Nonfinancial Benefits of Strategic Management
Strategic management is the formalization of management processes in order to achieve strategic goals; it is often implemented in order to increase profits or return on investment, but there are nonfinancial benefits to strategic management that should also be considered. Managers who are considering using strategic management should be aware of these specific benefits and how they can help to build a stronger firm.
Often, especially in a large corporation, it can be difficult to understand a firm's goals or the processes used to achieve them. Strategic management lays out a clear plan for a business to follow. While this plan may change due to unforeseen circumstances, it helps to provide a rough blueprint for the organization.
An organization is composed of many individuals. Often, these individuals make strategic decisions independently. If managers do not have an overall company strategy to follow, they could inadvertently make decisions and initiate projects that are at odds with each other, resulting in wasted time and resources. Strategic management provides the necessary overall strategy for line managers to follow when making individual decisions, thus unifying strategic decisions.
An important benefit of strategic management is that it makes the firm's performance measurable. Strategic management frameworks measure multiple firm metrics including reputation, process efficiency and knowledge acquisition. Measuring performance makes it possible for a firm to continue to develop and improve.
Without strategic management, firms tend to simply react to changes in the environment. Strategic management allows firms to proactively plan for the future and to anticipate potential changes. This makes it possible for a firm to avoid potential threats in the market while at the same time identifying opportunities that can be exploited.