Every establishment has its own set of goals and objectives. These goals and objectives are made according to the organization’s capabilities and will to expand. Just making these goals is not enough. The Company needs to formulate the steps that are necessary to reach such goals. Such measures undertaken by the company are known as strategies. The task of handling these strategies is known as Strategic Management. The word strategy is a derivation from the Greek word ‘στρατηγος’ (stratigos), which means general, i.e., a leader or commander in the army. This word’s ancient meaning is the art and science of leading the military forces in a war or battle. In the modern-day, this term has a different purpose.
Definition of Strategic Management
The term ‘strategic management’ denotes the branch of management related to establishing a strategic vision, setting out goals and objectives, developing and implementing strategies, and introducing corrective steps for the fluctuation to reach the organization’s strategic target. There are two main objectives of strategic management.
- To gain competitive advantage, to outperform the competitors and achieve market dominance and
- To act as a guide to the organization to help in surviving the changes in the business environment.
What is Strategic Management?
Strategic management is the strategic utilization of the business’s resources to attain company goals and objectives. It requires consideration of the organization’s processes and operations and external constituents that may affect how the company works. The strategic management process guides top-level actions and decisions.
Strategic management covers the activities of setting objectives for the company, keeping an eye on competitors’ actions, reassessing the organization’s internal structure, evaluating present-day strategies, and affirming the implementation of those strategies throughout the company. It is a combination of strategic planning and strategic thinking. Strategic planning is the recognition of achievable goals. Strategic thinking is the capacity to identify the organization’s requirements to accomplish the goals pointed out through strategic planning.
Strategic planning can be prescriptive or descriptive. The former strategic management is the development of strategies in advance of an organizational issue. Descriptive strategic management is making the strategies as and when needed. While most of the companies’ upper management implements the strategy, others employ strategists who plan and execute the strategy to improve company function.
What is the Purpose of Strategic Management?
Strategic management is a practice that has more benefits than loopholes. Every organization needs to implement strategic management in their management practices. The businesses that practice strategic management in their course of business receive benefits because strategic management
1. Gives Competitive Advantage
Strategic management allows the organization to become proactive. The company can formulate the strategies based on the anticipation of the problem and not when the actual situation happens. This way, when the crisis arrives, the company already has a solution for the same. This characteristic will give your company a competitive advantage because while competitors are thinking of a way out from the changing market, your company already has a strategy for it.
2. Aids in Achieving Goals
Strategic management is a constant process of formulating strategies and implementing them to achieve goals. This helps in dividing the big plans into smaller, more achievable ones. With efficient strategy formulation and implementation, achieving the goals becomes an easy task.
3. Enables Sustainable Growth
With strategic management, the organization’s productivity and performance are enhanced and made more efficient. This leads to the sustainable and constant growth of the organization as a whole. With strategic management, the company is assured a steady but sure growth.
4. Unify the Organization
Strategic management sets a clear direction for the employees to follow. There is no confusion among the employees as the tasks are divided. The implementation of strategic management enables the organization to unify and have a clear goal. All the employees work for the same goals, and hence the organization can succeed as a whole.
5. Enhances the Managerial Awareness
Strategic management demands constant focus on the organization’s future. When managers perpetually look into the company’s future, they tend to grow more aware of the industry trends and hardships. They will also be well prepared to face future challenges.
Why is Strategic Management Necessary?
Strategic management helps the person in charge of decision making to get helmeted with management tools or expecting changes and guiding the organizational activities on the right path. Strategic management’s practice lessens the risk of operation by assisting the enterprise to innovate in time and take action beforehand. The following are the other reasons why strategic management is vital in the organization.
1. Helps to Anticipate the Changes
As discussed above, strategic management requires the manager to study the company’s future and the market. Researching the future continuously. The managers can anticipate the change. When done effectively, strategic management can lead the organization to proact to a change or even bring around the change in the market. Strategic management lets the companies make decisions based on detailed forecasts and not impulsive reactions. It enables the firm to take measures at a primitive stage of a new trend and reckon the lead time for efficient management.
2. Clarity in Objectives and Direction
Strategic management renders a strong inducement for the employees and management to attain company objectives. It functions as the foundation for management control and assessment. Strategic management also guarantees that the top executives have a united opinion on strategic problems.
3. Increases Employee Efficiency
The employees at all levels are included in the strategic management process. The employees feel more engaged and motivated to work. Necessary training is provided to the employees, and the inter-process of strategy implementation is done through the employees. This increases the efficiency of the employees. When the employees feel they are a part of the organization’s more astonishing view and are considered necessary to fulfill the organizational goals, they will be willing to give their best to the company. Their performance improves and the organization is ultimately benefited.
4. Rises Profitability
The profitability of the business unit depends upon the maximum utilization of the available resources. The managers can make full use of financial resources and use maximum labor capacity to increase the unit’s productivity and profitability with the help of strategic management.
5. Reduces Expenses
Strategic management helps the organization to reduce its expenses on unnecessary investments. For example, the fixed capital of any company is the amount invested in its fixed assets. With the help of strategic management, the managers may decide whether it would be profitable to invest in these fixed assets or rent them to decrease the fixed capital investment.
6. Fills the Organizational Gap
An organizational gap is an activity from the set of departmental activities not assigned to any employee. If such allotment is left out mistakenly, no employee can be held responsible for it. Because of the constant interaction and communication undertaken within the strategic management process, every employee receives equal work. Due to this reason, such organizational gaps can be avoided entirely. Such organizational gaps also a delay in the goal achieving capability of the business. With strategic management, this hurdle is conquered. The company can strategically formulate OKRs to align the employees’ goals with the organization’s goals.
How To Formulate Strategies?
Strategic management makes it necessary to dedicate to strategic planning. Strategic planning symbolizes an organization’s capability to fix their short term and long term objectives and ascertain the measures that need to be taken to accomplish those goals. Here are the seven stages in the process of strategic management :
1. Setting a Goal
The first stage of strategic management is to set the goals that the company wants to achieve. This step includes setting up of both the long term and short term goals. The manager should share these goals with the whole organization and explain how it will impact the business’s future. With this, each team member gets a sense of purpose for their jobs and feels engaged.
2. Gathering the Information
The next stage is gathering all the necessary data and information. This information will be an inherent part of the organization’s vision and mission. The information regarding what changes might come in the future, the market share of the organization, the competitors’ market share, etc. are all the questions that need answers.
3. Analyzing the Situation
After gathering the necessary information and defining their vision and mission, the next stage is to assess the present situation. This stage analyses the internal and external environments of the business and assesses its competitors. With all the information in hand, the managers should categorize it based on its relevance to the current situation.
4. Formulating the Strategy
After a thorough study of the information and the situation, the manager must formulate the strategy. The strategy thus made should be clear and transparent. Having a vague plan is worse than having none because it creates a loss of direction among the employees, giving rise to inefficiency and incomprehensibility.
5. Implementing the Strategy
The best way to determine if the strategy works or not is to implement it. The most critical skills at this level, are managerial skills. Communication of the strategy is inevitable, along with an explanation of the role of each employee. The new strategy must receive support all over the organization so that it can be effectively implemented.
6. Monitoring the Strategy
After implementation, it is essential to monitor the success of the strategy continually. The managers must perform a SWOT analysis to determine the company’s current SWOT and use it for other strategy formulation. Along with this, the manager must check if the strategy is giving positive results or not.
7. Making Changes
In case the strategy is resulting in some adverse effects, the manager should reconsider the same and make necessary changes. If the strategy is working fine, the manager can anticipate future problems to create strategies.
Planning for the near future of the organization is essential for operating a successful business. The concept of strategic management is the first step towards your final goal.
Strategic management is a skill and an art. It is called a skill because a person can learn the techniques as a body of knowledge. It is considered an art because it deals with the judgment and thought of the uncertain future. To practice strategic management effectively, one must possess the necessary skills to understand the company as a whole, understand its operating environment, develop the strategies suitable with such background, implement the strategy, and evaluate, control, and amend the strategy has been implemented. Strategic Management is broad and covers all functions, and thus it attempts to incorporate the knowledge and experience gained in various structural areas of management.