As we can see, “Strategic Management” is comprised of two terms; therefore, before delving into the specifics, it is necessary to understand each word individually for a better grasp of the concept. We are aware that the functions of management include the planning, organization, direction, and control of resources. The term “strategy” refers to the action plan established to attain organizational objectives, which is only achievable when senior management directs available resources appropriately. Thus, the comprehensive meaning of the term “Strategic Management” is typically understood as the design, implementation, control, and evaluation of an organization’s strategy in response to market problems posed by the business environment. The objective of strategic management is to bridge the gap between the organization’s desired future state and its current condition. It is the responsibility of the organization’s upper management to properly direct the organization’s resources. It is possible when top management has a reasonable understanding of the firm’s strengths and weaknesses as well as the opportunities and risks of the market. Strategic management is a tool that creates a relationship between an organization’s strengths and the market’s available opportunities by addressing the firm’s shortcomings and the market’s dangers. For a clear and comprehensive understanding of strategic management, it is vital to comprehend its development.
Changes in Strategic Management
At the beginning of the 19th century, planning for everyday company activity was conducted for short periods and on a daily basis, which was a difficult task that complicated commercial processes. Classical theorists like as F. W. Taylor, Weber, and Fayol advanced the notions of planning and gave management additional dimensions. Consequently, strategic management was initially viewed as business policy. In the 1920s, Harvard University introduced a course titled “Business Policy” for its business administration programme, which emphasized the integration of the functional areas of business administration, such as accounting, management, marketing, human resource, finance, and production. This course’s initial objective was to provide students with the capacity to apply knowledge from previous courses to organizational difficulties. As a result, the business policy course gave formal training and experience in addressing issues impacting the business, as well as systematic and analytical thinking in resolving performance-related difficulties affecting companies. Thus, the origin of strategic management was in the form of business policy took place but the term strategy was used by military, hence we need to investigate the word “strategy” more.
It is important to note that the name “strategy” derives from the Ancient Greek words “stratcgia” and “stratcgos,” which respectively mean “office of general, command, and generalship or army leader” and “the leader or commander of an army, a general.” It was interpreted as science and art of military command as applied to the entire planning and conduct of combat, an action plan meant to attain a specific goal. On the other hand, as the complexity of business increased, policymakers began planning for the future, i.e. the long term, rather than for the present, i.e. the short term. Thus, policymakers utilized the academic roots of the phrase strategic management. The application of strategic management assisted the decision-making process swiftly and effectively. In the 1960s, academics such as Peter Drucker determined that each organizational scenario is unique and that situational analysis is the most effective method for managing them.
In the 1970s and 1980s, strategic management emerged as a unique academic discipline as scholars began to scientifically examine businesses. The current business scenario is crucial as it includes all such activities which are organized and operated to provide goods and services to the society, and cater societal needs like creation of employment opportunities, offer better quality of life, contribution to the economic development of a country. Thus, we can assert that strategic management encompasses all ongoing processes and activities. Organizations systematically coordinate and align resources and actions with mission, vision and strategy. Strategic management actions transform a static plan into a system that offers strategic performance feedback to decision making and enables the plan to evolve and expand when requirements and other conditions change.
Meaning and Definition of Strategic Management
In his 1965 book, Corporate Strategy, Ansoff defines strategy as “the common thread across an organization’s operations and product markets that determines the core nature of the business the organization was or aims to be in the future.”
“Strategy” is defined by Balwani (2003) as “a unified, comprehensive, and integrated plan meant to ensure the achievement of the enterprise’s fundamental objectives.”
According to Drucker (1986, p. 57) strategy specifies what the important activities are in a specific firm and strategy entails knowing “what our business is and what it should be.”
According to Dess, Lumpkin, and Eisner (2006), the success of a company is largely dependent on three pillars of strategic management: analysis, decisions, and actions. The organizations’ senior management is concerned with the strategic analysis of their vision, mission, objectives (long-term and short-term), and objectives. To cope with this the most fundamental but significant questions must be answered by the management, which are: What industries should we compete in? How should we compete within these markets? These questions frequently affect both the domestic and international activities of a business. Now, considering these topics, analysis is often conducted by collecting and analyzing information about the organization’s internal and external environments. This analysis will yield a number of strategic options, and the management will pick the most appropriate course of action. Unless decisions are implemented, they have little purpose. Companies must take the required steps to implement their strategies. This necessitates that leaders assign the required resources and construct the organization to implement the desired strategies.
Strategic management provides a framework including a set of rules that facilitates the organization’s sustainable development decisions in the following ways:
- Imagining the future business climate
- Identifying and measuring the industry pulse in which a company operates
- Analyzing a company’s business climate
- Drafting vision and purpose statements for the organization
- Establishing short- and long-term goals
- Identifying the organization’s strengths and weaknesses
- Identifying the organization’s opportunities and threats
The Characteristics and Scope of Strategic Management
Strategic management is inherently interacting and interdependent with other organizational functional areas. Strategic management’s existence and effectiveness rely heavily on organizational structure. There is a connection between strategic management, organizational structure, and the corporate, strategic business unit (SBU), and functional and operational levels of strategy. Strategic Management is the art and science of designing, implementing, and evaluating cross-functional decisions that allow a company to attain its goals. The elements of strategic management are focused toward a company’s long-term survival and attainment of management objectives.
Why Strategic Management is Necessary
A Japanese proverb states, “When you are dying of thirst, it is too late to consider digging a well.” This proverb emphasizes the significance of strategic management in achieving success in any activity. Many of us have developed the habit of planning in at least one aspect of our life. Whether you’re making a major professional change, presenting an idea, or doing anything else, planning is an integral element of practically everything we do, and many of the actions we take in life involve a great deal of planning. Obviously, it is feasible to accomplish virtually anything without prior planning. The majority of the time, though, when we act without preparing, we take enormous risks with results that are, at best, disheartening or unpleasant. Few fields are as dependent on preparation as business. In fact, strategic management is so vital that it has its own name.
Strategic management is crucial to a company’s long-term success, particularly when it is executed well. When we state that a business is engaging in strategic management, we mean that its business actions are guided by a strategy with well-defined, specific objectives. The firm will then construct clear, well-defined strategies that it will implement to attain its goals and to align its business activities with those goals, so that the business will be in harmony with its goals. It will also assign the required resources to fulfill these objectives. A solid strategic management plan goes beyond increasing a company’s profitability. A strong strategy also provides the business with a proper social license to operate. In today’s world, this is a factor that is growing in significance for every organization, as there are numerous internal and external stakeholders. For instance, people are becoming increasingly aware of the things sold by businesses. They are also becoming more interested in a company’s business practices, in addition to the things it manufactures. This encompasses operations from both an ethical and an environmental aspect. All of these factors should be considered in strategic management and included into the business’ strategies, which should secure the company’s long-term survival.
Ansoff, H. I. (1965). Corporate Strategy. New York: McGraw Hill.
Balwani, N. (2003). Strategic Management and Business Policy. New Delhi: Excel Books
Dess, G.G. and Lumpkin, G.T. and Eisner, A.B. (2006). Strategic Management: Text and Cases: McGraw-Hill/Irwin
Drucker, P. F. (1986). Management Tasks, Responsibilities, Practices. New York, USA: Truman Talley Books.