What is Strategic Management?
Strategic Management is identification and illustration of the strategies that management implements in order to attain superior financial results for their organization, especially, in comparison to the competitors in the same industry.
Strategic management can also be observed as the set of decisions undertook by a manager impacting the results of the organization’s competitive performance. Detailed analysis of the available information and creative utilization of resources (may not be unique) is necessary for taking important strategic decisions. While taking strategic decisions, significant planning is required for both predictable scenarios as well as unpredictable situations.
Wikipedia defines Strategic management as,
“Strategic management 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 beneficial for any organization, irrespective of their sizes since there is always a room for improvement and each organization possesses some unique strengths and opportunities which can be capitalized upon. It ideally should be a continuous process and not a one-time evaluation or brainstorming exercise. It involves thoroughly studying competitors, understanding their approach and unique selling points which have helped them achieve their places. Also, rechecking own organization’s strategies regularly determining their applicability and potential success/ threats in present market conditions.
Bigger strategic decisions provide overall future direction to the organization and should be based on thorough analysis. Continuous monitoring is further required that organization is moving in the right direction and if any further steps are needed for more effective implementation.
Strategic Management for Employees
Strategic Management should aim at providing a strong perspective to the employees about their organization so that can better judge their fitment and map their long-term objectives to the organization’s overall direction. Strategic management can be used to manage employees so as to maximize the ability to achieve business objectives. Empowering the employees so that they can correlate well to organizational tasks and objectives, is a smart strategic move.
Further, strategic management makes employees capable of understanding the market reactions to organization’s product and taking corrective measures for the organization. Employees can also gauge the effect of the factors which can influence their jobs or roles and can take necessary corrective steps.
There are several tools and concepts which are generally used for the analysis of softer aspects of the organization aiding to the derivation of impactful decisions.
Important concepts of Strategic Management
SWOT framework was initially used by Harvard and later popularized by Kenneth R. Andrews and it still remains a commonly practiced analysis tool.
SWOT Analysis should be conducted, i.e., identify Strengths, Weaknesses, Opportunities, and Threats for your organization and accordingly utilize strengths in the best manner, work over the organizational weaknesses, grab the upcoming opportunities and make a backup plan for identified threats.
Coined by the Boston Consulting Group, 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.
Author Walter Kiechel identified several insights, such as a cost structure can always be improvised, varying costs structure in the same industry is a result of varying experiences of organizations, higher market share helps in cutting costs etc.
He wrote in 2010: “The experience curve was, simply, the most important concept in launching the strategy revolution…with the experience curve, the strategy revolution began to insinuate an acute awareness of competition into the corporate consciousness.”
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.
A contrary view on strategic management is that it significantly limits manager’s discretion in a dynamic market landscape. Strategies are developed to provide direction to the organization, and guidance on how to respond to adverse or favorable situations, however, there are certain elements are completely left out from the consideration.
According to Mintzberg “Strategy is a categorizing scheme by which incoming stimuli can be ordered and dispatched.” Since a strategy drives the organization in a particular direction, the approach may not be any more valid due to changes in circumstances. Mintzberg further said, “Strategy once established is a force that resists change, not encourages it.”
Some experts, in turn, promote an iterative approach, which is a repetitive learning cycle [rather than] a linear progression towards a clearly defined final destination.
Woodhouse and Collingridge suggested that true strategy should ideally follow “intelligent trial-and-error” concept in spite of adherence to pre-decided strategic plans.
Other expert quotes include: “Strategy should be seen as laying out the general path rather than precise steps”. “Means are as likely to determine ends as ends are to determine means.” “The objectives that an organization might wish to pursue are limited by the range of feasible approaches to implementation.”