What are the benefits of strategic management?
Strategic management is generally thought to have financial and nonfinancial benefits. A strategic management process helps an organization and its leadership to think about and plan for its future existence, fulfilling a chief responsibility of a board of directors. Strategic management sets a direction for the organization and its employees. Unlike once-and-done strategic plans, effective strategic management continuously plans, monitors and tests an organization’s activities, resulting in greater operational efficiency, market share and profitability.
Strategic management concepts
Strategic management is based around an organization’s clear understanding of its mission; its vision for where it wants to be in the future; and the values that will guide its actions. The process requires a commitment to strategic planning, a subset of business management that involves an organization’s ability to set both short- and long-term goals. Strategic planning also includes the planning of strategic decisions, activities and resource allocation needed to achieve those goals.
Having a defined process for managing an institution’s strategies will help organizations make logical decisions and develop new goals quickly in order to keep pace with evolving technology, market and business conditions. Strategic management can, thus, help an organization gain competitive advantage, improve market share and plan for its future.
Five stages of strategic management process
There are many schools of thought on how to do strategic management, and academics and managers have developed numerous frameworks to guide the strategic management process. In general, the process typically includes five phases:
assessing the organization’s current strategic direction;
identifying and analyzing internal and external strengths and weaknesses;
formulating action plans;
executing action plans; and
evaluating to what degree action plans have been successful and making changes when desired results are not being produced.
Effective communication, data collection and organizational culture also play an important part in the strategic management process — especially at large, complex companies. Lack of communication and a negative corporate culture can result in a misalignment of the organization’s strategic management plan and the activities undertaken by its various business units and departments. (See Value of organizational culture.) Thus, strategy management includes analyzing cross-functional business decisions prior to implementing them to ensure they are aligned with strategic plans.
