Strategic management is both a field of knowledge and specific practical activities. This includes general principles and methods, as well as specific techniques. The complexity of the potential of the company makes strategic management different compared to traditional approaches and methods of management.
The strategic dimension in the company has the following meaning:
- Includes a comprehensive range of business organization that is, all components arising in cause-effect relationships,
- Take into account the relations of company to the competitive environment (industry, domain)
- Considers the role of goals of industry and sector.
- Universal, since it relates to the resources, competitors, objectives and functions.
Planning and decision process that starts by establishing mission and goals, SWOT analysis, strengths and weaknesses, strategy realization and control in changing environment in a long-run perspective. Strategic management is a total system perspective reflecting organisation's ability to cope the demands by external and internal forces and go in with functioning of the organisation to allocate resources.
Genesis of strategic management
- H.I. Ansoff (1965, 1979) - an analytical approach to planning in strategic management,
- RL Ackoff (1970) - developed optimization account and synthesis of strategic planning,
- B. Henderson (1964) - the founder of the consulting firm Boston Consulting Group (BCG), developed research instruments such as the experience curve, growth / market share matrix (called BCG matrix), model of competition and the concept of customer retention,
- ME Porter (1980, 1982, 1990), introduced the concept of industry analysis, showcased a client role, recognizing it as the main factor determining the strategies of the company and developed the concept of international competition,
- T. Peters and R. Waterman jr. (1982), who pointed out sources of competitive advantage,
- G. Hamel and CK Prahalad (1990), who advocated a return to classical principles of specialization and staff, indicating that core competencies are the key factor for competitive advantage,
- H. Mintzberg (1991), who proposed a 5P model, which is a kind of alternative to the analytical approach,
Steps of the strategic management process
- Mission and vision and goal setting - Every company must have a vision of future being. Mission is a purpose of organization's existing and values that it will represent on the way to archive vision. By setting goals and archiving them managers get closer to organization's vision.
- Analyzing opportunities and threats in environment - It all starts with analyzing the industry and market. Next step is to examine competition and society. Afterwards organisation should analyze human resources, their needs and problems. At the end look for potential innovations.
- Strengths and weaknesses - First of all organizations have to have financial controlling department to examine income statement, know the outlay and maybe cut some unnecessary expenses, then analyze company's structure, all levels of management and employees to focus on how to improve their work. Another important thing is to examine organization's: position on the market, production process, information systems.
- SWOT analysis - is a comparison of strengths that are helpful and weaknesses that are harmful in internal origin to opportunities that are helpful and threats that are harmful in external origin that helps executives in formulating a strategy.
- Implementation of strategy - strategies must be implemented under control of managers. The strategy must reflect in managers decisions and must match organization's environment.Implementation process changes the organization's structure, technology, human resources, information and reward system, culture and leadership style. In strategy implementation change starts with the leader.
- Strategic control system - helps managers to evaluate organization's progress. That system also includes monitoring finances and establishes limits.
Strategic management results in financial and non-financial. If it is effective it can bring organization's benefits and superior performance.
Advantages of Strategic management
A strategic management approach has a number of advantages for businesses. These include:
- Setting a clear vision and direction: Strategic management helps organizations to set a clear vision and direction for their operations, ensuring that everything is aligned to achieve the organization's objectives.
- Improved decision making: Strategic management allows organizations to make decisions based on data and facts, rather than guesswork. This helps organizations to make better decisions that are in line with their goals.
- Improved efficiency: Strategic management can help organizations to identify areas of inefficiency and develop strategies to improve them. This can help to reduce costs and improve organizational performance.
- Improved communication: Strategic management encourages open communication among all levels of the organization, ensuring that everyone is aware of the organization's objectives and strategies.
- Improved alignment: Strategic management ensures that all elements of the organization are aligned to achieve the same goals. This can help to reduce conflict and improve cooperation and collaboration among different departments.
Limitations of Strategic management
Strategic management is an important tool for creating value in an organization and achieving long-term success. However, there are several limitations to strategic management that should be taken into consideration. These include:
- Lack of flexibility: Strategic management requires organizations to develop a plan and stick to it, which can make it difficult to respond to changes in the external environment.
- Cost: Strategic management may require a significant financial investment, which can be a barrier for smaller organizations.
- Complexity: Strategic management involves a lot of complex decision-making and analysis, which can be difficult for some organizations.
- Lack of control: Strategic management is a long-term process and it can be difficult to monitor the results of the strategy.
- Human resources: Strategic management requires the right personnel to be in place to successfully implement the strategy.
- Time: Strategic management requires time and effort to develop and implement, which can be difficult for some organizations.
- Introduction: Strategic management is a field of knowledge and practical activity that involves general principles and methods, as well as specific techniques. There are other approaches related to strategic management that can be used to aid in the decision-making and implementation process.
- Business Model Analysis: This approach involves looking at the company’s existing business model and evaluating it for effectiveness and efficiency. This helps to identify ways in which the company can improve its operations and create more value.
- SWOT Analysis: This approach involves looking at the company’s Strengths, Weaknesses, Opportunities, and Threats. This helps to identify the company’s competitive advantages, areas for improvement, and potential threats that could affect the business.
- Porter’s Five Forces Analysis: This approach looks at the external environment and examines the forces that can affect the company’s success, such as competition, customers, suppliers, and potential entrants into the market.
- Balanced Scorecard: This approach involves creating a scorecard based on the company’s goals and objectives. This scorecard helps to track the company’s performance over time and identify areas for improvement.
- Scenario Planning: This approach involves creating a variety of possible future scenarios and planning for them. This helps to prepare the company for potential future events and provides a way to make decisions in a more strategic manner.
In summary, strategic management involves a variety of approaches and techniques that can be used to help the company make better decisions and create more value. These approaches include business model analysis, SWOT analysis, Porter’s Five Forces analysis, the balanced scorecard, and scenario planning.
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- Freeman, R. E. (2010). Strategic management: A stakeholder approach. Cambridge University Press.
- Hill, C., Jones, G., & Schilling, M. (2014). Strategic management: theory: an integrated approach. Cengage Learning.
- Mintzberg, H. (1990). The design school: reconsidering the basic premises of strategic management. Strategic management journal, 11(3), 171-195.
- Pearce, J. A., Robinson, R. B., & Subramanian, R. (2000). Strategic management: Formulation, implementation, and control. Columbus, OH: Irwin/McGraw-Hill.
- Porter, M. E. (1981). The contributions of industrial organization to strategic management. Academy of management review, 6(4), 609-620.
Author: Monika Stempień