Benefits Of Strategic Management Commerce Essay

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Research suggests that there is much to be done in enhancing strategic management. The poor positioning of many businesses indicates the need for new public policies and debate. Some directions might include encouragement of exports, rethinking and refining bilateral and multilateral trade agreements. At national, regional and local levels there is a requirement for industry policy and systematic implementation. Small to medium enterprises need encouragement to operate strategically, with passion and commitment, for the benefit of the enterprise and the nation. Promoting and sharing good practice is one effective way to achieve this. There are number of reasons why management is needed to strategize their policies. (Sharon and Wen, 2007).

These new demands on business stem from the changing world order of power and economics, from worldwide demographic changes and from new recognition of cultural diversity. In essence, strategic management interventions are intended to enhance the strategic capability and corporate performance of the organization (Brown, 2005). This report will cover all the important aspect how the organization can be benefited from strategic management. Organization should have clear vision and mission toward its objectives. And it is the duty of the managers who can perform the external environmental scanning and accordingly turn the internal settings to accomplish these strategic goals. On the other hand these organizations are needed to make available all the alternative plans in case of any failure, and base on available scenarios the manger can select the strategies with the capability not only to implement but also to control these strategies.

What is strategic management?

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According to Lyles (1990) cited in French (2009), strategic management is a process that deals with the entrepreneurial work of the organization, with organizational renewal and growth, and more particularly, with developing and utilizing strategy, which is a guide to the organization's operations. In this regard strategic planning or management represents the analysis and formulation of action plans. The key activity here should be the translation of business ideas and scenarios to consequences for the market, resources, structure, etc., of the company in order to find the opportunities for developing the company fast and correctly to the realization of the strategic thoughts (Drejer, 2004). Similarly, David (1989) cited in Yim (2008), defines strategic management as the art and science of formulating, implementing and evaluating cross-functional decisions that will enable an organization to achieve its objectives. There is a general consensus that the strategic management process contains eight elements, namely:

(1) Vision and mission;

(2) Objective setting;

(3) External environmental scanning;

(4) Internal environmental scanning;

(5) Strategic alternatives (crafting strategy);

(6) Strategy selection;

(7) Implementation; and

(8) control (French, 2009).

These elements are found consistently in the literature and taught in university business schools and undergraduate programmers. There is continuing interest in the study of the forces that impact on an organization, particularly those that can be harnessed to provide competitive advantage. Strategic management ideas and models which emerged during the period from 1979 to the mid-1980s and conceptualized by Michael Porter were based on the idea that competitive advantage came from the ability to earn a return on investment that was better than the average or the industry sector. The models have proved to be very powerful tools for analyzing industries and helping to formulate strategies.

Benefits of strategic management.

Many different authors seem to agree that the external dynamics of industrial firms has increased over the last decade or so. Some speak of increased competition and the need for more market-focused organizations, whereas others discuss technological pressures on firms. Regarding the former idea, it seems to have become accepted that whereas firms in the 1960s and prior could rely on stable (expanding) market conditions and customer-emphasis on price alone, today markets are less than stable and emphasis is on price, quality, delivery, innovation, and so on (Drejer, 2004,509). Globalization, while as old as capitalism itself, is in a new historical phase. As noted by Hamel and Prahalad, (1994) quoted in Sharon and Wen, (2007), the contemporary world is one in which a number of seemingly distinct processes are occurring more or less simultaneously and acquiring a global reach in a highly interconnected fashion.

According to Chandler (1962) cited in Nielsen (2005), strategic decisions over time lead to organizing capital and, ultimately, to a restructuring of the firm that yielded superior competitive performance. This view was adopted by Andrews (1971), who added the need to focus on internal strengths and weaknesses in concert with external opportunities and threats (often referred to as the SWOT analysis).

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A single event such the 9/11 attacks in New York impacts on every aspect of life - on business confidence, national and international security, personal safety and community relationships, not to mention the new wars that devastate environments. For many countries and firms, new strategic challenges emerging from globalization include massive industry restructuring with consequent job losses and enterprise relocation offshore. For instance, the Australian target to double exports by 2005 appears unachievable, given the continuing brain drain of skills and our apparent inability to conjure up new enterprises to replace those lost (Sharon and Wen, 2007). In comparison, China has to slow down its overheated economy focusing on a more balanced approach to economic development. China's entry into WTO has provided enormous impetus to development, and radically changed business environment and institutions. The modernization and privatization of state owned enterprises (SOEs) demonstrate the force and challenges of radical change, and the consequent difficulties in human and environmental terms. At the same time as these labor market readjustments are taking, firms also face emerging demographic trends. One currently attracting public attention in is the ageing workforce and concerns about paying for their retirement in several Western countries. However, proposals designed to keep them at work longer ignore the fact that their skills and personal development have not kept pace with the requirements of new workplaces and work arrangements.

Few businesses appear to be either managing strategically or demonstrating strategic leadership as they struggle to cope with demands on business resulting from the new world order of power and economics, demographic shifts, new recognition of cultural differences, and most critically, the planet's survival. There is no accepted practice in terms of planning cycles. In some cases marketing appears to play a major role ahead of other functional areas such as information systems, human resource management, and R&D. The arbitrary and irregular occurrence of strategic planning and management processes gives cause for concern. The accepted wisdom is that strategic management is a critical success factor for businesses today, and the process needs to be ongoing and participative to maximize "buy in" and commitment (Sharon and Wen, 2007). Turbulent and dynamic conditions for companies cannot be isolated from technological dynamics the basic problem of technological changes is that they often happen much faster than we as people, organizations or societies are able to adapt. On the outset, however, it is difficult to predict the impact of a new technology on a company's internal competencies and/or external competitive position (Drejer, 2004). In general, it has become accepted that technological life cycles in some industries seem to be decreasing compared to earlier, thereby putting pressure on firms to constantly innovate. As such new technologies have a strong competitive impact in general, and hence the technological dynamics will also influence the competitive dynamics of firms. In summary, it seems that there is general agreement that many companies have been subject to a radically altered change in their competitive environment since 1990. This has been given several names, e.g. hyper-competition.

A large proportion of companies are under a multidimensional competitive pressure these days. First, there is the competition from low-cost regions across the globe. Therefore, price competition is a kind of competition that few firms can hope to avoid and should be regarded as a condition for doing business. It is a condition that challenges companies to improve performance, use technology in intelligent ways to create competitive advantage and to develop competencies that use the know-how and skills of employees efficiently. In other words, most companies should get used to being under pressure on cost and price. At the same time, however, many companies experience a need for innovation both externally and internally. There is a hyper competition that is due to outsourcing, focusing and strong demands on suppliers and partners to take on competitively more responsibility and development.

Also many companies are part of the supply chain of major global players. This is why companies currently face a number of strategic challenges. It is no longer sufficient to produce and market products and services that are high quality at low cost. Companies of today also need to take the responsibility for product and technology development in order to continually innovate their products and services and even to create new needs in the marketplace. And in some industries this happens at a quickening pace due to decreasing of product and technology life cycles. Hence an important competitive priority of today is the ability to change quickly - often labeled strategic flexibility or agility - but in such an way that companies are agile as the same times as cost efficient (Drejer, 2004). The other side to these demands, however, is the opportunities for innovative and dynamic companies to differentiate themselves and achieve competitive advantage by proactive and fast strategic responses.

Conclusion

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The need for being concerned with strategic management for top managers has probably never been greater than in the markets of today and the near future. Clearly, today's companies will be under pressure to drastically improve their ability to develop businesses and change competitive position while at the same time maintain an effective operation of current activities. This generates a need to regard strategic management as something else and more than it is regarded at present. Thus, the challenge is to regard strategic management as a balance between (innovative) business development and effective operations. As such, it is quite possible to argue that hyper-competitive conditions are not a threat but an opportunity for agile and dynamic organizations. Therefore, we need to get managers to practice strategic thinking, innovation management and business creation. This seems to be the only way to deal with turbulent conditions, rather than the attempts to avoid dealing with the environment. Until businesses and firms locate strategic management as central to competitive advantage, success in an increasingly competitive world will remain a dream.