Nature of Strategic Management & Its Importance

Nature of Strategic Management & Its Importance

Nature of Strategic Management

  1. Strategic Management as a Process:

    Strategic management is basically a process. It has emerged out of management in other fields where the concept of management is taken as a process for achieving certain objectives of the organization. Thus, strategic management involves establishing a framework to perform various processes. The concept of strategic management must embody all general management principles and practices devoted to strategy formulation and implementation in the organization.

  2. Top Management Function:

    Strategic management is basically top management function. Thus, in order to ensure effective top management function, it is necessary that a distinction should be made between strategic management and operational management which emphasises day-to-day operations in the organization, so that top management can focus more attention on the strategic aspect rather than emphasising on operational management.

Since the environment of the organization is always changing providing new opportunities and threats, top management must spend more and more time on this aspect. Thus, there is a considerable change on the emphasis of top management functions in the organizations particularly in large and complex organizations. The change is from operational management to strategic management.

  1. General Management Approach:

    Strategic management has general management approach. This approach has three characteristics –

  • This approach uses system frame of reference in dealing with wholeness of an organization. In this dealing, the emphasis is put on identifying tendencies of various phenomena in the organization and relationships among these tendencies,
  • Decision criteria are based on overall betterment of the organization as a whole, not the criteria used by functional specialists,
  • Attempt is made to achieve organizational equilibrium and generation of synergy. This may be even suboptimal for some departments or units of the organization.
  1. Relating Organization to Environment:

    The focus of strategic management is on relating the organization to its external environment. This emphasises that there is continuous interaction between the organization and its environment taking an open systems approach. Thus, the organization must create adequate channel through which external information will pass to various points in the organization.

  2. Long-Term Issues:

    Strategic management deals primarily with long-term issues of the organization that may or may not have an immediate effect. For example, investment in research and development (R&D) may yield no immediate effect in terms of new product development. However, this investment may lead to development of new products and, therefore, enhanced profits.

  3. Flexibility:

    Strategic management has flexibility. This flexibility is required because strategic management works in the context of environment which is quite dynamic. As a result, many strategic actions planned maybe either left, postponed, or changed in the light of environmental requirements.

  4. Innovation:

    Strategic management puts emphasis on innovation which is the process of introducing new things or new ways of working. Innovation is achieved through new strategic actions which are quite different from the previous actions. Innovation is required to face environmental challenges effectively.

Importance of Strategic Management

  1. It helps the organization to be more proactive instead of reactive in shaping its future. Organizations are able to analyze and take action instead of being mere spectators.
  2. It provides framework for all the major business decisions of an enterprise such as – decisions on businesses, products, and markets, manufacturing facilities, investments and organizational structure.
  3. It seeks to prepare the corporation to face the future and acts as a pathfinder to various business opportunities. Organizations are enabled to identify the available opportunities and identify ways and means to reach them.
  4. It helps organizations to avoid costly mistakes in product market choices or investments.
  5. It helps organizations to evolve certain core competencies and competitive advantages that assist in their fight for survival and growth.
  6. Strategic management looks at the threats present in the external environment and thus companies can either work to get rid of them or else neutralizes the threats in such a way that they become an opportunity for their success.
  7. It also adds to the reputation of the organizations because of the consistency that results from organizational success.

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