All About Benefits of Strategic Management

Finding the goals of an organisation and the methods and measures taken to fulfil those goals is known as strategic management. There are 5 main processes involved in strategic management:

• Setting objectives

• The long term and short term objectives of the business are set. 
• The influence of various tasks of different levels of the company on the objectives is determined.

   

• Market analysis 

Data on the internal functioning of the business as well as the latest movements and rivals in the industry are collected and examined strategically.  This provides the business with the knowledge required to beat its rivals. 

• Strategy formulation

Strategies to improve the company’s status and achieve the long term goals are developed in the most cost-efficient manner.

• Strategy implementation

This involves periodic enforcement of the formulated strategy. This involves managing resources, creating systems, and preparing a structure. 

• Monitoring strategy and SWOT analysis

This involves monitoring the strategy and making sure it is implemented correctly as well as changing strategies with undesired outcomes. It includes recognising strengths, weaknesses, opportunities, and threats affecting the company by conducting a SWOT analysis.

Why is strategic management required?

Companies use the benefits of strategic management to fulfil the following requirements:

1. It ensures the company is taking more proactive decisions and being less reactive.
2. It determines the roadmap for the company.
3. It helps the company to use its resources effectively by charting out a long term plan and allocating them efficiently.
4. The strengths, weaknesses, opportunities, and threats of a particular decision can be analysed.
5. The company is equipped to expect a transition and be ready to handle it.
6. The company becomes better prepared to react to changes in the industrial environment.
7. It reduces the possibilities of faults and bitter surprises.
8. It sets distinct targets and sets paths for employees, giving them a broader, bigger view of the company. 

There are both financial and non-financial benefits of strategic management.

Benefits of strategic management – Financial 

1. Improved generation of revenue

• One of the benefits of strategic management is that it gives the senior management information regarding the essential alterations required in the present operational procedures to increase revenue. 
• Strategic management assists in planning examples of strategic decisions that bring in persistent revenue gains. It provides an avenue to attract fresh investors and sustain relations with current investors.
• It also allows an organisation to observe rival strategies and change its operations and innovate new ideas to outmatch them.

1. Increasing profits

• The setting up of hierarchical organisation levels is one of the benefits of strategic management. It allows higher-ranking executives to receive feedback from the different heads of departments. 
• This feedback, in turn, allows the executives to realise the varied obstructions at each level in the company and implement strategies to increase profits. 

1. Managing solvency 

• One of the benefits of strategic management is that it allows executives to examine the balance sheet, which includes current assets, liabilities and net worth and determine if the costs can be sustained for a long time. 
• It helps the company in achieving objectives like growth and expansion by taking all the required measures to perfect the asset-debt ratio and ensure solvency. 

1. Monitoring liquidity

• Periodically observing the cash flow statements or liquidity reports to make sure that a company’s cash flow is enough to achieve its long-term goals is one of the benefits of strategic management. 
• A company can take certain timely actions that lead to monetary benefits to prevent a liquidity crisis due to delayed payments by planning for this scenario using strategic management.  

1. Prevents legal risks

• The benefits of strategic management procedures allow the companies to include policies for employees. It also allows the company to frame policies and internal controls to resolve conflicts of interest among board members and stakeholders.  

Benefits of Strategic Management – Non-Financial

1. Develops a direction for the company

• The benefits of strategic management are that it allows the company to build a sense of ambition and plots the route for the company, which includes setting pragmatic goals and targets that will assist the company in accomplishing its mission.
• It also develops the framework for ascertaining the allocation of resources and enables effective decision-making in areas such as marketing, hiring, operations and allocation of budget.

   

1. Rejuvenate human resources

• The benefits of strategic management include making strategic decisions on developing a hiring strategy which attracts the most capable professionals to ensure the company is the most competent in the industry. 
• This can include a revision of hiring processes based on comprehensive feedback from both new employees and human resources and the preparation of detailed job descriptions which attracts the right talent and take other steps that improve employee fulfilment.

   

1. Identification of issues

One of the main benefits of strategic management is the SWOT analysis which provides an elaborate assessment of the company’s strengths, weaknesses, opportunities, and threats. The company can then take necessary strategic decisions based on this assessment to improve the situation.  

1. Better Decision-Making

Strategic management allows a company to make decisions quickly. If a certain undertaking is aligned with the long term goal, decisions can be made to invest and allocate resources for this undertaking. The decision can be made quickly because it is easy to ascertain if it helps accomplish long term goals.  

1. Performing a competitor survey

Strategic management allows companies to study all the techniques used by their rivals. This enables the companies to devise their strategies which are much improved and, in turn, make the business stronger and accomplish its goals faster. 

Conclusion

Finding the goals of an organisation and the methods and measures taken to fulfil those goals is known as strategic management. The long term operations of a company are impacted by these decisions and measures.  There are 5 main processes involved in strategic management: setting objectives, market analysis,  strategy formulation, strategy implementation, strategy monitoring, and SWOT analysis. There are both financial and non-financial benefits of strategic management. It enables the company to optimise financial planning, achieve targets, monitor the financial situation and make required changes along with setting goals, recruiting the right talent,  making better decisions and making sure it is competitive in the market.