What is Strategic Management, and Why is it Important?
Strategic management is the management of an organization’s resources to successfully achieve its goals and objectives. It’s a strategy designed to guarantee that both the company’s growth and its performance goals are achieved. Strategic management assists in offering a comprehensive direction by processing and developing plans and policies that are specifically created to achieve goals and then allocating the resources to begin the plan. Strategic management is therefore used by organizations to have a competitive edge over other competitors. Let us take a deep look into the concept of strategic management and why it is important.
What is Strategic Management?
Known as the father of Modern Management theory, Peter Drucker introduced and first defined strategic management in the early 1950s. Strategic management is the planning, monitoring, assessing, and analyzing of all the requirements an organization needs to complete its goals and objectives. When it comes to strategic management, the size of the organization is irrelevant because even small organizations need to understand how effective they are in their industry and what steps should be taken to improve their performance going forward.
The business environment is changing, and organizations must have plans to enable them to succeed. The strategic management process will help any organization to take components from their situation, brainstorm different strategies, and analyze and implement them to know the effectiveness of the implemented strategies.
Concept of Strategic Management
The concept of strategic management is completely based on the organization’s clear understanding of its mission. It entirely depends on the organization’s goals and where they see themselves in the future. Values are important because they guide the actions of the organization. It takes commitment to strategic planning and the ability of the organization to manage both long-term and short-term objectives to comprehend the vision and put strategic management planning into practice. Constantly planning strategic decisions and activities and allocating resources are included in strategic planning as they are needed to achieve all the goals set by the organization.
To manage an organization’s strategies, it is necessary to have a clearly defined process that will enable institutions to develop new objectives steadily in order to keep up with daily changes in the market, business environment, and technology. Therefore, strategic management will inevitably aid an organization in gaining an edge over rivals, increasing its market share, and continuously planning for the future.
Effective Implementation of the Strategic Management
There are a few widely accepted, straightforward methodological steps that organizations can use to integrate strategic management into their plans.
Step 1: The Strategic Intent
We need a strategic intent in order to successfully implement strategic management. Strategic intent begins with defining the organization’s objectives and then using them as a benchmark to measure the performance and progress of the organization. An organization’s vision and direction should be distinct, quantifiable, and simultaneously implementable. The stage of strategic intent is when businesses define their future areas of focus and assess whether or not using a specific strategic management method will make them profitable and expand their operations.
Step 2: Strategic formulation
The second step includes creating a strategy and carefully assessing the organization’s health. Organizations carefully assess and analyze their internal and external environments, as well as their own selves, during this stage. Understanding the company’s strengths, weaknesses, threats, and market opportunities is the main goal of this stage of the strategic analysis process. At this point, the company is aware of what it is doing better than its rivals and what needs to be changed if it wants to outperform them. Additionally, it examines the advantages that rival companies have in the marketplace. They will undoubtedly benefit from this in developing strategies for outperforming their competitors and advancing with the times. During this stage, the organisations also assess where they are and where they want to be, and once an evaluation has been completed, the strategy should be put into action.
Step 3: Strategic implementation
An excellent place to start with strategic management is an organizational plan, but the implementation of the plan as soon as possible is also required. To ensure an organization’s survival, growth, and expansion after studying it, a well-considered and discussed strategy must be put into practice. A report indicates that more than 60% of strategies are not successfully implemented, which ultimately leads to an organization’s demise. Therefore, developing a strategy alone is not the complete solution.
An organization’s success depends on
- Developing structures and systems
- Allocating required resources
- Overseeing change management
- Implementing the risk management strategies
- Creation of the decision-making procedures
- Formulating the project management capabilities
- Communicating strategies
- Building competitive capabilities
- Managing the resources provided by aligning the individual roles with performance objectives
- Rewarding or praising employees for their performance.
By successfully implementing strategic plans, organizations will be able to investigate new possibilities and take into account all the crucial elements of a business, including people, strategy, and operations.
Step 4: Strategy Evaluation
The final phase of strategic management is where we can evaluate and analyze the outcomes of the strategic process. By evaluating the performance of an organizational strategy, companies can finally decide to either stay on the same course of action or make any adjustments so that they can correct their actions and adapt accordingly to the ever-changing market conditions.
Strategic evaluation is a continuous process that offers organizations the chance to assess performance and take appropriate action. The strategic plan’s evaluation provides a glimpse of potential failures and determines whether the overarching company strategy needs to change course. Organizations are required to review their strategies on a regular basis to ascertain what will and won’t work.
Since strategic management is all about making crucial decisions, overcoming various distractions, and seizing opportunities as they arise, a person must have strategic management skills. The executive of a company should not only have keen analytical skills but also have the ability to motivate staff to perform at their best. They ought to be capable of having productive discussions with the organization’s stakeholders. The executive can help the company by learning the skills necessary to articulate its strategies.