In this blog, we will learn in detail about Strategic management.
Table of Contents
2. Features of Strategic Management
3. Process of Strategic Management
4. Tool’s of Strategic Management
5. Importance of Strategic Management
Strategic management is the systematic and continuous process of planning, monitoring, analyzing as well as implementing the strategy. It is done for achieving overall organizational goals and objective.
Management strategies are made particularly by the top management of an organization. It is done in order to achieve organizations objectives and goals in a systematic manner.
Features of Strategic Management
Given below are the following features of S.M.:
- Continuous process: It is particularly a continuous process. Because it continuous with each and every step of process. When one strategy ends, it gives rise to new strategy for further implementation of activities.
- Goal oriented: Strategic management is obviously a goal oriented process. It makes all the strategies and implement them for achieving the overall goal of an organization.
- Drives innovation: Strategy development is of course not easy. It not only drives innovation for approaching problems from various angles but also solves them in an efficient way.
- Pervasive function: Strategic management is also a pervasive function. Strategies are formulated basically for entire business. It is further implemented in each and every level of an organization for efficient working.
- Primary process: Strategic management is basically the primary process in all business. Strategy development is the initial stage which should be developed before any other activities in the organization.
- Supports decision-making: Strategic management also facilitates decision-making in the organization. In fact, strategies act as a guidance for making accurate decisions.
Process of Strategic Management
Given below are the following process of S.M.:
Steps for S.M. are:
- Goal Setting
Firstly, we have to set a particular goal. Because goal setting is the first step of strategic management.
Before formulating any activity or process, the management has to firstly decide what they want to achieve.
They have to basically set a fixed goal which they want to achieve in future.
- Environment Scanning
Secondly, we have to do environmental scanning.
After setting a particular fixed goal the further next step comes is environment scanning.
In environment scanning, all the internal as well as external factors influencing organization are analyzed.
Strength and weaknesses are the internal factors which are basically analyzed in environment scanning.
And opportunities and threats are the external factors to be analyzed particularly in environment scanning.
- Strategy Formulation
Thirdly, we have to formulate a strategy.
After environment scanning next step comes up is strategy formulation. In this step, the manager have to formulate strategies particularly for achieving the goal of an organizations.
Managers can make many further strategies. After making strategies, they have to select the best strategy for their purpose.
- Strategy Implementation
Fourthly, here comes strategy implementation.
In strategy implementation, the manager implements the strategy in the overall organization.
It includes managing human resources, distribution of resources, decision making as well as organization structure.
- Strategy Evaluation and Control
Now, finally, here comes strategy evaluation and control.
Strategy evaluation and control is the last step of strategic management.
In this process, the manager evaluates the efficiency as well as effectiveness of the strategy, which is implemented in the overall organization.
Meanwhile, it ensures that organizational strategy and implementation must meets the objectives of an organization.
Tool’s For Strategic Management
Given below are the following tool’s that are used for S.M.:
Porter’s 5 Forces
Michael Porter have given 5 forces as a tool for strategic management. This 5 forces are basically called Porter’s 5 forces.
Porter’s five forces model is the tool that uses five forces of the industry for determining the profitability level of industry as well as the competition of an industry.
These 5 forces are given below:
- Competition in the Industry: Firstly, competition in the industry tells us how competitive an industry is. It also tell us how much profitable is the industry. As we know, there are many industries in market with lots of competition. Thus, each industry must know how much competition it has to face in the market and how much profit is earned by each of the industry.
- Threat of new entrants: Secondly, threat of new entrants. This force specifically determine the difficulty level for the new entrants. If there is a profitable industry with few barriers for new entrants then, the competition will increase and the profit level will fall. Therefore, the existing firms must create high barriers for the new entrants in order to decrease competition.
- Bargaining power of suppliers: Thirdly, bargaining power of suppliers. The bargaining power of supplier directly effects the overall sell of products. In fact, strong bargaining power helps supplier to sell its low quality products at high prices which results in profit to the supplier.
- Bargaining power of customers: Fourthly, bargaining power of customers. In fact, strong bargaining power of buyer leads to purchase high quality products at lower prices which results in loss of supplier and vice-versa.
- Threats to substitute products: When the buyer finds a substitute product with high quality at lower price then the buyer switch to that substitute product. This leads to the loss for higher price seller.
Generally, it stands for Strength, Weakness, Opportunity and Threat.
It helps business specifically by describing what they are doing right as well as what all changes are required to make in the organization.
It basically analyses all the four ( strength, weakness, opportunity and threat) factors. And it also tells the favorable and harmful factors for the achievement of goals.
Value Chain Analysis
Value chain analysis is the tool that analyze the activities of the firm and opportunities for creating a competitive advantage for itself.
It helps firm by telling it the values which a firm can add in its product for selling its product and for gaining profit.
VRIO stands for Value, Rareness, Imitability and Organization analysis.
It is the technique for the evaluation of resources of an organization as well as its all the competitive advantages. This analysis helps the firms for making efficient business decisions.
It stands for Political, Economic, Social and Technological analysis.
These analysis basically analyze the external factors that influence the organizational operation for becoming more competitive in the market.
It analyze all the macro-factors that can influence the business now as well as in future.
Importance of Strategic Management
Strategic management helps the firms for utilizing limited resources in an efficient way. It gives us the strategies through which we can do maximum utilization of resources.
Strength and weaknesses
It helps the firm to know its strength and weaknesses. It also gives measures for increasing firms strength and for reducing its weaknesses.
A well defined strategy helps the firm for achieving its future goals and objective in an efficient way. Strategic management makes strategy as per the future objectives of the firm in order to achieve firms objective without any problem.
Solution of multiple problems
A good strategy detects all the future problems which can be faced by the firm. And it helps to solve this problems without any hurdle. A systematic strategy avoids unnecessary problems in the operation of various activities.
Operating successfully in dynamic environment
Strategic management helps the organizations to operate all its operations successfully in the dynamic environment of market.
Strategic management is very effective for the firms for running their enterprise successfully in the competitive market.
Strategy helps to avoid unnecessary problems and hurdles and direct all the employ to work in a systematic way which leads the firm towards success.
Hence, every firm should make a strategy before formulating any other operation in the organization.
(Ans.) Strategies fails mainly because of lack of monitoring and controlling; inaccurate and wrong time management; missing of effective planning and lose controlling system.
(Ans.) One can become a strategic management manager by acquiring a bachelor’s degree in business, finance and other related fields and must acquire an entry-level position in a company of the industry in which he/she wish to work to gain experience.
(Ans.) Strategic management helps small organizations to achieve the goals they want, by providing techniques and tools that helps to implement the strategy in a efficient way for increasing profits and growth of the organizations.
(Ans.) Strategic management system is the computer-based performance management tool which is designed to track the performance and mission objectives of both classified and unclassified networks of the government.