Strategic Management:MADM760

 

Abstract

In recent years, strategic management has increased in popularity as well as its importance (Tapera, 2014). In the last century, firms have concentrated on employing plans on a long term basis with the assumption that the internal and external business environments would remain constant. However, there is an increase in awareness among entrepreneurs and managers that business evolves much quicker than in the past. Therefore, it necessitates the employment of strategic plans to safeguard firms against losses. Notably, firms employ contingency plans to facilitate the recovery of essential information in a business. Focusing on the increasingly important roles of design, user experience, and innovation in shaping competitive advantage, strategic management incorporates concepts such as value creation, setting objectives, global integration, value chain efficiencies, and diversification. Thus, the paper endeavors to explore the importance of strategic management to businesses. It aims to explore the advantages as well as the disadvantages of strategic management. In addition, the paper seeks to evaluate the concepts of strategic management and its theories with the aim of offering a descriptive analysis of the effect of strategic management to organizations.

Background information

According to Robinson (2005), strategic management involves a continuous process of developing strategies aimed at profiting companies. It attempts to maintain an equilibrium between the company as well as the internal and external business environment. Johnsen (2015) also explores the concept of strategy in that it involves the actions of the management that influence the operations and the running of a company. The strategy of a company involves the approaches to business that managers assist in their development. Such moves facilitate the attraction and retention of customers to the company. Other approaches ensure that the company has the ability to maintain a competitive edge in the business market. Therefore, the approaches are tailor-made to ensure that companies maintain their market position and competitive advantage thus boosting the performance of organizations. Besides, the strategy is meant to increase the revenue of the company by exploiting internal resources and external factors to gain market share.

Strategic management entails the scanning of the environmental processes, coupled with the formulation and implementation of the strategy. It also involves the evaluation, review, and monitoring of the process of implementation. The objective is to ensure that the organizations achieve their long-term goals. Additionally, Siren, Kohtamaki, & Kuckertz (2012) perceive the employment of strategy as the culmination of different sets of actions aimed at supporting a set of goals. These actions are aided by the decisions in a company that assists in the self-sustenance of the organization.

Strategies assist management in crafting the operations as well as the conduction of the business in an organization. It clearly spells out the road map to be used for the achievement of the objectives of an organization. According to Tapera (2014), strategic management is the catalyst for satisfying customers, and as a result, improves the financial performance of a business. Importantly, an organization that is strategically focused is deemed to be a stronger performer than a company that does not prioritize strategical management. The execution and the formulation of an effective strategy have significant impact on the growth of the revenue, earnings as well as the investment returns.

Strategic management offers various benefits. They include the identification, exploitation as well as the prioritization of the opportunities. It helps in the provision of a view that is objective to the challenges in the management. Furthermore, it involves a framework that is key to the improvement of the control as well as the coordination of activities (Harrison & John, 2010). In addition, it helps in the minimization of the effects of the changes that are adverse to the firm. Besides, it allows for the decisions that are major in firms to be taken that supports the objectives that are established.

Strategic management allows for the allocation of the time as well as the resources in an effective manner, for the opportunities that are identified. As a result, it allows for the allocation of resources that are few offering less time to the devotion of correcting decisions that are erroneous (John L Thompson, 2010). The concepts of strategic management also facilitates in the behavior integration of the individuals assisting in the net effect of improved performance in the firm. It is linked to the ability of the concepts to foster progressive thinking. Besides, it offers an approach of cooperation, enthusiastic as well as integration to facing the challenges and the opportunities.

Benefits of strategic management

Financial benefits

Johnsen (2015) is of the opinion that the firms that employ the concepts of strategic management are more successful than other firms that lack its incorporation. As a result, the firms that employ concepts of strategic management have evidence of increased in the sales volume and productivity. In comparison to other firms, the employment of concepts in strategic management sets apart firms in terms of their productivity than other firms without any activities on the planning of the systems. Evidence indicates that the firms that are high performing prioritized on the systems of planning to take care of the fluctuations in the future in the various environments affecting organizations (Freeman, 2010). It includes the internal as well as the external environment. Further, the firms that employ systems of planning that integrates the concepts of the theories in the management of strategy show superior performance in their finances in the long run in comparison to the industry.

Improved decision making

According to Siren, Kohtamaki, & Kuckertz (2012), senior management requires the information in the business to offer the decisions necessary for the running of an organization on a daily basis. These decisions are vital in that they culminate in impacting the organization positively through the increase in revenue and competitive advantage. A strategic framework will facilitate faster decision making which will improve the performance of the organization as efforts will be driven towards the success of the organization. A strategy is key as it offers the essential framework for the making of decisions that are driven towards the achievement of the objectives of the organization (Harrison & John, 2010).

The concepts of strategic management facilitates firms that are high performing to make decisions that are informed with anticipation that is good in the consequences in the short and long run. Contrary, Lidia & Varbanova (2013) states that firms with poor performance majors on the activities with consequences in the short term. Therefore, such firms fail to have a good forecast of the future and its conditions. The strategists that are involved with firms with poor performance are most times occupied with the meeting of deadlines as well as solving of problems that occur internally in the firm. As such, the strategists underestimate the potential of their competitors and at the same time, overestimate the potential of their firms.

Most often, the strategists attribute the poor performance of their firms to factors that are uncontrollable such as the foreign competition, changes in technology as well as poor economy (Johnsen, 2015). For instance, the annual number of companies that fail in the United States exceed 100,000 (Siren, Kohtamaki, & Kuckertz, 2012). The failures include bankruptcies, liquidations, receiverships mandated by the court as well as foreclosures. However, it is important to note that the failure in businesses is not entirely based on the strategic management that is ineffective. Importantly, the concepts of planning have been proven to yield financial benefits that are substantial.

Ensures understanding

Strategic management ensures that there is an allowance for employees to participate during the process of the development of the strategy. It enables the understanding of the focus of the business, the reasons for choosing to focus on a particular goal and the benefits that are derived from the achievement of those goals. For example, understanding the direction of a company makes it easier for employees to offer their support (Rothaermel, 2013). There is the need for the establishment of a process that allows for the formulations and the communication of the strategy. Such a process helps in challenging the set-out strategy as well as increasing the support for it. Johnsen (2015) is of the opinion that good processes and formulation of strategy are key to the deployment of an effective as well as an efficient strategy.

Ensures progress measurement

The establishment of performance measures is essential as it assists the senior management team in dissecting the vast quantity of information available to firms. These measures assist a company in aligning various decisions with the strategy of the organization. Notably, the strategy assists the company in setting the direction and ensures that an organization is aligned according to its objectives (Robinson, 2005). Therefore, the measures of performance allow the passing of information that is key to decision makers, thus facilitating the evaluation of the progress of a company.

Increases innovation in an organization

Organizations are perceived to be strategically agile if they are able to capitalize on the opportunities that result from unanticipated changes in a successful way. Effective strategic management will result when the strategy is formulated based on various market conditions, including internal resources and external forces. Consequently, it will lead to an improvement of the organization’s ability to respond to the changes in the business environment. The formulation of strategy is most visible through the senior managers of an organization when they employ off-site retreats with the purpose of developing priorities as well as the direction for the organization (Johnsen, 2015). Such forums assist with the establishment of strategies.

Formation of the strategies are the decisions that culminate from the daily operations of a company. The decisions leading to strategy formation are determined by the focus of the company in pursuing opportunities presented to it. Siren, Kohtamaki, & Kuckertz (2012) suggests that for the maintenance of an efficient strategic system of management, there is a need for the existence of a good process for the formulation of a strategy that ensures flexibility. The flexibility capitalizes on the opportunities that arise in the business environment.

Maintenance of order in firms

The concepts of strategic management facilitates in empowering of the employees as well as the managers. As a result, it fosters discipline in the firm’s internal environment, and order. Therefore, Siren, Kohtamaki, & Kuckertz (2012) proposes that it can be the onset of a turnaround in a firm’s effectiveness and maintenance of a management system. In addition, the strategic management offers the renewal of the confidence in the strategy that the business employs. Hence, the process of strategic management provides the fundamental platform for the identification as well as the rationalization of the need for the changes to the employees and the managers in a firm. As such, it helps the members of the organization to perceive the changes in firms as opportunities rather than threats.

Disadvantages

Unpredictable future

Strategic management requires companies to anticipate changes in the future business environment, however, these changes are difficult to anticipate. As such, if the future is not anticipated, then strategic management is futile in its efforts. Evidence suggests that organizations that employ strategic management often achieve better results than organizations that fail to do so, regardless of goal attainment. Tapera (2014) categorically states that the action of strategically thinking of the alternatives in the process of formulating a strategy boosts the ability to make a decision by the management, especially during a crisis.

Lack of value on return of investment

The return on investment is an issue that has been associated with the difficulty of realizing value derived from the process of formulating a strategy (Freeman, 2010). Difficulty exists in justifying the effect of the formulation of strategy, in terms of its value, especially when most of the processes of formulating strategies lies in books with senior management. The process of strategy formulation should be linked to the process of deploying the strategy to realize an improvement in the performance of the organization. As such, the strategy used in the investment can have a positive effect on the returns (Siren, Kohtamaki, & Kuckertz, 2012).

Globalization orientation

Currently, businesses are getting globalized. In a bid to stay ahead in the competition, companies employ operations in the business that are foreign. In addition, firms are constantly faced with the challenge of globalizing its operations. Therefore, it leads to the emergence of orientations. For instance the management of the international human resource as well as the international finance. Importantly, firms have to continuously renovate their strategic management to take care of the new orientations (John L Thompson, 2010).

Diversifications

There has been an increase in the risk levels in the market as a result of globalization. As such, the increased uncertainties, as well as the changes that are rapidly in the environment of the business, necessitate the use of operations that are diversified. The diversification involves the focus of firms in various areas of the business to deal with the risks in business that are diversified. As such, firms move away from the specializing in a particular market. Consequently, the capacity of the strategic management should facilitate the management of the opportunities in business as well as the identification of diversification (Lidia & Varbanova, 2013).

Stiff competition

Previously, firms were exposed to local competitions when they operated in local markets. However, with the increase in globalization, pressure has been exerted in the market. Precisely, competition has become stiff. Thus, firms have to develop strategies that are effective, to survive in the competition. The strategic management process can facilitate the generation of intelligence in the competition. It can also assist with forecasting of the rivals successive moves. Therefore, it can foster the development of a competitive strategy to face out the rivals (Harrison & John, 2010).

Cripple agility

According toSiren, Kohtamaki, & Kuckertz (2012), the processes of strategic management can cripple the ability of organizations to remain agile in various ways. For instance, when firms undertake processes of strategic management, it can result in the management failing to approve some opportunities. As such, if the formulation of strategy offers the only opportunity for the addressing of the issues, it may in itself inhibit the ability of firms. It is as a result of the process inhibiting the formation of strategy which results in the missing of opportunities (Rothaermel, 2013). In addition, it offers the potential for firms to stifle in innovation. Therefore, in this case, the process of strategic management in itself inhibits the ability of firms to seize opportunities as well as innovate.

The other method that firms impede their ability to remain agile is through the execution of the alignment and strategic integration. The alignment facilitates in firms directing their efforts in one direction to achieve the objectives of a firm. Robinson (2005) cites alignment as a major contributor of the success of strategies that are well executed. However, it is vital for the comprehension of the need for the processes that are appropriate as well as the criteria for the assessment and integration of the opportunities in the period of planning as it affects the ability of firms to stay agile. Besides, various methods exist in the management of strategy that allows the formulation of firms as well as the deployment of strategy, while at the same time developing the agility of strategies and integration (Harrison & John, 2010).

Conclusion

Stiff competition, globalization, and evolving markets are presenting challenges to businesses in ways never before seen. As such, companies need to develop and execute strategies to remain competitive. Strategic management is a vital field in management that assists companies to survive turbulent business environments. Like any discipline, strategic management offers both advantages and disadvantages. It can be used as a process and at the same time as a tool of collection to the needs and requirements of the organization. Strategic management is not a process on its own, neither is it a single tool as is usually documented. When it is used correctly, it can assist organizations to plan, control, as well as manage its operations in a manner specifically designed to reward the firm.

References

Freeman, R. E. (2010). Strategic management : a stakeholder approach. Cambridge: Cambridge University Press.

Harrison, J. S., & John, C. H. (2010). Foundations in strategic management. Mason: South-Western Cengage Learning.

John L Thompson, F. M. (2010). Strategic Management. Andover: Cengage Learning.

Johnsen, A. (2015). Strategic Management Thinking and Practise in the Public Sector: A Strategic Planning for All Seasons? Financial Accountability & Management, 243-268.

Lidia, & Varbanova. (2013). Strategic Management in the Arts. London: Routledge.

Robinson, R. (2005). The Advantages and Disadvantages of Strategic Management. Abaris Consulting, 1-5.

Rothaermel, F. T. (2013). Strategic management : concepts & cases. New York: McGraw-Hill Irwin.

Siren, C. A., Kohtamaki, M., & Kuckertz, A. (2012). Exploratin and Exploitatin Strategies, Profit Performance, and the Mediating role of Strategic learning: Escaping the exploitatin trap. Strategic Enterpreneurship Journal, 18-41.

Tapera, J. (2014). The Importance of Strategic Management to Business Organizations. The Internatinal Journals Research Journal of Social Science & Management, 122-129.