Without strategic management, business decision would be made only within each of the four functional department. And, they would be focused on external constraints affecting the business.
Strategic management allows for making ‘cross-functional decisions’ in a firm. It brings together decision that have an impact on all functional departments, not just one of them.
Hence, strategic management deals with those decisions that determine the long-term direction of the entire business organization.
What is strategic management?
Strategic management collects ideas from four business functions to analyze, develop and evaluate future strategies for various business situations.
It is setting long-term goals and implementing cross-functional decisions that should enable the entire business to reach these goals in the future.
And to do so, strategic management needs to implement and manage major changes as the business is going to go through. The job for strategic managers is to implement this strategic change to ensure that the future direction of an organization is successful. Specifically, get rid of the old reality, identify several choices, put resulting strategies into action to make it happen and let the new reality to emerge.
It also considers the company’s past, present and future in the wider market context as well as comes up with specific strategies that relate directly to particular business department to maintain the overall effectiveness of the entire firm.
Why is strategic management important?
There are several reasons why strategic management is important.
Firstly, it generates the knowledge where the business is now and where the business is going to provide a clear sense of overall direction to the work of the whole organization. It examines the importance of having clear and well-defined aims and objectives to make business decision appropriate and effective.
Secondly, making key strategic decisions for a new direction of a business about the products and markets makes all departments work together. Any cross-functional decisions must involve inputs from finance, marketing, Human Resources (HR) and operations.
Thirdly, changing business strategy is rather very expensive, therefore ample resources must be provided across the entire business organization. These resources should be sufficient in quantities and made available at the right time to allow new plans to work.
Finally, strategic management often involves managing major changes as the business is going to go through. The job for business managers is to implement strategic change – scrap the old reality, identify choices, put resulting strategies into action, let the new reality to emerge – to ensure that the future direction of an organization is successful.
The outcome of the new strategy will be thoroughly measured against the original objectives set for it. Whilst lessons will be learned throughout the process from both failed strategies and successful strategies.
Why does strategic management include?
Making the new reality happen, requires business managers to use strategic thinking along with analytical tools. To manage the long-term activities of the entire business and implement new strategy to achieve its objectives, several actions in the strategic management process will be necessary.
- Strategic Analysis. Analyzing where the business is now, and where it aims to be in the future. Strategic Analysis involves looking at where the business by analyzing its internal and external situation.
- Strategic Choice. Choosing the option to get there from previously identified opportunities. After the business has identified its current position on the market, the business must examine current market opportunities and threats to be able to plan for the future.
- Strategic Implementation. After deciding on the future direction of the business, its vision and mission, aims and objectives, the business must now put strategies into action.
The aforementioned aspects of strategic management make sure the business is able to plan for the future, respond logically to the changing business environment and make effective long-term decisions based on clear business objectives.
Key stages of strategic management
The process of strategic management includes several stages such as:
- Mission and objectives. Setting the company’s new mission statement and business objectives. These will most likely be new the business is undergoing a significant change of direction.
- Analyzing strategically. Assessing the current position of the business in relation to its external environment including markets and competitors.
- Choosing strategically. Making important long-term decisions that will push the business organization towards the pre-set objectives.
- Implementing strategically. Integrating and coordinating all the activities of different functional areas of the business. Allocating sufficient resources to put strategic decisions into effect.
- Control and evaluation. Evaluating success by judging the overall performance of the business organization and its progress towards objectives.
At the final stage of strategic management, developing a change culture is crucial. Implementing strategies to bring the business where it wants to be in the future by achieving objectives requires planning for and managing change. Business managers should be looking closely at the importance of leading, managing and implementing change successfully in any given situation.
To sum up, strategic management considers both the company’s past, present and future situation in the wider market context. It shall come up with specific strategies that relate directly to particular business department to maintain the overall effectiveness of the entire business organization.
