Strategic management is defined as the art of overseeing an organization’s resources to achieve objectives. Strategy-based management involves setting objectives through the analysis of:
- internal needs
- the business environment.
Strategy Meets Management
Strategic planning and management is a group of decisions and actions that are carefully formed and implemented to reach goals. It involves examining current and future internal and external environments. It is a continuous process that helps an organization adapt and keep up with its changing business environment in the most advantageous ways. This minimizes legal, financial and operational risks.
It answers three basic planning questions:
- where is the organization now
- where does it want to go
- how it will get there
The general concept is sometimes used to describe the specific planning activities related to:
- resource control
- technical planning
This formal management of change process provides:
- supportive structure
- a system of values
- direction for employees
It also helps management to shape policies and redefine their business mission.
Strategic management control is focused on long-term planning and forecasting. The standard time horizon is at least three years, but more companies plan five to 10 years in the future. The process of strategy driven management begins with identifying the company’s basic values and goals that are transformed into long range objectives. Next, management assesses the company’s external environment to identify risks and opportunities.
Then, management assesses the internal environment through evaluating available resources and capabilities that can be dedicated to achieve objectives. These include:
This process involves the creation of an official organizational structure that includes:
- target business units and their associated authority
- communication that they must have with each another
Finally, management agrees upon a decision-making structure to:
- allocate resource
- realize goals
- sustain values
What are the Benefits?
Strategic planning and management is essential to sustain a competitive advantage. This is what keeps the best organizations ahead of their competitors. It directly translates to better financial and industry performance. It helps management to view matters from broader perspective. This is important because finance, marketing, operational and other managers will most likely see things from their own specific angle and narrow view. This limited vision will hinder the company because it is too narrow for the whole organization to rely upon.
Strategic planning and management facilitates collaboration because functional middle managers are the people who actually implement the strategies and drive objectives on a daily basis. It improves situational awareness of both external and internal environments. It clearly identifies how to reach and sustain a competitive advantage. It help a company redefine its:
- future goals
It increases managers’ commitment to:
- achieving the objectives
- the coordination of activities
- the efficient allocation of resources
When properly implemented, strategic management helps companies integrate all functional areas of the company. It does this by facilitating communication and cooperation among employees of all levels.