Strategic Management

Strategic management is critical for the effective formulation and implementation of policies to achieve an organisation’s goals and objectives. It considers the interest of stakeholders depending on resource allocation and evaluation of internal and external business environments. 

The dynamic change in the business environment requires organisations to access and update their strategies. A well-formulated strategic management process helps organisations understand their present circumstances and accordingly plan out strategies to be implemented properly, and their effectiveness can be analysed accordingly.

This article will deal with a basic introduction and fundamentals of  strategic management. It will also shed light on strategic management and how policies are developed. 

Definition of strategic management

Over the decades, many authors attempted to define strategic management. According to Teece (1990), strategic management is defined as the formulation, implementation, and evaluation of managerial actions that enhance the value of a business enterprise. 

On the other hand, Rumelt, Schendel and Teece’s (1994) definition states that strategic management is about the direction of organisations, most often, business firms. 

Strategic management is essential for senior management of a company or anyone who wants their business to succeed. Strategic management can be defined as tackling problems concerning the creation and sustainability of an edge, advantage or pursuit of a common objective.

Strategic management process

Strategic management concerns the formulation, implementation, and evaluation of decisions with different functionalities and strategies to allow organisations to establish their goals. Let us take an example to understand it better.

Company X wants to be the cheapest smartphone company in the market. In such a case, the managers and other members would try to negotiate with the suppliers to reduce the cost of production.

Hence with a strategy formulation, it is ensured that the organisation follows certain paths aligned to its strategy. Formulating strategic management is also regarded as the highest managerial activity.

The process of strategic management has five significant steps. 

1. Defining the goal

The first step is about goal setting and developing relevant strategies. This stage is about defining the short term and long term objectives and identifying the process to achieve these objectives. The next step is to personalise the process as per personnel requirements and give each member a task they can complete. 

2. Analysing the goal

The analysis stage helps configure the rest of the stages. For analysis, the managers collect relevant information and data to understand priority business requirements and prepare a vision to assist the business in growing with strategic initiatives. It also includes examining any external or internal factors that can affect the objective of strategic management. A SWOT analysis (strengths, weaknesses, threats, and opportunities) will make a path to better management of the company’s resources. A SWOT analysis provides a realistic, fact-based, data-driven assessment of an organisation’s, initiative’s, or industry’s strengths and weaknesses. The organisation must maintain the study’s accuracy by avoiding preconceived notions or grey zones and instead focusing on real-world scenarios.

3. Strategy development

After reviewing the analysis results, it is necessary to develop strategies accordingly. Managers need to make a list of existing resources and how they can use them to achieve the defined objectives. It also includes identifying any area of strategy development where the team would need external resources to facilitate successful strategy formulation and implementation.

4. Strategy implementation

In this step, the strategy developed is implemented. Everyone in the organisation must be clear about their responsibilities to participate in strategy implementation effectively. 

5. Assessment and evaluation

After developing strategies, it is important to evaluate them and take proper control measures. However, it is necessary to ensure that the risk assessment and control process starts with evaluating the KPIs. So as mentioned before in an example, company X wanted to become the cheapest smartphone maker in the market. Hence the evaluation process would include evaluating their KPI like “what has been the volume of sales per region?” or “what has been their production cost and profit per sale?” Evaluating the KPIs helps companies understand whether the strategy has been implemented. 

Conclusion 

Strategic management is planning, evaluating, monitoring, and assessing important processes for business enterprises to grow and achieve goals. Any significant or trivial change in the business environment requires organisations to re-evaluate their strategies constantly. 

Hence organisations must take proactive steps to ensure a solid strategy formulation right from the beginning.