Strategic and Operations Management: Relevancy
Management of contemporary enterprises operating in dynamic and complicated external environment and increasingly depending on it shall be strategic in nature.
The fundamental distinctions between operations management and strategic management (Table 1) come down to the following aspects.
With all the variety of approaches, one can distinguish specific characteristic features inherent to strategic management as management technique and thereupon solve the issue of appropriateness and effectiveness of its using in the environment of a specific economic entity.
Table 1. Fundamental Differences between Operations Management and Strategic Management
|Characteristics||Operations Management||Strategic Management|
|Mission, intended purpose||Manufacturing of products and rendering of services to generate income from sales||Survival of organisation in the long-term perspective by way of establishing of dynamic balance with the environment|
|The focus of attention of management||Insight into the organization, search of ways of more efficient resource usage||Outsight outwardly organization, search for new opportunities in competition, tracking, and adjustment to changes in the environment|
|Consideration of time factor||Orientation towards short-term and mid-term perspective||Orientation towards the long-term perspective|
|The basis of the building of management system||Functions and organizational structures, procedures, techniques and technologies||People, information system and market|
|Approach to human resources management||View of employees as a resource of an organization, as a performer of specific works and functions||View of employees as the framework of the organization, its core value, and source of its welfare|
|The criterion of management efficiency||Profitability and rationality of use of business potential||Timeliness and accuracy of response of organization to new market challenges and changes, depending on changes in the environment|
The first peculiar feature and, at the same time, the advantage of strategic management is determined by the fact that, on the one hand, strategic management enables to widen the scope of management actions and to include not only the key elements of the internal environment of organization but also the external aspects of its operations in the system intended for making and implementation of managerial decisions.
On the other hand, long-term objectives of enterprise development cease to be a reflection of the environment of its current activity but turn out to be the result of analysis of the changes in the external and internal environment. Besides, strategic management creates conditions for the making of proactive decisions and interactive operating of the management system.
Another peculiar feature is that effectiveness of using of strategic management depends on some prerequisites, including the following:
- the organization has a clear vision of what it intends to achieve in future;
- primary sources of problems are concentrated outside the organization rather than inside;
- the organisation has implemented technology for timely detection of problems and means for solving problems;
- managerial response to risks and threats is proactive in nature;
- the centre of influence in management is shifted towards anticipation and prevention of adverse development of situation or to minimisation of losses if the adverse scenario is inevitable;
- objectives and direction of development are selected, based on the use of opportunities to the full advantage which are offered as a result of changes in the external environment;
- the potential of the organisation is the function of changes occurring in the external environment and is flexibly adjusted to the long-term objectives and tasks of development of the organisation;
- daily management constitutes continuation and concretisation of strategic management and is exercised within the scope of the existing strategy.
It should also be remembered that the basis of development of strategies for business growth is made up of such components as potential and competitiveness. Irrespective of what concept is behind the development of strategic plans – MOS Concept (Mission, Objectives, Strategies) or a more advanced concept of core competences and dynamic capabilities – it is assumed that alongside with weaknesses, the enterprise has both advantages and individual potential of growth. Enterprise can independently use these advantages for the achievement of the objectives in view, exchange them or use together with its partners within the scope of network-based conduct of business.
Lack of conditions required for effective integration in the market system has put many European enterprises in the complicated economic situation. If previously enterprises could find a guaranteed market, in the new environment (market conditions and its unpredictable development), sales of products are put in a position of dependency on compliance with the market requirements, i.e., on their competitiveness. In its turn, manufacturing of competitive products requires permanent renewal of products and technological systems as well as using of progressive forms of arrangement and management of the business process. However, these tasks cannot be solved in the absence of required domestic savings and possibility to raise funds available for investment from the third parties. Since under the current conditions enterprises can far from always earn the required funds by themselves and owners of funds available for investment consider investments in industrial production to be quite risky and unprofitable, the circle of problems is closed. Hence, one has to witness with increasing frequency how enterprises become insolvent and subsequently bankrupt. That is why it is so relevant under the current conditions to find and implement such form and methods of management which could enable to recover businesses from critical condition and, in case of bankruptcy, to prepare and implement turnaround programs.
Of course, the point at issue is not that enterprises shall completely abandon the strategic management in the new environment. Since only if proven strategies are available, enterprises can address the challenge of survival and development in future, build up a system of interconnected and consistent marketing, financial, research and development plans as well as create effective mechanisms for the achievement of their objectives. However, management system shall be improved on a step-by-step basis.