Strategic management concepts and applications

Strategic Management

The concept of strategic management is so complex that any attempt of resuming it to a few words will most certainly leave out some of its important characteristics. We should attempt to give out a definition as a sum of some of the different aspects that strategic management covers. Most simply put, strategic management is a "way of running an organization." However, one of the first steps that a manager taking a strategic decision is to acknowledge that the company evolves and acts in an economic, social, political, legal or technological environment and adapt his decision so that he will be able to make decisions, taking in account these factors "decisions that result in strategies (...) to help guide the organization into the future in a dominant competitive position."

There are several main elements that strategic management comprises. First of all, there is the company's mission, in terms of defining and abiding by it, seeking by every means to serve it. Missions generally focus on creating an "identity, continuity of purpose, and overall definition." Another important element is the levels of strategy that exist in a firm. Theoreticians vary the number of layers that may exist in a company, but, in general, they acknowledge that a decision may be taken on a corporate level (portfolio strategies), division level (business strategies) and a functional level (as strategic programs).

It is a common belief that a strategic decision needs to be based on factual information and a thorough analysis of data. In general, the company needs to gather information and reports both about the environment it operates in (external environment) and about the firm itself, with its strengths and weaknesses (internal environment). There are four type of analyses used in this sense, two for each environment in part: environmental analysis, industry analysis, financial analysis and internal diagnosis of functional areas.

An environmental analysis comprises an evaluation of the social, political, economical, demographic, technological and legal factors that may influence and affect the company. The industry analysis includes information about the main competitors, about the characteristics of the industry and its trends.

The two internal environment analyses bring out information about specific aspects within the company. The financial analysis is used to evaluate the financial situation within the company. Starting from the four basic accounting statements, financial ratios and trends are calculated. The internal diagnosis of functional areas is a specific analysis for each department in part and may include evaluations of the activity of the marketing or sales departments.

Strategic management can of course be successfully be used in the hospitality industry as well (in general, we may consider that strategic management needs to be applied in almost any company that wants to make it in the long run). Hotels, motels, resorts, recreation centers or any other components in the industry are companies where strategic management includes long-term goals, strategy levels, a mission and, even more important, the four types of analyses I have previously mentioned.

Indeed, if we consider a hotel, for example, in an internal analysis, the financial analysis will evaluate the financial health of the hotel, keeping in mind some of the industry's characteristics (such as seasonality) and the fact that the hotel's revenues may somewhat depend on the period it operates in. However, similar to other industries, financial ratios will be calculated based on the basic statements. An internal diagnosis of functional areas will take into account the specificity of the hospitality industry. In this sense, marketing and promotion probably plays an important role, as does public relations, in ensuring that the customers are satisfied with the services provided and that they will be using the same facility in the future as well.

The external environment analysis will take into consideration some of the factors that affect the hospitality industry. These may be, for example, legal factors (laws that may affect the industry, legal requirements, etc.), demographic factors (changes in income levels) or social factors. The industry analysis is no different than in other cases. Trends will evaluate indicators such as the number of visitors, number of visitors per facility, etc.