Strategic management and strategic thinking processes make a significant contribution to organisational performance.
A strategy, according to Robbins and Barnwell (2002, p. 139) is “the adoption of courses of action and the allocation of resources necessary to achieve the organisation’s goals”.
It is important for organisations to achieve their goals, as this can assist them to reach a competitive advantage, which is a highly attractive position for a firm to be in.
This essay will look at strategic management processes and how they can be used to improve organisational performance; it will also describe how strategic management processes have the ability to lower organisational performance.
Strategic thinking processes will then be assessed, with a comparison of strategic thinking and strategic planning, looking at the similarities and differences between the two. The positive and negative effects that strategic thinking can have on organisational performance will also be described.
Organisational Performance is the overall performance of an organisation in conjunction with its goals and objectives. An organisations performance can either be high or low, depending on its ability to meet these objectives.
The success of an organisation’s performance can be impacted upon by a number of factors, including Strategic Management and Strategic thinking processes.
The strategic management process works to achieve a strategic competitiveness over other organisations within the same industry. This is done by successfully producing a value-creating strategy. (Hanson, Dowling, Hitt, Ireland & Hokisson et al, 2008)
Value can mean different things to different people; it is measured by a product’s performance and by the elements it is made up of which customers are prepared to pay for. (Hanson et al, 2008)
If a firm is able to successfully construct a value-creating strategy, then they will have a better chance of gaining a competitive advantage. According to Barney p. 102, “a firm is said to have a competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors.”
Porter argues that no firm can provide value in all the ways that people wish value to be delivered, so they should select one strategy; cost leadership, differentiation or focus. (Robbins & Barnwell, 2002)
This indicates the importance of strategic management for organisations in making appropriate decisions and selecting strategies which will assist them to gain strategic competitiveness and as a result earn above-average returns.
A strategy which is adopted by an organisation indicates what area the firm intends to do well in. Firms who have a high competitive advantage will be able to create higher levels of successful organisational performance, hence signifying the positive contribution of strategic management to organisational performance.
In some cases however, organisational performance could be affected negatively by strategic management. This is evident in small businesses and new ventures which vary quite significantly to large businesses. Cooper (1981, p. 31) found in examining new and small firms, that “strategic management is examined separately in the start-up stage, the early-growth stage, and the later-growth stage.” This has the potential to create clashing goals and communication issues, which could hinder the progression of the organisation and have a negative affect on its organisational performance. It is evident from the supporting information that strategic management makes a significant contribution to organisational performance, both positively and negatively.
Strategic thinking is a second process which significantly contributes to a firm’s organisational performance.
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