As earlier discussion, strategic management can be defined as the art and science of formulating, implementing and evaluating cross functional decisions that enables an organization to achieve its objectives. It is a conceptual frame of decision and action which leads entire organization to develop vision, mission, goal and objective. It
Definitions on SM
Peter F Drucker- Strategic management is not a box of tricks or a bundle of techniques. It is analytical thinking and commitment of resource to action.
Wheelen and Hunger- SM is a set of managerial decisions and actions that determines the long-run performance of a corporation.
Lamb- SM is an ongoing process that evaluates and controls the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors.
Ansoff- SM is a systematic approach to a major and increasingly important responsibility of general management to position and relate the firm to its environment in a way that will assure its continued success and make it secure from surprises.
Characteristics of strategic management decision
- External environment considerations:
All business without any exception is affected by the external environmental factors-PEST. Strategic management decision considers these factors carefully during strategy formulation.
- Future orientation:
Strategic managers anticipate or forecast the future and accordingly formulate their strategies. Managers involve in strategic decision making process to confirm long term direction and scope of the organization.
3. Allocation of large resources:
Strategic decision is made to link the resource and big objective. It involves large portion of resource allocation to implement chosen strategy.
4. Impact on profitability of the firm:
Since it involves allocation of large resources for a long period of time, profitability both short term and long term is affected.
5. Top management involvement:
Strategic management decision is made by top level executives as per the values and philosophy developed by them to drive the organization. Involvement of top level of management ensures better utilization of large resource allocation in long term organizational betterment.
- None programmed- Strategic management decision deals with non routine type of issues. It is made by analyzing the context and content rather than prevailing procedures.
- Commitment- Strategic management decision is the commitment of the executives to achieve the long term objectives in organization. It reflects organizational promise to take competitive action.
Critical Tasks of Strategic Management (Put in Box)
- Formulate the company’s mission
- Develop company profile, reflecting its internal conditions
- Assess company’s external environment
- Analyze company’s options
- Identify most desirable options
- Select long-term objectives and grand strategies
- Develop annual objectives and short-term strategies
- Implement the strategic choices
- Evaluate success of the strategic process
As these nine areas indicate, strategic management involves the planning, directing, organizing and controlling of the strategic-related decisions and actions of the business
Importance of Strategic management
Strategic management offers financial as well as non financial benefits. Superior sales, productivity and profit are some example of financial benefit; and commitment, better understanding of top management decision making and smooth change management are the example of non financial benefit. It enables a firm to anticipate or predict the future and be prepared for the same. Rational Allocation of resources and co-ordination between various divisions of organization is achieved by applying strategic management framework.
The most highly rated benefits of SM are;
- Clarity of strategic vision for the organization.
- Better understanding of the rapidly changing business environment.
- Facilitates identification, prioritization and exploitation of opportunities.
- Minimizes the impact of adverse situations and changes.
- Better allocation of resources.
- Futuristic thinking.
- Encourages favorable attitude toward change.
Strategic management offers the following benefits:
It allows for identification, prioritization, and exploitation of opportunities.
It provides an objective view of management problems.
It represents a framework for improved coordination and control of activities.
It minimizes the effects of adverse conditions and changes.
It allows major decisions to better support established objectives.
It allows more effective allocation of time and resources to identified opportunities.
It creates a framework for internal communication among personnel.
It helps integrate the behavior of individual into a total effort.
It provides a basis for clarifying individual responsibilities.
It encourages forward thinking.
It provides a cooperative, integrated, and enthusiastic approach to tackling problems and opportunities.
It encourages a favorable attitude toward change.
It gives a degree of discipline and formality to the management of a business.
Source; Fred R David, Strategic Management (2013) pp 16