How Organizations Employ Strategic Management Concepts

1245 words - 5 pages

Organizations today are continuously evolving and employing new strategic management techniques to meet their potential. It is common for companies to regularly evaluate their performance through a gap analysis of where they are now and where they wish to be. This instructs their change in strategies and guides them to their goals. Organizations employ strategic management concepts to fill the gap between their actual performance and their potential.

Strategic management is concerned with a set of decisions and actions intended to improve the long-run performance of an organization (Boddy, 2009). It draws from the company’s will to adapt and survive in varying external and internal environments. Strategic management incorporates rationalization, planning ahead, setting clear goals, designing logical structures and monitoring systems for efficiency. It helps to determine a model of investment of resources, time, effort and capital. Thus it is a plan to reduce uncertainty about the future and to choose viable and potential solutions for growth.

Gap analysis is a measure of a company’s current performance as compared to its potential or predicted performance (Gap Analysis, n.d.). It is a useful gauge and assists companies in planning and organizing their teams, strategies, resources or products to move towards their potential performance. It identifies the gaps and reveals areas that can be improved. Hence, as seen in fig. 1, it is a means of classifying how well a product or solution meets a targeted need or a set of requirements with respect to time.

Figure 1: Gap Analysis, n.d.

The first question that gap analysis answers is ‘where are we now?’. It provides a basis for measurement of money, time, and human resources to achieve a particular result. This allows companies to assess and understand their market value and position better. There are several strategic management tools employed by companies that enable them to evaluate their current status like PESTEL and SWOT analysis.

PESTEL analysis (Political, Economic, Social, Technological, Environmental, and Legal analysis) defines the effect of macro-environmental factors on the business (Johnson & Scholes, 2002). It is useful in understanding market trends and direction for operations. As seen in fig 2, it takes into account the influence of several external factors that may influence a decision or a new business.


Figure 2: PESTEL Analysis, 2009
A SWOT analysis is a strategic management tool that involves evaluating a company’s strengths, weaknesses, opportunities and threats (Humphrey, 2005). A SWOT analysis identifies both internal and external factors that are favorable and unfavorable to achieve a business outcome (refer fig. 3).


Figure 3: SWOT Analysis, n.d.

The choice of tools used varies with industries and products. For example, business to business (B2B) and consumer companies would prefer to use SWOT analysis, while a global defense contractor...

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