Complex systems of the modern world require more than simple solutions. There is often a need to elaborate upon the context in totality, identify point that can be potentially leveraged to bring about long term changes, and find ways and means to manipulate the system into delivering the desired long term results. Welcome to the world of Strategic Management!
STRATEGIC MANAGEMENT lies at the top of the hierarchy of management decisions.
It differs from routine and day to day management in that it involves decisions that will shape the future of the organization. Unlike 'operational management' which takes care of operations within the organization by maintaining and improving the equipment and the processes, and the 'tactical management' which takes care of the problems and challenges faced by the organization on a day to day basis, strategic management reflects decisions that decide the future course of the enterprise and its long term fate.
One can define strategic management as consists of the decision making process pertaining to the direction in which the organization is intended to grow, that can drastically change the focus of the activities within it, its character, the product range, the marketing tactics and its market image and standing.
In simpler words, strategic management can be described as consisting of three steps. First is determining 'where you are now', second is determining 'where you want to go' and third is determining 'how to reach there'. All actions falling within the range of strategic management can be said to be included within these broad objectives.
The first step in strategic management requires 'self evaluation', 'situational analysis' and 'competitor analysis'. It is actually one of the most challenging tasks and requires great objectivity. These processes allow the management to take stock of how they are placed viz a viz their competitors and how are the circumstances and changes therein likely to impact their status.
The need for such evaluation was first describes by Philip Selznick in 1957. The processes for doing so gradually evolved and were later developed into SWOT analysis at the Harvard Business School. SWOT analysis consists of identifying strengths and weaknesses of the organization and their relevance to the capabilities and vulnerabilities of the organization in responding to the opportunities and threats provided by external environment.
This is perhaps the easiest to implement but the most critical step. It consists of evolving a vision for the organization in terms of its size, scope, nature and products. Peter Drucker described this step as 'Management by objectives' in as early as 1954. In many ways this is a step that often depends to a large extent upon the intuition of the leader. It is also the step that differentiates 'leaders' from 'managers'. In 1977, Abraham Zalaznik described leaders as those who inspire the team and care about substance, compared to managers who care about the processes, form and continuity. However, this does not mean that only CEOs determine where the organization wants to go. Many experts feel that strategic decisions are taken in two ways, one by the individuals and the other by the aggregate (Corner et al, 1994). The decisions by the aggregate are taken somewhat less conspicuously, in many small steps like encoding information, strategic choice and feedback. In other words, many a times, the organizations take strategic decisions without even realizing that they are doing so.
This is the step which involves maximum creativity and skills. It is a domain that falls somewhat between operational management and strategic thinking, and consists of identifying processes, techniques, products, advertising strategies and customer relationship techniques that can take the organization in the direction you want it to go. This step involves adding capacity for production, modifying marketing techniques, entering partnerships, focusing on particular clientele, deciding whether to compete on quality or price, identifying target segments of the market for growth, orienting publicity and advertising campaigns to focus on certain target groups, deciding the brands, brand ambassadors and public perception and identifying areas that can be outsourced or expanded. Thus this third step of strategic management actually consists of multiple steps in different operational areas. Significant theoretical work in this regard has been done by Igor Ansoff, who developed a strategy grid. In 1965, he introduced the concept of 'gap analysis', the process of identifying the gaps between where you are placed and where you want to be, before identifying the steps for narrowing those gaps.
Strategic management is a complex but very effective process that is essential for any organisation intending to take rapid strides. When successfully executed it helps the organisation select the best possible course of action for its future growth. However, it is not without risks and drawbacks. The risks arise as much from taking wrong decisions, as from the inability to accurately predict the challenges that the future may throw at you. One of the primary criticisms about it is that by committing the organization to a particular objective there can be loss of flexibility which can hamper the sustainability when faced with adversities. Another major drawback of strategic management is that by entering into too complex and elaborate analysis, there is always a risk of 'analysis paralysis' that may prevent the organization from making any timely strategy.
In spite of its complexity and its criticism, strategic management is now considered an essential ingredient of successful management and leadership. However, it may also be appropriate to say that though it is a complex analytical process, it is still influenced by individual instincts, brilliance and risk taking abilities.
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