Strategic Management and Its Importance for Businesses

For any business to prosper strategic management should be applied in its running. There are different terms used in strategic management. One of these terms is strategic planning. Strategic planning is a broad term that is simply used to show a business practice of defining its policies. In looking at strategic planning, an organization usually considers its current practices, those people whom they work for, and the techniques they use to excel. (Lusch,& Lusch 1987)

This brings in the important question of mission. The strategic situation shows the mission statement of any organization. For a business to have a clearly defined mission in the future, it ought to know where it stands at present. This means that a business should look at its current situation to act as a pointer of where it is heading. (Treacy& Wiersema 1995) The strategic situation, therefore, shows where a company stands in its current undertakings. This shows its strengths and weaknesses and therefore points out areas where the organization needs to put more emphasis. In short, a strategic situation is a formulation put in by businesses to show where it is today and where it needs to be in a few years. (Fahey & Narayman 1986)

Another term to consider in strategic management is strategic direction. Though this term is closely related to the strategic situation, the two are applied differently in an organization. While a strategic situation looks at a company’s mission, the strategic direction looks at the vision that an organization has. Strategic direction is therefore a pointer of the road that an organization wants to follow to get to where they want to be. (Lusch, & Lusch 1987)

Porter’s generic strategies framework plays a key role in defining strategic management. First developed by Professor Michael Porter in 1985, the strategy shows that an organization can stay ahead of its competitors by having different products from that of its competitors. The model further suggests that a company can stay ahead of its competitors by maintaining low prices than one’s competitors. Though the model has its benefits, it has widely been criticized from different quarters. Though companies often earn a high profit by reducing their prices, the strategy can become primary at the expense of other key areas of the company. This often makes a company forget the key reason why it undertook such a process in the first place. By differentiating a company’s products in the market, one can charge a higher price for its products in the market. However, critics say that competitors who choose to copy the differentiated product can make a company lose its uniqueness. Though the focus has also been identified as a strategy that can make a company stay ahead of the competition, critics argue that the niche cut by the organization may fade away due to the changing customer preferences. (Porter1985)

Another tool used in strategic management is the Ansoff Growth matrix. This tool helps businesses to decide on the kind of products to deal in and decide on the best market growth strategies. This matrix helps companies to decide if it needs to market a new product or choose a brand that is in the market and modify it. Market penetration that is advocated by this strategy requires little investment to conduct new market research. This, therefore, reduces a company’s expenditure in looking for new markets. The other strategies that the Ansoff matrix promotes are market development, product development, and diversification. Although many people have hailed the Ansoff matrix as a good strategic management option, some people have criticized the model because of the risks carried by diversification. (Tutor2u n.d)

The other notable strategic tool used in strategic management is the resource-based view. This is simply a financial instrument that is used to determine and identify the strategic resources available to an organization. This theory is primarily used to identify the key income within an organization. It also seeks to identify if the said resources meet the criteria needed for an organization to prosper. Once the resources in question are found to meet the required criteria, the model proposes the best way to protect these resources since this in the long last improves the overall performance of an organization. (Grant 1991, p.117)

Strategic management is an important tool for determining and setting the success of any business enterprise. For a successful and smooth running of a business, an organization is required to use different aspects of strategic management to achieve this objective. Some of the key strategies that can be applied are strategic planning, using Porter’s generic strategy, and applying the Ansoff matrix.


Fahey,.L, & Narayman, V.K.1986, Macroenvironmental Analysis for Strategic Management & rdquo, West Publishing

Grant, R.M. 1991, “The Resource-Based Theory of Competitive Advantage: Implications for Strategy Formulation”, California Management Review; 33, (3), pp. 114–135.

Lusch, F.R, & Lusch, V.N. 1987, Principles of Marketing, Kent Publishing.

Porter, M.1985, Competitive Advantage, The Free Press, NY.

Treacy, M., Wiersema, F. 1995, The Discipline of Market Leaders, Addison-Wesley.

Tutor2u.n.d, anasoff’s product/market matrix, 2010. Web.

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