Every company, no matter how big or small, is managed in some way, whether the management function is formally assigned to a specific employee or not. Even in companies with more casual workplace cultures, approaching management from a strategic, long-term perspective can increase a business’s chance of success. Strategic management is the process of employing that kind of large-scale, objective-oriented approach through the use of three major components: environmental scanning, strategy formulation and implementation and strategy evaluation.
The first step in the strategic management process is environmental scanning, sometimes referred to as simply “scanning.” Basically, this is a process of quickly reviewing and processing anything that might have an impact on your business and how it operates.
Factors both inside and outside the company can influence a business. Managers are usually familiar with what’s going on inside their companies, so internal factors may be more obvious initially. For example, if your company is experiencing an unusually high rate of employee turnover, it's an issue management needs to address. Other kinds of internal factors include sales data, productivity rates and profit margins.
External factors may take a little more effort to find and process. Smart managers try to stay on top of industry news and data, since these factors may predict or reflect changes that will sooner or later hit their companies. Other external factors that should be scanned include overall data on the economy, the target market and the company’s competitors.
Each of these factors – internal and external – can become part of a thorough SWOT analysis. This is a strategic review of a company’s strengths, weaknesses, opportunities and threats. SWOT analysis helps give a company a more accurate snapshot of where it fits into the industry and the economy as a whole and identifies steps it can take to grow and improve its financial health.
Strategy Formulation and Implementation
Environmental scanning produces a lot of information. Strategic managers use that information and data to formulate a strategy that can be implemented company-wide.
A strategic manager develops thoughtful strategies to capitalize on the strengths and opportunities identified in the SWOT analysis. Ideally, the selected strategies also either bypass or minimize the importance of the company’s weaknesses and threats.
After the business buys into the manager’s proposed strategy, the strategic manager develops an actionable plan to execute that strategy. Each action or step in the plan is assigned to a specific employee or department. These workers are accountable for meeting specific goals in order to track the company’s progress towards the overall objective.
Implementing a smart strategy isn’t sufficient by itself to meet goals. Once the company’s employees are carrying out the planned actions, the company must also periodically assess the results of those actions.
As part of their process, strategic managers identify relevant metrics which are carefully monitored and assessed to make sure the company is on track to meet its goals. Usually, the evaluation phase will set out specific, regular reporting periods where managers and team leaders measure progress. This kind of scheduled approach helps to make sure nothing falls through the cracks or gets overlooked.
The strategy evaluation process is crucial in strategic management. This is how managers and businesses learn what’s working and what still needs to be adjusted to achieve the best possible results.
Each of the three components of strategic management requires excellent, consistent communication to make sure the company’s objectives are met.
All the stakeholders in a business must communicate well with each other. Ideally, this communication should offer each party the opportunity for input. This includes not only a business’s employees but also relevant external stakeholders as well. Vendors, industry leaders, customers and even legislators may have an impact on the planned strategy. If that’s the case, their input should be considered.
At a minimum, the company should communicate its plans through the appropriate corporate channels. Today’s technology makes it much easier for busy companies to keep external stakeholders informed. Blogs, email newsletters and social media mean it’s easier than ever before to communicate clearly with key constituencies.