Understanding Strategic Management
Understanding Strategic Management
Definition and Importance of Strategic Management
- Strategic management is the continuous planning, monitoring, analysis, and assessment of all that is necessary for an organisation to meet its goals and objectives.
- In an ever-changing business environment, strategic management allows organisations to be more proactive than reactive.
- It enables businesses to foresee their future and prepare accordingly.
- With strategic management, an organisation can become more resilient in confronting economic turbulence and fierce competition.
Process of Strategic Management
- Strategic management is not a one-time process; it is an ongoing series of activities.
- It involves setting objectives, conducting both internal and external analysis, strategy formulation, strategy implementation, and evaluation and control.
- Strategy formulation includes the process of crafting strategies that align with the mission, vision, and strategic objectives of the organisation.
- Strategy implementation involves making the strategies work as intended or putting the organisation’s chosen strategies into action.
- Evaluation and control check how well the organisation is performing, what is working and what needs modifying.
Porter’s Five Forces Framework
- The framework helps a business understand the forces influencing competition in its industry.
- These forces include competition in the industry, potential of new entrants into the industry, power of suppliers, power of customers, and the threat of substitute products.
- Porter’s five forces is an excellent tool for gaining a deeper insight into the balance of power in a sector and understanding the strengths of the organisation’s current competitive position, and the strength of a position the organisation is considering moving into.
SWOT Analysis
- SWOT analysis is a strategic planning tool that helps an organisation analyse its Strengths, Weaknesses, Opportunities, and Threats.
- Strengths and weaknesses are often internally-related, while opportunities and threats deal with factors that are external to the company.
- Through the SWOT analysis, strategies can be formulated to leverage strengths, reduce weaknesses, exploit opportunities or block threats in order to achieve desired objectives.
PESTLE Analysis
- This tool assesses external factors and the broader business environment which affects an organisation but over which it has no control.
- The factors considered in PESTLE include Political, Economic, Social, Technological, Legal, and Environmental variables.
- It is crucial in determining the changes that might affect an organisation’s operations and consequently, how these changes should be managed.
Strategic Decision-making
- Strategic decisions are the decisions that are concerned with whole environment where an organisation operates, the entire resources, and the people who form the organisation.
- These decisions have major resource propositions for an organisation.
- Strategic decision-making requires a futuristic vision, considering the environmental changes that may affect the organisation’s operations and taking appropriate steps to address them.
Balanced Scorecard
- The balanced scorecard is a management tool that provides a balanced view of an organisation’s performance by integrating financial measures with other key performance indicators.
- It uses a balanced set of measures separated into four perspectives: financial performance, customer knowledge, internal business processes, learning and growth.
- This tool is useful in not only evaluating performance but also in identifying areas that need improvement for achieving the strategic objectives.