Strategic management can be defined as the practice of specifying the overall goals of the organization, creating and planning of policies to accomplish the objectives, and finally locating the necessary resources in order to implement the plans laid out. To ensure that strategic management of a company is effectively implemented, all the stakeholders must collaborate and aim at attaining the goals and objectives of the organization. Strategic management helps in the success of an organization in the survival in the global market.
Strategic management can be defined as the practice of specifying the overall goals of the organization, creating and planning of policies to accomplish the objectives, and finally locating the necessary resources in order to implement the plans laid out. Strategic planning is known to be the utmost level of managerial functions that the Chief Executive Officer of any organization undertakes in collaboration with the executive team (Ethiraj, Gambardella & Helfat, 2016). Therefore, it means that strategic management gives the general direction for the entire organization, including a set of measures and decisions that result in formulation and implementation of strategies that are designed to realize organization’s goals. Strategic management is a continuous approach, which allows any business entity to adapt its operation activities to the changing external and internal environment in a beneficial way. It is also a significant aspect for any organization to survive and win in the competitive market. This paper will discuss various perspective of strategic management and its effects on any organization in the market.
Elements of Strategic Management
Any organization is required to choose a certain direction in which it will follow company’s goals. Strategic management is composed of three main elements which include strategic analysis, strategic choice, and strategy implementation.
The main purpose of the strategic analysis is to focus on understanding the organizational strategic position. This element is more focused on changes occurring in the current environment and the possible effect of such changes to the entire operation of the organization. The strategic analysis mainly focuses on creating a view of the factors that can have impact in both future and present operational results (Toor, 2014).
If the strategic management is organized properly, it can easily help in choosing the right strategy to use. To ensure that strategic management of a company is effectively implemented, the three factors to be discussed below should be considered. First, the environmental factors such as social or political factors are to be considered. It would be difficult for any organization to survive with harsh economic, political, commercial, social, cultural, and technological environment. However, for certain organizations these environment factors may be more favorable than for other competitors in the same industry. Therefore, it is important for different companies are to clearly understanding of the impacts and how to deal with different environmental changes by formulating the most effective strategic plan. The second factor is available resources in the organization, which are considered to have internal influence (Lee, 2016). However, while discussing strategic capabilities of the business entities it is necessary to examine its weaknesses and strengths. An organization can identify its weak and strong sides by analyzing its resources such as management, products, physical plants, and its financial structure. Finally, the last factor is the prospects of the various stakeholders in the growth of the organizations. The assumptions and beliefs of the stakeholders have great influence on the organization’s culture. Moreover, the stakeholders can have high influence in decision making process and the impact depends on the respective authoritative powers of the stakeholders. The influence that tends to dominate depends management that has the more power.
After completing the strategic analysis, it is a proper time to make a strategic choice. Strategic analysis usually creates the foundation for strategic choice. Strategic choice refer to the act of choosing the most effective plan to achieve the best strategy for operating in the competitive market. This depends on the evaluation of the available strategic options. There are three parts of strategic choice which include the strategic options, evaluation of the options, and the selection of strategy. In the process of strategic choice, there may be over representation of strategic options, thus it is important to make sure that the selected option is the most desired stratgy. The second step of strategic choice which is used in evaluation of strategic options. Assessment of the strategic option may be carried out during strategic analysis in order to evaluate their relative merits. Before the business entity decide to follow a certain option, it has to consider some factor (Toor, 2014). For example, the organization might consider whether the option is built upon strengths or if the option is one that takes advantage of the opportunity. With such inquiries, the company will overcome weaknesses while minimizing threats that might face the business. This is also referred to as searching for the suitability of the strategy. The third part involves the choosing a strategy that the organization will benefit from. In some cases, the selected choice is usually a matter of the final decision from the management. In addition, during the process of strategic choice, the implemented strategy is usually influenced by the values of the manager and other workers with certain interest in the organization.
This is the third and the main element of strategic management, which is focused on strategy transition into action. There is need of proper realization of organization’s available resources in the strategy implementation. In addition, it is important to carefully handle the possible changes in the company’s structure and provide thorough planning. There are different parts which are included in the strategy implementation. The initial part embrace planning and allocation of resources. Strategy implementation involves resource planning which, particularly logistic of implementation. The second part is about organization’s design and structural outlay. There are several changes that should be carried out during strategy implementation. For instance, there is the need of the organization to adapt a system that can be used to manage its operation. The third part is about the governance for strategic change. If there is the implementation of the strategy, it will demand to manage the strategic changes (Yasir, Majid &Tabassum, 2014). On the other hand, action from the managers is required as it will determine how the change process will be conducted and the mechanism that will be applied. The mechanism adapted by the managers will affect the redesign of the organization, and alter the daily operations and organization cultural aspects (Szymaniec-Mlicka, 2016).
Therefore, all three elements of strategic management are in one way or another interrelated. There must be an analysis of options in order to decide on the strategy that will be the most successful for the organization. The strategic implementation is a great determinant of the strategic choice, and it is carried out by considering different strategies to arrive at the most suitable one to be implemented in the organization. This will ensure the achievement of the expected goal.
The Phases of the Strategic Management
An organization evolves through these four major stages of strategic management.
Phase.1-Basic Financial Planning
The project is analyzed through little information from the organization. The sales of the organization do not provide sufficient information about environmental protection. The time horizon is usually one year. Such operational planning is not very accurate and it is quite time-consuming.
Phase.2- Forecast-Based Planning
Additional to the internal information, the manager collect available data from environment to extrapolate the current development in the last five years of the operation. In this phase, it appears to be more time-consuming. This process is also politicized as the managers compete for large share and funds. Here, the time horizon lasts for about three to five years.
Phase.3 Externally Oriented Planning
In this level, the management controls the planning process through the introduction of strategic planning. The organization makes efforts in changing markets and competition through strategic thinking. A five-year plan is developed by top management with the help of all stakeholders.
Phase.4 Strategic Management
A strategic plan is developed by employees at many levels of the various department, which is aimed at achieving the organization’s primary objectives. The five years plan is replaced with the help of all levels of the organization throughout the year.
Levels of Strategic Management
Strategic management may and should be conducted on the different organizational levels, which include:
Corporate Level Strategy
Corporate Level Strategy focuses on the entire operations of the organization, and the formula to be used to ensure that value is added to the different units of an organization. Corporate strategy does work successfully with the three main categories of stability, expansion, and reduction of expenditure (Smith, 2017). It is important for a firm to formulate a business strategy that incorporates cost leadership, ensure that there is differentiation of order to gain a sustainable competitive advantage, which results to long-term success. On the other hand, an organization can achieve high growth and big profit by developing a blue ocean strategy that breaks the previous value-cost trade off by pursuing both differentiation and low cost (Ethiraj, Gambardella & Helfat, 2016).
Business Level Strategy
This indicates how plans of the organization which are included in the business strategy will compete in specific market. For this reason, business strategy is known as competitive strategy. This deals with issues related to pricing strategy, innovation, and better production. Although, a corporate level strategy participates in the overall organization, the strategic decisions relates to certain business unit. The business level strategy should also be reviewed continuously alongside environment changes. It may be reviewed annually or after a certain period of time. A business strategy must also show progress as outlined in the organization plans in order to help management to understand the current business environment, and the effective programs and projects to be implemented. In addition, there must be accurate and timely information about the corporate risk register, the major investments to date, and the risk associated with it (Toor, 2014).
This is the third level of strategy and it is at the end operation of an organization. The approach is aimed at taking the functional areas in order to attain the corporate objectives and strategies by maximizing the resources productivity.
Importance of Strategic Management in Organization
Strategic management is significant for any organization operating in the current world. When strategic management is effectively employed, it will be an important tool in formulating strategies, which can be applied in the environment changing. Therefore, strategic management helps in the existence of the organization since the management is able to formulate strategies that will lead to the successful operation of the business despite the various barriers it might experience (Grossberg, 2016). In all businesses, the environment is always changing and therefore, there is need to review the company’s operation in order to cope with the environmental changes. Strategic management, can foster the business to successfully operate in the complex, dynamic environments. In order for the enterprise to survive in such environment and increase its competitiveness in daily operations, it should be less bureaucratic and more flexible. Organizations are supposed to develop in a strategically flexible way in order to shift from dominant strategy. An organization operating in a conducive environment, it tends to have competitive advantage that helps it in its daily operation. (Yasir, Majid & Tabassum, 2014).
Strategic management is also important as it provides the governors of the organization with an opportunity to consider the goals of the stakeholders and more so, understand the behavioral pattern and the impact they have in the present condition and in future (Bridoux & Stoelhorst, 2013). When all these factors are considered, it will be easier for the organization to develop business strategies through the employment of strategic management. Thus, strategic management is very essential as it acts as a tool for developing, executing, and evaluating the organization strategy.
Strategic management enables the organization to achieve its goals in efficient manner. It works collaboratively with the mission and vision of an organization. An improved and effective strategic management process will always help in facilitating the development of more complex management structures, which is requires for company’s growth and survival (Smith, 2017). It also helps the organization in articulating, communicating, and monitoring the strategy implementation by the use of interlink system with a long-term vision of the organization.
Strategic management helps in the success of an organization in the survival in the global market. This is achieved by integrating experience and knowledge that has been gained in various functional areas. On the other hand, it helps the organization in understanding the complex interaction found in different areas of management and plan ahead. When the organization is planning ahead, it ensures that it is implementing strategies that will enable it to stay long in the market and meet the needs of its clients. In addition, strategic management gives direction, sense of unity and direction towards the goal of the business (Lee, 2016).
Finally, strategic management usually results in higher performance of the organization. Studies indicate that organizations that implement an effective strategic management are always in a better position to improve their financial performance (Hwang & Chung, 2016). This is because, the organization has enough knowledge on the best strategies to be implemented to enable it to penetrate the market and adapt to the new change business environment.
Strategic management is also a powerful tool in the success of the organization as it allows to manage organization effectively. Strategic management should be a continuous process and should be reviewed annually to ensure that the organization understands the current business environment. Therefore, all business entities should be engaged in strategic management because it determines their success and survival in the competitive market. The strategic management approach of decision-making derives both financial and non-financial benefits. Hence, for the organization to reap the best strategic management, it is important for managers and workers to ensure that they maintain a good relationship.