Strategic management is an essential process whose implementation is required for executing, assessing, and enhancing approaches aimed at fulfilling an organisation's enduring aspirations and reaping the benefits of strategic management. This multifaceted process delves into an organisation's internal and external landscapes, shaping its vision and mission, defining objectives, and selecting optimal tactics. It involves executing meticulously laid plans, monitoring and regulating performance, and adapting as necessary. Notably, strategic management diverges from strategic planning, the latter being a narrower endeavour focused on specific actions and required resources for strategy execution. Strategic management, on the other hand, encompasses the entire spectrum of strategic activities and decisions, illuminated by an example of strategic management.
Why Does Strategic Management Matter?
The imperatives that pinpoint the significance of strategic management include:
Globalisation: The increasingly intricate and interconnected global economy spawns fresh markets, clientele, rivals, suppliers, and collaborators. It also exposes organisations to diverse cultures, regulations, standards, and expectations, making it vital to manage everything strategically.
Technology: The swift evolution and diffusion of technology present various prospects and threats. It enables organisations to enhance their offerings, refine processes, and amplify communication. Simultaneously, it compels them to grapple with evolving consumer preferences, disruptive innovations, cyber threats, and ethical dilemmas.
Competition: Intensified competition, both domestically and internationally, compels organisations to elevate their calibre in quality, efficiency, innovation, and client contentment. It beckons them to distinguish themselves from competitors and craft a sustainable competitive edge.
Customers: The increasingly discerning and varied customer base prompts new demands and expectations. Customers yearn for heightened value, variety, convenience, personalisation, and responsiveness in the products and services they patronise. They also possess augmented access to information, alternatives, and avenues for feedback.
Stakeholders: The mounting sway and vested interests of diverse stakeholders introduce fresh commitments and openings for organisations. These stakeholders encompass shareholders, employees, customers, suppliers, partners, regulators, society, and the environment. Each harbours distinct objectives, principles, anticipations, and influence over the organisation.
Attributes of Strategic Management
Strategic management exhibits several distinctive attributes that set it apart from other managerial facets:
Long-term Orientation: Strategic management pivots towards the organisation's enduring trajectory and performance. It contemplates the prospective consequences of existing decisions and actions.
Holistic Perspective: Strategic management encompasses the entirety of an organisation and its environment. It integrates the manifold functional domains and hierarchies within the organisation. Furthermore, it factors in the concerns and requirements of the varied stakeholders.
Dynamic Process: Strategic management remains neither an isolated nor a stagnant undertaking. Instead, it unfurls as an unceasing, iterative process characterised by learning, feedback, adaptation, and refinement. It proves responsive to the mutable conditions and situations in the external environment.
Complexity: Strategic management tackles intricate and unpredictable quandaries entailing numerous facets and variables. It necessitates the application of creativity, intuition, discernment, analysis, synthesis, evaluation, and decision-making acumen.
Visionary Leadership: Successful strategic management calls for visionary leadership capable of inspiring, motivating, steering, and aligning the organisation toward a common purpose and trajectory. It also mandates participatory leadership that actively engages, empowers, communicates with, and collaborates among diverse stakeholders.
How Does Strategic Management Work?
Strategic management operates via a sequence of interrelated, interdependent steps. The precise sequence and content of these steps may vary depending on the particular context and situation confronting each organisation.
Analysis: This constitutes the preliminary step in strategic management, wherein the organisation scrutinises its internal strengths and weaknesses in conjunction with its external opportunities and threats. Multiple tools can facilitate this evaluation, including SWOT analysis (Strengths-Weaknesses-Opportunities-Threats), PESTEL analysis (Political-Economic-Social-Technological-Environmental-Legal), Porter's five forces analysis (Industry rivalry-Bargaining power of suppliers-Bargaining power of buyers-Threat of new entrants-Threat of substitutes), VRIO analysis (Value-Rarity-Imitability-Organisation), and others.
Formulation: The second step in strategic management involves formulating the organisation's vision (the desired future state), mission (the fundamental purpose), goals (the specific outcomes), objectives (the quantifiable targets), strategies (the broad courses of action), tactics (the specific measures), policies (the general directives), programs (the detailed schemes), budgets (the financial allocations), and more.
Implementation: Following formulation, the organisation progresses to the third stage of strategic management, where it translates its strategies into tangible actions. This involves the allocation of resources, execution of plans, delegation of responsibilities, coordination of activities, monitoring of progress, quality control, and issue resolution, among other facets.
Evaluation: The fourth phase in strategic management entails appraising the organisation's performance. This is achieved through the measurement of results, juxtaposing actual outcomes with anticipated ones, identifying disparities and deviations, scrutinising causes and consequences, and assessing strengths and vulnerabilities, along with acknowledging accomplishments and setbacks.
Improvement: Strategic management's final stage revolves around enhancing strategies. This involves gleaning insights from experience, soliciting feedback, effecting adjustments, implementing corrective measures, pioneering innovations, and fortifying capabilities.
Advantages of Strategic Management with Examples
Let's delve into the benefits of strategic management in simple terms. Imagine it as a way to plan and steer a company's ship in the right direction.
Financial Gains with Strategic Management
Strategic management advantages increase a company's profitability, sales, and productivity. Principal financial advantages include:
Boosting Profits: Strategic management lets the superior authorities in a company get input from department heads. This helps them spot problems at various levels and fix them, leading to more money. Think about LG Electronics in South Korea. They faced tough competition and low profits years ago. By pricing their products lower in rural areas and boosting their brand's visibility, they turned things around.
Being Financially Secure: Since strategic management focuses on long-term goals, leaders look at their assets, debts, and overall financial health. This helps them ensure they can cover future costs. This is crucial for growth.
Cash Flow Check: Businesses using strategic management keep an eye on their money flow. Imagine it as checking your bank account regularly. This helps avoid problems like late payments to suppliers. ake Tesla, for example. They partnered with Panasonic for batteries and even bought Maxwell Technologies to save money and keep the cash flowing.
Non-Financial Benefits of Strategic Management
An organisation may make its strategies more logical, reasonable, and methodical by using strategic management.
Hiring and Keeping Good People: Strategic management also helps with hiring and keeping the best employees. Companies create detailed job descriptions, improve hiring practices, and make employees happier.
Spotting Problems: Businesses may thoroughly examine their strengths, weaknesses, opportunities, and threats with the help of strategic management. They can deal with issues and adjust thanks to this. For instance, they may prepare special promotions if a new rival opens up close by.
Understanding the Competition: Strategic management helps businesses understand what their rivals are doing. Instead of copying them, they apply what they learn to become better. Consider HP, which maintained its competitive edge by adjusting its marketing and responding to client demand.
Conclusion
Strategic management is a critical procedure that aids organisations in achieving their long-term objectives and adding value for their stakeholders in a fast-paced, cutthroat environment. It also needs comprehensive thinking, a dynamic process, complexity, and a long-term focus from the leadership. Through the provision of data and analytics, ProHance workforce management and productivity analytics tool assists in making wise choices about the strategic management of a dispersed and hybrid workforce using their cutting-edge tools. With over 3,20,000 users in more than 24 countries, ProHance has a worldwide presence and impact.