Nature of Strategic Management

Nature of Strategic Management

• Strategic Management (SM) serves as the capstone course for management and business studies, integrating knowledge from various business disciplines.
• Managers undertake several key functions including planning, staffing, directing, and controlling, each considered of equal importance.
• It focuses more on planning compared to other managieral functions.
• Strategic managers dedicate a significant amount of time and resources to planning activities.
• Managerial positions exist at all levels (top, middle, and lower), each involving managerial functions and economic decisions.
• Strategic Management addresses the roles and needs of top-level managers, incorporating input from middle and lower-level management.
• Planning begins and concludes at the top level.
• Top-level management defines the overall direction of the company.
• Leadership styles at the top influence how Strategic Management is applied.
• Middle and lower-level managers align their plans with the direction set by top-level management.
• Business policy is the predecessor to Strategic Management.
• Business policy defines the long-term goals of a company, as determined by top-level management.
• Business policy and Strategic Management share a concern for the long-term performance of a company.
• Business policy focuses on the internal environment, while Strategic Management considers both internal and external environments.
• It recognizes principles of other management and business courses.
• It emphasizes top-level planning involving various stakeholders.
• It analyzes both the external and internal environments.
• It defines and directs the achievement of short and long-term company objectives.

Definition of Strategic Management

• Wheelen and Hunger (2010) defined Strategic Management as decisions and actions determining long-run performance, including environmental scanning, strategy formulation, implementation, and evaluation, and emphasizing external opportunities and threats relative to company strengths and weaknesses.
• David (2013) defined Strategic Management as the art and science of formulating, implementing, and evaluating cross-functional decisions to achieve company objectives.
• Operationally, Strategic Management is a continuous process of defining a company's long-term direction by evaluating competing forces to gain a competitive edge.

Stages of Strategic Management

• Strategy formulation involves developing long-term goals after analyzing the company's environment.
• Strategy implementation is the stage where plans are put into action, aligning with business programs, procedures, and budgets.
• Strategy evaluation and control is the final stage, where company performance is monitored, evaluated, and corrective actions are taken.

Evolutionary Phases of Strategic Management

• Short-term financial planning phase involves top-level managers requiring departments to prepare budgets based on internal information, conducting a one-year period analysis to guide top management.
• Medium-term planning phase extends the planning process from one to five years, using internal data for projections and involving competition among departments for resources, with projections assisting top management towords goals and objectives.
• Strategic planning phase delegates planning to selected staff, who work with consultants to develop a five-year plan, with limited input from lower levels.
• Strategic Management phase considers inputs from all management levels, decentralizing planning and using internal and external information to formulate strategies, plans, and objectives.

Importance of Strategic Management

• Provides a clear overall direction.
• Helps overcome direct and indirect competition.
• Enables a company to achieve a competitive advantage.
• Leads to superior business performance.

Purpose of Strategic Management

• Exploit business opportunities from a changing environment.
• Identify prioritites requiring financial assistance.
• Assist in reducing business risks.
• Continuously define and redefine direction.
• Build competitive advantage.

Benefits of Strategic Management

• It provides a clearer sense of strategic vision for the company.
• It creates a sharper focus on what is strategically important.
• It facilitates an improved understanding of a rapidly changing environment.
• It allows readily aligned resources for optimal results.
• It simplifies the implementation of risk control measures to minimize uncertainty.

Strategic Management Model

• Core stage (Strategy Analysis): Gathering relevant and reliable information and thoroughly evaluating the different forces comprising the external and internal environments of a company, including the analysis of the company itself.
• First stage (Strategy Formulation): Developing a comprehensive plan to manage external forces and exploiting opportunities with the use of a company's strengths and resources.
• Second stage (Strategy Implementation): Structuring organizational programs, assigning monetary values to activities and projects, and drawing of various operational procedures.
• Third stage (Strategy Evaluation and Control): Performing activities regarding the performance evaluation of an entire company and its various operating units.