12 Benefits of Strategic Management with Examples

Imagine trying to navigate a ship with no map. That’s what running a business is like without strategic management. Strategic management serves as the guiding compass, guiding an organization in finding ways out of challenges and in optimizing resource utilization to meet long-term objectives. Benefits such as increasing profitability and innovation, among others, will influence every level of business operation.

We will now learn about the 12 critical financial and non-financial advantages of strategic management, which will be demonstrated through examples, to demonstrate why strategic management is necessary for organizational success.

KEY TAKEAWAY: Creating the right strategy through strategic management would help businesses to allocate and utilize their finances judiciously to increase profitability. With it, businesses can easily monitor liquidity and ensure they have enough finances to meet long-term objectives.

Key Benefits of Strategic Management

Now that we know what is strategic management, let’s understand some of the financial and non-financial advantages of implementing a strategic management system within an organization to bring a substantial difference. Let’s get started!

Benefits of Strategic Management with Examples

Some of the advantages of implementing a strategic management system are discussed here.

What are the Financial Benefits of Strategic Management?

Benefits of Strategic management result in higher profits, sales, and productivity in firms. Main financial benefits include:

1. Profitability Management

Enables senior executives to get feedback from department heads. This feedback helps them understand the bottlenecks at different hierarchy levels in the organization and take relevant action to improve profits.

Based on existing conditions, the senior management can develop their strategic vision and improve financial gains. Consider the example of South Korea based LG Electronics. The company faced stiff competition and low profitability almost two decades ago.

Its pricing strategy to offer products at lower costs in rural areas helped increase revenue and sales volumes. It also worked on improving brand visibility, which made LG a household name in many countries.

2. Solvency Planning

Since strategic management deals with long-term goals, leaders analyze the existing assets, liabilities, and net worth in the balance sheet to know whether they can meet expenses in the long run.

The organization takes all necessary measures to optimize the asset-debt ratio and maintain solvency. Solvency planning is necessary to accomplish goals like growth and expansion.

3. Liquidity Monitoring

The benefits of strategic management allow companies to ensure that their cash flow aligns with their long-term goals. They check it by constantly tracking cash flow statements or liquidity reports.

A company facing the liquidity crisis often strains its relationship with vendors due to delayed payments. Businesses can undertake activities that result in monetary gains for performing operations by knowing about the situation on time.

For example, the electric vehicle (EV) manufacturer Tesla partnered with Panasonic for lithium batteries. The company also opened a factory to facilitate battery production.

Later, it acquired battery manufacturer Maxwell Technologies. The aim was to cut down battery costs and decrease the selling price of the vehicle to customers. This helped improve cash flow.

4. Improved Revenue Generation

Strategic management enables the senior management to make necessary changes in the existing operating processes. By looking at competitors’ strategies, the company can develop better ideas and tweak its processes to outperform them.

It helps them look for innovative ideas that can bring long-term benefits to the company in terms of revenue. It also helps bring in more investors and maintain relationships with the existing ones.

5. Prevents Legal Risks

The companies can include employee-related policies, conflict of interest policies for board members and other partner stakeholders, and other internal controls as part of the strategic management process.

They can consult their insurance provider, attorney, and other professionals who can help maintain legal compliance. Consultation helps avoid the risk of penalties due to failure in fulfilling legal obligations.

What are the Non-Financial Benefits of Strategic Management?

Strategic management allows an organization to be more logical, rational, and systematic in its strategies.

1. Revitalize Human Resources

Often includes proactive staffing practices that help hire the best talent and be more competitive. Companies can prepare detailed job descriptions, improve recruiting practices, provide 360-degree feedback, and take other steps that reduce turnover and boost employee satisfaction.

According to a case study published by Kesko Ltd., a trading sector company, the strategy development started from a generic level and was later devised at field level for different industries. Due to mutual trust and cooperation among the members involved, the company witnessed growth in sales, customer numbers, and market share.

2. Identify Problems

Enables a detailed analysis of the organization’s strengths, weaknesses, opportunities, and threats. Based on the problems, the company can take relevant actions like changing the pricing model, recruiting more staff, adding distribution channels, etc.

For example, a new competitor opening a shop nearby can be a threat to your business. You can plan loyalty campaigns, discounts, special offerings and other strategies on time to keep your customers away.

3. Better Decision Making

You can make better decisions in a shorter time with the benefits of strategic management. For example, if you get the opportunity to take up a new project, you can make a better decision whether to invest resources in it or not. Given that a project aligns with your ideas, you can plan and allocate resources to the project.

4. Improved Understanding of Competitors’ Strategies

Enables organizations to learn all the practices followed by their competitors. They can then implement their strategies without imitating them. This move can help in strengthening your business and meeting brand awareness goals.

For instance, HP maintained a competitive advantage over the years by refining the marketing strategy and re-branding sometimes. This helped ensure that its products met its customers’ evolving technological needs.

5. Higher Stability

By selling to new markets, acquiring new businesses, and adding new products, you reduce your dependency on individual entities. Your profits do not depend on the success of a single product or client.

If you have just a few clients, you might have to work completely on their terms to prevent your business from shutting down.

6. Offers an Organizational Perspective

Instead of focusing on a single component or department, strategic management focuses on the organizational viewpoint and analyzes the department’s functioning.

This helps identify the potential improvement areas in the overall functioning and formulate strategies that help departments to focus on improvement to work towards the organizational goals.

7. Creates a Better Company Future

Your organization’s effectiveness automatically increases when the strategic decisions are implemented properly. They help to set a framework for the entire organization to work according to the set organization goals.

This increases the chances of accomplishing goals that bring both profit and success to your organization.

KEY TAKEAWAY: Leveraging the strategic management will leave a positive impact on the business procedures. From understanding the market trends, analyzing the external environment to formulating effective strategies, businesses will greatly benefit from it.

Conclusion

Strategic management is more than just a tool to plan; it’s what lays the bedrock upon which sustainable success is built. It’s the avenue through which organizations can align resources, anticipate problems, and create innovation to succeed in competitive markets.

Whether it’s financial performance or operational efficiency, all is assured with the help of Strategic Management. Therefore, businesses that follow strategic management ensure they achieve their intended goals as well as have a sure foundation for a prosperous future.