Why Is Strategic Management Needed?

Why Is Strategic Management Needed?

Most business owners want to make wise decisions, but they sometimes are at a loss of where to begin. This is where strategic management comes into play. An important concept for business owners and managers to grasp, strategic management entails evaluating business goals, objectives and plans in light of your company focus on effectiveness and efficiency.

Defining Strategic Management
Strategic management is an oft-used and sometimes ill-understood concept in business. It helps to consider the two words separately first. Strategies are the initiatives a company takes to maximize its resources and to grow its business. This might involve financial planning, human resources management or focusing on a mission statement. Management is the process of operating the business on a day-to-day basis and planning for future success. When you put the two words together, strategic management is about driving the company's growth through effective management techniques focused on goal-setting.
Corporate Governance
An effective organization is often one that has initiated programs and services within its structure that ensure open communication, good management and effective leadership. Without these hallmarks of corporate governance, it is difficult to manage strategically because the basic framework of goal-setting and decision-making are missing. Setting up a control and reporting mechanism is also important to strategic management as part of a wider corporate governance push. This allows the organization to make changes when they are needed to constantly monitor its own progress.
Core Competencies
Strategic management can help your business to identify and capitalize on its core competencies -- things within your business that you do best. As Edward Russell-Walling notes in his book "50 Management Ideas You Really Need to Know," a core competency has three key factors: it is not easy for competitors to duplicate, your business can use it in a number of different products or services and it provides a benefit to your customers. For some companies, a core competency is the brand name: People buy the products simply because they carry the organization's name, which is associated with quality and prestige. For others, the core competency might be the cost of production. Whatever your core competencies are, Russell-Walling is quick to note that most companies only have a few. If you think your business has strengths in multiple areas, it's important to get at the root of what causes these successes.
Setting Goals
Strategic management is vitally important even on the small scale within a business. However, strategic management is difficult to accomplish without a clearly defined set of goals for the business' operation. Knowing what your core competencies are is good from the standpoint of understanding your strengths in the marketplace, but this also helps you to identify areas for improvement and set goals and objectives based on those weaknesses. If you know, for instance, that your business is lagging behind in utilizing the power of the Internet to sell its products, one of your goals can be to introduce an online trading platform within the next six months. Importantly, the goals your business sets should be measurable, specific and have a time frame attached to them. Setting goals in this way helps you to strategically position your business for future success.