Characteristics of Strategic Management
Strategic management is a set of decisions and actions used to formulate and execute strategies that will provide a superior fit between the organization and its environment and helps to achieve organizational goals. The main features or characteristics of strategic management are mentioned below:
Facilitates Strategy Implementation
One of the main characteristics of strategic management is that it facilitates the effective implementation of strategy or strategies. Formation and implementation of strategies are the main functions of strategic management for achieving organizational goals.
In addition, the essence of strategic management lies in the implementation of strategy – if strategies are only formulated and not implemented this can not be strategic management.
Directed Towards Overall Direction of an Organization
Strategic management means influencing the overall direction of the organization. It includes the top management decisions and actions to direct the overall activities to achieve certain defined objectives.
Goals and objectives are set at both functional and organizational levels. They include production goals, marketing goals, human research goals, research & development goals, and financial goals. Goals should be in such a way that there is a high degree of rationality between the functional and organizational goals.
Strategic management is always directed toward the overall direction and set of goals and objectives of the organization that help to reach there.
Multiple Stakeholders in Decision Making
Stakeholders are people or organizations who have a say in how a company operates and achieves its goals. In a company, there are numerous stakeholders. Customers, employees, suppliers, labor unions, financial institutions, social institutions, and the government are among them.
They all have distinct reasons for being a part of the organization. They will continue to support a company until it meets or surpasses their expectations. Organizations that manage stakeholder interactions efficiently perform well. In strategic decision-making, stakeholder support is critical.
Strategic management is nothing but the planning of predictable and unfeasible contingencies. It operates in an uncertain environment. It develops plans ambitiously though it guarantees positive results sometimes the results are uncertain or unexpected.
Strategic management is a complex phenomenon. It operates in an environment that is uncertain and unpredictable. As the environment is uncertain, the uncertainty leads to complexity. Managers need to be more focused on the complexities of the environment and analyze forces that may affect the setting of long-term objectives.
Strategic management is fundamental for the organization. Without a strategy, an organization looks like a ship moving around a circle with no rudder. Strategy is the crucial means for the organization without it the organization could not achieve its goals.
Future-Oriented or Long-Term Implications
Strategic management talks about the future prospects and influences the future growth of the organization. It could have set objectives of more than five years. It has the least focus on the short objectives of the organization.
It predicts the future, reads market conditions, analyzes likely threats & opportunities of environments, and sets objectives that influence the long-term goals of the organizations. Doing so concerns the organization’s vision, mission, and objectives.
Incorporation of Both Long-Term and Short-Term Objectives
The desired outcomes over a set length of time are referred to as objectives. Strategic management takes into account both long- and short-term goals. Managers must retain both a vision for the organization’s future as well as a focus on its current operational requirements.
According to studies, corporate leaders frequently take a short-term approach to the cost of long-term shareholder value creation. Short-term objectives must be met in order to achieve long-term goals. They should not, however, be overemphasized at the expense of long-term goals.
Trade-Off Between Effectiveness and Efficiency
Effectiveness is tailoring actions to the need of an organization rather than wasting efforts whereas efficiency is performing actions at a low cost relative to a benchmark. In other words, effectiveness is doing the right things and efficiency is doing things right.
Strategic management is directed toward establishing a trade-off between effectiveness and efficiency. It has a short-term focus to maintain efficiency and a long-term focus to anticipate opportunities in the competitive environment for effectiveness.
A firm’s resources and competencies that enable it to overcome the competitive dynamics in its industry are referred to as competitive advantage. It is a company’s competitive advantage over its competitors.
When a company implements a strategy that its competitors are unable to duplicate or find too costly to imitate, it gains a competitive advantage. Firms must realize that no competitive advantage lasts forever. Increase the value of the product to enhance customer satisfaction to get a competitive advantage.
It is critical to an organization’s success. As a result, strategic management focuses on developing competitive advantages that are distinct, valued, and difficult to copy or imitate by competitors.
The right match between organizational strengths and opportunities in the environment is known as a strategic fit. The search for a strategic fit with the company environment can be viewed as strategic management.
An organization’s strategic fit prepares it to deal with environmental uncertainty. As a result, strategic management strives for a strategic fit in order to achieve superior results.
A Means Only
Strategic management is only a means to achieve organizational goals. In other words, it is not the end itself. It may not work in many instances especially when the assumptions on strategy formulation change during strategy implementation and poor control has been exercised. Hence, strategic management does not always guarantee success.