Strategic Management

Definition

Strategic management is the process of identifying an organization's long-term goals and objectives, and then making and implementing decisions about how to allocate resources to achieve those goals. It involves analyzing the organization's internal and external environment, formulating a strategic plan, and monitoring the implementation of that plan to ensure the organization's success and sustainability.

5 Must Know Facts For Your Next Test

1. Strategic management is crucial for organizations to achieve long-term success and remain competitive in their respective markets.
2. The three primary responsibilities of management, as defined in 1.1, are planning, organizing, and controlling, all of which are key components of strategic management.
3. The Balanced Scorecard, as described in 12.4, is a strategic management tool that helps organizations align their business activities to the vision and strategy of the organization, monitor performance, and make adjustments as needed.
4. Effective strategic management involves analyzing both the internal and external environments of the organization to identify opportunities and threats, and then formulating and implementing strategies to capitalize on those opportunities and mitigate the threats.
5. Strategic management is an ongoing process that requires continuous monitoring, evaluation, and adjustment to ensure the organization's strategies remain relevant and effective in a constantly changing business environment.

Review Questions

• Explain how strategic management relates to the three primary responsibilities of management (planning, organizing, and controlling).
  • Strategic management is closely tied to the three primary responsibilities of management. Planning is a key component of strategic management, as it involves setting long-term goals and objectives for the organization and developing strategies to achieve them. Organizing involves aligning the organization's resources, including its people, processes, and technology, to support the implementation of the strategic plan. Controlling involves monitoring the organization's performance, evaluating the effectiveness of its strategies, and making adjustments as needed to ensure the organization is on track to achieve its strategic objectives.
• Describe how the Balanced Scorecard can be used as a strategic management tool to align an organization's activities with its vision and strategy.
  • The Balanced Scorecard is a strategic management tool that helps organizations translate their vision and strategy into a set of performance measures across four perspectives: financial, customer, internal business processes, and learning and growth. By aligning these performance measures with the organization's strategic objectives, the Balanced Scorecard provides a comprehensive framework for monitoring and evaluating the organization's progress towards its goals. This, in turn, allows managers to make informed decisions about resource allocation, process improvements, and other strategic initiatives to ensure the organization remains on track to achieve its desired outcomes.
• Analyze how the process of strategic management, including environmental analysis, strategy formulation, and strategy implementation, can contribute to an organization's long-term success and sustainability.
  • The strategic management process is essential for an organization's long-term success and sustainability. By analyzing the internal and external environments, organizations can identify their strengths, weaknesses, opportunities, and threats (SWOT), which informs the development of strategies to capitalize on their competitive advantages and mitigate potential risks. The formulation of these strategies, which are aligned with the organization's vision and mission, provides a clear roadmap for resource allocation and decision-making. Effective implementation of the strategic plan, including the deployment of appropriate organizational structures, processes, and controls, ensures that the strategies are executed in a way that delivers the desired outcomes. Ongoing monitoring and evaluation of the organization's performance, and the subsequent adjustment of strategies as needed, further contribute to the organization's ability to adapt to changing market conditions and maintain its competitive edge over the long term.

Related terms

Strategic Planning: The process of defining an organization's strategy, or direction, and making decisions about allocating its resources to pursue this strategy.

Competitive Advantage: The ability of an organization to perform in one or more ways that competitors cannot or will not match, giving it an edge in the marketplace.

SWOT Analysis: A strategic planning technique used to identify an organization's Strengths, Weaknesses, Opportunities, and Threats.