Diagnosing Strategic Problems

Often many companies go off track from what their original objective of being in business was. Now it might not be their entire fault, it could be the economical/social factors are working against them. For this reason shareholders pay top dollars to the managers the keep the ship a float. What is that job? It is called strategic management. Strategic management is the art and science of formulating, implementing and evaluating variety decisions that will enable an organization to achieve its objectives. It is the process of specifying the original objectives, developing policies and plans to achieve these objectives, and allocating resources to implement the policies and plans to achieve the organization's objectives. So, why do many companies fail? It is because the management forgets or fails to implement this definition. Lets look a couple of early indicators of strategic problems.

Firm needs to create a solid image for it self if it wants to achieve a lasting profitability. They often get bad press in the media for a lawsuit or any questionable action on the hands of the management. A company like wal-mart is the exceptional example. It has done nothing wrong but to implement their strategy of cost leadership and growth. They have been so successful at this that they a seen as to small business destroyers. In other words, wal-mart has trouble opening new stores because they are seen to be anticompetitive on their price, much so that they will drive out their small competitors out of business. Wal-mart have become a victim of their success. They are so good at what they do, the media and the public persona has given them a bad name. Personally, I think that if a merchant is offering an identical product at a lower price, then why you would want to buy it any where else.

A company needs to be focused on their direct business. That is why many economists disapprove companies diversifying. They argue that, a business needs to focus on what they a selling when they look to diversify that business they lose that niche focus leading into financial distress. A company like GE, which is involved in so many unrelated and related businesses, is a perfect example. How can the board of directors hire a management team which has experience in all of their businesses from finance to aviation to media? GE competes in many markets which mean its earnings are well protected from a decline, many diversification supporters say. But it a company offer so many different products and services that are miles apart how can it focus on each a every one item to maintain and expand its market share? Shareholders may diversify companies within their portfolio at a lower cost than a company trying to diversify buy buying another unrelated business. Shareholders want to company to excel in the market it competes in and if the management has too much on their plates they might not be able to achieve that goal.

.