12 Benefits of Strategic Management with Examples (Financial & Non-Financial)

Summary: Strategic management is indispensable for any organization to thrive in the competitive world. With benefits of strategic management, businesses can meet their long-term goals, adopt new technologies for process automation, and track trends to outperform competitors.

You must have come across numerous case studies of different businesses talking about how they successfully overcame their process-related challenges. But what is common among all of them? Their well-defined strategic management approach.

Strategic management is a popular concept among business owners and most firms understand its significance. Irrespective of their size, companies analyze their position and develop strategies to obtain financial and non-financial benefits. It helps meet the goals and vision of an organization, remain competitive, and survive all odds in the long run.

What Is Strategic Management?

Strategic management can be defined as the procedure of developing and implementing plans that help an organization meet its objectives and goals. This might include formulating strategies, allocating resources, and planning the organizational structure.

This type of management takes place at different levels like the leadership level and the departmental level.

Difference Between Strategic Management vs Strategic Planning

Strategic management involves formulating, implementing, evaluating, and improvising on strategies to achieve an organization’s long-term objectives, considering internal and external factors.

While strategic planning involves the proposal and formulation of schemes to achieve a target. In terms of management, strategic planning helps optimize an organization’s operations by identifying existing problems. Strategic planning is used for creating a focused, timely, and beneficial strategic management process.

In addition, identifies actions to be taken, resources for allocation, appropriate time and the approach for executing the actions. Strategic planning’s function is to only identify the actions to be taken.

Strategic management focuses on producing strategic results while strategic planning focuses on optimal decision making. In other words, benefits of strategic management are action-oriented while strategic planning is analytical.

What Is the Strategic Management Process?

Strategic management process, it involves strategy development, implementation and analysis. It comprises analyzing the current organization situations, developing plans to accomplish goals, and executing those plans. Lets look at this entire procedure in detail below:

• Goal Setting

First, decide the short and long-term goals of your organization. Think about the individual, team, and department-level tasks. You must know the impact of these task accomplishments on the organization’s goals in the future before delegating responsibilities.

• Environmental Scanning and Analysis

In this stage, information is gathered, scrutinized, and provided for strategic purposes. Evaluating the industry environment is necessary to be aware of the latest trends and competitors.

You will get a clear picture of the resources required to gain an edge over competitors. You must also continuously analyze your processes, employees, and resources to improve.

• Strategy Formulation

Strategies are created at business, corporate, and international levels depending on the finalized objectives. The decisions are made for the best use of available employee connections with suppliers, dealers, government, and consumers.

Strategies must help improve the company’s competitive position without resulting in huge expenses. The strategies should also not have negative legal, economic, social, or political consequences.

• Strategy Implementation

A strategy is worthless if not enforced in a timely manner. This stage includes distributing resources, designing the organizational structure, developing systems, and managing human resources.

To put the organization’s chosen strategy into action, good communication and managerial skills are of utmost importance. These skills can ensure that all the departments readily agree to and work towards implementing new strategies.

• Strategy Monitoring and SWOT Analysis

The final step includes constant monitoring and preparing a remedial plan to improve the outcome of strategies. Managers must do a SWOT analysis to identify strengths, weaknesses, opportunities, and threats that may affect the organization. This stage is crucial for an organization to progress without obstacles.

Examples of Strategic Management

Let’s look at some examples where strategic management has been implemented to meet the overall objectives of the company:

1. Apple Inc

Apple’s Strategic Vision: Apple’s strategic management is deeply rooted on creating products which are both technologically advanced and beautifully designed.

Key Strategic Actions:

• Apple has gradually diversified its product portfolio from computers, mobile phones to watches.
• With integration of several Apple devices, the company builds its customer loyalty and brand stickiness
• By always challenging the status quo, Apple has cultivated their brand image in such a way that they can demand premium prices for their products.

Takeaway: Apple’s strategic management highlights the significance of a clear vision, innovation, and its constant focus on improving the customer experience.

2. Airbnb

Airbnb’s Strategic Vision: Airbnb has disrupted the typical hospitality industry by using technology to connect hosts with travelers and providing unique accommodations.

Key Strategic Actions:

• It offers a marketplace for guests and owners to transact for properties instead of owning properties.
• Airbnb strategically expanded its business in overseas markets with localization efforts and strategic partnerships.
• It offers an ‘Airbnb Community Center’ to build a community among guests and hosts.
• Airbnb focuses upon enhancing the user experience and providing a user-friendly interface with reviews, secure payment options, and personalized recommendations.

Takeaway: Airbnb’s strategic management highlights the power of disruptive innovation, user-centric design, and the significance of developing a strong community.

What Is the Need for Strategic Management?

Strategic management is critical for achieving organizational goals while overcoming all obstacles.

• Achieving Goals

Regardless of its sector and size, any company has numerous goals to achieve. These can be aimed at building industry leadership, international competitiveness, brand awareness, etc. Strategic management is crucial in successfully achieving all these goals.

• Overcoming Business Uncertainties

A business requires optimal investment and dedicated employees for its growth. However, business conditions keep changing, and companies have little influence over these factors.

Hence, there is no guarantee of profits in the future. Strategic management can protect companies from risks and employees from losing their jobs.

• Adopting New Technologies

Digital transformation of businesses is happening at a rapid pace worldwide. Customer demands are increasing, and innovations are being introduced constantly. Successful adoption and implementation of these technologies can be challenging and risky.

Strategic management helps organizations remain competitive as they integrate new processes and manage operations. It also helps in upskilling employees by enabling them to learn about new technologies.

• Fulfilling Social Responsibility

In today’s world, employees and consumers give a lot of value to an organization fulfilling its social responsibilities effectively. Strategic implementation can ensure that the company completes its planned tasks efficiently.

Fulfilling corporate social responsibility (CSR) is not only mandated by law but can also act as a unique proposition for an organization and sets it apart from its competitors.

• Beating the Competition

When you see old and new industry players profit and grow, you are quite likely to formulate your strategies and implement them. Strategic management helps businesses keep track of global trends and prevents them from becoming obsolete.

Characteristics of Strategic Management

Strategic management helps implement a long-term plan for strategy creation and improvements to achieve organizational goals. The main characteristics of strategic management are:

• Addresses the top management

Requires professionals in senior managerial roles to make decisions. There is a need to allocate resources and make decisions that can impact operations in several departments.

• Substantial resource requirements

Needs several resources such as workforce and logistics over a long period. Different departments in the organization are allocated and reallocated resources and responsibilities in this period.

• Dynamic business environment

Takes place for the long term in a changing business environment. This change can be economic, political, legal, technological, social or cultural.

• Future-oriented

Requires solving potential complex and uncertain situations. You select the most promising option among the strategic choices based on future predictions and projections.

• Multi-functional, long-term consequences

Strategic management impacts multiple business areas and long-term growth of the business. Once committed, businesses are likely to achieve greater success.

How Does Strategic Management Work?

The strategic management is completed in different stages. It starts with creating the goals that an organization needs to focus on to stay competitive and increase profitability. Here is a detailed elaboration on how strategic management works for an organization.

Step 1: Setting Goals and Objectives: The organization needs to determine and set goals according to the organization’s vision. The goals may be both short and long-term based on the purpose.

Step 2: Business Environment Analysis: The organization performs an in-depth analysis of both the internal and external environment to find potential threats, possible opportunities, etc. It will also help them to better understand their competitors.

Step 3: Strategies Formulation: Once the analysis is completed, the strategies are formulated based on the business goals and purpose of the organization.

Step 4: Strategies Implementation: After formulation, these strategies are implemented by creating plans, allocating the resources, involving different departments, etc.

Step 5: Evaluation and Improvement: After implementation, all the strategies are evaluated against the set goals and changes or modifications are made to improve these strategies.

5 Types of Strategic Management

There are different types of strategic management that an organization can use for formulating and implementing strategies aligning with their business goals.

These types follow a certain approach for developing plans based on the business requirement. Let’s discuss the major 5 types of strategic management as elaborated below.

• Linear Strategic Management

Under this, the organization identifies multiple risks and opportunities depending on the internal and external business environments. Once identified, the organization implements strategies suitable for mitigating risk-grabbing opportunities.

Organizations using this react to internal and external changes that do not have any major effects on the products and services offered.

• Adaptive Strategic Management

Under this, the organization evaluates the internal and external business environment for possible risks and opportunities.

Once done, it creates strategies that could help it in adapting to the changing business environment. Under this, they follow the concept of dynamic adaptation where organizations need to adjust to the current business environment.

• Interpretive Strategic Management

The organization focuses on understanding and implementing its mission and goals. With it, the organization continuously evaluates its strategy’s performance to determine whether the strategies are aligning to its objectives.

Majorly, these strategies are meant to meet the needs of customers, employees, and stakeholders.

• Expressive Strategic Management

With this type, emotionally intelligent strategies are created and implemented, considering their stakeholders’ opinions. Following this type helps businesses understand what their stakeholders think about their business and how their opinions can be used to shape plans.

• Transcendent Strategic Management

Under this, the company formulates and implements strategies for its long-term objectives. It considers the financial performance, environmental impact, and customer satisfaction to create strategies. By following this type, businesses can increase their company’s value in the long run.

KEY TAKEAWAY: Organizations need to conduct a detailed analysis of internal and external parameters to implement the best suited type of strategic management. Through the right implementation of strategies, an organization can gain a competitive edge and increase profitability.

12 Benefits of Strategic Management with Examples (Financial & Non-Financial)

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:

• 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.

• 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.

• 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.

• 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.

• 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.

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

What are the Non-Financial Benefits of Strategic Management?

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

• 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.

• 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.

• 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.

• 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.

• 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.

• 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.

• 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.

Limitations or Disadvantages of Strategic Management

• Uncertain Future

Based on anticipating the future environment and making plans accordingly. Companies can only use the available database to analyze environmental factors.

However, unforeseen situations may invalidate a strategy. The best way to prevent this situation is to follow an approach that is not highly dependent on future predictions.

• Not a cost-effective process

In fact, before implementing a strategic management process, companies need to analyze the cost to benefit ratio. Several small companies and non-governmental organizations find it difficult to bear the costs of implementing strategic management.

Many times, there are additional costs of hiring external consultants. Such companies require assistance from funding agencies and other volunteering organizations.

• Difficult implementation

It is a team effort and if anyone does not fully understand it, things can go wrong and affect the business adversely. Moreover, there might be internal disputes or a lack of adequate support from members in the management. It would be best if you have a strong leadership and proper resource allocation to achieve your goals.

• Lacks flexibility

This involves following a set of rules for a long period. The organization only takes up new opportunities that align with the implemented strategies. In fact, this restriction makes the process rigid and frustrating at times.

• Time Consuming Procedure

Senior management needs to invest a lot of time to implement the strategic management within your organization. Moreover, the managers also need ample time for learning about the nee management and training the staff regarding this. All of this might impact the everyday business operations the business might suffer in the long run.

What is the Goal of Strategic Management?

The goal of strategic management is to help organizations stay competitive by creating, implementing, and monitoring strategies. With it, organizations conduct in-dept analysis of both inside and outside environment to formulate strategies aligning with business goals.

In fact, organizations formulate plans by identifying benchmarks, allocating resources, estimating budget, and so on.

With this, organizations can keep their goals more organized and ensure that each employee is contributing to fulfilling business objectives in the right direction.

Conclusion

Strategic management is a highly beneficial process that can be applied to most organizations, given that you plan and implement it appropriately. So, if you know how to use it for your benefit, there are no inherent problems and start getting the benefits of strategic management.

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