Category: Management Notes

With the increasing use of the computer, companies are becoming more interested in the development of a corporate wide, inte­grated management information system. The purpose of such a sys­tem is to bring all of the flows of recorded information in the entire company into a unified whole. Thereby it is hoped that the manager’s capacity to plan and control the company’s activities will be improved. Such a system is often seen as a marked improvement over current procedures.

As companies have attempted to introduce such a system, how­ever, a consensus seems to be growing, especially among some computer hardware manufacturers, that a more realistic approach is to begin with smaller systems, such as one in marketing, or in production.

As Business Week recently put it, “Skeptics are backing of and asking whether one big system is such a good idea after all.” The reason for this change in view is the growing awareness that these smaller subsystem, such as one for marketing, can per­haps be conceptualized in enough detail to be operational, whereas, in the current state of the art, the larger systems probably cannot.

The human mind simply cannot grasp the whole manage­ment operation with efficient clarity and detail to permit it to be structured and modeled. New concepts will probably have to be developed to aid us in thinking about such a complex phenome­non. In the meantime, management can proceed to develop the smaller systems. In building the smaller systems too, we can ben­efit by learning from the mistakes that were made with global systems.

Marketing information systems are really the frameworks used for managing, processing and accessing data. They can be simply a sharing of information by key departments, but are more likely to be some form of integrated system based around information technol­ogy. The important issue is that the information from such a system is presented in a way that is useful to the marketing decisions.

There are three basic components of a good marketing information system:

1. Information acquired via market intelligence
2. Information from operating data
3. Information library.

Marketing information system is a set of procedures and methods for regular and planned collection, analysis and presentation of information in making marketing decisions. It is an interacting, continuing, future-oriented structure of persons, machines and procedures designed to generate an orderly flow of information collected from internal and external sources of information.

It is an integrated combination of information, information processing and analysis, equipment and tools (i.e., software and hardware) and information specialists who analyse and interpret the collected information and provide it to decision-makers to serve their analysis, planning and control needs.

Marketing information system is a broader and more encompassing term than market research and a variation of the term management information system. Marketing Information System (MIS) is the structure of people, equipment and procedures used to gather, analyses and distribute information required by an organisation.

These are the data to be used as a basis for marketing decisions. Market research reveals that information is collected for a specific reason or project; the major objective is a one-time use.

Marketing information system is a consciously developed plan for information flow (side by side with goods flow) and it is an ongoing or continuous process.

Such marketing information systems are beginning to evolve, as the following two examples illustrate:

1. MIS to Help Develop Marketing Plans:

To help its managers develop their marketing plans, the Gillette Company uses information gathered from five different types of regularly recurring research projects. The five projects were designed to provide the managers a complete picture of the razor and blade market, including detailed descriptions of consumers, competition, and dis­tribution. The five projects, and the usefulness of the information they gather, are as follows.

These five projects provide Gillette marketing managers with information on market shares, brand loyalty and brand switching, consumer attitudes, brand and advertising awareness, product advantages versus competition, inventory levels, out-of-stock, retail prices and display, local advertising, and more.

As the data are gathered from recurring studies, the managers have a complete picture of current market and competitive conditions from the most recent set of studies, and they know the recent trends that exist in all of these data. All of these items of information provide the Gillette man­agers an excellent historical record on which to base the development of their new marketing plans.

2. MIS to Evaluate the Marketing Plan’s Effectiveness:

Gross margin, marketing expenditures, and contribution to earnings are recorded for each market area and also totally. This information is also shown for each market (1) as a percentage of the total for all markets and (2) as the dollar amount of change this year compared with last year. Additionally, the total industry sales in dollars, the firm’s market share, the percentage of retail distribution achieved for the product, and television media costs are shown for each market, both for this year and last.

With these data, management can observe changes in demand (as reflected in total industry sales); changes in sales, costs, and earnings, changes in competition (as reflected in market share and retail distribution percentages) and, changes in advertising costs (as reflected in television media costs). This information is available by market and for all markets. With such information management can reappraise a product’s marketing expenditures plan as well as the effectiveness of the advertising-sales promotion mix used and then make changes.

For example- in Area A, advertising and promotion expenses of $100,000 produced $260,000 of contribution to earnings, while in Area E advertising and pro­motion expenses of $400,000 produced only $280,000 of contribution to earnings. This suggests that the company might increase its total contribution to earnings by shifting some advertising and promotion money from Area E to Area A.

Concluding Comments on Marketing Research Usage:

The materials show that marketing research is being used to measure the characteristics of markets, to obtain information needed for forecasting, to evaluate new-product ideas and improve existing products, to assist man­agers in making better advertising and promotion decisions, and for many other purposes. Marketing research is used throughout the four phases of the administrative process, from establishing strategies all the way through to evaluating the effectiveness of the marketing plan used to try to achieve the established strategy.

The role of marketing research appears to be headed for higher levels of sophistication and utilization as more and more companies begin to develop their own Marketing Information Systems (MISs).

Scope

Scope 1. Strategy Implementation:

MIS helps in product launches, authorizes the co-ordination of marketing strategies, and is an integral part of Sales Force Automation (SFA), Customer Relationship Management (CRM), and customer service systems implementations. It permits decision makers to more effectively manage the sales force as well as customer relationships.

Some customer management software companies are extending their CRM applications to include Partner Relationship Management (PRM) capabilities. This has become increasingly important as many marketers are choosing to outsource important marketing functions and form strategic alliances to address new markets.

Scope 2. Strategy Development:

Information needed to develop marketing strategy is also provided by MIS. It supports strategy development for new products, product positioning, marketing communications (advertising, public relations, and sales promotion), pricing, personal selling, distribution, customer service and partnerships and alliances. MIS gives the foundation for the development of information system-dependent e-commerce strategies.

Scope 3. Market Monitoring:

MIS enables the identification of emerging market segments, and the monitoring of the market environment for changes in consumer behaviour, competitor activities, new technologies, economic conditions and governmental policies at the time of using market research and market intelligence.

Scope 4. Wider Applications:

Under modern marketing ideologies, MIS includes operational, sales and marketing process-oriented systems, which serve in daily marketing operational activities such as direct mailing (database marketing), telemarketing and operational sales management. The users are middle management and operative sales and marketing personnel.

Scope 5. Support Management and Decision Making:

Marketing information systems support management decision making. Management has five distinct functions and each of them needs support from MIS. These are planning, organising, co-ordinating, decision-making and controlling.

Scope 6. Functional Integration:

MIS the co-ordination of activities within the marketing department and between marketing and other organisational functions like engineering, production, manufacturing, product management, finance, logistics, and customer service.

Marketing Information System Characteristics

1. MIS is an ongoing process. It operates continuously.
2. MIS acts as a data bank and facilitates prompt decision-making by manager.
3. MIS operates in a rational and systematic manner and provides required information.
4. MIS is future-oriented. It anticipates and prevents problems as well as it solves marketing problems. It is both a preventive as well as curative process in marketing.
5. The gathered data is processed with the help of operations research techniques. Modem mathematical and statistical tools are available for problem-solving in the field of marketing.
6. MIS is a computer-based method of data collection, processing, and storage.
7. Management gets a steady flow of information on a regular basis — the right information, for the right people, at the right time and cost.
8. Marketing Information System stands between the marketing environment and marketing decision-makers. Marketing data flows from the environment to the marketing information system. Marketing data is processed by the system and converted into marketing information flow, which goes to the marketers for decision-making.

In the past, most decisions were made on the basis of reports prepared through manual labour. Today, managers, with the help of specialists, can employ sophisticated mathematical and statistical techniques, such as simulation, allocation models, PERT network, inventory models, and similar quantitative models to minimise the risks of doing business in a real-time MIS environment.

They can do this on the basis of up-to-date information recalled or retrieved from the computer’s database. Computer is now regarded as an indispensable ready reckoner for effective managerial decision-making. The introduction of computers has facilitated the setting up of Marketing Decision Support System (MDSS).

The System comprises collection, storage, analysis and reporting of marketing data. MIS is normally centralised, whereas MDSS is decentralised and allows marketing and sales managers to interact directly with the database.

(1) Product

A product means what we produce. If we produce goods, it means tangible product and when we produce or generate services, it means intangible service product. A product is both what a seller has to sell and a buyer has to buy. Thus, an Insurance company sells services and therefore services are their product. In India, the Life Insurance Corporation of

India (LIC) and the General Insurance Corporation (GIC) are the two leading companies offering insurance services to the users. Apart from offering life Insurance policies, they also offer underwriting and consulting services.

(2) Pricing

With a view of influencing the target market or prospects the formulation of pricing strategy becomes significant. The pricing in insurance is in the form of premium rates. The three main factors used for determining the premium rates under a life insurance plan are mortality, expense and interest. The premium rates are revised if there are any significant changes in any of these factors.

• Mortality (deaths in a particular area) When deciding upon the pricing strategy the average rate of mortality is one of the main considerations. In a country like South Africa the threat to life is very important as it is played by host of diseases.
• Expenses: The cost of processing, commission to agents, reinsurance companies as well as registration are all incorporated into the cost of installments and premium sum and forms the integral part of the pricing strategy.
• Interest: The rate of interest is one of the major factors which determines people’s willingness to invest in insurance. People would not be willing to put their funds to invest in insurance business if the interest rates provided by the banks or other financial instruments are much greater than the perceived returns from the insurance premiums.

(3) Place

This component of the marketing mix is related to two important facets

i) Managing the insurance personnel, and

ii) Locating a branch.

The management of agents and insurance personnel is found significant with the viewpoint of maintaining the norms for offering the services. This is also to process the services to the end user in such a way that a gap between the services- promised and services offered is bridged over. In a majority of the service generating organizations, such a gap is found existent which has been instrumental in making worse the image problem. The transformation of potential policyholders to the actual policyholders is a difficult task that depends upon the professional excellence of the personnel. The agents and the rural career agents acting as a link, lack professionalism.

(4) Promotion:

The insurance services depend on effective promotional measures. In a country like

India, the rate of illiteracy is very high and the rural economy has dominance in the national economy. It is essential to have both personal and impersonal promotion strategies. In promoting insurance business, the agents and the rural career agents play an important role.

Due attention should be given in selecting the promotional tools for agents and rural career agents and even for the branch managers and front line staff. They also have to be given proper training in order to create impulse buying. Advertising and Publicity, organization of conferences and seminars, incentive to policyholders are impersonal communication.

Arranging Kirtans, exhibitions, participation in fairs and festivals, rural wall paintings and publicity drive through the mobile publicity van units would be effective in creating the impulse buying and the rural prospects would be easily transformed into actual policyholders.

(5) People

Understanding the customer better allows to design appropriate products. Being a service industry which involves a high level of people interaction, it is very important to use this resource efficiently in order to satisfy customers. Training, development and strong relationships with intermediaries are the key areas to be kept under consideration. Training the employees, use of IT for efficiency, both at the staff and agent level, is one of the important areas to look into. Human resources can be developed through education, training and by psychological tests. Even incentives can inject efficiency and can motivate people for productive and qualitative work.

(6) Process:

The process should be customer friendly in insurance industry. The speed and accuracy of payment is of great importance. The processing method should be easy and convenient to the customers. Installment schemes should be streamlined to cater to the ever growing demands of the customers. IT & Data Warehousing will smoothen the process flow.

IT will help in servicing large no. of customers efficiently and bring down overheads.

Technology can either complement or supplement the channels of distribution cost effectively. It can also help to improve customer service levels. The use of data warehousing management and mining will help to find out the profitability and potential of various customers product segments.

1. Flow of activities: all the major activities of banks follow RBI guidelines. There has to be adherence to certain rules and principles in the banking operations. The activities have been segregated into various departments accordingly.
2. Standardization: banks have got standardized procedures got typical transactions. In fact not only all the branches of a single-bank, but all the banks have some standardization in them. This is because of the rules they are subject to. Besides this, each of the banks has its standard forms, documentations etc. Standardization saves a lot of time behind individual transaction.
3. Customization: There are specialty counters at each branch to deal with customers of a particular scheme. Besides this the customers can select their deposit period among the available alternatives.
4. Number of stores: numbers of steps are usually specified and a specific pattern is followed to minimize time taken.
5. Simplicity: in banks various functions are segregated. Separate counters exist with clear indication. Thus a customer wanting to deposit money goes to ‗deposits ‘counter and does not mingle elsewhere. This makes procedures not only simple but consume less time. Besides instruction boards in national boards in national and regional language help the customers further.

(7) Physical Distribution:

Distribution is a key determinant of success for all insurance companies. Today, the nationalized insurers have a large reach and presence in India. Building a distribution network is very expensive and time consuming. Technology will not replace a distribution network though it will offer advantages like better customer service. Finance companies and banks can emerge as an attractive distribution channel for insurance in India. In Netherlands, financial services firms provide an entire range of products including bank accounts, motor, home and life insurance and pensions. In France, half of the life insurance sales are made through banks. In India also, banks hope to maximize expensive existing networks by selling a range of products.

The physical evidences include signage, reports, punch lines, other tangibles,

employee‘s dress code etc.

1. Tangibles: banks give pens, writing pads to the internal customers. Even the passbooks, chequebooks, etc. reduce the inherent intangibility of services.
2. Punch lines: punch lines or the corporate statement depict the philosophy and attitude of the bank. Banks have influential punch lines to attract the customers. Banking marketing consists of identifying the most profitable markets now and in future, assessing the present and future needs of customers, setting business development goals, making plans-all in the context of changing environment.

In India, banks hope to maximize expensive existing networks by selling a range of products. It is anticipated that rather than formal ownership arrangements, a loose network of alliance between insurers and banks will emerge, popularly known as bank assurance. Another innovative distribution channel that could be used are the non-financial organizations. We can‘t deny the fact that if foreign banks are performing fantastically, it is not only due to the sophisticated information technologies they use but the result of a fair synchronization of new information technologies and a team of personally committed employees. The development of human resources makes the ways for the formation of human capital.

Tourism marketing is different because the customer purchases a series of services, but is left with very little concrete value at the completion of his trip. As a result, the marketing initiatives have to emphasize the value of the memories, make the collection of services easily accessible and add value through additional programming and other factors. A key challenge is to convince potential customers that the item they are purchasing provides good value for the price, and that the services will be as described and expected. The 8 P’s in marketing tourism summarize the special approach that is required. Many small businesses market tourism products and employ these marketing strategies.

Product: What You Have to Offer

The product is the collection of services that have features and benefits. Standard features and benefits include the normal amenities of a hotel room, for example. Good marketing adds special features, such as free breakfasts or free Internet.

Price: What Customers Will Pay

The price has to match the product, but good marketing makes the price seem more attractive. The operator can either add features to the product and keep the price the same or give a discount for the same features.

Promotion: How You Sell Your Wares

The promotion gives details of the product and the price. The key characteristics of your travel marketing strategy are the method of communicating the information, the content of the promotion and the cost to the operator. The promotion has a target market, and the method and content of the promotion has to appeal to the people who it reaches. The price the members of the target market are willing to pay has to cover the cost of the promotion.

Place: Where You Do Business

Place refers to the location where the customer buys the collection of services. Ideally, the operator who sends out the promotion uses it to encourage the potential customer to visit the operator’s location and complete the purchase. With the convenience of online payments, the operator may find that the best strategy is to direct potential customers to an attractive website where they can complete the purchase.

People: Your Hidden Strength

Since the product is a collection of services, the people who provide the services are a key to the success of the transaction. Operators must have top-level service to initially complete the sale and to encourage repeat customers.

Planning: Look Ahead

The key service component of the tourism experience is planning. The customer expects that the experience will correspond closely to what he purchased. The only way to ensure that kind of correspondence is to execute according to detailed plans, and have contingency planning in place for problems.

Programming: Cater to Your Clients

One way to add value to the standard product and to distinguish a particular offering from competitors is to offer exclusive programming, a practice known as service marketing. Customers will purchase a product that caters to their particular interests. Special programming can address such preferences and draw in additional customers.

Physical Evidence

If possible, the provision of physical evidence that the customer experienced the particular tourism product can help sales. Providing professional photographs of the customers at key events or the supply of branded products are effective strategies for promoting particular tourism products.

Promotion

In marketing, promotion refers to any type of marketing communication used to inform or persuade target audiences of the relative merits of a product, service, brand or issue. The aim of promotion is to increase awareness, create interest, generate sales or create brand loyalty. It is one of the basic elements of the market mix, which includes the four Ps, i.e., product, price, place, and promotion.

Promotion is also one of the elements in the promotional mix or promotional plan. These are personal selling, advertising, sales promotion, direct marketing publicity and may also include event marketing, exhibitions and trade shows. A promotional plan specifies how much attention to pay to each of the elements in the promotional mix, and what proportion of the budget should be allocated to each element.

Promotional Mix

The Promotion Mix refers to the blend of several promotional tools used by the business to create, maintain and increase the demand for goods and services.

The fourth element of the 4 P’s of Marketing Mix is the promotion; that focuses on creating the awareness and persuading the customers to initiate the purchase. The several tools that facilitate the promotion objective of a firm are collectively known as the Promotion Mix.

The Promotion Mix is the integration of Advertising, Personal Selling, Sales Promotion, Public Relations and Direct Marketing. The marketers need to view the following questions in order to have a balanced blend of these promotional tools.

• What is the most effective way to inform the customers?
• Which marketing methods to be used?
• To whom the promotion efforts be directed?
• What is the marketing budget? How is it to be allocated to the promotional tools?

Tools (Elements) of Promotion Mix

1. Advertising

The advertising is any paid form of non-personal presentation and promotion of goods and services by the identified sponsor in the exchange of a fee. Through advertising, the marketer tries to build a pull strategy; wherein the customer is instigated to try the product at least once. The complete information along with the attractive graphics of the product or service can be shown to the customers that grab their attention and influences the purchase decision.

2. Personal Selling

This is one of the traditional forms of promotional tool wherein the salesman interacts with the customer directly by visiting them. It is a face to face interaction between the company representative and the customer with the objective to influence the customer to purchase the product or services.

3. Sales Promotion

The sales promotion is the short term incentives given to the customers to have an increased sale for a given period. Generally, the sales promotion schemes are floated in the market at the time of festivals or the end of the season. Discounts, Coupons, Payback offers, Freebies, etc. are some of the sales promotion schemes. With the sales promotion, the company focuses on the increased short-term profits, by attracting both the existing and the new customers.

4. Public Relations

The marketers try to build a favourable image in the market by creating relations with the general public. The companies carry out several public relations campaigns with the objective to have a support of all the people associated with it either directly or indirectly. The public comprises of the customers, employees, suppliers, distributors, shareholders, government and the society as a whole. The publicity is one of the form of public relations that the company may use with the intention to bring newsworthy information to the public.

E.g. Large Corporates such as Dabur, L&T, Tata Consultancy, Bharti Enterprises, Services, Unitech and PSU’s such as Indian Oil, GAIL, and NTPC have joined hands with Government to clean up their surroundings, build toilets and support the swachh Bharat Mission.

5. Direct Marketing

With the intent of technology, companies reach customers directly without any intermediaries or any paid medium. The e-mails, text messages, Fax, are some of the tools of direct marketing. The companies can send emails and messages to the customers if they need to be informed about the new offerings or the sales promotion schemes.

E.g. The Shopper stop send SMS to its members informing about the season end sales and extra benefits to the golden card holders.

Thus, the companies can use any tool of the promotion mix depending on the nature of a product as well as the overall objective of the firm.

Strategic Management is a stream of decisions and actions which lead to the development of an effective strategy or strategies to help achieve corporate objectives. The Strategic Management process is the way in which strategists determine objectives and make strategic decisions. Strategic Management can be found in various types of organizations, business, service, cooperative, government, and the like.

Strategic Management can be defined as “the art and science of formulating, implementing and evaluating cross-functional decisions that enable an organization to achieve its objectives”. In fact, Strategic Management focuses on integrating management, marketing, finance/accounting, production/operations, research and development, and computer information systems to achieve organizational success.

The term Strategic Management is used synonymously with the term Strategic Planning. The later term is more often used in the business world, whereas the former is often used in academia.

At time, the term Strategic Management is used to refer to strategy formulation, implementation, and evaluation, with strategic planning referring only to strategy formulation. The purpose of Strategic Management is to exploit and create new and different opportunities for tomorrow long-range planning in contrast, tries to optimize for tomorrow the trends of today.

A Strategic Plan is, in essence, a company’s game plan. Just as a football team needs a good game plan to have a chance for success, a company must have a good strategic plan to be able to complete successfully. A strategic plan results from tough managerial choices among numerous good alternatives, and signals commitment to specific markets, policies, procedures, and operations in line of other, “less desirable” courses of action.

Strategic management is a science of management of strategies. Hence, it deals with different types of strategies, i.e., different types of decisions. Different situations, different challenges, different opportunities, or different problems require different types of strategies to be formed and implemented. So, it is just not sufficient to put all the strategies in one category.

It is highly advantageous to know the classified information on different strategies and their characteristics to make right decisions at right time. Although the practice of decision-making is more of experience-oriented skill; it is significant to have clear knowledge of different types of strategies to understand the situations in which they are useful.

As the strategies are always crucial, every strategy must be formed after careful study of the situations, challenges, opportunities or problems being encountered. Ignorance about types of strategies may lead the managers to wrong conclusions or to wrong choice of strategies. Hence, the following account of types of strategies has practical significance in managing the firm well.

At the heart of strategic management is the question – ‘How and why do some firms outperform others?’ Thus, the challenge to managers is to decide on ‘strategies’ that provide advantages that can be sustained over time. Much of strategic management is about identifying and developing the strategies that managers can pursue to attain superior performance and a competitive advantage for their organisations.

Strategic management is the process of assessing the firm and its environment in order to meet the long-term objectives of the firm. It refers to the series of decisions taken by management to determine the strategies to achieve organisational goals.

Strategic management involves systematic analysis of the internal and external environments, to evaluate a company’s current policies, strategy and goals to build new strategic moves and plans.

Thus, strategic management is the process of planning, directing, organising, and controlling a company’s strategy-related decisions and actions to achieve competitive advantage and the long-run performance goals of a company.

By ‘Strategy’, managers mean:

1. Large-scale, future-oriented plans for interacting with the competitive environment.
2. An integrated and coordinated set of commitments and actions designed to exploit core competencies.
3. A company’s game and action plan of how, when and where it should compete, against whom it should compete; and for what purposes it should compete.

Different phases of development of strategic management are explained below:

Phase 1 Basic Financial Planning:

The first phase of the strategic development is fairly a simple routine of basic financial planning. The main concern during this phase is simply meeting annual budget requirement, operational functions like production, marketing, finance and human resources and emphasizing on the operational control.

Phase 2 Forecast-Based Planning:

During this phase, the primary concern is mainly on effective plans, environmental scanning, plan for the future and allocation of resources.

Phase 3 Externally-Oriented Planning:

There is a remarkable shift during this phase. The notable developments include: increasing response to markets and competition, complete situational analysis and assessment of competitive strength, evaluation of strategic alternatives and allocation of resources based on changing needs from time to time.

Phase 4 Strategic Management:

The focus shifts over time from meeting the budget to planning for the future, to thinking abstractly, to working to create desired future. To create future decision-makers, orchestrate and integrate all their organisation’s resources to gain a competitive advantage. They build flexibility into the organisational planning process, and foster a supportive, participative climate within the organisation.

Thus, developing an effective and efficient strategic management process can be a long and difficult task. It requires sustained effort, enormous patience and sharp political skills. Strategic management requires efficient leadership.

Some important objectives of strategic management are as follows:

1. To exploit and create new and different opportunities for tomorrow.
2. To provide the conceptual frameworks that will help a manager understand the key relationships among actions, context, and performance.
3. To put an organisation into a competitive position.
4. To sustain and improve that position by the deployment and acquisition of appropriate resources and by monitoring and responding to environmental changes.
5. To monitor and respond to the demands of key stakeholders.
6. To find, attract, and keep customers.
7. To ensure that the company is meeting the needs and wants of its customers, which is a cornerstone in providing the quality product or service that customers really want.
8. To sustain a competitive position.
9. To utilize the company’s strengths and take full advantage of its competitor’s weaknesses.
10. To understand the various concepts involved like strategy, policies, plans and programmes.
11. To have knowledge about environment—how it affects the functioning of an organisation.
12. To determine the mission, objectives and strategies of a firm and to visualize how the implementation of strategies can take place.
13. To find the solutions of problems in real-life business.
14. To develop analytical ability to identify threats and opportunities present in the environment.
15. To develop the skills of strategic decision making.
16. To develop a creative and innovative attitude and to think strategically.

Nature of strategic management specifies its characteristics which are as follows:

1. Strategic Management as a Process:

Strategic management is basically a process. It has emerged out of management in other fields where the concept of management is taken as a process for achieving certain objectives of the organization. Thus, strategic management involves establishing a framework to perform various processes. The concept of strategic management must embody all general management principles and practices devoted to strategy formulation and implementation in the organization.

2. Top Management Function:

Strategic management is basically top management function. Thus, in order to ensure effective top management function, it is necessary that a distinction should be made between strategic management and operational management which emphasises day-to-day operations in the organization, so that top management can focus more attention on the strategic aspect rather than emphasising on operational management.

Since the environment of the organization is always changing providing new opportunities and threats, top management must spend more and more time on this aspect. Thus, there is a considerable change on the emphasis of top management functions in the organizations, particularly in large and complex organizations. The change is from operational management to strategic management.

3. General Management Approach:

Strategic management has general management approach. This approach has three characteristics – (i) This approach uses system frame of reference in dealing with wholeness of an organization. In this dealing, the emphasis is put on identifying tendencies of various phenomena in the organization and relationships among these tendencies, (ii) Decision criteria are based on overall betterment of the organization as a whole, not the criteria used by functional specialists, (iii) Attempt is made to achieve organizational equilibrium and generation of synergy. This may be even suboptimal for some departments or units of the organization.

4. Relating Organization to Environment:

The focus of strategic management is on relating the organization to its external environment. This emphasises that there is continuous interaction between the organization and its environment taking an open systems approach. Thus, the organization must create adequate channel through which external information will pass to various points in the organization.

5. Long-Term Issues:

Strategic management deals primarily with long-term issues of the organization that may or may not have an immediate effect. For example, investment in research and development (R&D) may yield no immediate effect in terms of new product development. However, this investment may lead to development of new products and, therefore, enhanced profits.

6. Flexibility:

Strategic management has flexibility. This flexibility is required because strategic management works in the context of environment which is quite dynamic. As a result, many strategic actions planned maybe either left, postponed, or changed in the light of environmental requirements.

7. Innovation:

Strategic management puts emphasis on innovation which is the process of introducing new things or new ways of working. Innovation is achieved through new strategic actions which are quite different from the previous actions. Innovation is required to face environmental challenges effectively.

Strategic Management Importance

1. It helps the organization to be more proactive instead of reactive in shaping its future. Organizations are able to analyze and take action instead of being mere spectators.
2. It provides framework for all the major business decisions of an enterprise such as – decisions on businesses, products, and markets, manufacturing facilities, investments and organizational structure.
3. It seeks to prepare the corporation to face the future and acts as a pathfinder to various business opportunities. Organizations are enabled to identify the available opportunities and identify ways and means to reach them.
4. It helps organizations to avoid costly mistakes in product market choices or investments.
5. It helps organizations to evolve certain core competencies and competitive advantages that assist in their fight for survival and growth.
6. Strategic management looks at the threats present in the external environment and thus companies can either work to get rid of them or else neutralizes the threats in such a way that they become an opportunity for their success.

vii. It also adds to the reputation of the organizations because of the consistency that results from organizational success.