Strategic management is simply a set of managerial decisions and actions that determines the long-run performance of the organization. Today in this article, we have covered topics such as what is strategic management and its Nature, Scope, and Importance.
Strategic Management includes all types of environmental scanning (both external and internal), strategy formulation and long-term planning, strategy implementation, and evaluation and control.
The study of Strategic Management emphasizes the monitoring and evaluating of external opportunities and threats in light of the organization’s strengths and weaknesses.
What is Strategic Management?
Strategic Management is an emerging discipline and is a study of the functions and responsibilities of senior management or Top level management.
Definition of Strategic Mgmt
Strategic Management is defined in various ways by different authors that are as follows;
Strategic management is the art and science of formulating, implementing, and evaluating cross-functional decisions that enable the company to achieve its objectives. – Fred R David
Strategic management is defined as a set of managerial decisions and actions that results in the formulation of strategy and its implementation to achieve the objectives of the organization. – Channon
As this definition implies, strategic management focuses on integrating management, marketing, finance/accounting, production/operations, research and development, and computer information systems to achieve organizational success.
The term strategic mgmt in this text is used synonymously with the term strategic planning. The latter term is more often used in the business world whereas the former is often used in academia.
Sometimes the term strategic management is used to refer to strategy formulation, implementation, and evaluation with strategic planning referring only to strategy formulation.
The purpose of strategic management is to exploit and create new and different opportunities for tomorrow; long-range planning, in contrast, tries to optimize for tomorrow the trends of today.
Nature & Scope of Strategic Management
- Act as road map
- Better handling of corporate decisions
- Facilitates growth objectives and strategies
- Ensures the firm remains prepared
- Helps in best utilization of resources
- Serves as a hedge against uncertainty
- Helps to understand trends in advance
- Helps to avoid hazard response
- Provides the best possible fit
- Helps build competitive advantage and core competencies
- Draws from both intution and logic
- Prepares the firm to not face the future but even shape the future in its favour
- Seeks to influence the firms mega environments in its favour
Importance of Strategic Management
Here are the importance of strategic management:
- Establishing direction
- Aligning resources
- Achieving competitive advantage
- Managing risk
- Improving performance
- Encouraging innovation
- Enhancing communication
- Fostering accountability
- Adapting to change
- Promoting growth
Establishing Direction: Strategic Mgmt helps organizations to establish a clear direction and purpose for the organization. This includes developing a mission and vision statement, setting goals and objectives, and identifying key priorities.
Aligning Resources: Strategic Mgmt ensures that resources are allocated in a way that is consistent with the organization’s goals and objectives. This includes financial resources, human resources, and other assets.
Achieving Competitive Advantage: Strategic Mgmt helps organizations to identify and capitalize on their unique strengths, which can provide a competitive advantage over other organizations in the industry.
Managing Risk: Strategic Mgmt involves identifying potential risks and developing strategies to mitigate or avoid them. This helps organizations to minimize the impact of external factors on their operations.
Encouraging Innovation: Strategic Mgmt encourages organizations to be innovative and take risks in order to stay ahead of the competition. This includes developing new products, services, or processes.
Improving Performance: Strategic Mgmt helps organizations to improve their overall performance by establishing clear goals and objectives, aligning resources, and implementing effective strategies.
Enhancing Communication: Strategic Mgmt encourages communication and collaboration across all levels of the organization. This helps to ensure that everyone is working towards the same goals and objectives.
Fostering accountability: Strategic Mgmt helps to establish accountability for results and ensures that individuals and teams are responsible for achieving their objectives.
Adapting to Change: Strategic Mgmt helps organizations to adapt to changes in their environment, including changes in technology, customer preferences, and market conditions.
Promoting Growth: Strategic Mgmt helps organizations to identify opportunities for growth and to develop strategies to pursue them. This can include expanding into new markets, developing new products or services, or acquiring other companies.
Also Read: Steps in Planning Process
Types of Strategie in SM
There are three types of strategies on the basis of level.
- Corporate Level Strategy
- Business Level Strategy
- Functional Level Strategy
Corporate-level strategy: This type of strategy focuses on the overall direction of the organization, including decisions about diversification, mergers and acquisitions, and resource allocation.
Business-level strategy: This type of strategy focuses on how the organization will compete in a particular industry or market segment. It involves decisions about pricing, marketing, and product development.
Functional-level strategy: This type of strategy focuses on how each functional area of the organization (such as marketing, finance, or operations) will contribute to the overall goals and objectives of the organization.
Few Other Startegies are as follows;
- Integrated Strategies (Vertical, Horizontal)
- Intensive Strategy (Market Penetration and Product Development)
- Diversification Strategies (Related, and Unrelated)
- Defensive Strategies (Joint Venture, Divestiture, Liquidation)
- Competitive Strategy
- Growth Strategy
- Innovation Strategy
- Turnaround Strategy
- Cost Leadership Strategy
- Differentiation Strategy
- Focus Strategy