Strategic Management is basically the systematic organisation and execution of major targets and initiatives that are taken by the top management on behalf of the owners, after going through careful study of all the available resources and assessment of all the internal and external paradigms to reap the best possible results for the business1.
Strategic management works as a tool for ensuring the establishment of stable business machinery which conforms to all the vital factors that are essential for effective management2. It is the study of various management techniques and procedures which are focused on the integration of cross functional decisions, which are formed after thorough examination and are implemented to facilitate the achievement of a business’ objectives3. To put it simply, strategic management is concerned with the application and formation of judicious decisions which are to strengthen a business’ management, ultimately leading towards the achievement of its goals and objectives4.
Why Strategic Management?
Strategic management practices are largely focused on bringing into coherence the corporate policies of a business with its strategic priorities. It is used as a directive guideline to establish a harmonious connection between various internal and external factors that may affect a business’ management and a business’ objectives, ranked in term of their priority of achievement5.
Strategic management provides a unified platform for the integration of various vital factors that jointly work towards a business’ success. These factors that are actively combined through the implementation of theories of strategic management include appraisals of various internal and external factors and aspects of a business setup, formulation of viable management an organisational policies and application of feasible measures that provide a business a competitive edge over others6.
Strategic management specifically stresses on the present and future endeavours of a business entity. It includes the examination and appraisal of the current strategic position of a business organisation, ensuring the proper implementation of all the practical managerial procedures and selection and formation of fruitful strategic policies for the future7.
An Historical Account of Strategic Management
Strategic management finds its roots in the literary contributions of 1950s and 1960s. Few of the most prominent personalities that elaborated the concept of strategic management during that era include Peter Drucker, Alfred Chandler, Igor Ansoff and Philip Selznick. It was through the literary efforts of these individuals the strategic management was formally recognised as an educational and corporate discipline during 1950s and 1960s.
In his works, Alfred Chandler stresses upon the significance of combining all the integral factors of effective management on a unified platform. Prior to Chandler’s explanation and hypothesis, managerial activities were distinctly differentiated and integration of various managerial aspects was not a major subject of study.
Earlier, management practices included minimal inter-departmental interactions and the communication was limited to the relaying of only vital information, through one or two managers. Management functions were broadly differentiated on the basis of departmental divisions within a business organisation.
Ultimately, sighting the lack of coordination between management operations and decisions, Chandler apart from highlighting the importance of managerial functions also laid emphasis on adopting managerial approaches that provided a long-term perspective. Chandler published his work ‘Strategy and Structure’ in 1962, in which he elaborated on the significance of formulating and implementing long-term strategies and integrating managerial functions, which in his view were to enhance the structure of a business and provide it with a specified direction.
Philip Selznick had already explained the benefits of aligning a business’ external and internal paradigms, in 1957. His idea of creating a linkage between the internal and external business factors laid down the foundation for the globally appreciated appraisal method, SWOT analysis. Philip Selznick focused on explaining the importance of thorough and profound analysis of all the relevant factors for the formulation of a viable management strategy.
Where Selznick focused on the importance of strategic analysis and Chandler laid down the foundation for the integration of management practices and decisions, it was Igor Ansoff who took inspiration from Chandler’s theories and further refined the definition of strategic management. He added various strategic concepts to Chandler’s basic definition and presented a highly sophisticated strategic comparative analysis of product development, market development, diversification and horizontal and vertical integration. He explained it as a solution for businesses to prepare themselves for future opportunities and challenges.
His work was mainly focused on the development of management strategies for the future and consequently, in his work ‘Corporate Strategy’, published in 1965, he introduced the concept of gap analysis, to define a direction for the future, for a business.
However, most significant contributions in the field of strategic management may be attributed to the writings and theories of Peter Drucker. He particularly emphasised the significance of the recognition of defined and clear goals by a business. On this basis, he introduced the theory of ‘Management by Objectives’. In this theory, he states that once a business has defined its goals and objectives, the implementation of appraisal measures to gauge a business’ progress towards the achievement of its goals should be ensured at all levels of the business’ organisational structure.
He also highlighted the importance of intellectual capital. He indicated towards the increasing value of knowledgeable and skilled workers in the context of its consequences on management planning and procedures.
It was later in 1970s, that E. Chaffee explained the major aspects of strategic management. These include a business’ adaptability abilities, integrative platforms, provision of a directive force, relation between “content” and “process”, differentiated levels of implementation and conceptual and analytical approaches8.
Importance of Strategic Management
Achievement of Goals
Strategic management is primarily concerned with the formulation and implementation of feasible and viable management strategies. The feasibility of a management strategy is measured through its effectiveness to increases a business’ ability to adapt to its external environment and the achievement of strategic goals, as ranked on the basis of achievement preferences.
As the external environment of a business is likely to change after a specific period of time, a business consistently modifies its management strategies to be able to cope up with the altering trends of its external environment. However, despite these modifications, basic objectives of a management strategy remain same which confer with the principles of the development of competencies, synergy and cost value for the consumers.
Strategic management also focuses on the recognition and enhancement of core competencies of a business, to improve its position in the market. It may be used to distinguish and highlight the core competencies of a business to that it may be provided with a competitive edge over others.
Integration of various managerial functions and decisions is one of the prime focuses of strategic management and planning. It stresses on the development of synergy to enhance a business’ functional efficiency and contribute towards the achievement of its objectives9.
Role of Strategic Management in Present Age
Strategic management has been under a continual process of transformation and modification to increase its effectiveness with evolving business and market needs. Growing competition in the international markets has also contributed towards the incorporation of new trends and applications, into strategic management activities. One of the most prominent shift in the paradigms of strategic management in the recent times id highlight as the shifting of focus on the efforts to excel in the provision of premium quality services and products.
In fact, in the present times, strategic management is not only about achieving excellence in the quality of products and services, but in general, it is regarded as one of the basic fundamentals of business management that is to improve the efficiency and value of various business endeavours and operations.
It has come a long way from theoretical studies, and today, strategic management is more about practical implementation of judiciously formed decisions and diligently devised strategies. It has adopted a more practical and pro-active approach towards the achievement of business objectives.
Moreover, today strategic management gives due importance to the deliverance of value to the consumers. It is largely driven through factors which are concerned with the optimum consumer satisfaction and effective consumer interaction10.
Challenges in Strategic Management
Today, increasing market competition and various obstacles faced in the way of the growth of a business entity is one of the major challenged that is being faced in the field of strategic management. Businesses are particularly focused on growth objectives amid highly saturated consumer markets and they feel the need to deploy highly effective and efficient strategic management strategies in order to ensure their survival in the present ear of increasing global competition.
Moreover, it is necessary that businesses focus the development of management strategies towards value creation. It is one of the most significant factors that lead to the growth and progress of a business. Frequently evolving business needs have made it extremely difficult for the businesses to work in accordance with a consistent management strategy and they continuously modify their strategies to be able to establish a viable linkage between strategic application and profits and costs.
Hence, in order to meet all the objectives of value creation and eventual growth, it is recommended that strategic planning is to be focused on the appraisal of all the active participants of strategic procedures, and their feasibility towards reducing costs and increasing benefits.