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Strategic Management



Strategic Management » Introduction of strategic management » What is strategic management?, stages of strategic management, its advantages and disadvantages


Introduction of strategic management

What is strategic management?, stages of strategic management, its advantages and disadvantages


Strategic Management –

  • The strategic management process is defined as the process by which the managers or decision makers are able to make a choice of a set of strategies for the organization that will enable it to accomplish improved performance.
  • Strategic management deals with long term development of an organization.
  • Strategic management provides overall direction to an organization.
  • Strategic management is not a static but continuous process

Important Definitions of Strategic Management –

As per Chandler - Strategic management is “determination of the basic long-term goals and objectives of an enterprise and adoption of course of action and allocation of resources necessary to carry out these goals.”

As per Glueck - “That set of decisions and actions which lead to the development of an effective strategy or strategies to help achieve corporate objectives.

As per Paine and Naumes - “Strategic management involves the decision-making and the activities in an organization which

(1) Have wider ramifications,

(2) Have a long time perspective, and

(3) Use critical resources towards perceived opportunities or threats in a changing environment.”

Michael Porter identifies three principles underlying strategy:

  • Creating a “unique and valuable [market] position”.
  • Making trade-off s by choosing “what not to do”, and
  • Creating “fit” by aligning company activities with one another to support the chosen strategy.

What is strategic management process?

Process by which the managers or decision makers formulate strategies for organization which helps in

  • Specifying the organization’s objectives,
  • Developing policies and plans for achieving common organizational goals and
  • Allocating resources for the implementation of such plans.

What are the phases or stages of strategic management process?

Environmental Scanning –

  •  Review the current performance organization.
  • Scan internal & external environment to identify strengths, weaknesses, opportunities and threats of organization.
  • The internal and external scan helps in selecting the strategic factors.

Strategy Formulation –

  • Strategy formulation is the process of deciding about the best course of action for achieving organizational objectives.
  • It requires thinking skills and analytical skills.

Strategy Implementation –

  • Strategy Implementation means putting chosen or formulated strategy into action.
  • It requires coordination among many people.

Strategy Evaluation –

  • It is a final step of strategic management process.
  • Strategy Evaluation includes measuring performance and taking corrective action.

Why has strategic management become important?  

Importance of strategic management -

  • Strategic management deals with long term development of an organization.
  • Strategic management provides overall direction to an organization.
  • Discover organisation strengths and weaknesses.
  • Identify the available opportunities and possible threats
  • Discover the objectives and goals in line with organisations strengths and available opportunities.
  • Implement changes to overcome weaknesses and manage the threats.
  • Provide vision/mission or direction to future of organisations
  • Build a dynamic and strong organisation
  • Help to achieve growing and stable organisation.

What are the benifits of strategic management?

Following are the benifits or advantages of strategic management -
  • Strategic management provides framework for decision making.
  • Strategic management takes an organizational perspective and looks at all the components and the interrelationship between those components in order to develop a strategy that is optimal for the whole organization and not a single component.
  • A strategic management process forces an organization to set objectives and measures of success. 
  • Strategic management provides overall direction to an organization.
  • Strategic management deals with long term development of an organization.

What are the disadvantages of strategic management?

  • One of the major criticisms of strategic management is that it requires the organization to anticipate the future environment in order to develop plans, and as we all know, predicting the future is not an easy task.
  • Strategic management process can be expensive especially for small and not profit organisations.
  • Strategic management processes generally provides long-term benefits to an organisation, so if you want looking for immediate results than may be strategic management process won't help you. 

 

PORTER’S FIVE FORCES

  • Porter’s five forces model is an analysis tool created by Harvard Business School professor Michael Porter.
  • Porter’s says that an organization should keep close watch on their rivals, but organization should also consider other factors belong to it, to decide whether an organization should enter into an industry or not.
  • This five forces help in determining industry structure and level of competition in such industry.

 

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