Hello Friends, Today, we are going to discuss the characteristics and Importance of Strategic Management. Let’s start with some basics of the Characteristics of strategic Management.
The characteristics of strategic management decisions vary with the level of strategic activity considered. Corporate-level decisions are often characterized by greater risk, cost, and profit potential, greater need for flexibility, and longer time horizons. Such decisions include the choice of the business, dividend policies, sources of long-term financing, and priorities for growth.
Whereas, Functional level decisions implement the overall strategy formulated at the corporate and business levels. They involve action-oriented operational issues and are relatively short-range and low risk.
Functional level decisions incur only modest costs because they depend on available resources. They usually are adaptable to ongoing activities and therefore can be implemented with minimal cooperation.
And, Business-level decisions help bridge decisions at the corporate and functional levels. Such decisions are less costly, risky, and potentially profitable than corporate-level decisions, but they are more costly, risky, and potentially profitable than functional-level decisions.
Common business-level decisions include decisions on plant location, marketing segmentation, geographic coverage, and distribution channels.
Important characteristics of Strategic decisions are
- Non- programmed: – strategic decisions are unique and rare. They deal with uncertain and non-routine problem situations as they are complex in nature.
- Future-oriented: – Strategic decisions are future-oriented. They are made on the basis of predictions and projections. They are concerned with the long-term direction and scope of the organization.
- Dynamic: – They are dynamic in nature. They take place within a changing environment. Changing political, economic, socio-cultural, legal, and technological forces increase the complexity of strategic decisions.
- Top management-oriented: – Strategic management decisions are made by the top management of the firm. The values, philosophy, and expectations of top management greatly affect strategic decisions. So, the strategic decisions are top management-oriented.
- Competitive Advantage: – Strategic decisions help in gaining competitive advantages in the market by searching for unique resources and core competencies.
- Strategic fit: – Strategic decisions match the activities and resources of the organization with the opportunities in the environment.
- Commitment: – strategic decisions are long-term objectives of the firm and involve the long-term commitment of large amounts of resources.
- Choice: – Strategic decision is about making choice from among the strategic alternatives. It is a choice among the course of action for the long-term future.
Importance of Strategic Management
- Enhance organizational performance.
- Effective and Optimum Utilisation of Resources
- Reduce uncertainty.
- Change management.
- Participative management.
- Meet competition.
- Promotes Motivation and Innovation.
- Guide to Organisational Activities
Suman(Kul Prasad) Pandit is a graduate from Tribhuvan University with four-year experience in corporate and start-up sectors in UK and USA. Being a responsible & sustainable business enthusiast he is dedicated to business education to solve problems in entrepreneurship and business growth.