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Strategic management theory is the study of strategic planning, organizational development and implementation of a strategic plan in order to achieve an organizations long-term goals. It is the process of developing and applying a strategy to identify, understand and act on opportunities and challenges within an organizations environment in order to ensure its success. It is about making strategic decisions to gain advantage for an organization, now and in the future.
The strategic management theory framework typically includes four main steps in the strategy process: (1) setting objectives and deciding strategies for achieving the objectives, (2) assessing the external and internal environment, (3) formulating the strategies and (4) executing the strategies. The components of this framework are:
1. Set Objectives: Strategies are based on the objectives of an organization. Typically, objectives will be statements of what the organization hopes to achieve and how it will do it.
2. Assess the Environment: A comprehensive understanding of the external environment, industry conditions, competitor analysis and understanding of the internal environment is necessary.
3. Formulate Strategies: There are various forms of strategy, such as product differentiation and cost leadership. A strategy must be formulated based on the companys objectives, resources and capabilities.
4. Execute Strategies: This involves all aspects of implementing a strategy and managing it effectively over time. This includes operations as well as feedback loops such as performance measurement, assessment and control.
Strategic management theory focuses on the long-term sustainability of the organization and its ability to survive, grow and adapt in an ever-changing environment. An organization needs to stay competitive by continuously monitoring its external and internal environment, gathering relevant information from changes in the environment and responding to those changes in a timely and proactive manner. By doing so, an organization can gain competitive advantage over its competition and increase its market share.
The four main principles of strategic management theory are:
1. Alignment of strategy and objectives: The strategies and actions taken by an organization should be in line with its overall objectives.
2. Uncertainty and flexibility: An organization needs to be flexible and capable of quickly changing its strategies based on changes in its environment.
3. Long-term commitment: An organization needs to have a long-term outlook and plan for the future.
4. Performance monitoring and control: Performance should be monitored and tracked, and corrective action taken where necessary.
Strategic management theory is an important concept in the business environment and can be used to help organizations achieve their long-term goals. It helps organizations develop strategies that will help them stay competitive, increase their market share and improve their bottom line. An effective strategic management theory also forges a culture of collaboration and innovation within an organization, ensuring that every employee is working together towards a common goal.
