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Strategic Management- Nature, Benefits & Limitations

Strategic Management- Nature, Benefits & Limitations

Nature of Strategy

  1. Strategy as a Plan:

    That is a consciously intended course of action. The Strategy-as-plan may be general or detailed, formal or in the mind. However, as a plan, strategy is conceived in advance, has a purpose and is thoughtful to some degree.

  2. Strategy as a Perspective:

    Mintzburg points out that strategy may be a perspective, i.e. many people in the organization have the same orientation or perspective when they make strategic decisions. It is the same as “Strategy As A Plan” but without the formal planning. It also results in a predictable set of decisions and this relates to the “Strategy As a Pattern” definition.

  3. Strategy as a Pattern:

    A consistent pattern of decisions may be the result of an explicit and written strategy or it may result from organizational culture or it may result from the influence of one or more leaders. An inconsistent pattern of decisions also represents a sort of strategy a disjointed, non-thinking, random, non-strategy, perhaps, but a strategy that governs decisions. So, in a sense, every organization has a strategy; they all make strategic decisions or non-decisions that are also decisions.

  4. Strategy as a Position:

    We might also view strategy as a position relative to the environment. Company A, for example is well positioned to produce customized product for a narrow but lucrative market segment. Company B, in contrast, might be well positioned to produce standardize product for a large market segment. In a way, however, this is more the result of a strategy rather than the strategy itself.

  5. Strategy as a Ploy:

    There are times when strategy becomes a ploy designed to provoke a competitor’s reaction. For example, Company A might plan the development of a new facility hoping that Company B will thereby NOT develop a similar facility because of Company B’s perceived risk of industry overcapacity. This aspect of strategy is relatively rare.

Benefits of Strategic Management

According to Greenley, strategic management has following benefits:

  • It allocates for identification, prioritization, and exploitation of opportunities.
  • It provides an objective outlook of management problems.
  • It characterizes a framework for improved synchronization and control of activities.
  • It reduces the effects of adverse conditions and changes.
  • It allows major decisions to better support established objectives.
  • It allows more effective distribution of time and resources to identified opportunities.
  • It permits fewer resources and less time to be devoted to correcting erroneous or ad hoc decisions.
  • It generates a framework for internal communication among personnel.
  • It helps integrate the behaviour of individuals into a total effort.
  • It provides a foundation to clarify individual responsibilities.
  • It promotes forward thinking.
  • It provides a cooperative, integrated, and enthusiastic approach to tackling problems and opportunities.
  • It encourages a positive attitude toward change.
  • It gives a degree of discipline and formality to the management of a business

Limitations of Strategic Management

Besides numerous benefits, Strategic Management has following disadvantages:

  1. Strategic Management is based on certain principles and if the properties do not hold suitable the strategy or plans based on them would not be sensible or effectual.
  2. SWOT analysis is an important exercise in Strategic Management which requires lot of action and information. When these two are lacking the usefulness of the SWOT analysis is questionable and it could even lead to formulation of wrong or ineffective strategies.
  3. In Strategic Management, effective implementation is essential that demands many factors such as resource allocation, leadership implementation, right structure and effective evaluation and control. The cause for the failure of many strategies is the implementation failure. Company may face serious issues if there is lack of involvement of the internal people in the strategy formulation and when they are not equally taken into confidence.
  4. Strategic Planning is a multifaceted and complex task which requires people with vision, expertise and commitment and an appropriate system. Strategic Management is an expensive process. Major drawback of Strategic Management is that it sometimes makes the organization over determined and resultant failure to reach the goals cause disturbance. Impractical strategies may lead to serious problems.
  5. To summarize, Strategic management facilitate an organization to make its decisions based on long-term prediction. It also allows the establishment to make action at an early stage of new trend and consider the lead-time for effective management. The study of strategic management stresses the monitoring and evaluating of external opportunities and threats in the view of a company’s strengths and weaknesses in order to create and implement innovative strategic direction for company.

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