Strategic management in business is often described as the planning and management that goes into achieving objectives that align with the organisation’s visions and goals efficiently and in a systematic manner. It also includes formulating and implementing strategies that allow the organisation to follow through with their course of planned actions based on the goals set by shareholders. Furthermore, it helps identify and take care of potential bottlenecks and risks in order to achieve better performance and hence, a competitive edge over other organisations.
Strategic management can be either prescriptive or descriptive.
Prescriptive strategic management refers to developing strategies in advance of any organisational issue.
Descriptive strategic management refers to developing and implementing strategies if and when needed.
Strategic management is crucial for defining the organisation’s strategy in order to attain better performance overall. It consists of four steps in general, namely:
• Scanning the environment
In this the internal and external factors that effect the organisation are assessed while collecting and scrutinising information for strategic purpose. The environmental analysis and assessment must be evaluated in a continuous basis for constant improvement.
• Formulation of strategy
Under this, the best course of action with the intention of accomplishing organisational goals and vision is decided upon; thereafter, corporate, functional and business strategies are finalised upon.
• Implementation of strategy
It refers to making the strategy work or in other words, putting the decided path course of strategy into action. Implementation of strategy includes developing the process of decision making, distribution of resources as well as designing the structure of organisation and managing Human Resources.
• Evaluation of strategy
Falling under the final step of strategy management, it includes measuring performance, appraising internal and external factors which are likely to be the root of existing strategies. The essence of evaluation is to ensure the implementation of the organisation’s strategy meets the objectives, vision and goals of the organisation.
Knowing how to carry out strategic management is a start, but one needs to know the benefits that organisations might sow upon implementing this practise.
The benefits of strategic management to the companies and organisations that use it are:
• Strategic management helps companies and organisations achieve goals by using a dynamic and transparent/ organised process for formulating steps and implementation.
• It provides businesses and organisations with a competitive edge over competitors due to its proactive nature- that ensures organisations being up to date and aware of the changing needs and demands of the market.
• It leads to more efficient and effective organisational performance, thereby, leading to manageable growth.
• As it ensures that companies and organisations are aware of the dynamic needs of the market, it also means being more aware of industry trends and challenges, and hence, looking towards the company’s future. By implementing the art of practising strategic management, organisations and companies feel better prepared and geared to face the future potential challenges.
• It enables senior executives to get feedback from department heads thereby helping them understand the bottlenecks better and tackle them. As a result bottlenecks can be eradicated and profit increased.
• It helps communicate and implement goals company-wide and it usually are the organisations working in unity or unified direction who achieve the goal.
• Strategic management also allows companies and organisations to make sure that their cash flows and long-term goals that are set do align.
• It also has non-financial benefits such as revitalising Human Resources, Identifying problems in an organisation after performing a detailed SWOT Analysis and then taking relevant actions in response to counter those problems, enabling the organisation or company into taking better decisions in a shorter time with strategic management and also helping companies gain an improved understanding of the strategies of competitors.
Strategic management can be done in a variety of ways, and two of the most popular types of strategic management are:
• Balanced Scorecard
The balanced scorecard method is capable of generating timely reporting mechanisms that show all statistics pertaining to the growth of the company. This also helps in finding facets of the organisation or business that need improvement and need to be worked upon by breaking down the performance evaluation process into four legs/ areas, namely,
a. Learning and Growth
b. Financial Data
c. Customer Perspectives
d. Business Processes
• SWOT Analysis
This stands for Strengths, Weaknesses, Opportunities and Threats. In this method both internal and external factors are evaluated.
Internal factors exist within the organisation or business and can be fixed/ changed and includes positive (strengths) or negative (weaknesses)
External factors exists outside of thr subject being evaluated and cannot be necessarily changed or affected by the organisation in any way. It includes positive (opportunities) and negatives (threats).
Knowing the perks only gives us one perspective of the strategic management. While there are a lot of benefits that can be reaped by practising strategic management, there also are some limitations that must be kept in mind such as:
• Strategic management doesn’t account for a certain future. Unforeseen circumstances which cannot by predicted given the current available database may invalidate a strategy. The best way to deal with this setback is to not be too highly dependent on future predictions.
• It is not very cost effective especially when it comes to smaller companies or organisations as it may be difficult to bear the costs of implementing strategic management as well as manage additional costs required in hiring additional external consultants.
• Strategic management requires complete understanding and efforts from the team and it can backfire in a very adverse way if anyone does not fully understand it and ends up compromising it.
• It can impose restrictions on decision making of companies and organisations as they would always have to look for options that align with the formulated strategies, which as a result can be frustrating due to its lack of flexibility.
All in all, strategic management is a practice that organisations and companies can greatly benefit from given that they know how to use it effectively.
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