Strategic and Operations Management - RelevancyArticle posted on
Management of contemporary enterprises operating in dynamic and complicated external environment and increasingly depending on it shall be strategic. 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 certain characteristic features inherent to strategic management as a 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 for the purpose of generating of income from sales||survival of the organization in the long-term perspective by way of establishing of dynamic balance with the environment|
|Focus of attention of management||Insight into an organization, a search of ways of more efficient resource usage||Outsight outwardly organization, a search of 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 long-term perspective|
|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 the 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|
|Criterion of management efficiency||Profitability and rationality of use of business potential||Timeliness and accuracy of the response of the organization to new market challenges and changes, depending on changes of 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 activity and to include not only the critical elements of the internal environment of the 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 the effectiveness of using strategic management depends on several prerequisites, including the following:
- organization has a clear vision of what it intends to achieve in future;
- main sources of problems are concentrated outside the organization rather than inside;
- organization has implemented technology for timely detection of problems and means for solving of problems;
- managerial response to risks and threats is proactive in nature;
- centre of influence in management is shifted towards anticipation and prevention of adverse development of situation or to the minimization of losses if the adverse scenario is inevitable;
- objectives and direction of development are selected, based on the use of opportunities to full advantage which are offered as a result of changes in the external environment;
- potential of the organization 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 organization;
- daily management constitutes continuation and concretization of strategic management and is exercised within the scope of the existing strategy.
It should also be remembered that the basis of the 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 competencies and dynamic capabilities – it is assumed that alongside with weaknesses, the enterprise has both advantages and certain 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 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. But these tasks cannot be solved in the absence of required domestic savings and the 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 of 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 the 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, the management system shall be improved on a step-by-step basis.