Strategic management is identifying the purpose of being of an organisation and formulating and implementing plans that are designed to achieve its objectives (Pearce and Robinson, 2010). It helps a business entity interact with internal and external business environment in such a way that maximises profits. Thus, strategy is important and integral part of a business right from the stage of concept formation to plan implementation. The paper aims to understand the strategic management process that an organisation adopts to enhance performance and its utility in a running a business successfully. Five critical steps of a strategic management process are goal setting, analysis, strategy formulation, strategy implementation and strategy monitoring (Clayton 2012).
Why is Strategy Important to Business?
Goal setting involves formulating a company’s vision and mission statements, with emphasis on its purpose, values, and goals. It is important that the goals of the organisation are future oriented and forward looking. The vision and mission statements need to be clearly communicated to all the stakeholders of the company.
Analysis is the next step in the strategic management process that involves scanning the external environment and internal capabilities of the company. This helps in identifying the key strengths of the company and gives a direction to the strategy formulation process.
Strategy formulation is the third and most critical process of strategy management. It involves evaluating options that are desirable options in light of company’s mission and available resources (Pearce and Robinson, 2010). The company’s long-term and short-term strategies are built around the most desirable option. According to Gwin (2000), the four key attributes of an effective strategy is that it should be consistent with goals of the organisation, be adaptive to environment changes, provide competitive advantage and be feasible with the company’s resources. As the business environment is dynamic, strategic planning also needs to be done to manage contingencies.
Strategy implementation follows the strategy formulation stage. It involves reviewing the organisation structure, effective budget allocation, assigning roles and responsibilities to people, building technology platform and ensuring financial sufficiency. According to Gurowitz (n.d.), strategy implementation is inseparable from effective leadership and communication within the organisation. Overall, it involves mobilising resources and effective communication within and outside the organisation.
Monitoring and evaluation is critical to determine strategy performance. Strategy is evaluated based on predefined parameters, which are in line with the mission and goals of the organisation. The evaluation of key elements of strategy effectiveness acts as a strategic input for future decision making (Pearce and Robinson, 2010). Scanning the environment and monitoring related issues will help in redefining strategy in a more appropriate way.
Thus, strategy is critically important for an organisation. It helps a business entity prepare a future oriented plan to survive in a dynamic internal and external business environment. A futuristic plan is also essential for managing contingencies in the system. Goal setting and defining an organisation’s mission, purpose and philosophy in line with its vision is first step to strategy management. It gives a definite direction to an organisation. Effective implementation of strategy is also necessary for a business. It requires effective budget allocation and mobilisation of resources. Evaluating the implemented strategy is essential as it gives feedback for future strategy planning process.
Clayton, Jim (2012). The Five Stages of the Strategic Management Process. Retrieved from http://smallbusiness.chron.com/five-stages-strategic-management-process-18785.html
Gurowitz, Edward M. (n.d.). The Challenge of Strategy Implementation. Retrieved from http://www.gurowitz.com/articles/Strategy.pdf
Gwin, Carl R. (2000). A Guide for Strategy Evaluation. Retrieved from http://faculty.babson.edu/gwin/indstudy/strategy.html
Pearce, John A., II, Robinson, Richard B., Jr. (2010). Strategic Management, 12th Edition. The United States, US: McGraw-Hill