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Strategic management is the process of defining the purpose of the company, developing policies, planning to achieve the goals, and then securing the resources required to carry out the plans. The highest level of managerial responsibilities for any organization's chief executive officer to carry out in conjunction with the executive team is strategic planning (Ethiraj, Gambardella & Helfat 2191-2192). The general direction of the entire organization is thus provided by strategic management. In other words, strategic management refers to a collection of actions and choices that lead to the formulation and application of strategies that are intended to help a business achieve its goals. Therefore, strategic management is a continuous approach that demands the organization to match its operation with the changing environment in a way that it is beneficial to its operation. Strategic management is a significant aspect for any organization to survive in the competitive market. This paper will discuss various aspects of strategic management and its effects to any organization in the market.
Elements of Strategic Management
Organizations are required to choose a certain direction in which it will follow. Strategic management is composed of three main elements which include strategic analysis, strategic choice, and strategy implementation.
The main purpose of the strategic analysis is to focus on understanding the organizational strategic position. This element is more focused on changes occurring in the current environment and the possible effect of such changes to the entire operation of the organization. The strategic analysis mainly focuses on creating a view of the factors that can have impact in both future and present operation of the organization (Toor 37).
If the strategic management is organized well, it can easily help in choosing the right strategy to use. To achieve this, the three factors discussed below should be considered especially in strategic analysis. First, the environment is an important factor to consider. It would be difficult for any organization to survive without interacting with complex economic, political, commercial, social, cultural, and technological environment. However, these factors may sometimes appear more complex to certain organization compared to others in the same industry. Therefore, it is important for different organizations to have a clear understanding of the impacts when faced with environmental changes in order to formulate the most effective strategic plan. The second factor is resources available in the organization, which are considered to have internal influence. However, it is important to consider the weakness and strengths when discussing about the strategic capability of the organization. An organization can identify its weakness and strength by considering the organization resources such as management, products, physical plants, and its financial structure. Finally, the last factor is the prospects of the various stakeholders in the growth of the organizations. The assumptions and the beliefs of the stakeholders have great influence on the culture of the organization. More so, the stakeholders can also have high influence in decision making process and the impact depends on the respective authoritative powers of the stakeholders. The influence that tends to dominate depends management that has the more power.
After completing the strategic analysis, it is now ready to make a strategic choice. Strategic analysis usually creates the foundation for strategic choice. Strategic choice refer to the behavior of choosing the most effective course of action and this depends on the evaluation of the available strategic options. There are three parts of strategic choice which include the strategic options, evaluation of the options, and the selection of strategy. In the process of strategic choice, there may be over representation of strategic options, thus it’s important to make sure that the selected option is excellent. The second step of strategic choice is the evaluation of strategic options. Assessment of the strategic option may be carried out during strategic analysis in order to evaluate their relative merits. Before an organization decide to follow a certain option, it might ask several questions. For example, the organization might consider whether the option is built upon strengths or if the option is one that takes advantage of the opportunity. With such questions, the organization will overcome weaknesses while minimizing threats that might face the business. By focusing on these factors, this is referred to as searching for the suitability of the strategy. This is done by the organization through consideration of various questions during evaluation of strategic options. The third part involves the choosing a strategy that the organization will benefit from. In some cases, the selected choice is usually a matter of the final decision from the management. In addition, during the process of strategic choice, the implemented strategy is usually influenced by the values of the manager and other workers with certain interest in the organization.
This is the third and the main element of strategic management which is focus on strategy translation into action. There is need of proper deployment of organization’s available resources in the implementation of the strategy. In addition, it is important to carefully handle the possible changes in the structure of the organization and also have a careful planning. There are different parts which are included in the strategy implementation. The initial part is the planning and allocation of resources. Strategy implementation involves resource planning which involves the logistic of implementation. The second part involves organization’s design and structural outlay. There are several changes that should be carried out during strategy implementation. For instance, there is the need of the organization to adapt a system that can be used to manage its operation. The third part it the management for strategic change. If there is the implementation of the strategy, it will demand that the strategic changes be managed (Yasir, Majid and Tabassum 1878-1882). On the other hand, action from the managers is needed as it will determine how the change process will be achieved and the mechanism that will be applied. The mechanism adapted by the managers will affect the redesign of the organization, and alter the daily operations and organization cultural aspects (Szymaniec-Mlicka n.p).
Therefore, the three elements of strategic management are in one way or the other interrelated. There must be an analysis of options in order to decide on the strategy that will be most successful for the organization. The strategic implementation is a great determinant of the strategic choice and it is done after considering different strategies in order to arrive at the most suitable that will be implemented by the organization. This will ensure the achievement of the expected goal.
The Phases of the Strategic Management
An organization evolves through these four major stages of strategic management.
Phase.1-Basic Financial Planning
The project is analyzed through little information from the organization. The sales from the organization provide little information about environmental protection. The time horizon is usually one year. Such operational planning is not very accurate and it is quite time-consuming.
Phase.2- Forecast-Based Planning
Additional to the internal information, the manager gathers the necessary data from environment to extrapolate the progress of development in the last five years of the future. In this phase, it appears to be more time-consuming. This process is also politicized as the managers contend for large share and funds. Here, the time scope lasts for about three to five years.
Phase.3 Externally Oriented Planning
In this level, the management oversees the planning process via strategic planning. The organization makes efforts in changing markets and competition through strategic thinking. A five-year plan is developed by top management.
Phase.4 Strategic Management
A strategic plan is developed by employees at many levels of the various department an d its main purpose is to achieve the organization’s key objectives. The five years plan is achieved with collaboration of all levels of the organization.
Levels of Strategic Management
Strategy does exist in different levels of the organization. They include;
Corporate Level Strategy
This focus on the entire operation of the organization and the formulae to be used to ensure that valuable input is realized in all departments of the organization. Corporate strategy does work successfully with the three major classes of stability, expansion, and reduction of expenditure (Smith n.p). It is important for a firm to create a business strategy that include cost leadership, ensure that there is differentiation of order to attain sustainable competitive advantage which results to long-term success. On the other hand, an organization can achieve high growth and profit realization by developing a blue ocean strategy that breaks the previous value-cost trade off by pursuing both differentiation and low cost (Ethiraj, Gambardella & Helfat 2191-2192).
Business Level Strategy
This indicates how different businesses which are incorporated in the business strategy as well as compete in specific markets. Business level strategy also deals with issues related to pricing strategy, innovations, and the quality of the product. Therefore, a corporate level strategy participates of the overall organization, still, the strategic decision relates to certain strategic business unit within an organization. The business level strategy must also be maintained continually alongside the business and environment changes. It should be reviewed annually as per business planning around. A business strategy must also show progress and the achievement of the plans to date in order to help the planners to understand the changing business environment and the effective programs and projects to be implemented in the organization. In addition, there must be accurate and timely information about the corporate risk register, the major investments to date, and the risk associated with it.
This is the third level of strategy and the final operation of an organization. The approach is aimed at taking the functional areas in order to attain the goals and strategies of the organization as well as maximize its productivity.
Importance of Strategic Management in Organization
Strategic management is extremely necessary in any organization operating in the current world. If the strategic management is used effectively in an organization, it can be a very important tool that can be used in formulating strategies which can be applied in the changing of environment. Therefore, strategic management determines in the existence of the organization since the management can introduce strategies that will lead to the successful operation of the by overcoming the various barriers that many hinder smooth operation (Grossberg 24-26). In all businesses, the environment is always changing and thus, organizations need to review their strategies in order to deal with with the environmental changes. With strategic management, it will help the organization to conduct its operation smoothly in the complex environments. In order for the business to survive in such environment and increase its competitive forces in daily operations, the organization should be less bureaucratic and be more flexible. Organizations are required to operate in strategically flexible way in order to shift from dominant strategy. An organization operating in stable environment its competitive strategy will involve defining the competitive position and defending it (Yasir, Majid and Tabassum 1878-1882).
Strategic management is also important as it provides the management of the organization with an opportunity to work with all the stakeholders towards the same goals and objectives. On the other hand, the management is in a better position to understand the behavioral pattern factors resulting to environment changes, and the impact they have in the present condition and in the future (Bridoux and Stoelhorst 107-125). When all these factors are considered, it will be easier for the organization to develop business strategies through effective strategic management. Thus, strategic management is crucial for business operation as it acts as a tool for developing, executing, and evaluating the organization strategy.
Strategic management enables the organization to attain its goals with little hindrances in the current operating environment. It works collaboratively with the mission and vision of an organization. An improved and effective strategic management process enhances various strategies required in developing more complex management structures and which is also crucial for organization’s growth and survival (Smith n.p). It also helps the organization to articulate, communicate, and monitor the strategy implementation by the use of interlink system.
Strategic management helps in the success of an organization in the survival in the global market. This is achieved by integrating knowledge and experience gained from different functional areas in the organization. On the other hand, it helps the organization in understanding the complex interaction found in different areas of management and plan ahead. When the organization is undertaking major plans to be implemented in the future operation, it ensures that it is implementing strategies that will enable it to stay long in the market and meet the needs of its clients. In addition, strategic management give direction, enhance unity and strategies to be used in order to attain the goal of the business (Lee 314).
Finally, strategic management usually results in higher performance of the organization. Studies indicate that organizations that implement an effective strategic management are always in a better position to improve their financial performance (Hwang and Chung n.p). This is because, the organization has enough knowledge on the best strategies to be implemented to enable it to penetrate the competitive market and adapt to the new change business environment.
Strategic management is also a strong tool in determining the success of the organization. Strategic management should be a continuous process and one that should be reviewed annually to ensure that the organization understands the current business environment. All organization should ensure that they implement effective strategic management in their daily operation because it determines their success and survival in the competitive market. Therefore, for the organization to reap the best strategic management, it is important for managers and workers to ensure that they maintain a good relationship.
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