Benefits of Strategic Management
There are many benefits of strategic management and they include
identification, prioritization, and exploration of opportunities. For
instance, newer products, newer markets, and newer forays into business lines
are only possible if firms indulge in strategic planning. Next, strategic
management allows firms to take an objective view of the activities being done
by it and do a cost benefit analysis as to whether the firm is profitable.
Just to differentiate, by this, we do not mean
the financial benefits alone (which would be discussed below) but also the
assessment of profitability that has to do with evaluating whether the business
is strategically aligned to its goals and priorities.
The key point to be noted here is that strategic
management allows a firm to orient itself to its market and consumers and
ensure that it is actualizing the right strategy.
Financial Benefits
It has been shown in many studies that firms that
engage in strategic management are more profitable and successful than those
that do not have the benefit of strategic planning and strategic management.
When firms engage in forward looking planning and
careful evaluation of their priorities, they have control over the future,
which is necessary in the fast changing business landscape of the 21st century.
It has been estimated that more than 100,000
businesses fail in the US every year and most of these failures are to do with
a lack of strategic focus and strategic direction. Further, high performing
firms tend to make more informed decisions because they have considered both
the short term and long-term consequences and hence, have oriented their
strategies accordingly. In contrast, firms that do not engage themselves in
meaningful strategic planning are often bogged down by internal problems and
lack of focus that leads to failure.
Non-Financial Benefits
The section above discussed some of the tangible
benefits of strategic management. Apart from these benefits, firms that engage
in strategic management are more aware of the external threats, an improved
understanding of competitor strengths and weaknesses and increased employee
productivity. They also have lesser resistance to change and a clear
understanding of the link between performance and rewards.
The key aspect of strategic management is that
the problem solving and problem preventing capabilities of the firms are
enhanced through strategic management. Strategic management is essential as it
helps firms to rationalize change and actualize change and communicate the need
to change better to its employees. Finally, strategic management helps in
bringing order and discipline to the activities of the firm in its both
internal processes and external activities.
Closing Thoughts
In recent years, virtually all firms have
realized the importance of strategic management. However, the key difference
between those who succeed and those who fail is that the way in which strategic
management is done and strategic planning is carried out makes the difference
between success and failure. Of course, there are still firms that do not
engage in strategic planning or where the planners do not receive the support
from management. These firms ought to realize the benefits of strategic
management and ensure their longer-term viability and success in the marketplace.
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