential opportunities.

III. Risk management.

Management Accountants know how to get to the heart of the financial numbers
involved in any deal or proposed plan, making them well prepared to analyze associated
risks.