Why are some firms successful, some moderately so, and why do others fail? The answer probably lies in the business' ability to fit into its environment. Strategic management is the process of attempting to match an organization with its changing environment in the most advantageous way possible.
FIRST THERE'S STRATEGY
Strategy involves the match between an organization and its environment. Although some environments change faster than others, all organizations operate in a changing environment. Certainly, the public accounting profession has seen tremendous change over the last decade. New developments have included, for example, technological changes, new types of investments, increasing complexity in the tax code, personal financial planning, and increasing liability insurance premiums. As the environment changes, threats and opportunities are encountered. Some organizations react to the changing environment by implementing changes in their structure. These changes can affect the relationship between the firm and its environment, or the changes can relate to the internal operations of the firm. Changes relating to the relationship of a firm to its environment have more impact on the organization's effectiveness, and changes involving the organization's internal operations have a greater effect on the efficiency of the firm.
In general, the long-run success of a firm is more dependent on the organization's effectiveness rather than its efficiency. As Peter Drucker stated, "It is more important to do the right things than to do things right."
Thus, it is more important to long-run success to be effective being in the right place at the right time, offering the services demanded by tile firm's market nich--than to be efficient achieving the most output from a given set of inputs, e.g., using the internal resources of the firm to their maximum. It is possible that a firm doing the right things wrong (effective but not efficient), can outperform a firm doing the wrong things right (efficient but not effective). Concentrating on change involving the organization's internal operations and being extremely efficient will not always insure a firm's long-run success.
NEXT THERE'S STRATEGIC MANAGEMENT
Strategic management is a continuous process that works to fit an organization into its changing environment. Strategic management is a broader concept than strategic planning. strategic planning (or long-range planning) is traditionally regarded as a periodic process to develop long-range plans for the organization. Strategic management consists of strategic decision making and strategic planning. Thus, strategic management focuses on any strategic decision that must be made, regardless of its time frame and the planning necessary to complement that decision.
Strategic management should not be thought of only in a long-term time frame. Many times, changing a firm's strategies does take a long time to become operational, but sometimes threats or opportunities emerge that must be acted upon immediately. Thus, strategic management includes any decision that has strategic consequence and developing a plan (whether short or long-range) to implement the decision.
Strategic management should also not be confused with operating management. Operating management deals with the ongoing, day-to-day operations of the firm. These decisions are aimed at improving the efficiency of the firm. Certainly, operating management must not be neglected, and both areas of management responsibility must fit together and complement one another. The strategic function and the operation management function may be carried out by the same people, but the strategic function is separate and distinct from the operating function.
The strategic management process involves taking advantage of the opportunities that are made available to the organization and minimizing the threats to the organization. As a minimum, an organization must be able to react effectively to changes over which it has no control. …