What is Strategic Management?
Strategic management involves the intentional alignment and orchestration of an organisation’s assets and capabilities with the aim of achieving its predetermined goals and objectives. It encompasses various key elements, including goal setting, competitive analysis, internal assessment, strategy evaluation, and the effective implementation of strategies throughout the organisation.
Key points:
- Strategic management serves as a framework for companies, universities, nonprofits, and other entities to establish and achieve their objectives.
- Organisations that are adaptable and responsive to change may find it easier to adjust their structures and plans, whereas rigid organisations may struggle to navigate evolving environments.
- Strategic managers play a pivotal role in overseeing strategic management initiatives and devising strategies to ensure organisations meet their performance targets.
How Strategic Management Works
Strategic management encompasses diverse schools of thought. A prescriptive approach dictates how strategies should be formulated, while a descriptive approach emphasises their practical implementation. These perspectives vary on whether strategies are crafted through meticulous analysis, considering all threats and opportunities, or are more akin to broad guiding principles.
Factors such as business culture, employee skills, and organisational structure significantly influence an organisation’s ability to achieve its objectives. Inflexible companies may struggle to adapt in dynamic business landscapes. Maintaining a clear connection between strategy development and implementation is crucial for managers to assess the efficiency of achieving objectives.
While upper management bears ultimate responsibility for strategy, ideas often originate from lower-level managers and employees. Organisations may designate multiple employees to focus on strategy rather than relying solely on the CEO’s guidance.
Consequently, organisational leaders prioritise learning from past strategies and assessing the broader environment. This collective knowledge informs future strategy development and guides employee behaviour to propel the entire organisation forward. Thus, effective strategic management demands both inward reflection and outward awareness.
Important: Strategic management encompasses both internal and external communication practices, alongside diligent tracking mechanisms, to ensure the company effectively achieves the goals outlined in its strategic management plan.
Key Elements of Strategic Management
Vision and Mission
The vision and mission encapsulates the essence of a company’s existence. The vision articulates what the company aims to achieve in the long term. On the other hand, the mission statement outlines the purpose, core values, and fundamental objectives, acting as a compass that directs all organisational efforts towards a common goal. These elements provide clarity and direction, aligning everyone within the company toward a shared purpose.
Analysis
Through analysis, a comprehensive evaluation involves dissecting internal strengths and weaknesses while scanning the external landscape for opportunities and threats. The SWOT analysis framework, a cornerstone in strategic management, offers a structured approach to this assessment. It’s a diagnostic tool that unveils critical insights, helping organisations understand their competitive position, identify areas for improvement, and exploit opportunities while mitigating risks. This introspective and externally aware assessment serves as the foundation upon which strategies are built.
Strategic Development
Strategic development involves translating aspirations and analyses into actionable plans requiring creativity, critical thinking, and a deep understanding of the business environment. Strategies are formulated to leverage strengths, overcome weaknesses, capitalise on opportunities, and counter threats identified during the analysis phase. This process isn’t static; it’s a dynamic endeavour that adapts to changing circumstances, paving the way for achieving long-term objectives.
Execution
Execution involves putting plans into action, cascading goals down to various departments, and aligning resources and efforts toward the common objectives. Effective execution involves clear communication, strong leadership, and organisational agility. It’s not just about the top-level strategy; it’s about ensuring that every level of the organisation understands its role and contribution to the overarching goals.
Evaluation and Adaptation
Evaluation is the end of the strategic management cycle, with the processes including measuring performance against predetermined metrics and goals, learning from successes and failures, and extracting insights that inform future strategies. This phase emphasises agility and adaptability. If strategies fall short or circumstances change, they must be revised to stay aligned with the evolving business landscape.
Phases of Strategic Management
Strategic management involves several essential components and follows a model that typically consists of five interconnected phases:
Clear, Realistic Goals
The first phase of strategic management revolves around defining the destination. It involves setting clear, concise, and realistic goals that align with the company’s long-term vision and mission. These goals serve as the guiding stars, providing direction and focus for the organisation. By ensuring these objectives are not only aspirational but also attainable, companies can motivate their teams and align efforts toward common aims.
Analysis
Analysis encompasses a thorough examination of both internal capabilities and the external business environment. Analytic tools like SWOT (Strengths, Weaknesses, Opportunities, Threats) and PESTEL (Political, Economic, Social, Technological, Environmental, and Legal factors) aid in this process. By dissecting these elements, companies gain insights into their competitive position, market dynamics, risks, and opportunities, facilitating informed decision-making.
Strategy Development
Following the analysis phase, the development of strategies involves formulating action plans based on data collected during SWOT. This stage is about leveraging internal strengths to capitalise on opportunities and mitigating weaknesses and threats to reduce risks. Strategies are crafted to align with the company’s goals, offering a roadmap to navigate the complexities of the business environment.
Execute!
Execution marks the pivotal point where strategies are put into action. It involves deploying the formulated plans across all levels and departments of the organisation. Effective execution demands clear communication, strong leadership, resource allocation, and active involvement from all stakeholders. This phase ensures that strategies are not confined to paper but are ingrained into the organisational culture and operational fabric.
Evaluate with Metrics
The final phase encompasses evaluating the success of implemented strategies. This evaluation involves measuring performance against predefined metrics and benchmarks. It’s crucial to gather data, analyse outcomes, and draw insights to gauge the effectiveness of strategies. Learning from both successes and failures, organisations adapt and fine-tune their strategies to stay agile and responsive to changing market dynamics.
Examples of Strategic Management
Apple Inc.
Apple’s strategic management processes focus on innovation, product design, and ecosystem development, allowing it a chance to maintain a competitive edge in the technology industry for decades. Notable products Apple has introduced include iPad, MacBook, and iPhone
Woolworths Group
One of Australia’s most prominent corporations, Woolworths has centred its management around market expansion and diversification, such as expanding into new markets, diversifying product offerings, and investing in digital transformation. Their strategies focus on capturing consumer needs, enhancing customer experience, and adapting to changing market dynamics.
Amazon
Amazon’s strategic management approach includes diversifying its business into various sectors, such as e-commerce, cloud computing through AWS, and smart devices such as the ALEXA assistant speaker. This diversification has allowed the company to sustain rapid growth.
QANTAS Airways
Flag carrier QANTAS’ strategic management is marked by resilience and adaptability in a highly competitive industry. The airline’s strategic decisions, such as fleet renewal programmes and network optimisation, have contributed to its growth and operational efficiency.
BHP
BHP’s strategic management is evident in its continuous commitment to technological innovation, sustainable practices, and global diversification. The company strategically invests in technology to improve operational efficiency, reduce costs, and enhance productivity in mining operations. The work also accounts for changing environmental norms
Incorporating strategic management practices into their operations has allowed these companies to maintain a competitive advantage, adapt to changing market conditions, and sustain long-term growth and success.
Conclusion
Strategic management is a fundamental concept for businesses looking to achieve long-term success. In following the five phases of strategic management, companies can develop clear strategies, adapt to changes, and gain a competitive edge in the marketplace. Real-life examples of successful companies illustrate the practical application of these concepts, demonstrating how strategic management can drive long-term business growth and sustainability.
DISCLAIMER: This article serves solely for informational purposes and does not constitute official business advice. AVANTE PARTNERS has no working relationships with any companies named in the article or with any strategic management service.