Strategic Management
Introduction
Strategic management is the process of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives. It involves the systematic analysis of the factors associated with customers and competitors (the external environment) and the organization itself (the internal environment) to provide the basis for maintaining optimum management practices. The objective of strategic management is to achieve better alignment of corporate policies and strategic priorities.
History of Strategic Management
Strategic management as a discipline originated in the 1950s and 60s. Although there were numerous early contributors to the literature, the most influential pioneers were Alfred D. Chandler, Jr., Philip Selznick, Igor Ansoff, and Peter Drucker. Chandler stressed the importance of taking a long term perspective when looking to the future. Ansoff built on Chandler's work by adding concepts and inventing a vocabulary. Drucker was the first to discuss the need for strategic planning for long-term success.
Theories and Models
There are many theories and models that guide the discipline of strategic management. These include the SWOT analysis, PEST analysis, Porter's Five Forces analysis, and the Balanced Scorecard.
SWOT Analysis
The SWOT analysis is a strategic planning tool used to evaluate the strengths, weaknesses, opportunities, and threats involved in a project or in a business venture. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective.
PEST Analysis
PEST analysis stands for "Political, Economic, Social, and Technological analysis" and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management.
Porter's Five Forces Analysis
Porter's Five Forces Framework is a tool for analyzing competition of a business. It draws from industrial organization (IO) economics to derive five forces that determine the competitive intensity and, therefore, the attractiveness (or lack of it) of an industry in terms of its profitability.
Balanced Scorecard
The Balanced Scorecard is a performance metric used in strategic management to identify and improve various internal functions and their resulting external outcomes.
Strategic Management Process
The strategic management process means defining the organization’s strategy. It is also defined as the process by which managers make a choice of a set of strategies for the organization that will enable it to achieve better performance. Strategic management is a continuous process that appraises the business and industries in which the organization is involved; appraises its competitors; and fixes goals to meet all the present and future competitor’s and then reassesses each strategy.
Importance of Strategic Management
Strategic management is critical in today’s dynamic world. The rate of change that businesses face has continued to increase over the years and the future promises to bring the most challenging environment yet. Thus, organizations of all kinds must prepare themselves to adapt quickly to the changing environment to survive and prosper. Strategic management is one of the most important "hard skills" in business management. In Strategic Management, you'll learn how you can manage businesses and projects proactively with a focus on long-term strategy, rather than reacting to day-to-day hiccups.
Conclusion
In conclusion, strategic management is a vital part of any organization's success. It is a continuous process that requires a constant effort to meet customer needs and exceed their expectations, which leads to increased customer value and loyalty, and ultimately to increased profitability.