Strategic management is necessary for any type of organization because it recognizes that there are competing goals within the organization. Therefore, the strategy must be set for the entire organization and not just one segment or aspect of it. This is because if one part of the organization is pursuing a given goal, the others might be heading in the same direction, but they might be accomplishing things at a much slower rate than the whole organization. A successful strategy will include all sections of the business including the customer, staff, suppliers, government, regulatory agencies, and other interested parties.
Strategic management helps to determine the strategy needed to reach the goals. The first step is to set the goals and the next is to develop a strategy to reach these goals. The primary objective of the strategic management process is to create a detailed description of what the company is trying to accomplish; however, this description does not have to be drawn up in detail. The description should rather be a “snapshot” of the organization at the present time. By providing a “snapshot” of the organization in its current position in terms of goals, the manager can then analyze the situation and develop a plan to accomplish the objectives.
While some companies may develop their own strategies and others may hire a consultant, the more common method for developing a strategic management plan is to work with an outside source. Companies may want to develop their own strategies or they may desire to use the expertise of a consultant on this matter. There are a variety of approaches that can be taken to develop the plans. One strategy is to make an “all-in-one” plan. This strategy would involve defining the purposes for which the company needs to achieve certain goals and then lay out strategies to achieve these goals.
Other approaches taken by organizations include defining individual tactical goals within the larger strategic objectives. Within the larger strategic objectives, smaller goals could be related to increasing revenues or reducing costs. Again, these smaller goals could relate to things such as reducing costs or increasing profits. Also, the number of smaller goals could be related to different parts of the organization working together to achieve the overall strategic objective. It might include the creation of a new department, for example, or the addition of a specific team to an existing team. However, one thing to keep in mind is that the overall objective must always be to achieve the larger strategic objectives.
The second part of strategic management involves laying out short-term and long-term goals for the organization. These goals should relate to the larger objectives of increasing revenues or reducing costs. It is important to remember that these goals should not be too ambitious. They should also not be so broad that they are not balanced. A good example of a short-term goal would be reducing the cost of production for the first six months of the fiscal year.
The third aspect of strategic management deals with identifying opportunities for growth. This comes into play when companies are in the process of optimizing their performance in terms of profitability and competitiveness. Opportunities can exist anywhere in the business environment. These opportunities can relate to expanding markets, increasing customer service, or finding new customers. Identifying these opportunities can help to improve the profitability of the organization as well as its competitive position.
The final component of strategic management involves developing plans to achieve the goals. When this component is not properly monitored it can lead to a series of counterproductive actions. For example, developing a long-term plan for the company that will last for 20 years may be unrealistic if one-off goals are set at different times. This means that a long-term business strategy can develop more quickly than other strategies. The same is true of short-term goals, which can be easily missed if plans are not regularly developed and monitored.