A strategic management process assists managerial staff in making sure organisations function efficiently. Using strategic management stages helps businesses and organisations use internal resources and inherent strengths to ensure that the workforce is tuned to maximise business growth. In this article, we discuss the basics of a strategic management plan and the steps required to implement a successful business plan and guide you on how to run your business efficiently and profitably.
What is strategic management process?
Strategic management is the method a company or business uses to organise, manage, plan, analyse and evaluate decisions for the efficient running of a business to achieve better performance. An effective strategic management plan can assist a company or business in:
- Allowing organisations to be proactive
- Increasing efficiency
- Establishing a direction for business and employees
- Focusing on important factors
- Identifying weaknesses
- Capitalising on strengths
- Supporting long-term survival in the market
- Re-evaluating strategies for business durability
- Creating trustworthy and committed employees
- Adapting to external factors
- Tracking progress
3 common aspects of strategic management
You can adapt strategic management for different needs, goals and objectives for your business. However, the models you use will vary depending on the organisational culture, leadership style and prior experience in establishing and implementing strategic management steps. The most successful strategic management processes consist of the following three fundamental elements:
A company's financial situation can directly impact the range and success of the strategic management process. An economically stable company can set higher goals, employ more people to achieve those goals, meet objectives in less time, create more complex strategies and focus on ongoing projects. A new business can have limited financial resources available. It may have to focus on separate goals that fit with their financial standing and company needs. The financial status of a company depends on factors such as revenue, equity, investment returns, cash flow, expenses and liabilities.
A strategic management plan is organic in nature, and a company must continuously revisit and make adjustments to the process when mild or severe changes in the company's business environment occur. Cost-cutting and increasing revenues to obtain more profits can be a target for many companies. Still, strategic management enables you to foresee the changes happening in the industry so that you can take corrective measures in time to stay ahead of others in the business.
Shifts in the competitive business market, transitions in the labour market, customer trend analyses and technological factors such as advancements or software changes can keep changing the business cycles. These changes make it necessary to revisit the business strategy, revise and adapt to the transition fast enough to retain a competitive advantage in the business.
Forecasting involves tracking such critical changes, gathering and analysing data, monitoring technological innovations and maintaining awareness about public policy related to the business. This process helps businesses adapt quickly and sustain or increase profits.
It is important to consider external circumstances as a dependency when devising a strategic management process model, such as identifying strengths, weaknesses, opportunities and threats. An example of an external opportunity that can impact your business is the availability and quality of vendors based on the goods and services required to manage and support your team.
For example, a challenge from external sources can be competitive wages or lower pricing of similar products from another company. You may need to adjust your human resources or pricing policies to retain or increase the market share for your product or service. Other examples of external factors to consider are the weather, hiring trends, demographics, government policies, changing federal and state regulations and emergent technology.
5 stages of the strategic management process
The fundamental process of strategic management consists of five consecutive stages: setting goals, analysing data, formulating strategy, implementing that strategy and monitoring it for effectiveness. Each of the five stages provides an essential base for the process.
- Setting goals**:** The first stage is to identify, plan and set your goals. When doing so, you must focus both on the long-term and short-term goals for your business. These goals must be communicated effectively with all members. Every team member must understand the importance of their role and its impact on the organisation's ability to reach the set targets.
- Analysing data**:** For this stage, the focus is on collecting useful, credible data, performing statistical analyses and generating reports to help in the decision making process. An accurate and timely decision based on the analysis of this data can impact productivity in a positive manner and enable the business process to achieve its targets. Proper data analysis helps you to understand your business from different perspectives, identify issues or concerns that may need different strategies and highlight the various needs and requirements within the organisation. It may also reveal the weaknesses and strengths of a business structure.
- Formulating strategy**:** You can use this data to create a realistic plan, distribute the resources available and define the scope of your goals.
- Implementing strategy: Often, the implementation is considered the most critical stage, where each team member has a complete understanding of how their actions impact goals and how the plan is put into action. Usually, all the resources are allocated and contingencies are placed at critical points in the strategy before the operation begins.
- Monitoring strategy**:** This phase represents the cycle of evaluation and adjustment that takes place as you review the impact, effectiveness and success of the strategic management process in place. You can revisit the plan to track progress, guarantee it aligns with project goals and make alterations and adjustments as necessary to stabilise and strengthen the overall strategy.
Different strategic management process models with examples
Every business adopts a suitable model that works best for its individual needs. The steps described above are a general guide to help you develop your own strategic management process, which is unique to your business or organisation and the goals you set. The following three general models can serve as a starting point for you to help begin your process of strategic management:
Business strategic management
The business strategic management model focuses on how a business or organisation positions itself within the market and their approach to the marketplace. Some things to consider when using this process are consumer target, brand positioning, products and services offered, geographic areas of focus and availability to new markets.
Listed below are some examples of business strategic management. Businesses and companies choose the appropriate option to align their strategy towards their vision and mission. Sometimes, they may even use a combination of these plans for enhanced success.
- A strategy map: A strategy map is a visual tool designed to communicate a business plan to accomplish organisational goals effectively. It delivers essential data across an organisation in a unified and straightforward method.
- SWOT analysis: A SWOT analysis, or SWOT matrix, is a strategic management model utilised to measure opportunities and risks as external forces. SWOT is an acronym that stands for strengths, weaknesses, opportunities and threats.
- Red-Blue ocean strategy: This strategic management model involves the development of uncontested market space, or 'blue ocean.' The 'red ocean' is saturated or developed market space. The blue ocean strategy consists of the creation and capturing of a new demand within the market to make market competitors irrelevant.
Operational strategic management
An operational strategic management process focuses on the internal functions of a business, ways to maximise resources and how to improve what is already in place. When using this model, some things to consider are areas for improvement within the firm, technology or software that can help productivity and areas for the professional development of leadership, employees and staff.
To amplify business efforts and ensure a more reliable success rate, companies often use some of the following examples of operational strategic management. A company will evaluate their needs and select what best fits their own business model.
- Market penetration strategy: Market penetration strategy involves capturing a more significant portion of the market. Attracting more customers away from competitors, adding more value to existing customers or targeting customers based on location or other demographic information are examples of market penetration.
- Supply chain improvement: Supply chain improvement entails creating a product through delivery. Aspects such as lowering the cost of production, using an environmentally focused approach, decreasing cost of materials by buying in bulk or improving floor layout within a store are all examples of streamlining the process of providing goods to consumers.
- Product development strategy: A product development strategy focuses on introducing new products and offering support for pre-existing customers as a part of improving services or methods. An example is to provide a checkout process without having to wait in line.
Transformational strategic management
The transformational strategic management model is the most comprehensive. It involves adopting a plan that overhauls the entire business structure of a company to keep it competitive in the marketplace. It is complicated in nature and can require drastic changes.
Transformational strategic management requires strong leadership to inspire, guide and evaluate the team. Often, transformational strategic management involves a shift in company focus or priority. Although not limited to just this list, some transformational strategies implemented by organisations tend to focus on these aspects:
- Consumer services: Offering customers a unique consumer experience will shift focus from products to the buyers and make them feel valued.
- Develop strong partnerships: Utilising strong alliances with partnered companies can expand your customer base and introduce your company to a broader audience.
- Knowledge management system and technology: Utilising reliable and integrated management systems such as CRM and ERP software can help streamline communication within an organisation. These technologies also assist in reaching the changing demands of the consumer faster and with ease.