Strategic Management

Definition

Strategic management is the process of identifying an organization's long-term goals and objectives, and then making and implementing decisions to achieve those goals. It involves analyzing the organization's external environment and internal capabilities to develop and execute effective strategies that give the organization a competitive advantage.

5 Must Know Facts For Your Next Test

1. Strategic management helps organizations adapt to changes in the external environment and respond to competitive threats.
2. Effective strategic management requires a deep understanding of the organization's internal capabilities and resources.
3. The strategic management process typically includes environmental scanning, strategy formulation, strategy implementation, and strategy evaluation.
4. Strategic decisions have long-term implications and involve a significant commitment of organizational resources.
5. Successful strategic management can lead to improved financial performance, increased market share, and a stronger competitive position.

Review Questions

• Explain how strategic management relates to the organization's external environment.
  • Strategic management involves carefully analyzing the organization's external environment, including factors such as industry trends, competitor actions, and changes in customer preferences. This analysis helps the organization identify opportunities and threats, which are then used to develop strategies that allow the organization to adapt and thrive in the face of external challenges. By aligning the organization's internal capabilities with the external environment, strategic management enables the organization to gain a competitive advantage and achieve its long-term goals.
• Describe the role of SWOT analysis in the strategic management process.
  • SWOT analysis is a critical tool in the strategic management process, as it helps organizations evaluate their Strengths, Weaknesses, Opportunities, and Threats. By assessing the organization's internal capabilities and the external environment, SWOT analysis provides valuable insights that inform the development of effective strategies. For example, an organization may leverage its strengths to capitalize on emerging market opportunities, or it may address weaknesses to mitigate potential threats. SWOT analysis is typically conducted during the strategic planning phase and helps guide the formulation and implementation of the organization's strategic decisions.
• Evaluate how strategic management can help an organization adapt to changes in the external environment.
  • Strategic management is essential for organizations to adapt and respond to changes in the external environment. By continuously monitoring and analyzing the external environment, strategic managers can identify emerging trends, shifts in customer preferences, and new competitive threats. This information is then used to formulate and adjust strategies that allow the organization to capitalize on opportunities and mitigate risks. For example, an organization may need to diversify its product offerings, enter new markets, or adopt new technologies to stay relevant and competitive in a rapidly changing business landscape. Effective strategic management enables organizations to be agile, innovative, and resilient in the face of external challenges, ultimately enhancing their long-term success and sustainability.

Related terms

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

Competitive Advantage: A condition or circumstance that puts a company in a favorable or superior business position.

SWOT Analysis: A framework for identifying and analyzing an organization's Strengths, Weaknesses, Opportunities, and Threats.