What is Strategic Management?
Strategic Management encompasses the formulating and implementing of important goals and initiatives that are determined by senior management. This also includes planning and managing the resources available to an organisation.
What is Strategic Management?
Strategic Management encompasses the formulating and implementing of important goals and initiatives that are determined by senior management. This also includes planning and managing the resources available to an organisation.
It continuously requires the business processes and procedures to be evaluated, as well as the external factors that can influence the operations. The strategic management process is key to the decisions and initiatives that are taken by the top of the organisation. Strategic management is implemented in all fields and in companies of all sizes.
Strategic management encompasses the planning, monitoring, analysing and criticising of all matters an organisation requires in order to reach their set goal. Business environments change constantly and demand their organisation to continuously optimise their strategies. Strategic management helps organisations to criticise current situations and to determine the effectiveness of alternative strategies.
Strategic management as an independent discipline was established in the 1950’s and 1960’s. Key figures such as Peter Drucker, Alfred Chandler, Igor Ansoff and Philip Selznick have made important contributions to this development.
Before 1960, the word ‘strategy’ was only used in terms of war, not conducting business. After 1960, companies started to manage the strategic management process by implementing strategic planning jobs.
The process is more than just following a number of steps. It is a more philosophical approach to managing an organisation. An organisation’s senior management needs to first draw up a strategy and then implement it. Strategic management is most effective when everybody in the organisation is brought up to speed as to what the strategy and its implications mean to their work in particular.
Even though strategic management does not consist of merely following some steps, the process can be divided into four steps.
An environment analysis refers to the process of providing, collecting and analysing information for strategic purposes. Accurate and relevant information directly coming from a company’s internal and external environment helps senior management identify factors that affect business operations and other industry developments. Environment analysis is an ongoing activity which, through continuous evaluation, should be developed as best it can.
The second important element of the strategic management process is the developing and formulating of the strategy. Strategy development includes the process of determining what the best way forward is in order for the organisation to reach their goal. Based on a company’s general strategy, the division managers formulate both the business and functional strategies.
During the two phases mentioned above, the strategy was developed and formulated. During the third phase of the strategic management process, the strategy will be implemented. Implementation of a strategy means to implement the new or adjusted strategy. This phase includes the designing of the structure, the distributing of resources, development of the decision-making process and the managing of employees.
The fourth step is the most important one in the entire strategic management process. Some of the factors and techniques applied during this phase include the assessing of internal and external factors, the measuring of performances and taking corrective action. The evaluation of strategies ensures that both the strategy and the implementation thereof meet the organisation’s objectives.
Over the past years, management consultants and academics have introduced various frameworks and concepts related to strategic management. The arrival of these new methods and techniques reflects the simultaneously increased focus on management, competition and cost. A selection of popular and well-known methods in the field of strategic management are briefly described below.
The SWOT analysis is possibly the most widely used tool for strategic management purposes. This tool was born out of research on Harvard Business School’s corporate policy. During this research, the concept of aligning competencies with the surroundings was introduced. This framework later became known as SWOT. Read more about it here.
A company’s vision statement is about the greater ambitions they hope to achieve in the future.
The mission statement describes what the organisation must do now in order to realise the vision.
Often, the mission and vision statements are mixed up. The two should support each other whilst describing different matters. It defines how the organisation will set itself apart from other companies that operate in the same industry.
The Porter’s Five Forces model describes five different competition strengths and analyses how these are formed in each industry. This tool helps determine an industry’s strengths and weaknesses. The Five Forces analysis is often used to describe the structure of a sector in order to subsequently form a strategy.
The Boston Consulting Group’s BCG Matrix, or Product Portfolio Matrix, was designed to support senior management with their long-term strategic planning. It is now also suitable to help a company consider various growth possibilities. This model is also called the growth/share matrix.
