Strategic management is a branch of management that studies how to organize the structure of a firm, what products the firm should sell, how it should position itself in the marketplace, where it should get its supplies and whether it needs to differentiate or compete on costs. Strategic management also deals with other issues, such as human resources policies, employee compensation plans, competitiveness and productivity. A course in strategic management is a part of many MBA programs.
Strategic management deals primarily with long-term issues that may or may not have an immediate effect. For example, investing in the education of the company's work force may yield no immediate effect in terms of higher productivity. Still, in the long run, their education will result in higher productivity, and therefore enhanced profits.
Strategic management helps managers find new sources of sustainable competitive advantage. Executives that apply the principles of strategic management in their work continuously try to deliver products or services cheaper, produce greater customer satisfaction and make employees more satisfied with their jobs.
Effect on Operations
Good strategic management always has a sizable effect on operational issues. For example, a decision to link pay to performance will result in operational decisions being more effective as employees try harder at their jobs. Operational decisions include decisions that deal with questions such as how to sell to certain customers or whether to open a credit line to them. Operational decisions are made in the lower echelons of the organizational hierarchy.
Managing the organization strategically fashion requires that the interests of shareholders be put at the heart of all issues. Whether the question at hand is expansion into a new market or negotiating mergers and acquisitions, shareholder value should be at the core at all times.