What is Strategic Management?
Strategic management is the ongoing planning, monitoring, analysis and evolution of all that is essential for a company or organization to meet its goals and objectives. Changes in the business environment need businesses to constantly adjust their strategies for success. The strategic management process helps businesses take stock of their present situation, chalk out strategies, deploy them and analyze the effectiveness of the implemented management strategies.
Wikipedia defines Strategic Management as,
“It involves the formulation and implementation of the major goals and initiatives taken by a company’s top management on behalf of owners, based on consideration of resources and an assessment of the internal and external environments in which the organization competes.”
Strategic Management for Organizations
It can be helpful for any kind of organization , irrespective of their sizes because there is always a room for improvement and each organization possesses some unique strengths and opportunities which can be capitalized upon. The process must be continuous and not one-time evaluation or brainstorming exercise. It involves completely studying competitors , understanding their approach and unique selling points which have helped them to achieve their places. Also checking own organization’s strategies regularly determining their applicability and potential success in market conditions.
Bigger strategic decisions provide overall future direction for the organization and must be based on analysis. Organizations should monitor continuously moving on the right way and if any further steps are needed for more effective implementation.
Strategic Management for Employees
Strategic management should intend at providing a strong perspective to the employees about their business so that can be better judgement for their fitment and set their long-term objectives to the business’s overall direction. It can be used to manage employees so as to maximize the ability to achieve business objectives.
Also , it makes employees capable of understanding the market reactions to business’s product and taking correct measures for the business Employees can also analyze the effect of factors which can impress their jobs or roles and can take necessary corrective steps.
There are several tools and concepts which are generally used for the analysis of aspects of the organization.
Swot term was initially used by Harvard and made famous by Kenneth R. Andrews and it still remains a commonly practiced analysis tool.
A SWOT analysis identifies and compares the strengths and weaknesses of a business with the external opportunities and threats of its business environment. The SWOT analysis explains the internal, external and other factors that can have an impact on a business's goals and objectives.
Announced by the Boston Consulting Group around 1960s, the experience curve is a hypothesis that per unit product costs decrease gradually in the range of 15 to 25 percent whenever the cumulative production doubles in quantity. It has been confirmed by renowned organizations at different point of times. The decline in the costs can be attributed to numerous factors, including the learning curve, automation in the processes, and economies of scale.
Other important strategic management concepts include Environmental Scanning, BCG Matrix, Competitor Analysis, Porter’s Five Forces Model, Strategic Leadership, Strategy Formulation and Implementation, Corporate Governance, Business Ethics, Core Competencies etc.
Strategic Management Process
The strategic management process describes the business’s strategy. It is also the process which helps managers make a choice of a set of strategies for the business that will enable it to achieve better performance.
It is a continuous process that appraises the business and industries in which the organization is involved, its competitors; and fixes goals to meet all the present and future potential competitors and then reassesses each strategy.
Steps of Strategic Management Process
There are lots of thoughts on how to do strategic management. Academicians and managers have developed countless frameworks to guide the process of it. Generally, the process includes five phases.
- assessing the business's current strategic direction;
- identifying and analyzing internal and external strengths and weaknesses (SWOT);
- creating action plans;
- executing action plans;
- evaluating to what degree action plans have been successful and making changes when desired results are not being produced.
Communication, data collection and organizational culture also have a important point in the strategic management process, especially at huge, complex businesses. Lack of communication and a negative corporate culture can result in a misalignment of the organization’s strategic plan and the activities undertaken by its various business units and departments.
Benefits of Strategic Management
There are number of benefits of it. Now, it has become more necessary for the organizations to become successful in the competitive world. There are many potential benefits that are associated with it.
- The future of organization monitored proactively.
- Action are initiated & influenced.
- Opportunities to create better strategies.
It is verified through researches that those businesses that apply the concepts of strategic management are more successful & profitable than those that do not apply the concepts of strategic management. The sales, productivity & profitability is much better in the businesses that apply strategic management concepts than the other ones. The businesses that are potential & high performers try to perform systematic planning for their future altering considerations in their internal & external environments. The long-term financial performance is much better for the businesses that systematically apply the strategic management as compared to the entire industry. Following points clearly show the financial benefits of the strategic management.
- The productivity is improved
- The sales of the organization is improved
- The profitability of the organization is improved.
There are many benefits that are verified by the application of strategic management other than the above mentioned financial ones. The awareness about the external threats is much enhanced through application of strategic management concepts in the businesses. The understanding about the strategies of the competitors is also enhanced. The productivity of the employees in greatly increased. The resistance towards change is reduced and there is clear comprehension of performance reward relationship in the business using the concepts of strategic management.
The managers and employees of the businesses are more nurtured by increased interaction. The business objectives are better shared with all the employees and they are more empowered to accomplish those objectives. It also keeps a proper system of order and discipline in the organization. The managerial system of the organization become much efficient and effective. There is confidence between the managers and employees about existing strategy or in case of any correction to the existing strategies All the employees and managers consider change as an opportunity to them rather than as a threat. Following points show the non-financial benefits of strategic management.
- The productivity of the employee is enhanced
- The understanding about the competitor’s strategies is enhanced
- Awareness about the external threats is enhanced
- The relationship between performance & reward is better understood
- Problem avoidance is reduced greatly
- The resistance to change is reduced