STRATEGIC MANAGEMENT IN COMPANIES AND ITS RELEVANCE
Survival. This is the major goal in strategic management in companies currently. The market is increasingly more competitive and dynamic. Everyday we come across new barriers and competition, requiring us to be able to deal with shortcomings, changes and new trends, meaning – to be ready!
But after all, what is strategic management all about? Do you know how to properly apply it in your business? Find out now!
Strategic management concepts in companies
Before we approach the strategic management concept in companies, let us recollect where the word “strategy” comes from. The word is derived from the Greek word strategos, which could be translated as “the General’s art”. Yes, that’s right, strategy originated from the military sector, from the general’s art to overcome his opponents during war.
It was only after World War II that the word “strategy” was incorporated into the corporate world, becoming a part of the managerial scope of competence. The manager, whose purpose is to lead their team (army) to success, by overcoming the competition.
From then, several scholars started defining the expression “strategic management” in the corporate environment. Each from their standpoint, but always providing very similar elements.
According to the book Corporate Strategy, by Igor Ansoff, strategic management in companies is the decision-making process guiding the organization actions over time, considering its relationship with the environment in which it is inserted. To be effective, it must be planned, implemented and measured, aiming to guide organizational behavior towards its goals.
Ahlstrand Mintzberg, in Strategy Safari: A Guided Tour Through the Wilds of Strategic Management, states the strategic management process is bound not only to rational analysis, but also to creativity and social transformation. The author believes it is about managing the changes to which a company is subjected to, so as to preserve its culture, while pursuing competitive advantages.
Differently, for Porter, in Competitive Advantage: Creating and Sustaining Superior Performance, strategic management in companies is the search for a competitive position in the market, meaning, competitiveness! And at last, according to Drucker, in his book An Introductory View of Management, strategic management in companies is about transforming a business idea into real added value for all stakeholders in an organization, by means of an action plan comprising objectives and goals leading the company to profitability, competitiveness and survival in the market.
We could go on listing concepts about strategic management in companies. After all, in the last few decades, it has been one of the most debated subjects in the corporate environment. However, we believe that, from those definitions, you have already developed your own idea on strategic management in companies. Thus, let us proceed with the several angles of this process that is key to the success of your business.
Corporate management is about managing the whole company, regarding it as a complex set of areas and activities working to lead an organization towards meeting its strategic goals.
In an increasingly dynamic and competitive environment, the skill to properly manage company resources, in order to maximize results, is paramount, as access to new technologies and management models increases, the more difficult overcoming the competition becomes.
Other aspects making corporate management indispensable are the constant changes in the market and the stages in economic cycles. Crises arise all the time, and also economic recovery periods are also becoming more frequent. Thus, companies must be flexible and smart enough to make the most of each moment with its pros and cons, and proceed with activities without losing competitiveness.
In order to appropriately manage a company, a leader should be able to use the resources available in a strategic way, assess inherent risks to the business and reduce uneasiness with systemic and integrated thinking.
One of the ways to attain excellence in corporate management is by adopting a management model guiding venture actions, such as BSC – Balanced Scorecard, envisaged by Kaplan and Norton in Strategy Into Action.
According to this approach, a company should be managed from four standpoints:
- Financial perspective: focusing on improving business profitability and cost-effectiveness;
- Customer perspective: focusing on customer satisfaction and the consequent generation of new business;
- Internal business perspective: focusing on process performance and innovative capacity;
- Learning and growing perspective: focusing on the continuous improvement of company infrastructure, comprising tangible and intangible assets, such as team qualifications.
By managing those four perspectives on an integrated manner, understanding how each one of them impacts the whole, it is possible to develop long-term strategic management. Results should be constantly monitored, in order to ensure maximal corporate performance in the market.
People and human resources management
Shifts in the corporate environment brought about several changes concerning the concept of people and human resources management. We began at a mechanistic view, where workers were seen as mere resources to be optimized and replaced whenever needed, and came to a completely different interpretation: people as the actual competitive differential in organizations.
This new reality is the outcome of many studies and pressure for better quality of life and workforce valuing, but also of a new attitude by companies concerning their intellectual capital management.
Some authors define people strategic management as the total understanding of the human being in the work environment, comprising disciplines from corporate strategic management to Psychology and Sociology. Boxall in The Strategic HRM Debate and the Resource-Based View of the Firm approaches that new scenario as the ability the company has to generate cooperation, coordination and innovation, always aiming at overcoming competition in those three areas.
From the corporate point of view, managing people in a strategic way is capital to attaining goals and maintaining internal motivation, and also strengthening the corporate culture and ensuring talent retention. Therefore, it is not possible to think about people strategic management as an activity belonging only in the people and human resources management department. It is a task for the whole organization, particularly leadership.
Effective leadership is the means for professionals involved in the corporation to get inspired and motivated, and then act in a cooperative manner. As said by Hanashiro in a passage from Management of the Human Factor: A Vision Based on Stakeholders, people management strategy consists of retaining employee loyalty and attaining maximal efficiency in a company by means of a win-win relationship.
Costs and sales management
For a long time, cost management was focused only on reducing manufacturing costs, aiming at keeping prices low and thus, gaining competitive advantage in the market. Nevertheless, as technology makes great strides, competing only on price or focusing only on that business aspect to retain market leadership is not enough anymore.
Martins, in Cost Accounting, highlights that cost strategic management impacts the whole production chain in a company. Thus, when considering strategic management as a whole, any such advance is due to the fact that managing costs may make manufacturing processes more effective, and thereby, increase business profitability. As when talking about costs, we are talking about all added value related to the product or service in question.
Correct cost management also reflects in sale price formation, leading a company to understand what the real added value in its solutions are. Consequently, a more dynamic and effective sales cycle is provided, considering that more competitive products and services from a financial point of view are great arguments to convert customers.
Also note that cost strategic management may be focused not only on the manufacturing process, i.e., related to the solutions provided to the final customer. It should contribute to internal improvement, by means of process optimization and decreased waste.
As it is a subject encompassing the whole company, cost strategic management should be known to all, not only to high-level management. Therefore, it is fundamental to raise awareness in your team about becoming an ally to innovation and corporation change processes.
Technological shifts started with the Microelectronics Revolution, in the mid 1960s, and the constant advance of information and communication technology since then, has been widely contributing to strategic management in companies.
All that it takes is to analyze the decision making process as it was twenty years ago and what it’s like today: previously, manager insights prevailed, as well as market experience; currently, knowledge or the ability the company has to collect, store, process and interpret the huge amount of data generated on a daily basis are in charge.
Being able to analyze both the internal and external business environment, bound to the market and the economy, is not an option to any company anymore. It is mandatory, considering that it is necessary to anticipate events and trends to maintain competitiveness.
As said by Oliveira in Sistemas de Informação Gerenciais: Estratégias, Táticas, Operacionais (Information Management Systems: Strategies, Tactics, Operations), qualified information helps in the decision making process, leading a company to attain its strategic goals more effectively and accurately. It also contributes to managing the variants impacting corporate activity, so as to reduce business uneasiness and potentiate expected results.
Information management is also responsible for generating value for an organization’s stakeholders, strengthening the sense of innovation and continuous improvement through data that reveal the real needs of the market and how to supply it masterfully.
Information management may be composed of four large processes:
- Identifying information needs and requirements;
- Information classification and storage;
- Handling and presenting the acquired knowledge;
- Applying the knowledge to develop new solutions.
Based on that idea, we can conclude that information management is vital for business continuance, as that process causes the company to obtain business intelligence, learning to improve on a constant basis.
As it should be, for a company to have a business intelligence system – or business intelligence – it is necessary to have the right technology, able to manage information with agility and security. Among the possible solutions is Big Data, that is, a set of technological solutions that allow the collection, storage, process and interpretation of the data collected according to the context in which a company is operating.
Marketing, or market communication, is intended to establish a trust relationship between company, customers and consumers. Based on that, marketing is an essential activity for any corporation.
Broadly speaking, we are used to thinking of marketing as a sales strategy, to make a certain audience notice the presence of a company’s products and services in the market. However, it is more than that.
Marketing is strategic only when it is in line with business objectives and goals. It should contribute for the company to attain the expected results, by means of segmented and customized actions. Thus, it is responsible for building the brand in the market and eliciting positive perceptions about the company. And also, strengthening bonds with priority audiences and creating points of contact to facilitate dialogue with a qualified audience. Marketing decreases sales efforts, maximizing financial outcomes by attracting and retaining customers.
Each marketing goal should be connected to a greater goal, strategic and vital for perpetuating the company. It should also be specific and measurable, as by following performance indexes, more effective and profitable strategies for the organization are attained.
The marketing plan, namely, the set of actions to be developed, results from a previous strategic mind-set. It analyzes the company marketing context and based on that, suggests actions to enhance its position.
By gathering knowledge on strategic marketing, we elicited seven fundamental items to prepare an effective marketing plan:
- Identifying the opportunity;
- Market analysis;
- Defining the products and/or services mix;
- Price formation and perceived value;
- Distribution channels;
- Communication mix for promoting company products and services;
- Action monitoring and control.
A company without a good marketing plan is doomed to disappear behind so much competition, and also lose their market share and sales opportunities. So, never leave aside company marketing. Thanks to marketing, customers and consumers can find you.
Tools for strategic management in companies
If on one hand, being an entrepreneur was easier 30 years ago, as competitiveness was much lower, on the other, the amount of management tools was less than satisfactory. Currently, we have several resources available to help us make better decisions in any strategic management area in companies, whether people management, marketing or finance.
So as to not fill your head with dozens of possible resources, we tried to list those tools that may be applied to any business area, making your analysis and decision making process easier. Please see below:
SWOT analysis is a graphic model to help in assessing a businesses internal and external environment. Basically, you make a comparison between its strengths and weaknesses, threats and opportunities. The purpose is to understand where your corporation stands out and where it loses out to competition, and hence, search for alternatives for differentiation and increased competitiveness.
The BCG matrix is a tool to enable the identification of the most profitable products or services in your business. The purpose is to bring an analytical view to your solutions mix. Additionally, it keeps the balance between market share and potential market growth for products and services offered.
The BCG matrix design is the same as that of the SWOT matrix. However, the x-axis corresponds to market share and the y-axis to potential market growth. After the graph is built, you place your products and/or services in the four quadrants formed. Thus, you’ll have four decision options, according to the classification of each solution:
- To increase market share;
- To keep market share;
- To obtain maximum return, taking advantage of the time to market and then close the operation;
- To discontinue the product or service because it is not profitable enough.
The decision making process may make everything much easier if you simplify the problem, i.e., ask the right questions. That is the purpose of 5W2H, a strategic management tool that may be very useful in several situations.
The acronym corresponds to 7 essential questions you should ask yourself when preparing a project or action plan:
Try to always answer those questions straightforwardly, so there can be no space for double interpretation. Thus, not only will you but the whole team will know exactly what should be done and what the expected results are.
PDCA is a great application cycle for 5W2H. It works as a continuous improvement cycle within the company, as seen below:
Having so much data and information to manage, tools are required to allow deeper analyses to be done without wasting time. Performance index follow-up, comparative reports for analyzing the competition and your own history, goal monitoring and decision making are some of the resources you must have for effective and accurate management.
If you are wondering if you will have to do all that by hand, calm down! There are systems available that already offer that kind of solution for your company, online and completely automated, such as STRATWs One. By using it, you neither need to rework nor waste time by drawing graphs. Your only concern will be inserting data and analyzing results and insights.
The relevance of strategic management in companies
We talked a lot about what strategic management means in companies, but we did not address the essential knowledge for you to start mulling the matter over: how relevant the strategic view is for the success of your business.
Obviously, you want to grow your business and make it prosper, and that requires a long-term view, meaning, establishing goals and objectives to be attained over time. However, if you do not plan a way to get there, it will become much more difficult to attain the expected results.
That is where strategic management comes in, as it is the one guiding the company actions towards success. It helps to make the required changes and to overcome obstacles, in addition to decreasing risks and fully understanding what the business mission and view are.
By means of strategic management, you raise awareness in the professionals in your company about their responsibilities. It reflects on increased productivity and consequent business competitiveness. It is also responsible for helping in appropriate use of resources, reducing waste and maximizing the profitability of each action triggered by the venture. Thus, you should use strategic management as a guide to promote continuous improvement in your business, as well as ensuring the company survival over time.
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