Definition & Introduction
Strategic management is the procedure where an organization sets goals and objectives and starts planning and implementing the planning which helps to achieve these goals and objectives. This procedure is ever-changing which changes with the growth of the organizational goals and objectives. Businesses get involved in strategic management to cope with the technological advancements and globalization.
The Core of Strategic Management Concept
The central focal point or core of the concept of strategic management procedure is setting goals, developing a mission statement, organizational values, and objectives. Organizations or companies chase for strategic opportunities with the direction got from their set goals, the mission statements, values, and objectives. Goal setting helps managers make strategic decisions regarding achieving sales targets and generating higher revenue. Organizations develop plans and implement those plans to keep pace with the increased competition and globalization of the modern business world through goal setting.
Basic Elements of Strategic Management
The first step in strategic management procedure is goal setting. After goal setting, strategic management includes four basic elements:
- Environmental Scanning
- Strategy Formulation
- Strategy Implementation and
- Evaluation and control
Environmental scanning includes the comparison of the threats and opportunities of the organization in the external business environment. Environmental scanning can be affected by factors like government rules and regulations, the economy, social changes, changes in customer preferences, technological advancement, competition and other environmental factors. At this stage, a SWOT (i.e. Strengths, Weaknesses, Opportunities, and Threats) analysis is performed to contrast the internal assets and flaws of the trade with the external prospects and dangers.
Strategy formulation is the generation of long-term plans for the proper management of environmental openings and fears considering the fortes and faintness of the business or the company. It consists of defining the mission, attainable objectives, forming strategies and setting policies.
Mission: An organization’s purpose or the reason for its survival is called mission. It mentions how it is serving the society. An ideal mission statement specifies the unique purpose that differs the company from other similar companies and defines the scope of its functions in the form of the products and services served to the market.
Objectives: The outcomes of the planned functions are called objectives. Objectives mention what is to be attained by when. The attainment of the objectives should lead to the fulfillment of the company’s mission.
Strategies: A strategy is a broad master plan expressing how a company will accomplish its mission and objectives, maximizing competitive advantages and minimizing competitive disadvantages. Generally, a company or business takes into consideration three kinds of strategy: corporate, business and functional.
Policies: A policy is a comprehensive guideline for making decisions linking the formation and implementation of a strategy. Companies set policies to ensure that its employees’ decisions and actions support the company’s mission, its objectives, and strategies.
Strategy implementation is taking action in order to attain the goals of the organization. It requires organizing all the available and necessary resources to put the strategy into action. The higher management will pass the strategy to the managers and they will communicate the roles and responsibilities of their team members to implement the strategy. There are contributions of different members of different departments in the implementation of a strategy. A perfect coordination and cooperation between the management and other departments are absolutely necessary to implement a strategy successfully.
Evaluation and control:
The fourth and final basic element of the strategic management is evaluation and control. It requires an evaluation of the strategy to ascertain whether the actual outcome matches the expected outcome of the organizational goals. At this stage, the organization decides which area of planning should be evaluated and the method of evaluation to be used and after the evaluation makes a comparison between the expected result and the existing result. Through this evaluation, the company can decide to take different corrective actions to control the shortcomings (if any) and help the strategy to meet the desired organizational goals and objectives. For example, if a company fails to achieve the desired sales target, it can take many corrective actions such as providing discounts, adding extra attractive features to the product or service, giving attractive gifts with the product or service, etc.
Managers should have a complete understanding of strategic management to set the organizational goals properly and develop and implement effective strategies to achieve those goals increasing profitability and competitive advantage of the business or organization.