Strategic management involves developing and implementing an organization’s competitive strategy to tackle the uncertainty with an integrated approach.
Although the concept of ‘strategy’ was originally developed in military administration, it has become very popular in the business world.
As in war, rapid changes. and its accompanying uncertainty is common in business organizations.
The higher the survival stake, in both the war-field and the business field, the greater is the relevance of strategy to sound management.
Strategic management is applicable to all types of organizations whether business, not-for-profit, public or private, religious or social, educational institutions, football team, cricket team, hotels and restaurants, retail shops, service organizations such as banking and insurance or utility providers, hospitals and clinics, and any organized institutions.
Strategic management has come to be known as imperative for sustaining in this age of unreason. Enhancing competitive superiority, achieving superior performance and maximizing organizational productivity requires strategic actions on the, part of the organizations.
Strategic management is the process through which managers undertake efforts to ensure long-term adaptation of their organization to its environment. It involves developing and implementing an organization’s competitive strategy.
Strategic management is not a simple process; it is complex in nature. Its complexity may be attributed mainly to three reasons:
- Strategic management involves making decisions about the future. Future is uncertain. It is impossible for a manager to be sure about the future. Therefore, strategic management involves a high degree of uncertainty.
- Managers in different departments in an organization have different priorities. They must reach an agreement to ensure an. integrated approach. Strategic management needs an integrated approach, which is difficult to achieve.
- Strategic management involves major multifarious changes in the organization. It needs changes in organizational culture, leadership, organization structure, reward system, etc. All this makes strategic management complex.
Uncertainty in the business environment has thrown the business organizations to great challenges. Changes are continuously taking place in the environment. Most changes are unpredictable. And so uncertainty creeps up.
In the face of changes, many excellent new ideas may become obsolete. Changes are continually occurring in demographics, economic conditions, trade practices (due to deregulation/ liberalization), diversity of workers, technology, and globalization trends.
Changes are also occurring in the internal affairs of the business organizations in terms of high turnover of employees, loss of highly trained and skilled technical people, etc.
All these threatening changes cause several internal problems for an organization.
These changes lead to uncertainty and complexity in the business functioning. When the environment changes, managers must do something unique to ensure a ‘prospective future’.
If they continue doing what they have been doing, they might end up with having a future even worse than in the past. The strategy provides a way to deal with changes and their accompanying uncertainty.
Managers develop and implement the strategy to conquer the market. Thus, managers involve themselves in the strategic management process.
Organizations of any size can adopt strategic management process. It is applicable particularly to private, public, and not-for-profit organizations.
Since managers have to be involved in strategic management, they need to understand the concepts, issues, and process related to strategic management.
Strategic management is not a One-shot activity. You cannot stop doing further analysis of environment, once you have finished strategy implementation. You need to continuously monitor what is happening in the environment both within and outside the organization.
As a manager, you are responsible for detecting new developments in the industry or in the entire macro environment. Your job is to track progress, spot problems, monitor the winds of the market, identify changes in customer preferences, and initiate adjustments as needed.
This is why the task of evaluating organizational performance and initiating corrective adjustments is both the end and the beginning of the strategic management cycle.
You can ask a pertinent question: Is strategic management the sole prerogative or responsibility of the senior managers?
The straight-forward answer is ‘No.’ There is a wrong notion among some people that strategy-making and strategy implementation are the prerogatives of senior managers only, especially the Chief Executive Officer (CEO).
It is obvious that the primary responsibility of corporate or business-level strategy making rests mainly with the CEO, the board of directors and other senior-level managers.
However, in reality, all managers at all levels need to participate in the process of strategic management. Also, the relevant employees need to be involved in the effective formulation and implementation of the strategy.
In our view, personnel should be involved in performing the tasks of strategic management:
- The CEO,
- Other senior managers,
- Divisional and departmental managers, and
- The lower-level managers.
The CEO plays the role of chief guide and coach
Since competitive strategy is more than an idea and also it is about making that idea work, the CEO must play a significant role in strategy formulation.
The “CEO must perform in many roles, requiring an almost holographic capability – as the change agent, communicator, the public face of the company; as the decider, facilitator, teacher, and mentor as well as the leader.’
The senior managers assist the CEO in articulating and assimilating strategy-related information and ideas.
The mid-level managers play supporting role and do some or most of the strategy-making for their units.
The lower-level managers and employees assist in formulating and implementing the strategy in the work areas they are directly involved with.
Related: Types of Strategic Alternatives
Strategies Help Managers to Make Decisions
Strategies Help Managers to plan properly by guiding them to make operational decisions. The basic principle of the strategy and policy framework is as follows;
The more strategies and policies are clearly understood and implemented in practice, the more consistent and effective will be the framework for enterprise plans.
if a company has a major policy of developing only new products that fit its marketing organization, it will avoid wasting energy and resources on new products that do not meet this test.
Strategies and policies, to be effective, must be put into practice by means of detailed plans embodying minutest of ingredients necessary for operation.
These detailed plans, also called tactics, are the action plans through which strategies are pursued and implemented. Hence strategies must be supported by effective tactics.
Dunham and Pierce have defined strategic planning as the top management’s active and conscious effort to design a plan in order to place an organization within its external environment.
A strategic plan outlines a long-term perspective for the organization. It specifically states the organization’s reason for existence, its strategic objectives, and its operational strategies.
A strategic plan of an organization, therefore, answers a set of fundamental questions;
- What business is it doing or does it want to do in the future?
- What kind of organization is it or does it like to be? How is it going to conduct itself to achieve this strategic position?
The strategic planning process is a comprehensive framework that guides the decisions that determine the nature and direction of organizational activities and undertakings.
For a broader and better understanding of strategic planning, the following three concepts need to be appreciated,
- Organizational Mission
- Strategic Objectives, and
- Operational Strategies.
Let’s know briefly about them;
An organizational mission is a statement specifying the kind of business it wants to undertake.
It puts forward the vision of management based on internal and external environments, capabilities, and the nature of customers of the organization.
Particular mission statement, however, does not necessarily state specific strategic objectives or operational strategies or tactics.
A strategic objective provides statements of definable and measurable achievements. Realization of such achievements marks the fulfillment of an organization’s mission statement.
Operational strategies specify the actions that are to be taken in order to attain objectives.
Operational strategies or tactics mean the same things which are action plans designed to execute or implement strategies.