What is Strategic Management?
Strategic Management is the ongoing process of directing an organisation to meet its objectives. Once goals have been set, policies and plans are developed, with resources allocated to implement and achieve them. Strategic Management is a vital function because it enables an organisation to quickly adapt to internal and external changes in order to maintain business sustainability, liquidity or competitive advantage. Strategic management involves two major sequential, iterative processes – formulation and implementation – with each providing input for the other.
Why is Operations Management?
Operations Management primarily focuses on administering business practices that improves efficiency and control costs, within the scope set by an organisation’s strategy. Its function is to manage the day-to-day activities that convert human resources and materials into services and goods in the most efficient way possible, allowing for profit maximisation. Management theory separates the functions of Strategic Management and Operations Management.
Strategic Management: Formulation
Formulation involves analysing how an organisation will compete in a specific environment and then using that information to make strategic management decisions, by setting short and long-term goals.
Aspects of the environment to analyse includes;
- External environment: Legal, political, technological, social, economic and ecological.
- Internal environment: Organisational resources – People, processes, finances and technological infrastructure
- Industrial environment: New entrants, substitute products, competitors and consumer purchasing power
Once the environmental assessment is completed, questions can be answered to provide insights that will help drive strategic decision making processes. Common questions can be;
- What is the organisation’s core business, product or service?
- Who is the ideal target segment for the organisation?
- What differentiates the organisation from its competitors?
- What are the opportunities and threats the organisation faces in the short and long term?
- What core competencies and skills are required in the organisation?
- How can the organisation grow and generate greater value for all stakeholders?
Strategic Management: Implementation
Implementation involves deciding how, where and when to utilise an organisation’s resources to meet the formulated objectives. This process determines organisational structure, organisational hierarchy and leadership roles, incentives, communication – internal and external – as well as other aspects.
In this stage of the process, objectives are often taken over by specific departments or functions: Sales, Marketing, Logistics, Operations etc. from where Strategic Management decisions then get implemented.