Demistifying The Concept Of Strategic Management: Background, Definition, History, Scope, Relevance and Challenges of Strategic Management By Stephen Isayinka

ABSTRACT

Scholars like Ghemawat (2002), Pfeffer, and Jeffrey (2009) have stated that strategic management provides an organization or a country with general direction, as well as establishing policies and strategies to attain those goals and allocating resources to implement those plans. An overview of strategic management in world history is provided in this research paper, which includes a definition, history, and context. In order to better understand strategic management’s role in today’s global and business affairs, this study utilizes secondary data. An examination of strategic management challenges in today’s business environment, such as lengthy implementation times and a need for competent planning and other impediments are examined in this paper.

KEYWORDS: Strategic Management, Organization, Competitive Advantage, Vision, and Objectives.

 INTRODUCTION

Without a long-term vision, a company is doomed to flounder. When you’re wandering around aimlessly, you’re like a wandering vagabond. Future prospects are never bright without a good strategy in place and the chances of corporate failure increase. This means that the discipline of strategic management, a relatively new one in the field of management, provides companies with an overarching direction for achieving their goals and successes. An organization’s strategy is regularly re-evaluated in light of the constantly changing business environment. Management in an organization is tasked with selecting the optimal course of action from a multitude of possibilities in order to fulfill the firm’s objectives (Nag, Hambrick, Chen, 2007).

It is common in corporate discourse to refer to the difficult process of setting goals and devising plans on how to achieve them as “strategic management.” A company’s strategy refers to the overall design or ‘plan’ it uses to move or react toward the set goals by employing its resources. It is common for strategies to have a comprehensive plan of action, as well as a planned allocation of attention and resources, to achieve wide goals. An organization is said to be efficient and operationally effective if its goals and strategies are on the same page. The parts must be put together to form a complete construction. Using strategic management, a firm can gain and sustain a competitive advantage by proactively responding to its unpredictable situations (Porter, Michael, 1985).

Because of its focus on streamlining administrative procedures, the Nigerian e-commerce juggernaut; Jumia is an excellent case study in strategic management. With the help of the sales organization’s many units and departments as well as the individual ambitions of each employee, Jumia will devise a strategy for achieving these objectives. To be successful, a company must have a single, united strategy for achieving its objectives (Turner, 2012).

2.0 OBJECTIVES OF STUDY:

The study’s primary objective is to establish a broad definition and context for the concept of “strategic management” in today’s society.

The specific objectives include;

2.1 To give a historical backdrop for strategic management, as well as its scope and significance.

2.2 To fathom the challenging elements in strategic management that impedes national and organizational productivity in today’s corporate climate, such as time consumption, difficulty in implementation, requirement for skillful planning and other bottlenecks\ roadblocks.

3.1 LITERATURE REVIEW

3.1.1 Conceptual Clarification:

To achieve the study’s wide purpose, basic ideas such as “Strategic management” must be understood and elaborated upon.

3.1.1.1 Understanding the Concept of Strategic Management:

The phrase “strategy” comes from the Greek verb “strategos” which means “army head” (Bracker, 1980).  It is the goal of strategic management to identify and describe the strategies that managers can employ to enhance their company’s performance and acquire a competitive edge. It is argued that a company has a competitive edge if it surpasses its industry rivals in terms of profitability (Turner, 2012).

Igor Ansoff, the “Father of Strategic Management,” believes that developing a strategy required predicting future environmental threats and developing appropriate strategic responses. Based on an organization’s objective, future vision, and values, Igor believes strategic management is based on unambiguous goal-setting. The method requires a commitment to strategic planning. Strategic planning is a component of business management that includes setting short- and long-term goals (Teece, 1984).

To put clearly, Strategic Management is about finding gaps in performance that can be fixed to improve performance and regain a competitive edge. Ultimately, strategic management is used to gain a competitive advantage. We live in a fast-paced world in the twenty-first century, which encompasses business and competitive contexts. Organizations that fail to pivot risk falling behind competitors, resulting in lower sales and stagnant growth (Courtney, Roger, 2002).

Strategic management, according to Alkhafaji and Abbass (2003), is the process of directing an organization’s assets toward achieving its objectives. There are many steps involved in developing a strategic plan, including establishing objectives, conducting market research, and evaluating the structure of a business. It’s important to keep in mind that in order to maintain a competitive advantage, companies must periodically review their success tactics. A company’s current situation can be examined, strategies developed, put into action and management approaches evaluated using the strategic management process.

4.0 BACKGROUND OF STUDY

4.1 The History of Strategic Management:

The specific beginnings of strategic management have been a source of contention among scholars and historians such as Bracker (1980), Ghemawat, and Pankaj (2002), who have been unable to establish a consensus. As a result, there are two opposing viewpoints on the historical roots of strategic management throughout history. They include;

4.1.1 Religious Perspectives:

The Old Testament of the Bible contains one of the earliest known debates about strategic administration, which dates back around 3,500 years (Bracker, 1980). As seen in Exodus 35, the Israelites were building their most important artifacts, the Tabernacle and its furnishings. Therefore, Moses picked leaders and ordered the Israelites toward manufacturing methods as seen in the scriptures. In both instances, Moses planned his resources to be as efficient as possible in order to carry out the vision that God had given him to fulfill (Hill; Jones, 2011).

After leading his people out of Egypt’s slavery, the Israelite leader known as “Moses” was presented with a great problem. As the lone strategist in charge of a nation with a population that may have reached a million, he felt hopelessly outmatched. Moses began distributing responsibility to other leaders, each of whom was in charge of a distinct group of people, on the suggestion of his father-in-law, Jethro. Through the delegating of authority in a hierarchical system, Moses was enabled to focus on making the most important judgments while simultaneously receiving assistance in carrying out those decisions. A single chief executive officer (the highest-ranking CEO) can no longer handle the strategic management responsibilities that exist today. Due to the extensive range of vital responsibilities allocated to vice presidents and senior executives (Pfeffer, Jeffrey, 2009).

4.1.2. Historians Perspectives:

The seminar writings of early authors such as Igor Ansoff (1965), Alfred Chandler (1971), Peter Drucker, Philip Selznick, and Bruce Henderson helped establish strategic management as a subject/discipline in the 1960s. For example, Ansoff highlighted in his work titled ‘Corporate Strategy (1965)’ that strategic management contained three components: planning, implementation, and internal resistance to change (Courtney, Roger, 2002).

Peter Drucker, an American author and management consultant, addressed key strategic themes in a seminar work titled “The Practice of Management Writing.” “What is our business?” is the first question that top management should address and ensure that the response is thorough. He explained that the customer’s reaction is the only one that matters. Eight areas in which objectives should be set include market position (including positioning in the marketplace), innovation and productivity, physical and financial resources, worker performance, attitude, profitability, manager performance and development (including management development), as well as public duty (which includes public duty), according to him (Nag, Hambrick, Chen, 2007).

Philip Selznick, a sociologist and pioneer in the subject of strategic management, used the term “distinctive competence” to describe the Navy’s efforts to set itself apart from the rest of the armed forces. Along with this, he developed and formalized the idea of balancing internal organizational characteristics with external environmental circumstances. It was in 1963 that Kenneth R. Andrews invented the SWOT analysis, which examines a company’s strengths and weaknesses in relation to the opportunities and threats that are available to it in its surroundings (Teece, 1984).

The conclusion is that the field of strategic management has advanced tremendously, becoming a more mature and well-established field within the management sphere as a result. There are thousands of years of previous ideas and ‘strategy’ books to draw upon in this topic. “Strategy” was previously associated with war and politics rather than with business, at least until 1960. During the 1960s, many firms established strategic planning departments to develop and apply formulation and execution approaches for their businesses (Hill; Jones, 2011).

4.2 Scope of Strategic Management:

Strategy management, as the art and science of administering an organization’s resources in order to achieve its goals and objectives, is separated into four stages: planning, implementing and evaluating.

a.  Strategic Intent:

Strategic management begins with the formulation of strategic intent, which entails identifying the organization’s goals and using them as a benchmark against which to measure its progress and success. Successful organizations have narrowed their focus, made specific actions and established metrics to measure their progress toward their goals. In this phase, companies determine their future focus, which could include profitability, shareholder wealth creation, or market positioning (Nag, Hambrick, Chen, 2007).

b. Strategic Formulation:

The next phase is to establish a plan, which entails conducting a SWOT analysis to determine the sucess of the organization. It is a process in which organizations meticulously assess themselves and their operations, both internally and externally, as well as the environment in which they conduct their operations. In this strategic study, the organization’s strengths, weaknesses, opportunities, and dangers are identified and discussed in greater detail. Using this technique, a firm can discover what it does better than its competitors, what it needs to improve on, and what advantages its competitors have over the organization. As a result, they will be better equipped to devise strategies for out-competing their competitors and adapting to changing market conditions. During this moment, businesses are also determining where they are and where they want to go. It’s time to put your strategy into action when you’ve finished your evaluation (Alkhafaji, Abbass, 2003).

c. Strategic Implementation:

Organizational design is a great place to start when it comes to strategic management, but it must be implemented as rapidly as feasible. Put plans in place to ensure the firm’s long-term viability, growth and expansion. More than 60 percent of people fail to reach their full potential, according to some estimates. If the organization is to achieve its goals, it must have properly constructed and maintained structures and systems and allocate resources, overseen change management and implemented risk mitigation strategies; develop decision-making processes; strengthen competitive capabilities; communicate strategy; and manage human resources by aligning individual r (Nag, Hambrick, Chen, 2007).

d. Strategic Evaluation

A last element of strategic management is assessing the impact of your strategic planning efforts. The performance of an organization’s strategy can be used to determine whether to continue on the existing path or to make adjustments to correct activities in order to adapt to changing market conditions. As a result, firms may constantly monitor and adjust their performance metrics and take remedial actions if necessary. In order to determine if a change in the overall company strategy is essential, a review of the strategic plan is necessary. Businesses should examine their methods on a regular basis to see what works and what doesn’t (Ghemawat, 2002).

4.3 Relevance of Strategic Management:

Individuals, corporations, corporate groups, and nation-states can all benefit from strategic management for the reasons outlined in the following;

a. Environmental awareness

Strategic management’s strategic planning process is vital to a company because it makes senior management more cognizant of shifting market conditions. Market oversupply with more competition, customer moral and aesthetic transformations as a result of environmentally friendly products as well as technology advances like automation are all part of our fast-changing world today (Teece, 1984).

Such rapid and substantial transformations have two consequences: Firstly, they open the door to new opportunities for the firm if it is properly positioned to take advantage of them; secondly, they open the door to new risks that might be detrimental to the organization if it is not well equipped to deal with them. If a company has not assessed the current business climate and made appropriate preparations, either method could have negative consequences. The strategic planning process, on the other hand, focuses the company’s attention on new opportunities and threats, and prepares it to pivot to them by asking important questions such as: What are our organization’s weaknesses? What are our organization’s opportunities? What are our competitors currently doing, and what do they seem to be planning to do in the future? Is it feasible that some of our company’s products will have to be modified as a result of this? What is the current state of our company’s cash flow? When it comes to capital expenditures, what are the needs of our organization? Does our market share meet the criteria for acceptable? How confident are we that our company is on the correct track? (Courtney, Roger, 2002) (Courtney, Roger, 2002).

b. Helps in defining Mission

Identifying a company’s broad objective is made easier through strategic management. The mission statement of a business explains what the organization does, why it exists, and what it hopes to accomplish in the future. A company’s role or advantages in a specific setting could be referred to as a mission. The mission of a company serves as a guide for setting goals and objectives (Alkhafaji, Abbass, 2003).

Senior management will be better prepared to cope with key strategic concerns arising from the following questions: What is our company’s competitive market? What requirements must we meet to compete successfully? Is a company’s size critical to its success? What are our company’s core strengths and weaknesses? Is our mission feasible given our skills, interests, and opportunities? How can we gain consumer trust? How does our company treat customers, suppliers, employees, and creditors? (2002).

c. Creates long-range objectives

Setting long-term organizational goals is another reason why organizations require strategic management. Overly general and vague goals, such as “Our goal is to create a profit,” lack precision and focus. Executives might use precise goals for sales figures, profit margins, market share percentages, return on investments, and other metrics to monitor success (Alkhafaji, Abbass, 2003).

d. Specifies policies and strategies

Strategic management also helps businesses develop rules and plans that affect resource allocation. Policies and strategies help senior management make decisions that align with the organization’s goals and objectives. Establishing the overarching master policy or strategy allows senior management to continuously assess the business environment, identify the nature of the business, work toward attainable goals, and create and deploy solutions that assist the corporation achieve its goals (Warren, 2008)

e. Helps an organization to gain competitive edge and make profit:

Strategic management can help maintain a solid bottom line in a market where technology is continually altering employment. Executives who understand their own company’s products or services, as well as their competitors’ strategies, can foresee and plan timely business activities to optimize profit. They can also plan for future opportunities and hazards (Nag, Hambrick, Chen, 2007).

Knowledge of global trends, competitive dynamics, and stakeholder expectations are all essential to the creation of a strategic vision. When a corporation knows what it wants to accomplish, it can allocate its resources in that direction. By making strategic decisions and planning for the future, organizations can increase their long-term competitiveness (Teece, 1984).

Beyond monetary compensation, strategic management may increase employee motivation. Employee productivity can be boosted by setting personal and organizational goals. Linked goals have been shown to improve both employee and organizational performance. It’s not enough to have a strategic management strategy in place. In order for a business to succeed, it must constantly evaluate and review its strategy and tactics. They are better equipped to deal with rapidly changing business conditions if they constantly evaluate their company structure and design. There is a strategic plan in place, and they can lead the organization there (Warren, 2008).

f.  Strategic thinking helps one to innovate

Strategy and innovation go hand in hand. Thinking can help you design inventive solutions to problems like the COVID-19 epidemic and prepare your firm for future catastrophes. Strategists must consider future business changes. During the COVID-19 crisis, for example, firms felt compelled to innovate to adapt (Ketchen, Boyd, Bergh, 2008).

Strategic management has resulted in virtual internships and innovative business solutions for multinational organizations, all aimed at improving the customer experience. Notably, a company that can innovate and strategize throughout a crisis will be able to find growth opportunities (Warren, 2008).

g. Strategy is essential for achieving sustainability:

Because of the urgency of the climate crisis, the United Nations Framework Convention on Climate Change (UNFCCC) and other non-profit organizations such as the Intergovernmental Panel on Climate Change (IPCC) have been able to exercise strategic leadership in the development of long-term green solutions. Examples include the fact that global sustainable investment reached $30 trillion in 2019; hence, it should come as no surprise that climate-conscious businesses are in great demand for strategists in this field (Porter; Michael, 1985).

4.4 Challenges of Strategic Management:

Because strategic management involves long-term goals and objectives, the issues are large and complex. Strategic management offers numerous advantages, but it also has limitations. Strategic management is complicated, difficult, time-consuming, and requires careful planning to avoid errors (Warren, 2008)

a. It is a Complicated Process:

Strategic management includes continuous analyses of external and internal environments, short- and long-term goals, organizational structure, and strategic control. Because these elements are interdependent, a change in one can affect others. In a bad economy, a company may have to cut staff. The external component, which is a bad economy, affects the internal environment, which is employment. The company may then need to review and adjust its aims. A company’s management, leadership, and structural systems all have an effect on decision-making (Ketchen, Boyd, Bergh, 2008).

b. Time Consuming:

When it comes to the strategic management process, managers spend a lot of time planning, studying, and talking about it, which can negatively effect the company’s day-to-day operations. When managers don’t deal with day-to-day concerns, it might result in lower employee productivity and lower short-term sales. If problems aren’t handled swiftly, staff turnover can increase. As a result, a company may be forced to reallocate valuable resources, thereby delaying the fulfillment of key managerial goals (Alkhafaji, Abbass, 2003).

c. Difficult to Implement:

A well-defined strategy must be implemented with the full attention, active participation, and accountability of corporate leaders as well as all company employees to be effective in the implementation phase. By building and increasing employee synergies, managers may ensure that the company’s goals and mission are supported by its staff. This can be quite tough to achieve in some circumstances. He or she may not feel responsible for their decisions if he or she is only involved in strategic formulation but not implementation (Warren, 2008).

d. Requires Professional Planning:

In order to achieve long-term goals, strategic plans can help lower the risk of failure. However, the planning process itself might lead to errors. Planning for the future is essential for any organization, as it involves varying degrees of uncertainty and change. To avoid mistakes, managers must have the necessary skills to design a strategy and eliminate risk factors. Contingency plans should be developed and monitored by managers in order to prepare for changes in the external environment that could hurt the organization, such as changing market circumstances or competitive dynamics or economic variables (Porter; Michael, 1985).

To conclude, it cannot be overstated how important it is in today’s corporate world to address the underlying challenges such as time consumption, difficulty in implementing changes, and the need for skillful planning, all of which continue to be major roadblocks to the achievement of the goals and objectives of various organizations.

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