Strategic management is a managerial practice that handles organizational goals. Through strategic planning, management includes developing organizational visions, objective definitions, and strategic execution. Studying management improves professional performance.
Strategic Management Meaning
The meaning of strategic management remains straightforward because it deals with directing organizational resources toward the goal. The practices of goal setting coupled with external and internal firm environment assessments, strategic review, and strategic implementation across organizational units form strategic management.
Importance of Strategic Management
Strategic management strategies assist businesses in finding direction through assessment, evaluation, and development. Thus, strategic planning is a business’s lifeblood. It can help define new business goals, create appropriate and achievable objectives, and help the organisation regain its competitive advantage.
What is the Strategic Management Process?
Strategic management involves defining and implementing an organisation’s strategy and implementation terms. It also involves analyzing a business’s current circumstances, developing a plan to achieve its goals, and executing that plan.
A company implements a constant culture of evaluation as part of its strategic management process to surpass competition. Despite how straightforward it may seem; this is a difficult process that includes developing the institution’s broad vision for its current and long-term goals
Why is the Strategic Management Process Important?
A strategic management process’s primary goal is to help organisations achieve sustainable strategic competition in the market. Utilizing the strategic management steps given below, businesses can examine their existing situation, develop and implement strategies, and then evaluate the effectiveness and success of those initiatives. Even during a slump, company development is possible with the right knowledge gained through a strategic management course. Understand why the Strategic Management Process is important:
- Helping the organization for any major decisions.
- Guiding organizations in fixing realistic and achievable goals, and aligning them with the company vision.
- Assisting the business to analyze the competitor’s actions with the help of market trends and guide then succeed in the business goal
- Preparing the business for potential challenges and helping them cope with the competition in a dynamic environment.
- Ensuring that the organizations copes with the competition in a dynamic environment and survives in an uncertain market
7 Steps of Strategic Management Process
Now you know why strategic management is so important, let’s look at the 7 essential steps in the strategic management process. The steps in the strategic management process include the following. The impact of strategic planning on the growth of a business is possible. Once you are clear on the most basic strategic management steps, you can see the impact of strategic planning on a business’s growth.
1. Goal Setting
Making a road map to assist you in achieving your vision is the central focus of the strategic management process. Therefore, you must be clear about the goals your firm has before moving forward. A vision statement is a common first step in the strategic management process for businesses. Your future goals are expressed in your vision statement. Although it differs from your company’s mission statement, which explains why it exists, both statements should guide your strategic plan.
2. Environmental Analysis
Analysis is the next important strategic management step. Knowing your existing position is absolutely necessary before defining strategy and other actions. This encompasses internal and external factors, including your location, structure, talent, and internal and external factors like your competition and market forces.
3. Strategy Formulation
Developing a strategy involves utilising readily available knowledge. This process includes noting a business’s predicted trajectory and the practical steps to meet its goals. This procedure allocates resources, sets priorities, aligns the entire organisation, and validates business objectives.
4. Strategy Implementation
Strategy implementation is setting plans into action to obtain the desired result. In essence, it’s the art of accomplishing things. Every organisation’s ability to make choices and carry out crucial procedures effectively, consistently, and efficiently determines its success.
5. Adjust and Revise
The implementation step generally constitutes the most critical phase during the entire sequence. When problems appear throughout the process implementation, you should alter your chosen method while implementing necessary correction steps to strengthen the workflow. Your project success will benefit the most from agile implementation when you properly update team members and stakeholders about all progress.
6. Complete the Job
Regular monitoring of your team members will help track project progress while verifying the necessity for extra resources to reach the goal. Providing essential information about job progress and reporting delays in team performance must be communicated to all stakeholders.
7. Review and Reflect
The last phase of strategic product planning includes retrospection on the implementation outcomes. Examine the complete implementation process as you evaluate successful and unsuccessful outcomes. Leverage the insights you have obtained to enhance your strategy development techniques across upcoming project initiatives.
Formulation of Strategic Management in Companies
Another excellent example of strategy formulation is Apple’s process for developing its legendary Macintosh computers in the 1980s. By utilizing a gap in the IT market that no one else was familiar with at the time, Apple crafted a strategy to herald a new phase with the Macintosh series. They executed their plan after research and were immensely successful.
Strategic Management Process Models
Strategic management models provide frameworks for developing and implementing organisational strategies. Here are some commonly used models.
- SWOT Analysis: The SWOT analysis examines internal organizational strengths and weaknesses and external threat and opportunity factors. The model enables organizations to detect strategic goal-impacting factors that arise both internally and externally.
- Balanced Scorecard: This presents a second fundamental framework of strategic management. Business activities align with the organizational vision and strategy through the organisation’s structural planning and management system. It enhances communication at all levels, internally and externally, while tracking organizational achievement of established strategic objectives.
- Porter’s Five Forces: This basic strategic management system evaluates industry competition dynamics to assist organizational decision-making. Organizations can determine competitive pressure levels and industry profitability through this model, which directs their strategic plans.
- PESTEL Analysis: This method analyzes external environmental factors. The model evaluates factors from political systems, economic variables, societal elements, technological innovations, and ecological trends and legal frameworks that may affect organizations. Strategic planning gains deeper comprehension from this model through its ability to analyze important influences on the strategic planning environment.
- BCG Matrix: The organization uses this strategic planning instrument to evaluate product lines and business units. Organizations can divide their assets into four categories using the tool’s analysis, which depends on the following criteria: market growth and market share positions. The model assists organizations with allocating resources.
Also Read: Exploring Different Types of Strategic Management
How does technology impact the strategic management process?
Utilizing technology as a fundamental business strategy enables you to allocate funds for disaster planning and recovery, security enhancements, and employee training. It enables you to create security plans for staff members across all levels and departments.
Strategic Management Process with Example
Example 1: Chrysler Group suffered significant losses in 2000 due to performance issues, the recession, increased costs, and invasive imports. This happened when the automaker grouped all strategy-related tasks into a single operation unit. As part of this, it established the Office of Strategy Management. This office helped administer business plans and aided business units in creating new products.
Employees and management worked together to develop the fundamental competencies to meet organizational objectives. Despite a weak domestic market, the car company successfully introduced several new cars in 2004 and achieved a $1.2 billion profit.
Example 2: To expand his limited furniture business, Alex plans to add a new product category that includes all home decor items. He is doubtful about how his brand would do because it took him years to build up his furniture company, and he was slow to recognize the drawbacks. To minimize risk this time, he performed a SWOT (Strengths, Weaknesses, Opportunities, and Threats) study for strategic management.
He identifies the advantages and disadvantages of doing business and assesses possible opportunities and dangers based on the present market trend. As a result, he plans and strategies procedures, from manufacturing to advertising, making sure to allocate the proper resources to the appropriate locations.
Also Read: Strategic Management Concepts
Conclusion
Strategic management is essential for organizations to achieve long-term success by setting clear goals, analyzing internal and external factors, and formulating effective strategies. It helps businesses adapt to changing environments, optimize resources, and gain a competitive edge. A well-implemented strategic management process ensures sustainable growth, innovation, and resilience in a dynamic market. Explore the Integrated Program in Finance and Financial Technologies, in collaboration with MIT Open Learning, to gain the expertise needed for strategic decision-making.