Strategic management is the process of making decisions and taking actions that will shape and guide a company’s future. It involves setting goals, developing plans and policies, and allocating resources to achieve these goals. Strategic management aims to create and maintain a competitive advantage for the company. Businesses of all sizes and industries must have a strategic management plan in place, as it helps them to stay competitive and adapt to changes in the market.
What is Strategic Management?
Strategic management is a continuous process that involves analysing a business’s internal and external environment, setting objectives, and developing and implementing plans to achieve those objectives. The process of strategic management includes four steps:
Situation analysis
This step involves analysing the internal and external environment of the business to identify opportunities and threats. This includes analysing the company’s strengths and weaknesses and the opportunities and threats in the market.
Strategy formulation
This step involves setting goals and developing plans and policies to achieve them. This includes identifying a target market, creating a value proposition, and determining the resources needed to execute the plan.
Strategy implementation
This step involves putting the plan into action. This includes allocating resources, creating action plans and timelines, and communicating the plan to all relevant stakeholders.
Strategy evaluation
This step involves monitoring and measuring the effectiveness of the plan and making adjustments as needed. This includes evaluating progress against goals and identifying areas for improvement.
Importance of Strategic Management for Businesses
Strategic management is essential for businesses as it allows them to identify and capitalise on opportunities, as well as mitigate risks. It also helps companies to stay competitive by identifying and adapting to changes in the market. According to a Harvard Business Review study, companies with a formal strategic management process are three times more likely to outperform their peers.
Furthermore, with the ever-changing market conditions and dynamic business environments, it’s imperative for businesses to have a proactive approach towards strategic management. This enables them to be prepared for any eventualities and capitalises on opportunities as they arise. Also, having a well-structured strategic management plan enables an organisation to align its resources, processes and people towards a common goal, thereby improving overall efficiency and effectiveness.
A Brief History of Strategic Management
The concept of strategic management has been around for centuries, with roots dating back to ancient military strategy and tactics.
However, it wasn’t until the 20th century that the term “strategic management” was first coined and began to be studied as a distinct field of business management. Since then, the field has evolved significantly, with new theories and models being developed to help organisations navigate the complex and constantly changing business landscape.
Different Types of Strategic Management
There are several different types of strategies that businesses can employ in the field of strategic management. These include:
Corporate strategy
This type of strategy is used to manage a company’s overall direction and performance. It is centred around diversification, mergers, and acquisitions, nurturing how a business will grow and create value through these methods.
Business strategy
This type of strategy is used to manage a specific business unit or product line. It is focused on how a business will compete in a specific market through its product development and competitive positioning.
Functional strategy
This type of strategy is used to manage specific functions within a business. It aims to create value by optimising the performance of individual functions through process improvement and outsourcing.
Operational strategy
This type of strategy is used to manage day-to-day operations. It is focused on creating value by optimising the performance of individual processes through capacity planning and logistics.
What is Strategic Leadership?
Strategic leadership is the process of using a combination of leadership skills and strategic management to achieve long-term organisational goals. The goal of strategic leadership is to create a shared vision and align the organisation’s resources to achieve that vision. A strategic leader is someone who can inspire and motivate their followers to work towards a common goal while also making the tough decisions necessary to achieve that goal.
One example of a strategic leader is the former CEO of General Electric, Jack Welch. Welch was known for his focus on efficiency and ability to create a sense of urgency within the organisation. He implemented a strategy of “workout,” which focused on streamlining operations and cutting costs. This strategy resulted in significant cost savings for the company and helped position GE as a leader in the industry.
Another example of a strategic leader is the former CEO of Apple, Steve Jobs. Jobs was able to create a culture of innovation within Apple and was instrumental in the development of products such as the Macintosh computer and the iPhone.
Strategic leadership is not just limited to CEOs and top executives. It can be found at all levels of an organisation. A team leader, for example, can be a strategic leader by creating a shared vision and aligning the team’s resources to achieve that vision. A front-line manager can be a strategic leader by making the tough decisions necessary to improve the team’s performance.
Types of Strategic Leadership
Strategic leadership is the process of using a combination of leadership skills and strategic management to achieve long-term organisational goals. Just as there are different types of strategies in strategic management, there are also different types of strategic leadership. These include:
Transformational Leadership
This is characterised by leaders who inspire and motivate their followers to not only achieve their goals but also to exceed their own expectations. Transformational leaders focus on creating a shared vision and building a sense of community within the organisation. They also encourage creativity, innovation, and risk-taking.
Transactional Leadership
The leaders following this approach focus on maintaining the status quo and achieving specific, measurable goals. Transactional leaders set clear expectations and hold their followers accountable for meeting them. They use a system of rewards and punishments to motivate their followers to achieve the desired outcomes.
Servant Leadership
This type of leadership is characterised by leaders who prioritise the well-being and development of their followers. Servant leaders focus on building strong relationships, creating a positive work environment, and empowering their followers to achieve their full potential. They lead by example and put the needs of their followers before their own.
Authentic Leadership
Leaders who practice this are true to themselves and their values. Authentic leaders lead with integrity and honesty and consistently align their actions with their beliefs. They are transparent and open in their communication and inspire trust and respect from their followers.
Visionary Leadership
Leaders characterise this type of leadership with a clear and compelling vision for the future. Visionary leaders inspire their followers to think big and work towards a common goal. They are able to inspire and motivate their followers to make sacrifices in the short term for long-term success.
As you can see, each of these different strategies is unique and plays a vital role in achieving the company’s objectives. Understanding the different types of strategic management and their components is crucial for organisations to make informed decisions and stay competitive in the market.
Conclusion
Evidently, Strategic Management, as well as Strategic Leadership, form vital components of any successful business strategies in today’s day and age. These approaches are responsible for keeping businesses stay competitive and adapting to the constantly changing business landmark. As an aspiring management student, you should have clear ideas about these types of leadership, when these work, and how one differs from the other.
upGrad’s Global Doctor of Business Administration from SSBM program is an excellent way to learn more about strategic management. The program is designed to provide students with the skills and knowledge they need to become successful leaders in the business world. With a focus on practical, real-world applications, the program is perfect for professionals looking to advance their careers in strategic management.
You can also check out our free courses offered by upGrad in Management, Data Science, Machine Learning, Digital Marketing, and Technology. All of these courses have top-notch learning resources, weekly live lectures, industry assignments, and a certificate of course completion – all free of cost!
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