Strategic Management Definition
The management sets goals on behalf of business shareholders. It then develops strategies (prescriptive model) and puts them into practice (descriptive model). Crucial steps in between include strategy evaluation, resources allocation, competition analysis, and internal structure assessment. Almost all companies, academics, nonprofit organizations, etc., incorporate strategic planning and management to gain a competitive advantageCompetitive advantage refers to an advantage availed by a company that has remained successful in outdoing its competitors belonging to the same industry by designing and implementing effective strategies that allow the same in offering quality goods or services, quoting reasonable prices to its customers, maximizing the wealth of its stakeholders and so on and as a result of which the company can make more profits, build a positive brand reputation, make more sales, maximize return on assets, etc.read more. You are free to use this image on your website, templates, etc, Please provide us with an attribution linkArticle Link to be Hyperlinked
Understanding Strategic ManagementThe strategic management model deals with the planning, analyzing, and assessing different factors and inputs critical for production. It also entails the evaluation, allocation, and exploitation of available resources to achieve specified business objectives. The corporate culture, internal structure, and skills of human resources influence the strategy development process of an organization. You are free to use this image on your website, templates, etc, Please provide us with an attribution linkArticle Link to be Hyperlinked By identifying and managing strategies, a company can make decisions about its future direction and performance. Also, with strategic organizational management, top officials can learn from past failures and devise an action plan. It further necessitates evaluating potential threats and opportunities and analyzing possibilities for operational improvement. Let us understand this with a simple example: Diana runs an apparel store that employs ten people, including herself. She assigned two people to work on social media promotions of her store, two people for physical advertisements in the local area, two software developers to design and develop her e-commerce website, and two representatives to attend customers at the store. Diana herself took the responsibility of supervising all the tasks and coordinating with the teams. As the business flourished, she decided to open more branches. Diana listed down her business expansion goals, finalized the budget, and formulated strategies. She also hired the best people and put them to work to achieve objectives. Diana noticed that her products receive more attention online. So, she decided to focus more on online promotions and her e-commerce website. Therefore, she collaborated with the best logistics partners to ensure her products get delivered to customers on time. The planning and assessment of different inputs and factors helped Diana make informed decisions, thereby assisting her in developing effective strategies. Process Of Strategic ManagementAn organization must follow a set of processes for strategic planning to be effective and fruitful. The following are the steps in the strategic management process: #1 – Identifying DirectionThe first step requires the organization to have a clear vision and direction. Before developing plans, a business should determine its short- and long-term objectives. The company will not have any clarity on processes and procedures unless it sets its goals beforehand. #2 – Analyzing ResourcesAn organization must first arrange its resources to carry out specific tasks to reap the strategic management benefits. For example, someone who excels at marketing may struggle to manage the organization’s public relations. Hence, the management should assess its resources and select the best one for respective processes. #3 – Framing StrategiesAfter selecting the best resource for every process, the organization frames its action plan for accomplishing the goal. This strategic planning consists of elements needed to achieve the set objectives effectively. The analysis, assessment, and supervision of processes at every stage help the business resolve issues, whether internal or external. #4 – Implementing StrategiesFollowing the strategy development based on the organization’s objectives, the next stage is to execute them. Every business must train its human resources, from entry-level employees to managers, to ensure they fully understand the process. It will bring core competencies into action within the organization for the best possible output. #5 – Evaluating EffectivenessThe review of strategies is the final step in the process. Looking into each aspect of the business during the strategy formulation and implementation helps the management identify the efforts of every individual. The organization can recognize these efforts through performance appraisal schemes, which are essential aspects of the business. ExamplesLet us understand the concept better with the below-mentioned strategic management examples: Example #1Dave intends to extend his constrained furniture business by introducing a new product category, i.e., all home decor goods. However, he is unsure how his brand would perform as it took years for him to establish his furniture business due to a delay in identifying negative factors. Thus, to avoid any risk this time, Dave conducts SWOTSWOT Analysis is an analytical tool to identify and evaluate an entity’s strengths, weaknesses, opportunities, and threats.read more (Strengths, Weaknesses, Opportunities, and Threats) analysis as part of the strategic management. He identifies the strong and weak points of business. He also analyzes potential opportunities and threats based on the current market trend. Accordingly, Dave strategizes and plans the processes, starting from manufacturing to advertising, ensuring that he allocates the right resources at the right places. Example #2The old strategy calendar is a strategic management approach that signifies the process execution in isolation without guidance, coordination, or collaboration. As a result of the disconnect between enterprise strategy and strategic groups and units, many businesses failed to achieve their goals. Due to performance concerns, the economic slump, rising expensesAn expense is a cost incurred in completing any transaction by an organization, leading to either revenue generation creation of the asset, change in liability, or raising capital.read more, and invading imports, Chrysler Group experienced massive losses in 2000. It was when the automotive manufacturer decided to combine all strategy-related activities into a single functional unit. As a part of this, it set up the Office of Strategy Management. It aided in the management of company strategies. Furthermore, it helped in the development of new products by business units. The collaboration of employees and management resulted in core competenciesThe core competencies in business refer to its resources and unique fundamental capabilities that distinguish it from market competitors. It is an essential component of marketing strategy leading to brand recognition and business growth. The concept serves to be useful for companies focusing on multiple product lines and operating more than one business unit at a time. read more required to achieve business goals. In 2004, the automobile brand successfully launched a series of new sedans and made a profit of $1.2 billion despite struggling domestic market. Importance of Strategic ManagementBesides preparing organizations for market competition, strategic management helps them identify opportunities that arise from time to time. In addition, businesses get a clue of threats that might hurt them in the long run. Through step-by-step formulation and implementation of strategies, companies can overcome hurdles coming their way and grow efficiently. Let us have a look at some more points that make strategic planning a crucial aspect of any business:
Frequently Asked Questions (FAQs)What is strategic management? Strategic management aids a business in developing a model that includes specifics on existing resources and how to use them to achieve its goals. Also, developing appropriate solutions becomes easier with good communication, relevant data collection, and a complete understanding of the organizational culture. Why is strategic management important? Strategic planning and management give companies a competitive advantage and also help in the identification of possible opportunities. Furthermore, organizations gain insight into potential risks that could become roadblocks in the future. What are the steps in the strategic management process or SMP? The five steps followed in the strategic management process are as follows: Recommended ArticlesThis has been a guide to strategic management and its definition. Here we discuss a model of strategic management work along with process, examples, and importance. You may also have a look at the following articles to learn more –
What is concerned with managing the strategic making the performance of a company thereby increasing the value of the enterprise to its owners and shareholders?Strategic leadership is concerned with managing the strategy-making process to increase the performance of a company, thereby increasing the value of the enterprise to its owners, its shareholders.
What is the strategic management process?Strategic management process is a continuous culture of appraisal that a business adopts to outdo the competitors. Simple as it may sound, this is a complex process that also covers formulating the organization's overall vision for present and future objectives.
How does strategic management improve performance?Apart from financial gains, strategic management can also boost workplace motivation. Setting effective goals for employees and involving them in organisational objectives can improve overall performance. Studies show a dramatic increase in both employee and business performance when goals are aligned.
What are processes of strategies making?The strategy making process is the activity by which an organisation defines its strategy and ensures that the defined strategy becomes a reality rather than just an abstract wish list. It involves not only coming up with a strategy but also planning how to execute it and adjusting to unexpected events.
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