At present, businesses are facing rapid change, due to new government regulations, product innovations, increased competition and an ever-evolving workforce. Businesses must adapt in order to stay relevant.
Strategic management involves planning, monitoring and analyzing the needs of an organization to meet its goals. Tools like SWOT (strengths, weaknesses, opportunities and threats) analysis help form strategies.
1. Understand the Environment
Environment plays an integral part in shaping business strategies. A company seeking to expand in a foreign country may need to modify their plans if its economy experiences recession, while one attempting to introduce an innovative product might find that its competition has already established a presence there.
Managers strive to reduce environmental uncertainty by tapping their experience and knowledge of their industry to locate reliable information sources (Wang et al., 2021). Furthermore, they attempt to synchronize resources to respond promptly when environmental changes take place.
Strategic management covers an array of activities, such as planning, organizing, leading and controlling. It enables an organization to meet both short-term and long-term goals more easily.
2. Develop a Vision
Strategic management requires leaders and managers to develop visions and goals that fit with a desired future state. A strategic vision helps provide long-term direction, outline activities and capabilities required, as well as foster an atmosphere of purposeful action.
Your strategic vision must be both ambitious and realistic based on your available resources. If, for example, you aim to exceed the current market leader with an aggressive plan involving an exponential increase in revenue over time, that likely won’t be achievable given your current financial limitations.
IF YOUR ORGANIZATION IS LARGE ENOUGH, it would be wise to engage employees in its strategic planning process. Involving employees will give them ownership over your vision and motivate them to carry out on planned strategies.
3. Develop a Mission
Once a company has a clear understanding of its environment and is aware of all of its strengths, weaknesses, opportunities and threats, it can create a mission statement to meet its goals. This step involves active information gathering and research. Typically senior management will visit employees, customers and suppliers to gain a more complete picture of the business – management consultants refer to this approach as active approach management by walking around (MBWA).
Establishing a strategy requires taking stock of what resources a company possesses, including capital, time, people and technology. Furthermore, this assessment allows managers to gauge whether current activities align with their planned strategy.
Implementation is key to any strategic change’s success, and resistance from employees to changes in company policy can often be overcome through transparency, training and planning.
4. Develop a Strategy
Strategies are planned courses of action created to address specific problems or situations. A business can create and implement plans with strategic thinking in mind to meet goals, lead change initiatives, control resources effectively and achieve growth and expansion.
Michael Porter famously described three generic strategies businesses may follow when setting their strategies: low cost leadership, product differentiation or market focus. In his 1980 book ‘Profit from People: Cost Leadership to Product Differentiation to Market Focus’.
Companies developing new strategies must carefully consider how it will impact employees and organizational culture. Anticipating potential sources of resistance by actively engaging employees in decision making processes, can help minimize any negative repercussions from new plans. Offering training or support services as needed to assist workers adapt can also be effective approaches.
5. Implement the Strategy
After creating a strategy, its implementation should be successful. A process known as strategic management provides this essential service: it involves identifying business challenges, planning an implementation strategy and then carrying it out effectively.
Implementation can take different forms from company to company; however, certain basic steps should be followed for successful implementation.
Companies should evaluate the effectiveness of their strategies using tools like SWOT analysis. This analysis helps companies identify opportunities and threats while also helping identify gaps in internal and external resources that could impede competition and profitability for a company.