Reasons for Strategic Management


Strategic management is used by successful firms, taught in leading business schools and is practiced by thousands of strategy consultants. The overwhelming support for strategic management suggests that there are strong reasons for using it. Managers should understand exactly what these reasons are so that they can assess whether or not they fit the needs of their respective firms.

Providing Direction

A reason for using strategic management is to provide a clear direction for the firm. An important component of strategic management is selecting goals to achieve; this allows a firm to be progressive and work toward its goals. Without strategic management, a firm may be reactive: it may simply react to changes in the marketplace after they occur. According to Richard D. Irwin of the University of California, Chico, strategic management allows firms to be proactive, meaning that they anticipate changes and are able to adapt more quickly.

Enhancing Performance

According to a presentation from the University of Texas at El Paso, strategic management is capable of increasing firm performance. This includes both the firm's financial and non-financial performance. Examples of increased financial performance include higher return on investment, reduced operating costs and increased profits. Examples of increases to non-financial performance include better exploitation of opportunities, improved marketing and higher productivity. These performance increases can provide a strong reason for managers to employ strategic management.

Measuring Progress

Strategic management is effective in measuring a firm's progress. A common method for measuring progress is through a gap analysis, which measures the gap between a firm's goals and its actual achievements. A gap analysis allows a firm to see if it is making progress toward its goals and how much improvement it must make in order to achieve them.

Structuring Decision Making

Ron Robinson, president of Abaris Consulting, argues that an important reason for using strategic management is that it offers a framework for making decisions within an organization. Businesses need to make many decisions and in a large organization, these decisions can quickly become incompatible and contradictory. Strategic management formalizes the decision-making process, making it possible for an organization to make consistent decisions across multiple departments and levels of the firm hierarchy.

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