importance of strategic management essay

importance of strategic management essay

The Importance of Strategic Management in Achieving Organizational Success

1. Introduction to Strategic Management

Yet it is all too easy to subordinate strategic leadership to the harsh imperatives of quarterly corporate performance commitments demanded by analysts and lenders. To do so runs the risk of missing important signals indicating the possible need for strategic change. Even where there is a leadership ability to recognize these signals and capitalize on emerging threats and opportunities, initiating appropriate strategic management procedures is a different matter. There has to be recognition of the need for action, reflected in decisions that represent strategic intent. Gestating strategic change creates a momentum which inexorably stimulates the delicate creative balance between strategic planning, strategic learning, and corporate entrepreneurship.

Traditionally, top management teams have been criticized and castigated for excessive preoccupation with the utilization of scarce resources, share price, and sound financial management. There is, however, an increasing realization that an organization’s stakeholders (such as allied organizations, community workforce, regulatory bodies, and the natural environment) increasingly expect top management to demonstrate leadership in terms of formulating, communicating, and successfully implementing a strategic vision for the organization.

2. Key Concepts and Theories in Strategic Management

Strategic management is defined as: “the set of decisions and actions resulting in the formulation and implementation of strategies designed to achieve the objectives of an organization. It consists of strategy evaluation, formulation, and implementation.” According to this definition, strategic management is a form of management that deals with the coordinated combination of its resources (internal and external) not only to achieve the desired result, individually or as an organization, but also to choose the set of strategies that have the highest likelihood of success given intentions established by stakeholders. Indeed, deliberate and explicit theory-making and conceptual modeling could redirect strategic management’s focus on pro-action and intended outcomes. Drawn towards strategic subject matter, such activities might elevate the discipline’s academic respect. In the absence of explicit theorizing and adequate sample designs, strategic management’s validity and generalizability have been challenged by perceived empirical flaws.

Definition of strategic management

To better understand why strategic management is important, we need to discuss its key concepts and theories, as well as the contributions of well-known scholars and how the field of strategic management has evolved over time.

3. The Role of Strategic Management in Achieving Organizational Success

Strategic management is an organization’s process of formulating and implementing a well-conceived strategy. Strategic management is of critical importance to organizational success in today’s highly competitive marketplace. The purpose of strategic management is to exploit and create new and different opportunities for tomorrow. Organizations need to plan ahead and create opportunities for the future. With strategic management, managers are able to ensure that the organization will achieve its purpose.

Managers must make organization-wide decisions about their company’s strategic direction. They must manage the corporation with an eye to the external environment. Bottom-line results are strategically important, but not by themselves. The goal of strategic management is to advance the organization’s mission or purpose.

In order to achieve organizational success, managers must: – Carry out the strategic management process – Evaluate and control the strategy management process – Monitor progress and change – Turn reactive into proactive – Capitalize on strategic planning.

Meeting the challenges of a changing marketplace and regulatory environment is always high on any organization’s priority list. In order to align the corporation with the demands of the marketplace and to maximize shareholder value, managers are under constant pressure to turn reactive initiatives into proactive strategies and then capitalize on their strategic plans. Strategic management attempts to link strategic planning and management processes to the needs of the organization as a vehicle for achieving and sustaining competitive advantage.

4. Challenges and Best Practices in Implementing Strategic Management

One of the leading reasons why strategy execution may be a weak link in the quest for organizational success may be that the leadership role in implementation is under-managed at the beginning of the planning process. If the executive suite is not clear about its commitment during strategy formation, it is not surprising that it fails in implementation. A second likely reason for execution failure is strategic planning that introduces unrealistic expectations and disregards convergent feedback in its recommendations. First among our list of likely execution-failure reasons is the absence of needed resource allocation, a failure due to lack of leadership attention. The orthodox approach to action follow-up from the strategic planning process points to a number of potential shortcomings in support. Second, it is possible that those who have the formal authority to implement a plan lack the capacity to do so. The third link from the strategic planning decisions often points to the fountainhead of the “barriers to successful implementation” literature: communications – many employees within an organization, those who are charged with execution as well as those at higher levels, do not understand the reasoning behind the decisions and the consequent need for action. A number of best practice actions and circumstances have been identified as predictive of successful strategy execution and the ready availability of leadership support. This chapter provides first an elaboration of why the support and assessment from the top is one of the best practices of strategic management and then a distillation of expert practitioners’ views of the other conditions and practices conducive to effective execution.

Strategy formulation, execution, and good strategic leadership share a set of at least 10 best practices. They also share some likely reasons for failure. Much attention in the management literature is focused on identifying the best practices critical for achieving strategic gains, and with good reason: adopting a winning strategy can bring success for many organizations. Achievement of superior goals also requires execution – the group of activities by which strategies and policies are put in place – and strategic leaders who can guide organizational transformation effectively. Without adequate direction and support from the top, the planning group, which is often located at a lower level, has limited authority to direct the actions of the many internal organizational units responsible for implementing decisions. Even when management at the corporate and business levels supports the decisions of strategic planning in theory, it may not truly support them in practice.

5. Conclusion and Future Directions

Organizations should recognize that they have a responsibility to the total environment in addition to their responsibility to their stockholders who invest funds in the organization and expect the organization to experience growth and financial performance greater than that available from alternate investments in securities. The responsibility to the stockholders, although primary, should not be overemphasized at the expense of an appropriate commitment to other important organizational stakeholders. The competitive strategy should reflect a balance among various valid claims by the relevant stakeholders in the organization, including customers, employees, suppliers, creditors, and the local community. The organization which effectively executes the strategic management process becomes skilled in thinking strategically, which is a key discipline that augments the skills associated with effectively using the other systems of management. The organization that embraces the spirit of strategic thinking and executes the strategic management process prudently furthers its ability to figure out the important questions and respond effectively. The organization is able to properly integrate ambient changes when they are compelling and mold itself successfully into the international network of organizational stakeholders. The organization develops the capability to perceive its role clearly within the broad, complex, and rapidly changing surroundings in which it exists and to take a proactive stance in formulating and executing the strategies that govern the day-to-day and year-to-year decisions that contribute to a consistent record of performance that matches the organization’s strategic vision.

Strategic management can serve as a practical and valuable approach to achieving success in conditions of extreme uncertainty. It also underscores the organizational responsibility to the needs and expectations of society. This responsibility is embodied in the societal value that an organization creates through the goods, services, and employment opportunities that it provides to society, and the expected contribution that the organization makes to the living standards and the quality of life of the stakeholders in and around the community where it operates.