What is strategic management?

Strategic management is the art and science of formulating, implementing and evaluating cross-functional decisions that will enable an organization to achieve its objectives. It involves the systematic identification of specifying the firm's objectives, nurturing policies and strategies to achieve these objectives, and acquiring and making available these resources to implement the policies and strategies to achieve the firm's objectives.

Strategic management process

There are four essential phases of strategic management process. In different companies these phases may have different, nomenclatures and the phases may have a different sequences, however, the basic content remains same. The four phases can be listed as below. 1. Defining the vision, business mission, purpose, and broad objectives. 2. Formulation of strategies. 3. Implementation of strategies. 4. Evaluation of strategies. It may not be possible to draw a clear line of difference between each phase, and the change over from one phase to another is gradual. The next phase in the sequence may gradually evolve and merge into the following phase. An important linkage between the phases is established through a feedback mechanism or corrective action. The feedback mechanism results in a course of action for revising, reformulating, and redefining the past phase. The process is highly dynamic and compartmentalization of the process is difficult. The change over is not clear and boundaries of phases overlap. 1. Strategic management process that could be followed in a typical organization is presented in above figure. The process takes place in the following stages: 2. The Strategic Planner has to define what is intended to be accomplished (not just desired). This will help in defining the objectives, strategies and policies.

3. In the light of stage I, the result of the current performance of the organization are documented. 4. The Board of Directors and the top management will have to review the current performance of the documented. 5. In view of the review, the organization will have to scan the internal environment for strengths and weaknesses and the external environment for opportunities and threats. 6. The internal and external scan helps in selecting the strategic factors. 7. These have to be reviewed and redefined in relation to the Mission and Objectives. 8. At this stage a set of strategic alternatives and generated. 9. The best strategic alternative is selected and implemented through programmed budgets and procedures. 10. Monitoring, evaluation and review of the strategic alternative chosen is undertaken in this mode. This can provide a feedback on the changes in the implementation if required. As can be seen, this provides a rational approach to strategic decision-making and it can be successfully practiced by Indian organizations, which now have to operate in a competitive environment.

15 Key Benefits of a Strategic Management System Which of these benefits are still missing in your organization? 1. Taking an organization-wide, proactive approach to a changing global world 2. Building an executive team that serves as a model of cross-functional or horizontal teamwork 3. Having an intense executive development and strategic orientation process 4. Defining focused, quantifiable outcomes measures of success 5. Making intelligent budgeting decisions 6. Clarifying your competitive advantage 7. Reducing conflict; empowering the organization 8. Providing clear guidelines for day-to-day decisiion making 9. Creating a critical mass for change 10. Singing from the same hymnal throughout the organization 11. Clarifying and simplifing the barrage of management techniques

12. Empowering middle managers 13. Focusing everyone in the organization in the same overall framework 14. Speeding up implementation of the core strategies 15. Providing tangible tools for dealing with the stress of change

What are the benefits of Strategic Management? Strategic management includes strategic planning, implementation and review/control of the strategy of an organization. All most all the modern organizations engage in strategic management to ensure that they achieve the desired level of performance. There are many benefits that an organization can obtain by engaging in strategic management and they can be described as follows :

Sets the strategic direction to the firmStrategic management process clearly defines what is the desired level of performance (mission/goals/objectives) and it sets the direction so that everyone in the organization knows where are they heading towards. Strategic management act as a road map to everyone in the organization and it clearly defines the way to get to the final destination/desired level of performance. Focus on critical factors of the organizationStrategic management identifies the critical factors that are strategically important to the organization. When critical factors are identifies company can analyse and take relevant measures to ensure satisfactory performance in those areas. Understanding the changing environmentStrategic management predicts the future changes that can take place. Predicting future changes that can take place will help the organization to be proactive and take necessary steps to manage change with contingency planning and change management strategies. Obtaining sustainable competitive advantageThis is the most important and the most critical benefit of strategic planning. By a successful strategic management process company should be able to build a competitive advantage over other competitors which can be sustained overtime without being imitated or outperformed by its competitors. Strategic management identifies the competitive advantages that can be generated through strengths of the organization and take necessary steps to effectively obtain it. Lead to better performanceThe successful strategic management should ensure that the company performs very well and generates profits for its owners. When the competitive advantage is built company can thrive on that to make profits and record good performance.

Ensure the long term survival in the market placeStrategic management identifies opportunities and threat that influence the organizational performance. It make use of opportunities and minimize threat to make sure that company can survive in the market by outperforming its rivals. Simplifies complex scenarios and develop suitable strategiesCurrent business world is too complex, volatile and dynamic. A firm without strategic management finds it hards to interprets the complexities faced by the organization. In contrast firm with strategic management makes the business complexities simple, predict future dynamics and take proactive steps to minimize threats and make use of opportunities. Strategic management allows and organization to be more proactive than reactive in shaping its own future; it allows an organization to initiate and influence activities and thus to exert control over its own destiny.Small business owners, chief executive officers,presidents and managers of many for-profit and non-profit organizations have recognized and realized the benefits of strategic management. Historically, the principle benefit of strategic management has been to help organizations formulate better strategies through the use of the more systematic,logical and rational approach to strategic choice.

Financial Benefits: 1.Improvement in sales. 2.Improvement in profitability. 3.Improvement in productivity.

Non-Financial Benefits: 1.improved understanding of competitors strategies. 2.Enhanced awareness of threats. 3.Reduced resistance to change. 4.Enhanced problem-prevention capabilities.

Levels of Strategy Strategy may operate at different levels of an organization -corporate level, business level, and functional level. Corporate Level Strategy Corporate level strategy occupies the highest level of strategic decision-making and covers actions dealing with the objective of the firm, acquisition and allocation of resources and coordination of strategies of various SBUs for optimal performance. Top management of the organization makes such decisions. The nature of strategic decisions tends to be value-oriented, conceptual and less concrete than decisions at the business or functional level. Business-Level Strategy. Business-level strategy is applicable in those organizations, which have different businessesand each business is treated as strategic business unit (SBU). The fundamental concept in SBU is to identify the discrete independent product/market segments served by an organization. Since each product/market segment has a distinct environment, a SBU is created for each such segment. For example, Reliance Industries Limited operates in textile fabrics, yarns, fibers, and a variety of petrochemical products. For each product group, the nature of market in terms of customers, competition, and marketing channel differs. There-fore, it requires different strategies for its different product groups. Thus, where SBU concept is applied, each SBU sets its own strategies to make the best use of its resources (its strategic advantages) given the environment it faces. At such a level, strategy is a comprehensive plan providing objectives for SBUs, allocation of re-sources among functional areas and coordination between them for making optimal contribution to the achievement of corporate-level objectives. Such strategies operate within the overall strategies of the organization. The corporate strategy sets the long-term objectives of the firm and the broad constraints and policies within which a SBU operates. The corporate level will help the SBU define its scope of operations and also limit or enhance the SBUs operations by the resources the corporate level assigns to it. There is a difference between corporate-level and businesslevel strategies. For example, Andrews says that in an organization of any size or diversity, corporate strategy usually applies to the whole enterprise, while business strategy, less comprehensive, defines the choice of product or service and market of individual business within the firm. In other words, business strategy relates to the how and corporate strategy to the what. Corporate strategy defines the business in which a company will compete preferably in a way that focuses resources to convert distinctive competence into competitive advantage.

Corporate strategy is not the sum total of business strategies of the corporation but it deals with different subject matter. While the corporation is concerned with and has impact on business strategy, the former is concerned with the shape and balancing of growth and renewal rather than in market execution. Functional-Level Strategy. Functional strategy, as is suggested by the title, relates to a single functional operation and the activities involved therein. Decisions at this level within the organization are often described as tactical. Such decisions are guided and constrained by some overall strategic considerations. Functional strategy deals with relatively restricted plan providing objectives for specific function, allocation of resources among different operations within that functional area and coordi-nation between them for optimal contribution to the achievement of the SBU and corporate-level objectives. Below the functional-level strategy, there may be operations level strategies as each function may be dividend into several sub functions. For example, marketing strategy, a functional strategy, can be subdivided into promotion, sales, distribution, pricing strategies with each sub function strategy contributing to functional strategy. What is Environmental Scanning? Careful monitoring of an organization's internal and external environments for detecting early signs of opportunities and threats that may influence its current and future plans. In comparison, surveillance is confined to a specific objective or a narrow sector. What is strategic implementation? The activity performed according to a plan in order to achieve an overall goal. For example, strategic implementation within a business context might involve developing and then executing a new marketing plan to help increase sales of the company's products to consumers. Definition 1 A process by which strategies and policies are put into action through the development of programs, budgets, and procedures. Definition 2 The methods by which strategies are operationalized or executed within the organization; it focuses on the processes through which strategies are achieved.