Strategic Management: Definition, Importance and Objectives

Strategic Management: Definition, Importance and Objectives

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Chanchal
Chanchal Aggarwal
Senior Executive Content
Updated on Mar 8, 2024 14:56 IST

Strategic management is the process of formulating and implementing strategies to achieve the goals and objectives of an organization. Strategic management is important in charting the future course of an organization. It ensures the organization’s ability to prosper and maintain competitiveness in an ever-shifting business environment.

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Strategic Management is the synergistic combination of Strategy and Management. Strategy involves making choices and decisions to achieve organizational goals, while Management focuses on planning, organizing, and controlling resources to execute those strategic choices effectively.

Strategic management (SM) played a pivotal role in Amazon’s phenomenal success. Amazon strategically focused on customer-centricity, continuously innovating its offerings to meet customer needs. By leveraging technology, building a robust logistics infrastructure, and forging strategic partnerships, Amazon achieved a competitive advantage in the e-commerce market. Their long-term vision, commitment to innovation, and strategic decision-making enabled them to outperform competitors, expand globally, and become a dominant player in the industry.

In this blog, we will discuss the meaning of strategic management and its related concepts. But before that, understand the meaning of Strategy.

Check Out: What is Business Strategy?

Table of Content

What is Strategy?

Strategy refers to a plan or approach designed to achieve a specific goal. It involves making choices and decisions about using resources effectively and overcoming challenges. It helps to determine the best course of action to achieve long-term success and stay ahead of competitors.

The company which is known for its strategic excellence is Amazon. Amazon’s success lies in its customer-centric approach and relentless focus on innovation. They have strategically expanded their product offerings, established a robust logistics infrastructure, and invested heavily in technology to create a seamless online shopping experience. Their strategic initiatives, such as Prime membership and personalized recommendations, have propelled them to become a dominant player in eCommerce globally. 

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What is Strategic Management?

Strategic management refers to formulating and implementing strategies to achieve organizational goals. It involves analyzing the internal and external environment, setting objectives, making strategic decisions, allocating resources, and monitoring progress. SM helps organizations align their activities, adapt to changes in the market, and gain a competitive advantage. The strategic management process is a structured approach that includes strategy formulation, implementation, and evaluation to ensure an organization’s long-term success and adaptability to its environment.

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Example of Strategic Management

Amazon employed several strategic management techniques to overcome local players like Snapdeal and Flipkart in the Indian market:

Strong Market Entry: Amazon entered the Indian market with significant investment and long-term vision, demonstrating its commitment to success. They strategically focused on building a robust logistics infrastructure, expanding product offerings, and offering competitive pricing.

Customer-Centric Approach: Amazon prioritized providing exceptional customer experience by offering fast and reliable delivery, easy returns, and a wide range of products. They leveraged their global expertise in e-commerce to create a seamless online shopping experience for Indian customers.

Continuous Innovation: Amazon introduced innovative features and services tailored to the Indian market, such as Hindi language support, regional content, and localized payment options. They constantly adapted their offerings based on customer feedback and market trends.

Competitive Pricing: Amazon employed a competitive pricing strategy to attract customers, offering discounts and deals on popular products. They leveraged their global scale and supply chain efficiencies to provide cost-effective solutions.

Strategic Partnerships: Amazon forged partnerships with local retailers, brands, and small businesses, enabling them to expand their product range and offer exclusive deals. This approach helped them tap into the vast Indian market and build trust among local sellers.

Investments in Technology: Amazon significantly invested in technology and data analytics to enhance customer personalization, improve operational efficiency, and drive insights for strategic decision-making.

These strategies allowed Amazon to differentiate itself, gain market share, and gradually surpass local players like Snapdeal and Flipkart in terms of customer trust, brand recognition, and market dominance.

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Objectives of Strategic Management

The objectives of SM are:

Setting Direction: It aims to establish a clear direction for the organization by defining its vision, mission, and long-term goals. It helps align the efforts of the organization towards a common purpose.

Creating Competitive Advantage: It identifies and develops strategies that give the organisation a competitive edge. This includes leveraging strengths, exploiting opportunities, and mitigating risks to outperform competitors.

Resource Allocation: Effective SM ensures optimal allocation of resources, including financial, human, and technological assets. It involves allocating resources based on priorities, maximizing efficiency, and achieving the desired outcomes.

Adapting to Change: It helps organizations adapt to the dynamic business environment by scanning for external factors, anticipating changes, and formulating proactive strategies. It enables the organization to stay agile and responsive to market shifts and emerging trends.

Enhancing Performance: The ultimate objective of SM is to enhance overall organizational performance. This includes achieving financial growth, increasing market share, improving operational efficiency, and delivering value to stakeholders.

Long-Term Sustainability: It focuses on ensuring the long-term sustainability and viability of the organization. It involves strategically considering the social, environmental, and ethical aspects to foster responsible and sustainable business practices.

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Importance of Strategic Management

Strategic management is important because it provides a structured approach for organizations to set goals. It makes informed decisions, allocates resources efficiently, and adapts to changes in its external environment, ultimately leading to sustained success and growth.

Clear Direction

Strategic management gives organisations a clear direction by defining their vision, mission, and goals. It helps align all stakeholders towards a common purpose and provides a framework for decision-making and resource allocation.

Competitive Advantage

It enables organizations to gain a competitive edge by identifying their unique strengths, differentiating themselves from competitors, and capitalizing on market opportunities. It helps position the organization favourably in the market and stay ahead of industry trends.

Adaptation to Change

In today’s dynamic business environment, strategic management is crucial for organizations to adapt effectively. It involves scanning the external environment, anticipating shifts, and formulating strategies. This is done to navigate challenges and capitalize on emerging opportunities.

Resource Optimization

Effective strategic management ensures the optimal allocation of resources such as finances, human capital, and technology. It helps identify strategic priority areas, maximise efficiency, and effectively utilise resources to achieve organizational objectives.

Performance Improvement

This process enhances organizational performance by setting goals, monitoring progress, and implementing corrective actions. It provides a framework for measuring success. It identifies areas of improvement and drives continuous growth and innovation.

Risk Management

Strategic management involves assessing risks and uncertainties associated with various strategies and making informed decisions to mitigate them. It helps minimise potential threats and seize opportunities while considering potential risks and their potential impact.

Long-Term Sustainability

It emphasizes long-term sustainability by considering social, environmental, and ethical factors in decision-making. It promotes responsible business practices, stakeholder engagement, and the creation of value that extends beyond short-term gains.

Conclusion!!

Strategic management is a vital discipline that empowers organizations to navigate the complexities of the business world. It involves setting clear objectives, devising effective strategies, and continuously assessing and adapting to changing circumstances. By doing so, businesses can remain competitive, seize opportunities, and achieve long-term success. Strategic management is not just a tool. It’s a mindset that fosters resilience and innovation, allowing organizations to thrive in dynamic environments.

FAQs

What is strategic management?

Strategic management is the process of formulating and implementing strategies to achieve organizational goals and gain a competitive advantage.

Why is strategic management important?

Strategic management is crucial for organizations as it provides direction, helps adapt to changes, optimizes resource allocation, improves performance, and ensures long-term sustainability.

What are the phases of strategic management?

The phases of strategic management include strategic analysis, strategy formulation, strategy implementation, strategy evaluation, and strategy review and adaptation.

How to develop a strategic management plan?

Developing a strategic management plan involves conducting a thorough analysis of the internal and external environment, setting strategic objectives, formulating strategies, implementing them, and continuously evaluating and adapting as needed.

About the Author
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Chanchal Aggarwal
Senior Executive Content

Chanchal is a creative and enthusiastic content creator who enjoys writing research-driven, audience-specific and engaging content. Her curiosity for learning and exploring makes her a suitable writer for a variety ... Read Full Bio