Why Strategic Management Is Important (With Examples)

Working in management can involve a lot of strategising, especially when figuring out how to optimise workplace operations for maximum success. Strategic management involves creating a plan that details exactly how a company can apply their resources to meet the organisation's goals. If you work in a management role in a company, understanding what strategic management is and how it can improve operations can provide helpful insight for determining if this approach is worth implementing to help the organisation achieve its short- and long-term goals.

In this article, we define what strategic management is, discuss the benefits of using strategic management, explain how it works, explain strategic management methods, list five steps for implementing the management system and provide examples of how strategic management works throughout each step of the process.

Why Strategic Management Is Important

Strategic management is a management method companies use that involves making a specific plan with goals and objectives that they plan to meet in the future. To implement strategic management in a workplace, it is important for managers to evaluate and access the operations within the company that impact its overall success. Strategic management approaches can be helpful across various industries, no matter the size of the company itself.

Related: Your Guide To The Strategic Management Process

Types Of Strategic Management

There are two types of strategic management that can differ substantially in their approaches:

• Prescriptive strategic management: This approach to strategic management involves making specific plans using logic-based thought processes that depend on facts and figures as opposed to word-of-mouth or hearsay. Prescriptive management is a common approach when developing business strategies, as it uses hard figures to support business decisions.

• Descriptive strategic management: The descriptive approach to strategic management differs from the prescriptive one in that it is more concerned with the real-life implications of business decisions beyond how they appear on paper. Rather than going by what numbers would suggest to be successful results, descriptive management prefers to look at real-life examples of other businesses that have used approaches similar to the ones they are considering to examine exactly how effective they are in day-to-day situations.

Benefits Of Strategic Management

There are various advantages to implementing strategic management within a company. Some of these benefits include:

• Competitive advantage: Strategic management can benefit businesses by providing constant information about the market, thanks to the regular evaluations involved in the process. This allows companies to prepare for market changes and potentially win over new customers thanks to their preparation.

• Achieving goals: A major reason companies implement strategic management in the first place is to better identify and keep track of short- and long-term goals. Strategic management methods make it easy for managers to create steps and milestones that employees can work towards.

• Sustainable growth: Strategic management can also help companies achieve sustainable growth within their industries. This is due to the increased organisation within the company's operations that encourages exceptional performance from employees, which results in steady growth for the business over time.

• Cohesive organisation: Cohesive organisation refers to a company's ability to work together successfully for the better of the organisation. This often manifests in the form of strong inter-employee communication and the establishment of a common goal that encourages individuals to work to their fullest potential.

Related: Strategic Vs Operational Management (With Career Options)

How Does Strategic Management Work?

Strategic management requires setting objectives for the company, analysing the actions of competitors, reviewing the organisations' internal structure, evaluating current strategies and confirming that managers implement these strategies company wide. While upper management implements strategies, ideas, goals or organisational challenges can come from any member of the company. Many companies employ strategists whose job it is to think and plan strategically to improve company function.

Related: What Is Corporate Strategy? (With Types And Importance)

Strategic Management Approaches

Here are two common approaches to strategic management you can implement in the workplace:

SWOT analysis

A SWOT analysis is a type of strategic management method that involves having individuals analyse how internal and external factors can impact performance and results. SWOT is an acronym that stands for:

• Strengths

• Weaknesses

• Opportunities

• Threats

The internal factors of a SWOT analysis are the strengths and weaknesses of the organisation's operations. Identifying these positive and negative factors allows for companies to determining where they succeed and where they fall short, which they can take into consideration when making management and operational changes. The external factors of a SWOT analysis are opportunities and threats. These also represent positive and negative factors, but differ from internal factors because they occur outside of the subject that the manager is evaluating, making it harder to change them directly.

Related: SWOT Analysis Guide (With Examples)

Balanced scorecard

A balanced scorecard is a strategic management method that involves using four performance areas of a company, known as legs, to determine where management can make improvements. The four legs of a balanced scorecard are:

• Financial data

• Customer perspectives

• Business processes

• Learning and growth

This approach provides a streamlined option for identifying how effective various components of an organisation are. Managers can then apply these findings to their decision-making when updating company operations and standards.

Related: What Is A Balanced Scorecard? (4 Perspectives And Examples)

5 Steps Of Strategic Management

While there are different approaches and frameworks for strategic management, there are typically the same five steps in the process:

1. Identification

The first step in this type of management is evaluating the company's current direction. This often includes understanding the company's goal, mission and overall strategic direction. Assessing where the company's current process will help you achieve your goal.

2. Analysis

Once you understand the current process, you must analyse the details. You can ask questions like 'What is working?' 'What is not working?' and 'What input from organisational stakeholders can you gather?'. This is the time to answer questions that will help solidify the elements of the strategic plan. A SWOT analysis, or identification of strengths, weaknesses, opportunities and threats, is a useful tool.

Related: Guide: How To Write a Personal SWOT Analysis

3. Formation

Once you have the information you need, it is time to create an action plan for reaching the goal. Make sure the steps are clear, focused and directly related to the goal. Prepare easy-to-understand implementation guidelines if the process or procedure will impact many people within the organisation.

4. Execution

Follow the steps you outlined in your strategic plan. Make sure that all stakeholders are implementing the plan as designed for maximum efficiency. This ensures proper execution and higher likelihood of client satisfaction.

Related: Your Guide To The Functions Of Management

5. Evaluation

Evaluate the final product. Did you achieve your goal? Was the process implemented appropriately company-wide? Based on your answers to these questions, you can reflect and revise as needed.

Related: What Is Job Analysis? Importance And How To Conduct One

Example Of Strategic Management

Here is an example of ways to implement strategic management steps in the workplace:

1. Identification

A furniture company named Wood's Fine Furnishings is preparing to introduce a new line of kitchen tables. They decide to implement strategic management to ensure that the product release goes smoothly, efficiently and consistently across all of their retail locations.

2. Analysis

In the past, Wood's Fine Furnishings has suffered from inconsistent marketing and incorrect shipping costs with the release of new products in their multiple retail locations. Before the release of their new kitchen table line, they run a SWOT analysis to see how they can improve the process.

Strengths:

• Quality product

• Several locations for the ease of purchase

• Flat shipping rate

Weaknesses:

• Poor communication between store managers and between store employees

• Shipping rate applied multiple times at some stores

• Inconsistent marketing strategy

Opportunities:

• Unified marketing

• Transparent fees

Threats:

• Wood's Fine Furnishings' main competitor released a line of kitchen tables last quarter

Related: How To Use Strategy Formulation: A Step-By-Step Guide

3. Formation

Using their SWOT analysis, Wood's Fine Furnishings creates a strategic plan for the release of their kitchen tables. It includes providing consistent marketing collateral, both print and digital, to all retail locations. It also includes sending a representative to each retail location to explain how to apply the shipping rate to all purchases. The support team sets up an internal messaging system so store managers can communicate quickly and easily about challenges and successes in their stores.

4. Execution

One month before the release of the new kitchen tables, the marketing team provides the marketing collateral to all retail stores. Every store receives the same guidance on how to implement the marketing items effectively. Two weeks before the launch, store managers receive training as a group on the new messaging system. The trainers field questions and make sure every manager has the messaging service set up on their company cell phone and office computer to be accessible at all times.

5. Evaluation

Wood's Fine Furnishings reviews the data from their kitchen table release one month after the first day of sales. They find that the marketing plan drove consumers to the retail location closest to them to see the tables in person. The internal messaging system was under-utilised by most managers, many of whom did not like customers seeing them on their phones while out on the floor. There were no issues with shipping costs during this release. The strategic managers take this data and use it as they plan for their next new product release.

Please note that none of the companies, institutions or organisations mentioned in this article are associated with Indeed.