What Is Strategic Management and Why Is It Important?
By Indeed Editorial Team
Updated 11 October 2022 | Published 20 May 2021
Updated 11 October 2022
Published 20 May 2021
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
As change is inevitable, companies need to reassess their strategic management to ensure that they remain on a good financial track. Any company that has clear long-term goals will find it easy to set its direction, consolidate efforts and gain a competitive advantage. By applying strategic management, companies can not only endure challenges, but they will also flourish.
In this article, we explain what strategic management is and how it works to enhance the success of an organisation.
What is strategic management?
Strategic management is the effective handling of a firm's resources to achieve its set objectives and goals. It involves action plans that ensure continued performance and thriving progression. A strategic management process can help guide the decisions and actions of senior executives within an organisation.
You can also think of it as the various decisions and actions that a manager takes to affect the company's performance. Such a manager needs to know everything about the company's general and competitive business environment to make proper decisions. They can use this information to predict, plan and put contingencies to enhance organisational success.
Strategic management can also combine strategic planning with strategic thinking. Strategic planning refers to sorting out company objectives and identifying the achievable ones. Strategic thinking involves the identification of the company's needs to ensure that it achieves the objectives identified through strategic planning.
Functions of strategic management
Strategic management is practical for many companies regardless of their size or industry. Some key functions that it plays include:
Developing the company strategy and stating its vision
Defining the mission and vision of a company helps to offer clarity on why it was established. Developing a strategy helps to clarify the specific actions necessary to chart out the company's future growth.
Identifying markets and products
A company needs to remain consistently innovative to keep its market share and competitive edge. Strategic management helps to review uncharted territories in terms of geographical markets and products or services. The process can assess their viability and give feedback on whether to exploit them.
Affirming the organisation's brand
People normally relate to the position and value that a particular brand has. The process of strategic management upholds, sustains and reinforces brand positioning.
Aligning across departments or businesses
Strategic management considers all business departments to ensure that none are isolated. They all have a part to play in achieving the company's goals and purpose.
Course correction and planning
Companies must keep changing their plans to ensure that they align both promises and deliverables to the market. Strategic management helps to identify the business processes that are lagging and in correcting them.
How does strategic management work?
Strategic management can either be descriptive or prescriptive. Descriptive strategic management involves employing strategies when the need arises. Prescriptive strategic management involves developing strategies before an organisational need arises. The two strategic management methods make use of management practices and theory.
Senior executives in an organisation roll out strategies. However, ideas, objectives or organisational problems can come from any employee. There are companies that outsource or employ strategists to do strategic planning and thinking for continual organisational success.
Strategic management works by following these four steps:
Strategic management starts with strategic analysis or intent. This involves identifying the company objectives and making them a point of reference when evaluating progress and performance. You should take insights from many stakeholders to know what works and what doesn't. At this point that you should conduct a SWOT analysis. This involves the identification of the company's Strengths, Weaknesses, Opportunities and Threats.
The organisation needs to have a specific, measurable and attainable direction as opposed to a broad path. This allows the company to outline its primary focus, for example, profitability, market leadership or shareholder wealth.
Create an action plan to help you attain your objectives. Make clear, focused steps that directly connect to your aim. In addition, come up with implementation guidelines that everyone can understand. You should also think about coming up with an alternative approach for each of your strategic steps, to ensure that economic and business situations are fluid.
Ensure to implement all steps laid out in the strategic plan. This is the action stage, and you ought to verify that it aligns with the current business structure. Install a new structure before starting your strategic management implementation if the current one does not align.
You also need to secure funding or other resources before you begin the implementation process. Confirm with all the stakeholders to ensure that they are aware of their responsibilities and that they implement them to enhance maximum efficiency.
4. Evaluation and control
You can use the goals set at the beginning of the strategic management process as measurement parameters. This means that your progress depends on how your results match up to your initial plan. Conduct performance measurements and consistently analyse internal and external problems, before identifying and making any necessary corrective actions.
When you monitor your internal and external problems, you may also gain the insight you need to counter any shifts in your business environment. Take corrective action if you discover that the strategy is not steering the organisation forward. If the corrective steps fail, redo the strategic management process. Ensure to store any data you gain during this stage, as it could be useful in developing future strategies.
Benefits of strategic management
A strategic management plan is like your company's game plan. It has the following major benefits:
Achieving organisational goals
Strategic management can help an organisation perform efficiently and establish manageable growth. It also charts the path that a company ought to follow and outlines realistic goals and objectives that align with the established mission and vision. The strategic plan acts as a solid foundation upon which a company can thrive.
Gaining a competitive advantage
The proactive nature of strategic management makes companies have an awareness of the future and make the necessary changes. This allows them to adapt to the changing market by avoiding unfavourable scenarios and taking advantage of potential opportunities. This ensures that the organisation always stays ahead of the competition.
Enhancing a cohesive organisation
Strategic management sets forth a culture of goal implementation and communication within the entire company. This results in cohesiveness all over, as all employees understand each other and work in unison to achieve the set goals.
Promoting sustainable growth
Efficiency in organisational performance is one consequence of strategic management. Such efficiency fuels manageable growth and the company solidifies its foothold in the current market while conquering new ones.
Ensuring increased managerial awareness
Strategic management implies that managers ought to keep looking forward. They should constantly evaluate the future of the company, which makes them have a better understanding of the prevailing problems and trends. They can then employ strategic planning and thinking to get ready to face the upcoming challenges.
Example of strategic management in action
Here's an example of a clothing company known as Bella's. It wants to introduce a new line of suits. They decide to employ strategic management to safeguard the smoothness, consistency and efficiency of the product release in all their retail stores.
Bella's has experienced marketing and shipping cost issues in its previous product releases across multiple stores. They opt to run a SWOT analysis before embarking on their current product release. An evaluation process can help reveal the strengths, weaknesses, opportunities or threats to your business.
Bella's has used its SWOT analysis to develop a strategic plan for the release of their new suits line. The plan allows for the provision of consistent digital and physical marketing to all stores. The plan also includes sending a message to each store to explain the shipping rate and how to apply it correctly. There is also the creation of a new internal communication system to allow stores to share their challenges and success stories.
The marketing team makes the marketing material available to all stores a month before the release. Every store receives similar instructions regarding the effective implementation of the marketing aspects. Store managers get training on how to use the new messaging system two weeks before the release. The trainers answer all questions and ensure that all managers set up the messaging system on their phones and office computers. Store employees receive training on the proper application of shipping rates to a sale one week prior to the launch.
Bella's reviews their suit release one month after they started selling them. They find that the marketing plan attracted customers to stores that were closest to them to fit the suits. Many managers did not like to use their phones while talking to customers, and this led to the under-utilisation of the messaging system. The shipping costs offered no challenges during this product launch. The strategic managers store this data to use during the next product release.
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