Lomonosov Moscow State University

Economic Faculty

STRATEGIC MANAGEMENT AS A TOOL FOR COMPETITIVE

RECOVERY OF RUSSIAN ENTERPRISES

Economic essay

Sofya Shuster
This essay considers the value of strategic management in maintaining the
competitiveness of Russian enterprises on the domestic and world markets.

Strategic management is a fast-developing field of science and practice of

management, which arose in response to the increasing dynamism of business
environments and complication of organizational systems. The theory of strategic
planning and management was developed by American researchers of business and
consulting firms. Subsequently this tool became part of the arsenal of methods of
corporate planning applied in all developed countries. It is now increasingly being
adopted by Russian businessmen.

Strategic management is a process of management decision-making and

achievement of goals. The central theme revolves around making strategic choices
based on a comparison of an enterprise’s own resource potential with the
possibilities and threats of the external environment in which it operates.

Initially strategic planning and all of the methods of strategic management were
aimed at the competitive recovery of enterprises working in the conditions of
intense competition inherent to market economies.

Strategic management can be defined as management of competitive advantages. A

competitive advantage is the position of a firm in the market, which allows it to
overcome the forces of competition and to draw custom. Competitive advantages
are created by the unique tangible and intangible assets that an enterprise owns,
those strategically important fields of activity for the given business, which allow
the firm to be successful in a competitive struggle. Competitive advantages are, as a
rule, realized at the level of strategic business units and form the basis of the
business (competitive) strategy of the enterprise.

Competitive advantages allow the enterprise to achieve above average profitability

for firms of the relevant sphere or market segment (through more efficient use of
resources) and to occupy a strong position in the market. It is considered that the
advantages of an enterprise lie in offering consumers goods which have high value
for them. This can take the form of providing goods of higher quality, providing a
set of services or having lower prices (and possibly, on the contrary, higher prices
for up-market goods).

It is necessary to have a clear idea about the strengths and weaknesses of the
enterprise’s activity and its position on the market when developing the competitive
strategy. However, it is also necessary to understand the structure of the sphere in
which the enterprise works and that of the national and world economy as a whole.
In Russian business practice the tools of strategic management are in the formation
stage. However, domestic and international analysts consider that the Russian
market has entered a stage where the absence of a developed strategy significantly
hinders enterprises. Taking decisions on the spur of the moment, which brought
many companies success in the early 1990s, no longer works. Many companies
either go out of business or, having reached a certain stage, stop growing. Therefore
both the heads of companies and the directors of many state-owned enterprises have
come to understand the necessity of formulating a development strategy. This is
promoted by the identification of an enterprise as a complete isolated system, and by
the formation of new goals and interests of the enterprise and its employees.

Changes in the environment in which domestic enterprises operate also stimulate the
creation of new methods, systems and methods of management. If the environment
is relatively stable, there is no particular need to be engaged in strategic
management. However, the majority of the Russian enterprises work in fast
changing and difficult to predict environments, and therefore they require strategic
management.

The necessity for the formation of strategic management systems for domestic
practice is also caused by the integration processes, which are taking place.
Industrial groups that unite technologically connected enterprises are appearing in
Russian business. There is an active process of formation of financial and industrial
groups. Commercial companies, almost simultaneously with the creation of their
core business, are starting to organize financial-commercial groups. Even small
enterprises are uniting in order to successfully function as small corporations.

Business concerns and groups, behind many of which stand commercial banks, have
begun acquiring industrial enterprises, taking part in privatization and investment
tenders, and aggressively accumulating shares in attractive enterprises. Well known
examples include LogoVaz, Microdin, Alfa Group and industrial groups of banks
such as Menatep and Russian Credit. The central issue now lies in ensuring stable
and effective development of integration processes. However this is impossible
without resolving the issue of strategic management.

The next important precondition for the development of strategic management is the
process of globalization of business, which is also taking place in our country.
Global firms consider the world as a unified whole in which national distinctions
and preferences are erased. It entails standardization of consumption.

The goods of such global firms as Mars, Siemens, Sony, Procter and Gamble,
L'Oreal and many others are on sale worldwide and play an important role in
heightening competition on national markets. It is only possible to resist the impact
of the goods of global firms by operating with similar methods, i.e. by developing a
competitive strategy.

Thus, an understanding of the importance of formulating long-term goals and

planning long-term development is growing in the minds of Russian directors. The
problem is that many Russian enterprises have found themselves in a kind of
information vacuum. On the one hand there is an abundance of disordered external
information; on the other there is a lack of systematized reference points for
choosing directions for development. The majority of domestic producers are only
beginning to understand the concept of strategic management.

To conclude, strategic management can help enterprises to predict business

development trends; to closely monitor and understand the effect of the
environment; to make strategic choices and realize strategies. The special methods
and tools of strategic management help leaders to assess and rank different kinds of
business, to focus attention on key issues and directions and, finally, to ensure the
sustainable development of the enterprise and its long-term competitiveness.

Bibliography:

1. I.Ansoff “Strategic Management” - Мoscow: Economy, 1989.

2. V.Markova, S.Kuznetsova “Strategic Management” - Мoscow: INFRA-M;
Novosibirsk: “The Siberian Agreement”, 2004.
3. V.Parakhina, L.Maksimenko, S.Panasenko “Strategic Management” -
Мoscow: KNORUS, 2006.
4. J.Underwood “The New Corporate Strategy” – New York: Wiley, 2001.