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What is Strategic Management

Posted in Business Management, Strategy on Feb 17th, 2014 | 0 comments

What is Strategic Management

There are three core elements to be discussed when it comes to strategic management.
  1. Analysis
  2. Decision
  3. Action

Strategic management is nothing but taking the organization or project or process to the next higher level by implementing strategic actions.

When we say strategic action or plan of action, it concerns both the internal and external environment thoroughly analyzed, to decide upon the future course of action.

Strategic management is oriented towards future development with the present environment and past experiences serving as the premises.

 

What is strategic management

 
Definition of important terms:
Strategic Management: Strategic management consists of the analysis, decisions, and actions an organization undertakes, in order to create and sustain competitive advantages.

Competitive Advantage: A firm having an edge over its competitors. For example, Narasus Coffee has established its foot hold very strongly in South India, because of its unique flavor.

The advantage can be in the form of uniqueness, service, customer satisfaction or availability.

Distinctive Competence: Strategy is all about being different from everyone else.

Sustainable competitive advantage is possible only through performing different activities from rivals or performing similar activities in different ways.

Think about this, if you do not keep your eyes and ears open as to how your competitors are planning to capture the market, where will you be in the next two or three years?

Suppose you are running a restaurant that offers multicuisine menus, what will be your plan of action to make it distinctive from your competitors and where would you want the facility to be located?

And how will you popularize your service?

Crux of Strategic Management:

So, what do we mean by strategic analysis?

Analysis or interpretation of strategic goals of the organization and also of the internal and external environment of an organization.
  • Vision
  • Mission
  • Goals
  • Objectives
All these are some of the means by which an organization devises its short term and long term plans and actions. Say, you are running a blog, your blog will be yet another blog among the millions of other blogs to start with. Two things to be considered if you want to survive and sustain. 1. Your blog should be unique in order to attract audience- Returning visitors are the key to success. 2. Search Engine Optimization is equally important to satisfy the search engines who are the carriers. In modern corporate firms, there is a separate wing established for strategic planning.

Next is strategic decisions:

Ask yourself the following questions! 1.What industries should we compete in? 2.How should we compete in those industries? 3.Domestic or international arena?  

Broadly speaking, in an automobile industry a car manufacturer would have to compete both with competitors in his own niche and other niches, say two wheeler manufacturers.

He must analyze why a person would want to buy a four wheeler instead of a bike, whether he owns a product that would satisfy the buyer in terms of service and features, what part of the demography he should target and what would be the value added services he might offer to the buyers, e.g., insurance and loan.

Strategic decisions are taken by the owners or senior executives of the top level management.

 Next, what do we mean by strategic action?

1. Allocation of resources- financial, human and other physical resources 2. Structuring the organization to bring the intended strategies to reality Focusing on two basic questions, 1· How should we compete in order to create competitive advantages in the marketplace?

For example, managers need to determine if the firm should position itself as the low-cost producer, or develop products and services that are unique which will enable the firm to charge premium prices-or some combination of both.

2· Managers must also ask how to make such advantages sustainable, instead of highly temporary, in the marketplace.

That is: How can we create competitive advantages in the marketplace that are not only unique and valuable but also difficult for competitors to copy or substitute?

Summary or Conclusion

Competitive advantage becomes competitive parity over a period of time. This can be materialized when two firms join hands with each other.

Citibank has a tie-up with Indian oil, where you can redeem your Citibank credit card points to fill up gas from Indian oil.

One of the Indian states Gujarat is a power-surplus state by installing solar power plants and also accepts lot of foreign direct investments.

It takes some courage and determination to present yourself in a unique manner backed up by a clear vision.