Nature of strategic management
| Nature of strategic management |
|---|
| See also |
Nature of strategic management can be described in following points:
- strategic management is based on quantitative and qualitative data
- uncertainty about the future and quality of data acquires is relatively high
- selecting management strategy is based on various methods, processes, rules and theories
- there is not one best way to develop a strategy
- management strategy should take into account deductive or empirical methods and techniques
- resources of organization is one of most important strategic issues
- people and knowledge is key success factor of business
Strategic management involves the formulation and implementation of the main goals and initiatives taken by an organization's management. Strategic management provides general direction to an enterprise. Involves also specifying the organization's objectives, developing policies and plans to achieve those objectives, and then allocating resources to implement the plans. Academics and practicing managers have developed numerous models to assist in strategic decision-making in the context of complex environments and competitive dynamics[1].
Definition
Strategy is defined as the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.
Strategic management involves the concepts:
- Of strategics planning
- Of strategics thinking
Strategic planning has analytical nature and refers to formalized procedures to produce the data and analyses used as inputs for strategic thinking.Strategic planning happens around the strategic thinking or strategy making activity[2]
Strategic management is involving two main processes:
- formulation of strategy
- implementation of strategy
Nature of Strategy
According Professor Ellen Earle-Chaffee, the main elements of strategic management are:
- Involves adapting the organization to its business environment
- Affects the entire organization by providing direction
- Involves also strategy formulation processes and implementation of the content of the strategy
- May be planned and unplanned
- Is done at levels: overall corporate strategy and individual business strategies
- Involves both conceptual and analytical thought processes.
Research up to that point covered three models of strategy:
- Linear strategy: A planned determination of goals, initiatives, and allocation of resources (It may have a long planning horizon).
- Adaptive strategy: In this model, the organization's activities and goals are primarily concerned with adaptation to the environment.
- Interpretive strategy: The aim of interpretive strategy is credibility or legitimacy in the mind of stakeholders. It places emphasis on symbols and language to influence the minds of customers[3].
Strategic Managers
Managers play a key role in the strategy-making process. They must take responsibility for formulating strategies, which the aim is to attain a competitive advantage and to putting those strategies into effect.
There are two mains types of managers:
- general managers - they are bear responsibility for the overall performance of the company
- functional managers - they are responsible for supervising a particular function, for example: a task, activity, or operation.
General managers have profit and loss responsibility for a product, a business, or the company as a whole. They are responsible for deciding how to create a competitive advantage and achieve high profitability thanks the resources and capital[4].
Examples of Nature of strategic management
- Effective Planning: Strategic management involves developing a plan of action that takes into account internal and external factors, such as customer demand, competition, market conditions, and resource constraints. This plan of action helps organizations to maximize their resources and achieve their desired goals.
- Resource Allocation: Strategic management requires organizations to allocate resources efficiently. This means that resources and budgets are allocated towards activities and initiatives that will generate the greatest returns.
- Risk Management: Strategic management involves understanding and managing risks associated with business decisions. Risk management helps to identify potential risks, develop strategies to minimize their impacts, and create contingency plans in case the risks become reality.
- Goal Setting: Strategic management involves setting realistic and achievable goals. This helps to ensure that activities are aimed towards the organization's desired outcomes.
- Organizational Alignment: Strategic management helps to ensure that all parts of an organization are working towards the same objectives. This alignment helps to ensure that resources are used in the most effective manner.
- Effective Communication: Strategic management requires an organization to effectively communicate its vision, objectives, and strategies to its stakeholders. This ensures that everyone is on the same page and working towards the same goals.
- Monitoring and Evaluation: Strategic management involves regularly monitoring and evaluating progress towards the organization's goals. This helps to ensure that goals are met and performance is improved over time.
Advantages of Nature of strategic management
Nature of strategic management is a process whereby a company defines its objectives and develops plans, actions and resources to achieve them. It involves analyzing the current state of the company and setting long-term goals to ensure success. The following are the advantages of the nature of strategic management:
- It helps to create an effective and efficient organizational structure that is tailored to the needs of the organization. It enables a company to identify the strengths and weaknesses of their organization and devise strategies to capitalize on strengths and address weaknesses.
- Strategic management improves the coordination between departments and divisions in the organization. It helps to ensure that the departments work in alignment with the goals and objectives set by the organization.
- Strategic management encourages innovation and creativity. It helps to create an environment where employees work together to come up with creative solutions to challenges.
- Strategic management helps to identify areas where the organization can cut costs and increase profits. By analyzing the financial statements and other resources available, it can help to identify cost-saving strategies that can be implemented.
- Strategic management is a continuous process that helps to ensure that the organization is constantly improving and adapting to changing conditions. It helps to ensure that the organization is prepared for the future and is able to respond to the changing environment.
Limitations of Nature of strategic management
- Strategic management is the process of managing an organization's resources to achieve its goals and objectives in an effective and efficient manner. However, there are several limitations to the nature of strategic management, including:
- Limited resources – Organizations have limited resources such as capital, labor and technology, which can make it difficult to implement strategic plans.
- Time constraints – Strategic plans must be implemented within a certain timeline, which can make it difficult to achieve desired results.
- Unpredictable environment – The external environment is constantly changing, making it difficult to predict the impact of strategic decisions.
- Ignoring stakeholders – Strategic plans often ignore stakeholders’ interests, which can lead to negative outcomes.
- Short-term focus – Organizations may focus on short-term goals instead of long-term objectives, which can limit their success.
- Poor execution – Poor execution of strategic plans can lead to failure, as the desired outcomes are not achieved.
- Poor communication – Poor communication between departments can lead to misaligned objectives, resulting in ineffective strategic decisions.
Introduction: Strategic management is a comprehensive process that involves analyzing the external and internal environment of an organization and developing strategies to achieve goals and objectives. Following are the other approaches related to Nature of strategic management:
- Contingency Theory: This approach states that the strategies must be designed based on the circumstances and conditions of the organization. A strategy that is successful in one situation may not be successful in another.
- Processual Approach: This approach emphasizes on the process of formulating and implementing a strategy. It focuses on the different phases in the process and the steps that should be followed to ensure the successful execution of the strategy.
- Environmental Approach: This approach takes into account the external environment and its influence on the strategies. It requires a keen understanding of the external environment to ensure that the strategies are in line with the external factors.
- Competitive Advantage: This approach focuses on the ways in which an organization can gain a competitive advantage over its competitors. It helps the organization to identify and use resources and capabilities that can be used to create a unique advantage.
- Strategic Leadership: This approach is concerned with the role of leadership in the formulation and implementation of strategies. It emphasizes on the importance of effective leadership for successful strategy execution.
Summary: Strategic management is a comprehensive process that involves analyzing the external and internal environment of an organization and developing strategies to achieve goals and objectives. Other approaches related to Nature of strategic management include Contingency Theory, Processual Approach, Environmental Approach, Competitive Advantage and Strategic Leadership. Each of these approaches focus on different aspects of strategic management, with the aim of helping organizations to develop successful strategies.
References
- Barney J. B. (2001) Is the resource-based “view” a useful perspective for strategic management research? Yes. Academy of Management Review, 26(1)
- Chaffee E. (1985) 'Three models of strategy’, Academy of Management Review, nr 1
- Graetz F. (2002) ‘Strategic thinking versus strategic planning: towards understanding the complementarities’ Management decision, 40(5)
- Hill C., Jones G., Schilling M. (2014).'Strategic management: theory’, Cengage Learning.
- Nag R., Hambrick D. C., Chen M.J. (2007). ‘"What is strategic management, really? Inductive derivation of a consensus definition of the field"’ Strategic Management Journal, 28 (9).
Footnotes
Author: Karolina Piotrowska
