Meaning & Definition of Strategic Management
Combining the words “strategy” with “management” creates the phrase “strategic management.” The development of a vision, objectives, strategy, and execution of that plan are all parts of strategic management, as are adjustments to the strategic intent in response to changing organisational demands.
The initial stages in strategic management are the creation of a mission statement and the setting of organisational objectives. The process concludes with the execution of functional activities to satisfy predetermined goals and targets after which a company portfolio or business model is produced.
According to Ansoffs, “strategic management is a systematic approach to a critical and increasingly important responsibility of general management to position and bind the company to its environment in a way that assures its continued success and shields it from shocks.”
According to Glueck, “strategic management” is a set of decisions and actions that result in the development of an effective plan or set of strategies that help a firm accomplish its objectives.”
According to Lloyd Le Byars, “strategic management is involved with making decisions about the future course of a company and carrying those decisions through “.
The ideas of strategic management have changed throughout time. Strategic management is an ongoing process that is often examined and put into action. It is a thorough plan that ensures harmony between the organisation and its environment.
As a consequence, strategic management is concerned with a range of organisational activities, including environment analysis, direction-giving, the creation and execution of plans, and the adoption of strategic control mechanisms.
Characteristics of Strategic Management
1) Long-Term Issues: Long-term concerns are a common focus of strategic management. Although these issues may not have an immediate effect on the organisation, they will benefit it in the long term.
For instance, if a business invests in the education of its employees, it may not see an increase in productivity right away, but in the long run, highly educated people will provide better results and help to increase profits.
2) Competitive Edge: Managers that are looking for new ways to gain a long-lasting competitive edge are helped by strategic management. Applying the principles of strategic management systematically to an organization’s operations enables managers to increase the number of happy customers, provide goods and services at competitive pricing, and foster a highly satisfied workforce.
Check here for latest case studies and research book : https://kit.co/Anurooba/case-analysis-text-books
3) Impact on Operations: Strategic management practises that are effective have a positive impact on operational issues. For instance, if compensation increases and performance are linked, staff members would be motivated to put in additional hours, which would raise operational productivity.
Determining the best way to handle sales with a certain consumer group or deciding whether to provide items on credit are examples of operations decisions. Operations-related decisions are made by managers at a lower level.
4) Uncertain and Future-Focused: Makes strategic management decisions addressing issues that will arise in the future but are unrelated to current operations. The dynamic and unsteady business environment causes managers to be unaware of the consequences of their decisions.
5) Complicated: Strategic management becomes complex as a consequence of its unpredictability. There are situations in the business world that managers find challenging to understand. Analyzing both the internal and external environments is necessary.
6) Organization-Wide: Strategic management application affects the whole organisation, not simply the operation where the principles are employed. It follows a deliberate process and incorporates strategic choices.
7) Long-Term Effects: Strategic management has long-term effects that have little bearing on an organization’s daily operations. The organization’s purpose, vision, and objectives are addressed by the strategic management principles.
8) Aids in the Implementation of Strategies: Strategic management makes sure that action-oriented plans are employed to effectively carry out and implement strategies.
Conceptual Framework For Strategic Management
The creation of the organization’s strategy is the main emphasis of the strategic management process. Management chooses solutions that will help the organisation improve its performance using a distinct process.
It is a never-ending activity to evaluate the businesses and sectors connected to the organisation and its rivals. To compete with current and potential competitors, the organisation has to set realistic goals with the aid of strategic management.
1) Environmental scanning: Environmental scanning is the process of keeping an eye on, analysing, and disseminating information to the relevant individuals of the company from both the external and internal environments.
Its goal is to pinpoint the internal and external factors that will determine the organization’s destiny as strategic considerations. The simplest method for doing an environmental scan is SWOT analysis. A company’s unique Strengths, Weaknesses, Opportunities, and Threats—which are strategic aspects—are expressed by the acronym SWOT.
i) External Environment: The external environment consists of elements (opportunities and threats) that are external to the organisation and often out of the immediate control of senior management. The environment in which the organisation functions is made up of several elements.
ii) Internal Environment: An organization’s internal environment consists of elements (Strengths and Weaknesses) that are unique to the organisation and are often out of the immediate control of top management.
The working environment is determined by these traits. Structure, culture, and assets of the company make up these components. By using its main strengths, which comprise a set of core competencies, the company may gain a competitive advantage.
2) Strategy Formulation: The creation of a strategy The creation of long-term organisational plans that enable the best execution of organisational duties is a need for the formulation of a strategy. The creation of a strategy is essential for the successful running of a company. Plans are created at this phase by visualising the organization’s long-term future.
The SWOT analysis is used to determine the organization’s core competences and strategic capabilities, as well as to outline the order in which objectives must be reached, after the strategists have analysed the organization’s current and future situations.
The strategy is then developed with these objectives in mind. Strategies outline the course an organisation would follow to accomplish its goals. An organization’s strategy should be developed to enable environmental analysis, realisation of the organization’s vision, and achievement of the targeted objectives.
In order to establish a strategy, it is necessary to effectively manage external opportunities and threats while creating long-term plans for the organization’s strengths and weaknesses. This include developing the company’s vision, deciding on its purpose, setting realistic objectives, developing strategies, and defining norms for commercial conduct.
i) Vision of the Organisation: A vision statement for an organisation should outline the position it hopes to achieve in the future. A vision statement is developed by the senior management, which may include the CEO, president, managing director, chairman, etc. A vision statement conveys the organization’s future position in terms of its goals, scope, and competitive leadership.
It creates a framework for encouraging the growth of relationships between the organisation and its stakeholders, which include its investors, employees, suppliers, customers, and other entities directly or indirectly connected with the organisation. It assists in the creation of broad objectives related to the performance of the organisation and its diversification into other industries, both of which are essential to its development.
A vision statement’s primary goal is to provide a clear image of the organisation. It is a challenging statement for the whole organisation and all of the many sectors that are each striving toward their own objectives. This declaration provides employees with a common goal and inspires them to do routine jobs competently. It motivates employees to act morally and ethically in conformity with the norms of the company.
ii) Organizational Mission: A mission statement explains the purpose of the organisation. It sets the guiding principles for managing the business organization’s operations and describes the organisational culture and values. Based on its mission statement, the organisation develops its strategy.
A company’s purpose is a standout statement that details its products, target audiences, and geographic reach in addition to its market price and other aspects. This remark becomes solely focused on the specifics at the corporate level. The elements of the mission statement represent the organization’s vision for developing strategies, its goal, and the degree of excellence required to achieve market leadership.
iii) Goals / Objectives: Organizational plans are often long-term in nature, and thus produce long-term objectives. These objectives include things like the company’s profitability, position in the market, reputation, return on investment, productivity, and personnel development, among other things. These objectives must to be specific and quantifiable rather than vague. The organization’s goals should be both challenging and doable.
The results envisioned for business activities are called objectives. The organization’s goals show how committed the management is to achieving the desired results within a certain time period. They also assist in developing the performance standards used to evaluate performance. These objectives encourage cohesiveness between options and decision-makers, which aids in the design of strategies.
iv) Strategies: A business’s strategy is a comprehensive plan that helps it accomplish its goals and objectives. creation of plans for gaining a competitive edge and reducing factors that contribute to the organization’s downfall.
When Tata Group of Compartments realised its current diversification strategy would not allow it to achieve its goals, it sold Hindustan Lever Limited its subsidiary companies, including Tomco, Lakme, and other brands. It made the decision to stick with its more core sectors, including steel and automobiles, which offered greater potential for growth and development.
v) Policies: Policies are a thorough set of guidelines for decision-making that link strategy, formulation, and implementation. Policies ensure corporate guidelines that make sure decisions are made with the organization’s purpose, objectives, and strategy in mind.
Policies prioritise the best use of resources while also emphasising the accomplishment of organisational goals. An organization’s policy refers to the responsibilities of corporate-level management, long-term strategic decisions, and factors influencing the success of the organisation.
3) Strategy Implementation: The third step in the strategic management process is to ensure that strategies are successfully executed once they have been formulated and a sound strategic plan has been created.
Strategists must take into account a variety of implementation-related aspects since the selected strategy must be correctly executed in order to fulfil the organization’s business objectives. Ineffective implementation renders even the best-laid plans meaningless. Therefore, strategic implementation is the process that makes it possible to execute the selected strategy effectively.
The execution of strategies is facilitated by programmes, finances, and procedures. The organization’s culture, structure, or management system may all alter as a consequence of this process. Following an assessment by senior management, middle or lower management often executes the plan. Following through on plans is necessary for a strategy to be executed successfully:
i) Programmes: The actions or activities necessary to carry out a single-use plan are referred to as programmes. Programs assist in putting concepts into action. Programs might include restructuring an organization’s operations, changing its culture, launching a new research effort, etc.
ii) Budgets: A budget is a financial statement of a programme for an organisation. The expenses related to each programme are listed separately in a budget. Budgets are often used for management and planning. A budget employs financial statements to emphasise the anticipated impact on the organization’s financial future in addition to outlining the full plan of the strategy that will be used.
iii) Procedures: Also referred to as Standard Operating Procedures (SOP), are detailed instructions on how to carry out a task. Procedures often include an explanation of how many operations are necessary to finish a programme.
4) Evaluation and Control: It’s critical to regularly evaluate a strategy once it has been successfully carried out. Since it makes it easier to oversee the implementation of the plan, evaluation must be included into the strategic management process. The effectiveness of the adopted strategy is assessed in light of strategic objectives and performance indicators.
It is an essential step in getting an objective assessment of the expected and actual results. The manager is in charge of keeping track of the expected responses from the different organisational divisions and business units where the plans are put into effect. Analysis of market responses is also an essential part of evaluating and managing strategies.
Strategic control requirements vary depending on factors such the organization’s size, business activity, number of business divisions, organisational structure, etc. Implementing control should result in the required corrective action. The difference between expected and actual results determines the amount of required control.
All of the steps used throughout the strategic management process lead to performance. Since the strategic management method enhances organisational performance, it has acquired significant appeal. Managers need timely, accurate, and intelligible information from their subordinates in order to carry out the tasks related to strategic evaluation and control. Managers may use this data to compare the final result to the expectations set throughout the plan-making process.
Input that is relevant and timely is necessary for effective strategy appraisal. The information provided by subordinates will determine how well a strategy evaluation is conducted. It plays a critical part in assessing the feasibility of the chosen strategy. Regular feedback on the effectiveness of the previously planned approach would be provided via continuous assessment.
A feedback activity is a component of the strategic management process that enables management to get the feedback required for performance evaluation and the implementation of necessary corrective actions. When an organisation creates plans, programmes, etc., it should assess its earlier decisions and correct any errors.
For instance, performance that falls short of expectations suggests problems with the creation or implementation of the strategy. It’s also possible that environmental scanning and analysis missed a crucial element, like a fresh opponent.
A BEST WAY TO EARN WHILE YOU STUDY, JOIN THIS APP UPLOAD PHOTOS, SAVE MONEY FROM NOW ON : https://bit.ly/3g7PxAg
Importance of Strategic Management
1) Board Member Responsibilities: Relieving board members of their duties is one of the most important benefits of implementing strategic management in an organisation.
2) Aids in Objective Assessment: Strategic management relieves the board and senior management of some of their routine duties so they may focus on securing the organization’s future. Organizations may adopt a wider perspective via the use of strategic management disciplines rather of limiting their attention to the current problems at hand.
3) Creates a Framework for Decision-Making: With the assistance of a sound strategy, employees are able to make routine decisions inside a framework while making sure that those actions move the firm in a certain direction.
In addition to examining an organization’s mission and fundamental values and outlining its objectives, strategy also helps an organisation identify its risks and opportunities and provides tactics to strengthen and improve upon its weaknesses. As a result, it creates parameters and a framework within which decisions may be made.
4) Aids in Measuring Progress: By using the strategic management process, the organisation is forced to establish objectives and construct measures of organisational success. The organisation must analyse the factors that have led to its current performance in order to develop success measures.
The organisation must then revise, reassess, or update its objectives before putting them into action. The corporate level management and the board of directors must also be aware of these performance measures.
5) Offers an Organizational Perspective: Managers often focus on operational issues while ignoring interdepartmental or organizational-wide issues. In order to create an organizational-wide strategy, strategic management emphasises interrelated sectors while taking into consideration the organization’s viewpoint.
6) Increases Stability: Some strategies work to fortify an organisation by generating more room for growth. For instance, if a business only has a few clients, it cannot survive if any of them leave. Strategic management works to help organisations attract more customers so they are less dependent on a select group of clients.
By implementing strategies like releasing a new product line, buying a new business, and catering to a new market segment, among others, a corporation may strengthen its stability by using strategic management.
7) Strong Labor Supply: Strategic management makes it easier to put into practise practical staffing methods that improve the quantity and quality of labour. By creating thorough job descriptions for employees, improving hiring procedures, conducting annual reviews, planning training sessions, taking steps to lower the employee turnover rate, creating succession plans, creating compensation packages that are competitive, and abiding by federal and state laws and regulations, an organisation can develop a strong workforce.
8) Improves Brand Management: A company’s brand image may be damaged by the introduction of a new product in its line or by the acquisition of a business that does not fit with its image in the market. When choosing an organisational structure, strategic management takes brand management objectives into account.
9) Identifies SWOT: Strategic management analyses the environment of the company to determine both the organization’s overall SWOT and the SWOTs of each of its divisions. It is straightforward to pinpoint issues with the product line, marketing channels, pricing plans, marketing methods, hiring practises, e-commerce operations, etc. once they have been identified.
Limitations of Strategic Management
1) Time Consuming: The process of strategic management takes a lot of time. An organisation must devote a lot of effort and money into implementing strategic management.
2) Difficult Procedure: The implementation process for strategic management is rather intricate. To establish and carry out a strategy, specialised professionals with good qualifications are needed. A doctorate or master’s degree in the same discipline is needed to work as a strategist. For a business, hiring these strategists or working with a firm that offers strategic advice is often quite expensive.
3)Absence of Short-term Benefits: The advantages of employing strategic management ideas are only realised over the long term, despite the fact that investors expect quick gains. In order to produce long-term profits for an organisation, strategic management sometimes causes short-term losses. These immediate losses can diminish the organization’s value, which might result in its death.
4) Unexpected Results: Predicting the future is connected to several strategic management ideas. The future is not always predictable, however. Any significant political or financial adjustment in the environment might lead to consequences that vary greatly from what was originally anticipated.
It is incredibly challenging to predict future company success because of how quickly the environment changes. Strategic management may therefore be harmful to the organisation under such circumstances.
5) Lack of Adaptability: Strategic management may encourage bureaucracy and rigidity inside an organisation, making it more difficult for that organisation to adapt to environmental changes. As a result, the organisation is unable to take advantage of environmental opportunities and mitigate environmental risks.
6) Limited by a Set of Rules: A company cannot use the strategic management process in accordance with established guidelines, plans, or deadlines. It is based on a philosophy that has a preset approach for every situation.
As a result, rather than being a practical approach, strategic management becomes a business and management idea or doctrine. This makes it difficult to develop plans.
7) Assists in Achieving Objectives: Strategies help a business achieve its goals and forge a market position by allocating resources, providing workers with the right training, expanding production capacity, etc.
Difference between strategy and policy
| Basis of Difference | Strategy | Policy |
| Meaning | A strategy provides a direction in which the organisation needs to go for achieving the organisational goals by employing various resources. | A policy provides guidelines to the employees for smooth operations and decisions making. |
| Nature | With the help of strategy, the formulated policies are applied practically within a stipulated time frame. | A policy just instructs in work but is not associated with any time frame. |
| Features | Strategies are formulated for those situations which have yet not occurred and hence the organisations have no formal response | Policies are formulated for activities which are repetitive in nature. |
| Orientation | Strategy is formulated for critical issues and requires constant attention from the top management | Policies are formulated by the top management for day-to-day activities. After the policies are formulated it becomes the responsibility of subordinates to implement those without the involvement of top management. |
| Scope | Strategies are formulated on the basis of actions | Policies are formulated on the basis of thoughts |
| Implementation at Levels of Organisation | Strategy is implemented at every level in the organisation | Policies are implemented by middle and lower-level employees. |
| Focus/ Objectives | Strategies are the ways to achieve the organisational objectives | Policies are the instructions to achieve the objectives. |
| Overall Goal | Strategies are formulated to utilise the available resources to achieve the organisational goals efficiently | Policies are formulated to direct the operations and activities of the organisation. |
Related Topics:
0 Comments
5 Pingbacks