What is Strategic management?

Strategic management is the process of setting goals, objectives and developing plans, policies in order to achieve those objectives, and then allocating the requisite resources to implement those plans. This is done in order to make the firm more competitive.

What is Strategic management?

Strategic Management is concerned with establishing the proper “organization – environment fit” or matching the organizational factors with the environmental factors. It involves an analysis of organizational factors (strengths and weaknesses of the organization) and the environmental factors (threats and opportunities in the business environment).

It is the art and science of formulating, implementing, and evaluating cross-functional decisions and strategies that enable an organization to achieve its objectives.

Related: What is a Strategy?

Strategic-Management is about answering the following questions:

• Where are we now?
• Where do we want to go?
• How are we going to get there?

Strategic management is a costly activity that takes up a lot of management time. It is therefore important to stop & consider why it is important:

• Issues, decisions and actions affecting the firm as a whole
• Issues, decisions and actions that deal with the direction and scope of the firm
• Issues, etc. with a time horizon; long term but with intermediary goals
• Issues etc. with resource implications; financial, physical, human and ‘knowledge’ resources.

‘Competitive strategy is about being different. It means deliberately choosing a different set of activities to deliver a unique mix of value.’ (Porter , 1996).

Achieving sustainable competitive advantage is the central issue of strategic management

• Exists in all walks of life
• The ability of the firm to outperform other firms in the market (customers and profit)
• Need not be destructive

Importance and Benefits of Strategic Management

In today’s age, strategic management is more important than ever for organisations!

It allows an organisation to become more proactive rather than reactive. It has helped organisations formulate sound strategies. These strategies are based on a more systematic, logical and rational approach to strategic choice.

• Even if you’re on the right track, you’ll get run over if you just sit there (Will Rogers)
• Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat (Sun Tzu)
• The best way to predict the future is to create it (Peter Drucker)
• The essence of strategy is choosing what not to do (Michael Porter)

Benefits of Strategic Management

Benefits of Strategic Management includes Enhanced Communication, Greater Commitment, Deeper/Improved Understanding, Positive Results.

Financial Benefits:

• Improvement in sales, profitability and productivity.
• Profits will come naturally.

Non-Financial Benefits:

• Improved understanding of competitors strategies.
• Reduction in resistance to change. More and more opportunities can be exploited in the process.
• Helps define the management problems objectively.
• Provides a framework for a company to coordinate and control activities.
• Encourages strategic thinking!

The Strategic-Management Model

Stages of Strategic Management:

• Strategy analysis: Internal and External Environment Analysis
• Strategy formulation
• Strategy implementation

Related: Strategic capabilities of a firm that it uses to compete.

A strategic plan is a company’s game plan. It results from tough managerial choices among numerous good alternatives, and it signals commitment to specific markets, policies, procedures, and operations.

References

Strategic Management – Fred R. David, Published by Prentice Hall International.

Business Policy and Strategic Management – Dr. Azhar Kazmi, published by Tata McGraw Hill Publications

Nagpal, Sharma: Strategic Management, SYBMS (Sem. 3), Sheth Publishers

Nagpal, Shelankar, Sharma: Strategic Management, M.Com (Sem. 3), Sheth Publishers