Importance Of Strategic Management Commerce Essay

Importance Of Strategic Management Commerce Essay Strategic management is a combination of art and science for formulation, implementation evaluation of decisions that enables an organization to achieve its goals objectives. Firstly, it assesses its competition in a market and then sets goals strategies to meet its competitors. Secondly, managers carry strategies to achieve the best performance of their company. An organization has an advantage if their profit rate is higher than their competitors. 1.3 Value of Strategic Management: Value of strategic planning is obvious. The companies which plan strategically have a better financial position in a society than those organizations that dont. In todays world, Strategic planning is not only applied in the private sector but also in government owned firms which include government departments, hospitals educational institutions. For example, increasing costs of university education, competition from different universities offering good education in less price reduction in student loans by banks student education funds by government etc and this had led many education providers to research and assess their universitys aspirations to find out a market niche in which they can prosper and after planning they can apply their strategies if set goals are achieved then its an effective strategy. 2.0 Importance of Strategic Management: The importance of strategic management is discussed as follows: Strategies make a difference in the performance of an organization. It helps managers to overcome challenging situations to cope with uncertain environments. It indicates the need of changing making alteration in an organization (new ways of thinking applying latest precautionary measures) Many organizations are made up of different divisions and departments that requires coordination with each other, else there should be no focus on achieving goals of an organization. Its useful for both profit based non-profit based organization. 3.0 Components of Mission Statement: Mission statement is the statement of the role by which an organization intends to serve its stakeholders. It describes why an organization is operating and thus provides a framework within which strategies are formulated. It describes what the organization does (i.e., present capabilities), who all it serves (i.e., stakeholders) and what makes an organization unique (i.e., reason for existence). Once the mission statement is formulated, it serves the organization in long run, but it may become ambiguous with organizational growth and innovations. In todays dynamic and competitive environment, mission may need to be redefined. However, care must be taken that the redefined mission statement should have original fundamentals/components. Mission statement has three main components-a statement of mission or vision of the company, a statement of the core values that shape the acts and behaviour of the employees, and a statement of the goals and objectives. 3.1 Features of a Mission Statement: Some of its main points are discussed below: Mission must be feasible and attainable. It should be possible to achieve it. Mission should be clear enough so that any action can be taken. It should be inspiring for the management, staff and society at large. It should be precise enough, i.e., it should be neither too broad nor too narrow. It should be unique and distinctive to leave an impact in everyones mind. It should be analytical,i.e., it should analyze the key components of the strategy. It should be credible, i.e., all stakeholders should be able to believe it. 4.0 The Individual Steps in the Strategic Management Process: There are 8 steps of strategic management process which are shown in the form of diagram and also these are explained below: Figure 1: C:UsersacerDesktopSM.jpg Step 1: It includes the Mission Statement, also it includes its features which have been discussed above in Components of Mission Statement. Step 2: This step of strategic process is complete when management has an accurate grasp of what is taking place in its environment and is aware of important trends that might affect its operations. This awareness is aided by environmental scanning activities and competitive intelligence Step 3: After analyzing and learning about the environment, management needs to evaluate what it has learned in terms of opportunities (strategic) that the organization can exploit and threats that the organization faces. In the simplest way, opportunities are positive external environmental factors and threats are negative ones. Keeping in mind that same environment can can present opportunities to one organization and pose threats to another in the same or a similar industry because of their different resources or a different focus. Step 4: In this step,we move from looking outside the organization to look inside..Thats we evaluate the organizations internal resources..This step forces management to recognize that every organization no matter how large and powerful, is constrained in some way by its resources and the skills it has available. Step 5: Internal Resources or things that the organization does well are its strengths. And these strengths represent the unique skills or resources that can determine the organisations competitive edge are its Core competences. And when an organization lacks certain resources we label its weakness Step 6: It includes the analysis and counter checking of Mission Statement. Step 7-How to Formulate Strategies: Strategies need to be set for all levels in the organization. Management needs to develop and evaluate alternative strategies and then select a set that is compatible at each level and will allow the organization to best capitalize on its resources and the opportunities available in the environment. Step 8-Implementation of Strategies: The last step of strategic management process is Implementation. No matter how good a strategic plan is, it cannot succeed it its not implemented properly. Top management leadership is a necessary ingredient in a successful strategy. And finally results must be evaluated. 4.1 Strategic Management Avoiding Pit falls In strategic Management, a word SMARTER is used. Smarter is an acronym that can help organizations avoid a major pitfall in the development and implementation of strategic plans: Specific Measurable Acceptable Realistic Timeframe Extending Rewarding. 4.2 Advantages Of Strategic Management: The advantages and benefits of undertaking Strategic Management in a systematic way include helping an organization to: Clearly define its purpose Establish realistic goals and objectives consistent with its mission Ensure the effective use of resources by focusing on key priorities Establish an mechanism for informed change when needed The Individual Steps in a Strategic Management Process: 5.0 SWOT Analysis: A combination of external internal factors which results in an evaluation of opportunities that are provided by an organization. SWOT is an acronym of strengths, weaknesses, opportunities, threats. Basically SWOT Analysis is done frequently in order to identify a strategic position that an organization can achieve easily to carefully evaluate the companys position as compared to its competitors. When SWOT analysis is done, the organization reviews its mission objectives. Also opportunities provided by an organization are reviewed, either its mission objectives are truly existent or not, they require any modifications or not, and where any other changes are needed. On the other hand, if no changes are obligatory, management is ready to actually formulate strategies. Conclusion This assignment provides an overview of strategic management and strategy. Ideas about strategy span many centuries, and modern understanding of strategy borrows from ancient strategies as well as classic military strategies. We should now understand that there are numerous ways to conceptualize the idea of strategy and that effective strategic management is needed to ensure the long-term success of firms. The study of strategic management provides tools to effectively manage organizations, but it also involves the art of knowing how and when to apply creative thinking. Knowledge of both the art and the science of strategic management is needed to help guide organizations as their strategies emerge and evolve over time. Such tools will also help us effectively chart a course for our career as well as to understand the effective strategic management of the organizations for which we will work.