STRATEGIC MANAGEMENT AT COMPANIES AND ITS RELEVANCE
Survival. This is currently the major goal in strategic management at companies. The market is increasingly more competitive and dynamic. Everyday we come across new barriers and competition, requiring us to be able to deal with shortcomings, changes and new trends, meaning – to be ready!
But after all, what is strategic management all about? Do you know how to properly apply it to your business? Find out now!
Strategic management concepts at companies
Before we approach the strategic management concept at companies, let us recollect where the word “strategy” comes from. The word derives from the Greek strategos, which could be translated as “the General’s art”. Yes, that’s right, strategy originates in the military scope, from the general’s art to overcome his opponents during war.
It was only after World War II that the word “strategy” was incorporated into the corporate world, becoming a part of managers’ competences scope, whose purpose is leading their team (army) to success, by overcoming the competition.
As of that milestone, several scholars started defining the expression “strategic management” in the corporate environment. Each from their standpoint, but always providing very similar elements.
According to the book Corporate Strategy, by Igor Ansoff, strategic managements at companies is the decision-making process guiding the organization actions over time, considering their relation with the environment in which it is inserted. To be effective, it must be planned, implemented and measured, aiming at guiding the organization behavior towards its goals.
To Ahlstrand Mintzberg, in Strategy Safari: A Guided Tour Through the Wilds of Strategic Management, the strategic management process is bound not only to rational analysis, but also to creativity and social transformation. The author believes it is about managing the changes to which the company is subject, so as to preserve its culture, while pursuing competitive advantage.
Differently, to Porter, in Competitive Advantage: Creating and Sustaining Superior Performance, the strategic management at companies is the search for a competitive position in the market, meaning, competitiveness! And at last, to Drucker, in his book An Introductory View of Management, strategic management at companies is transforming their business idea into real added value to all stakeholders in the organization, by means of an action plan comprising objectives and goals leading the company to profitability, competitiveness and survival in the market.
We could go on listing concepts about strategic management at companies. After all, in the last few decades, it has been one of the most debated subjects in the corporate environment. However, we believe that, from those definitions, you have already developed your own idea on strategic management at companies. Thus, let us proceed with the several angles of this process that is capital to the success of your business.
Corporate management comprises managing the whole company, regarding it as a complex set of areas and activities functioning to lead the organization to meeting its strategic goals.
In an increasingly dynamic and competitive environment, the skill to properly manage the company resources, in order to maximize results, is paramount, as the more the access to new technologies and management models increases, the more difficult overcoming the competition becomes.
Another aspect making corporate management indispensable is the constant changes in the market and the stages in the Economy cycles. Crises arise all the time, and also economic recovery periods are also becoming more frequent. Thus, companies must be flexible and smart to make the most of each moment with its pros and cons, and proceed with the activities without losing competitiveness.
In order to appropriately manage a company, the leader shall be able to use the resources available in a strategic way, assess inherent risks to the business and reduce uneasiness with systemic and integrated thinking.
One of the ways to attain excellence in corporate management is by adopting a management model guiding the venture actions, such as BSC – Balanced Scorecard, envisaged by Kaplan and Norton in Strategy Into Action, does.
According to this approach, the company shall be managed from four standpoints:
- Financial perspective: focusing on improving business profitability and cost-effectiveness;
- Customers perspective: focusing on customer satisfaction and consequent generation of new business;
- Internal business perspective: focusing on process performance and innovative capacity;
- Learning and growing perspective: focusing on continuous improvement of the company infrastructure, comprising tangible and intangible assets, such as team qualification.
By managing those four perspectives on an integrated manner, understanding how each one of them impacts the whole, it is possible to develop long-term strategic management. Results shall be constantly monitored, in order to ensure maximal corporate performance in the market.
People and human resources management
The shifts in the corporate environment brought about several changes concerning the concept of people and human resources management. We began at a mechanistic view, where workers were seen as mere resources to be optimized and replaced whenever needed, and got to a completely different interpretation: people as the actual competitive differential in organizations.
This new reality is the outcome of many studies and pressure for better quality of life and workforce valuing, but also of a new attitude by companies concerning their intellectual capital management.
Some authors define people strategic management as the total understanding of the human being in the work environment, comprising disciplines from corporate strategic management to Psychology and Sociology. Boxall in The Strategic HRM Debate and the Resource-Based View of the Firm approaches that new scenario as the ability the company has to generate cooperation, coordination and innovation, always aiming at overcoming competition in those three areas.
From the corporate point of view, managing people in a strategic way is capital to attain goals and maintaining internal motivation, and also strengthening the corporate culture and ensure talents retention. Wherefore, it is not possible to think about people strategic management as an activity belonging only in the people and human resources management department. It is a task for the whole organization, particularly leaderships.
Effective leadership is the means for professionals involved in the corporation to get inspired and motivated, and then act in a cooperative manner. As said by Hanashiro on a passage from Gestão do Fator Humano: Uma Visão Baseada em Stakeholders, people management strategy consists of retaining the employees loyalty and attaining maximal efficiency in the company by means of a win-win relationship.
Costs and sales management
For a long time, costs management was focused only on reducing manufacturing costs, aiming at keeping prices low and thus, gaining competitive advantage in the market. Nevertheless, as technology makes great strides, competing only at prices or focusing only on that business aspect to retain market leadership is not enough anymore.
Martins, in Contabilidade de Custos, highlights that costs strategic management impacts the whole production chain in the company. Thus, when considering strategic management as a whole, such advance is due to the fact that managing costs may make manufacturing processes more effective, and thereby, increase business profitability, as when talking about costs, we are talking about all added value related to the product or service in question.
Correct costs management also reflects in sale price formation, leading the company to understand what the real added value in its solutions is. Consequently, a more dynamic and effective sales cycle is provided, considering that more competitive products and services from a financial point of view are great arguments to convert customers.
Also note that costs strategic management may be focused not only on the manufacturing process, i.e., related to the solutions provided to the final customer. It should contribute to internal improvement, by means of processes optimization and decreased wastes.
As it is a subject encompassing the whole company, costs strategic management shall be known to all, not only to high management. Thereto, it is fundamental to raise awareness in your team and make it become an ally in innovation and corporation change processes.
Technological shifts started with Microelectronics Revolution, in mid 1960s, and constant advance of information and communication technologies since then, have been widely contributing to strategic management at companies.
All that it takes is analyzing the decision making process as it was twenty years ago and what it is like nowadays: previously, the managers insights prevailed, as well as market experience; currently, knowledge or the ability the company has to collect, store, process and interpret the huge amount of data generated on a daily basis are in charge.
Being able to analyze both the internal and external business environment, bound to market and Economy, is not an option to any company anymore. It is mandatory, considering that it is necessary to anticipate events and trends to maintain competitiveness.
As said by Oliveira in Sistemas de Informação Gerenciais: Estratégias, Táticas, Operacionais, qualified information helps in the decision making process, leading the company to attain its strategic goals more effectively and accurately. It also contributes to manage the variants impacting the corporate activity, so as to reduce business uneasiness and potentiate expected results.
Information management is also responsible for generating value to organization stakeholders, strengthening innovation and continuous improvement sense, by means of data revealing actual market requirements, and how to supply them with mastery.
Information management may be composed of four large processes:
- Identifying needs on information and requirements;
- Information classification and storage;
- Handling and presenting the knowledge acquired;
- Applying the knowledge to develop new solutions.
Based on that idea, we may conclude that information management is vital for business continuance, as that process causes the company to obtain business intelligence, learning to improve on a constant basis.
As could not be otherwise, for a company to have business intelligence, the appropriate technology, able to manage information in a dynamic and safe way, is required. Among possible solutions, there is Big Data, i.e., a set of technological solutions able to collect, store, process and interpret data collected as per the context the company is inserted in.
Marketing, or market communication, is intended to establish a trust relationship between company, customers and consumers. Based on that, marketing is an essential activity to any corporation.
Broadly, we are used to thinking marketing as a sales strategy, to make a certain audience notice the presence of your products and services in the market. However, it is more than that.
Marketing is strategic only when it is in line with business objectives and goals. It shall contribute for the company to attain the results expected, by means of segmented and customized actions. Thus, it is responsible for building the brand in the market and eliciting positive perceptions about the company. And also, strengthening the bonds with priority audiences and creating points of contact to facilitate dialogue with a qualified audience. Marketing decreases sales efforts, maximizing financial outcomes by attracting and retaining customers.
Each marketing goal shall be connected to a greater goal, strategic and vital for perpetuating the company. It shall also be specific and measurable, as by following performance indexes, more effective and profitable strategies for the organization are attained.
The marketing plan, namely, the set of actions to be developed, results from a previous strategic mind-set. It analyzes the company marketing context and therewith suggests actions to enhance its position.
By gathering knowledge on strategic marketing, we elicited seven fundamental items to prepare an effective marketing plan:
- Identifying the opportunity;
- Market analysis;
- Defining the products and/or services mix;
- Price formation and perceived value;
- Distribution channels;
- Communication mix for promoting company products and services;
- Action monitoring and control.
A company without a good marketing plan is doomed to disappear into so much competition, and also losing their market share and sales opportunities. So, never leave aside your company marketing. Thanks to it, customers and consumers get to you.
Tools for strategic management at companies
If on one hand, being an entrepreneur was easier 30 years ago, as competitiveness was much lower, on the other, the amount of management tools was less than satisfactory. Currently, we have several resources available to help us making better decisions in any strategic management area at companies, either people management, marketing or finance.
To not fill your head with tens of resources possibilities, we tried to list those tools that may be applied to any business area, making your analysis and decision making process easier. Please see below:
The SWOT analysis is a graphic model to help assessing the business internal and external environment. Basically, you make a comparison between its strengths and weaknesses, threatens and opportunities. The purpose is to understand where your corporation stands out and where it loses out to competition, and hence, search alternatives for differentiation and increased competitiveness.
BCG matrix is a tool to enable the identification of the most profitable products or services to your business. The purpose is bringing an analytical view on your solutions mix. Additionally, it keeps the balance between market share and potential market growth for products and services offered.
BCG matrix design is the same as that of SWOT matrix. However, the x-axis corresponds to market share and y-axis to potential market growth. After the graph is built, you place your products and/or services in the four quadrants formed. Thus, you’ll have four decision options, according to the classification of each solution:
- To increase the market share;
- To keep the market share;
- To obtain maximum return, taking advantage of the time to market and then close the operation;
- To discontinue the product or service because it is not profitable enough.
The decision making process may make everything much easier if you simplify the problem, i.e., make the right questions. That is the purpose of 5W2H, a strategic management tool that may be very useful in several situations.
The acronym corresponds to 7 essential questions you should ask yourself when preparing a project or action plan:
Try always to answer those questions straightforwardly, so as there is no space for double interpretation. Thus, not only you but the whole team will know exactly what should be done and the results expected.
PDCA is a great application cycle for 5W2H. It works as a continuous improvement cycle within the company, as seen below:
Having so much data and information to manage, tools are required to allow deeper analyses to be made without wasting time. Performance indexes follow-up, comparative reports for analyzing the competition and you own history, goals monitoring and decision making are some of the resources you must have for effective and accurate management.
If you are wondering if you will have to do all that by hand, calm down! There are systems available that already offer that kind of solution to your company, online and completely automated, such as STRATWs One. By using it, you neither have rework nor waste time by drawing graphs. Your only concern will be inserting data and analyze results and insights.
The relevance of strategic management at companies
We talked a lot about what strategic management concerns at companies, but we did not address the essential knowledge for you to start thinking the matter over: how relevant the strategic view is for the success of your business.
Obviously, you want to grow your business and make it prosper, and that requires a long-term view, meaning, establishing goals and objectives to be attained over time. However, if you do not plan how to get there, it will become much more difficult to attain the expected results.
That is where strategic management comes in, as it is the one guiding the company actions towards success. It helps making required changes and overcoming obstacles, in addition to decreasing risks and fully understanding what the business mission and view are.
By means of strategic management, you raise awareness in the professionals in your company about their responsibilities. It reflects on increased productivity and consequent business competitiveness. It is also responsible for helping in appropriate use of resources, reducing waste and maximizing the profitability of each action triggered by the venture. Thus, you should use strategic management as a guide to promote continuous improvement in your business, as well as ensuring the company survival over time.
See here our strategic map template.