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Today, interest in strategic management is gradually growing. Many owners and managers of small, medium-sized and big enterprises use mechanisms of strategic planning and management. The scope of strategic management is extremely diverse. It gives huge advantages to organizations functioning in various spheres of modern society. These advantages include the rational use of limited resources and time. Thus, these and other benefits of strategic management have to be studied in detail in order to find out the reason of its importance for modern enterprises.
The Importance of Strategic Management
Researchers in the field of strategic management began to pay attention to enterprises in the nineties of the last century. It is connected with the fact that by that time, business turned into the main support of economy in many countries. Some researchers consider that formal procedures of strategic management are especially inappropriate for small and medium-sized enterprises which do not have neither administrative, nor financial resources. However, many specialists agree that for those decisions, which are connected with a choice of a suitable market or a product, strategic management is important for all enterprises. Nowadays, advantages of strategic management are obvious and connected with the fact that it allows organizations to operate preemptively to take preventive actions and to increase their commitment to change (Piccolo, 2011).
The achievement of the appropriate correlation between an organization's strategy and its environment, processes and structure has a positive influence on the organization's performance. Enterprises may not follow intuition-based strategies when they become large, create management layers as their environment is changing significantly. Since modern business environment changes become more complex, corporations apply strategic management as one of the methods to make the environment more flexible and manageable. The importance of strategic management consists in the importance of further informing about demographical, political and cultural changes influencing the enterprises around the world (Piccolo, 2011).
One of the reasons why strategic management is important for modern enterprises is that it is capable to have a considerable impact on the efficiency of an organization (Kozami, 2005). The most fundamental questions that can be answered by means of strategic management include why firms achieve success or suffer losses and why they have different levels of efficiency while functioning in almost identical environment. Researches on the factors influencing organizational efficiency showed that strategic planning and efficiency of companies are interrelated. In other words, organizations practicing strategic management tend to have higher rates of efficiency in comparison with those, which are not engaged in this activity. This fact makes strategic management very important in modern conditions ("Rule 3: The importance of strategic management," 2015).
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The value of strategic management in management of modern firms increases. Strategic management is the way of thinking and management which coordinates purposes and opportunities of an enterprise and interests of workers. It not only determines a general course of activity (behavior) of an enterprise, but also increases motivation and interest of all workers in its realization (Kozami, 2005). Today, strategic management is widely applied in diverse fields of human activity, providing numerous advantages to organizations. These advantages include the fact that strategic management creates a sense of confidence in employees and managers, promotes consistent development and implementation of managerial decisions and focuses on sustainable development in market conditions (Piccolo, 2011).
One more reason of huge importance of strategic management is explained by the fact that organizations of all types and sizes work in the conditions of continuous changes today. These changes can be both serious and insignificant; however, managers should deal with them constantly, and strategic management helps them. Following all stages of strategic management, managers analyze the corresponding variables and make reasonable decisions concerning what is necessary to do and how it should be done. If a manager uses strategic management, he or she copes with uncertainties of the environment better ("Rule 3: The importance of strategic management," 2015).
Strategic management is also important owing to the nature of organizations. They, as a rule, consist of various divisions, departments, functions and types of working activity (production, marketing, accounting, etc.), which need to be coordinated and directed on the achievement of specific organizational goals. This is what strategic management is also engaged in (Barnat, 2014).
The necessity of formation of strategic management system for modern business practice is also caused by ongoing integration processes. In the business world, there are industrial groups uniting technologically related enterprises and there is an active process of formation of financial and industrial groups. Commercial companies almost simultaneously with the creation of the core business began to organize financial and commercial groups. Commercial firms along with groups, which are supported by commercial banks, began to acquire industrial companies participating in privatization and investment competitions, actively trying to buy shares of attractive companies. Apparently, the central challenge now is movement from the current state of integration towards sustainable and effective development of the integration process, which is impossible without solving the problems of strategic management ("Rule 3: The importance of strategic management," 2015).
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Another important factor pointing to the need for strategic management is the process of globalization of business. Global firms consider the world as a unit in which national distinctions and preferences are erased, and in which is standardized consumption exists. Products of global corporations (for example Mars, Siemens, Sony, Procter & Gamble, L'Oreal and others) are sold worldwide and it is an important factor of competition in the national markets. The resistance to an impact of goods produced by global firms is possible only if companies will act using similar methods, i.e. developing strategy of work in the competitive environment, and if these duties are carried out by strategic managers (Barnat, 2014).
Finally, strategic management is important because it defines many decisions made by managers. Current considerable events in the business world, reported in various publications, are most often connected with strategic management. Besides, during one recent poll among owners of several firms, it was revealed that 69 percent of them had strategic plans, and 89 percent of the respondents were convinced of their efficiency in practice. For example, they managed to plan specific goals and to provide their employees with a uniform, complete picture of development of the organization. Although some management analysts declare that strategic planning becomes irrelevant today, most experts emphasize its huge value (Orcullo, 2008).
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The Role of the Major Stages of Strategic Management
As well as any management process, strategic management necessarily includes the stages of analysis, planning and implementation of the made decision. At the stage of strategic analysis, the top management traces the factors that are most important for the future of a company, called strategic factors. The purpose of the analysis of strategic factors is the identification of threats and opportunities of environment, and strengths and weaknesses of an organization. Well performed administrative analysis (or business diagnostics of an enterprise's activity) which provides a real assessment of its resources and opportunities is a starting point for the strategy development of the enterprise ("Rule 3: The importance of strategic management," 2015).
At the same time, strategic management is impossible without deep understanding of a competitive environment in which an enterprise works that assumes implementation of marketing researches. The emphasis on monitoring and assessment of external threats and opportunities and internal strengths and weaknesses of an enterprise is a distinctive feature of strategic management. The following important feature of strategic management is that it is future-oriented. Therefore, it is necessary to clearly define the course of development: something to strive for, what goals to set. For this purpose, corporate mission and long-term goals of an enterprise are defined on the basis of an assessment of strategic factors (Barnat, 2014).
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The second stage of strategic management is the formation of alternative directions of the development of an enterprise, their assessment and choice of the best strategic alternative to be realized. For this purpose, special tools including quantitative methods of forecasting, development of future scenarios and portfolio analysis are used. In addition, it should be noted that the process of the formation and the assessment of alternative options of an enterprise's development represents an independent value for management since it allows managers to comprehend possible directions for development (Kozami, 2005). This stage induces strategic managers to reflections concerning what can occur in the environment and how it can affect the enterprise. Development of scenarios, portfolio analysis and other methods of change anticipation increase flexibility of an enterprise. Besides, this effect is seen even when the plan was not carried out due to the fact that some of the hypotheses underlying the script did not materialize (Orcullo, 2008).
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When a general strategy is formulated, the attention of strategic management moves towards the process of its realization. Strategy is realized through the development of programs, budgets and procedures which can be considered as medium-term and short-term plans of the strategy realization. The most important components of this stage include available resources, control system, organizational structure and the personnel, which will realize the chosen strategy. At last, results of the strategy realization are estimated, and the control of the organization's activity is carried out by means of the feedback system, during which correction of the previous stages is performed (Hill, & Jones, 2009).
Moreover, it should be noted that, in reality, the strategy development process can be iterative (cyclic). Both definition and selection of the strategy can be made at the environment analysis stage. At the same time, the strategy assessment process can demand an additional analysis of the environment. Besides, over time, the strategy may be changed, therefore, monitoring and annual updating of strategic decisions and plans are necessary. Consequently, these corporate objectives are achieved by means of application of strategic management (Kozami, 2005).
A brief review of the basic stages of strategic management shows that it is an integrated management system aimed at prediction of the environment and the development of ways to adapt an enterprise to its changes. Strategic Management System, as previously shown, can help managers anticipate business trends, track and understand the impact of the external environment, make strategic choices and implement strategy. Modern enterprises should actively use special methods and techniques of strategic management because they help managers evaluate and rank different types of business, focus on critical issues and trends, and ultimately ensure the sustainable development of a company in the long term (Orcullo, 2008).
Modern Enterprises and Strategic Management Process
Since the conditions of modern business have an extremely dynamic character, the process of strategic management is continuous and represents constantly renewing cycles with intensive feedback. For modern enterprises, strategic decisions are never completed and are subject to continuous adaptation to the occurring changes. However, it does not mean that a company`s strategy has to be reconsidered on a daily basis. Such situation would be a sure sign of poor quality of management and, besides, it is unsafe since it may inevitably cause an organizational disorder, personnel disorientation and other negative factors (Hill, & Jones, 2009).
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However, stability of a strategy is relative: managers do not have the right to ignore unexpected events, new opportunities, unexpected threats and other fundamental changes. In addition, managers do not have the right to avoid overdue adjustments and to limit adoption of strategic decisions by regulations of formal planning. When considering the process of strategic management, managers remember that borders between stages are rather conditional, and not division of stages and formal sequence, but their integration and interrelations are most important for modern corporations (Kozami, 2005).
For example, setting specific strategic objectives is beneficial as they define business prospects. On the other hand, goal-setting and strategy choice stimulate further development of conceptual ideas concerning the place of an organization in business, the main directions of its activity, basic activities, standards of behavior, etc. Practical experience of the strategic plan implementation can considerably change the general concept, the planned purposes, and the chosen strategy. Thus, it should be noted that the relative importance of the process stages changes depending on a particular organizational situation: creation of a business or its stable development (Hill, & Jones, 2009).
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Taking into account all abovementioned information, it should be noted that the need for flexible management, which can help an enterprise adapt to quickly changing environment, led to the emergence of strategic management. Today, timely response to arising changes is reached by means of strategic enterprise management. A significant advantage of the application of strategic management is the fact that management of an organization relies on human potential as a basis of the organization, focusing production activities and making them correspond consumers` needs. Thus, strategic management makes firms and their production demanded in the modern market. Finally, strategic management is also important as it carries out flexible regulation and timely changes in organizations thus allowing them to achieve competitive advantage, to survive in the long term and to achieve their objects.
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