Benefits of Strategic Management

"Research has revealed that organisations that engage in strategic management generally out-perform those that do not"

The connotation of the ancient Greek word "strategos", in its various grammatical forms, implies meaning of skilful manoeuvouring leading to achieving a highly crucial position or attaining a desired end. Commonly associated with the military operations, strategies aim at methodical out-performance of adversaries. Analogically, application of deliberate strategies in the business management context suggests combination of activities directed at becoming superior to business opponents. Hence, it can be assumed that engaging in these activities will produce better business results than not doing so.

This essay attempts to provide evidence to support the opening statement. It firstly reviews the purpose of managerial activities from the historic perspective. It, then discusses the impact of strategic management process components on organisational performance and finally describes benefits of strategic thinking and strategic integration.

The analysis concentrates on matching the theoretical principles of strategic management with the pragmatic business examples. For the purpose of this discussion, out-performance has been defined as surviving on the existing or successful entering the new market.

Although definitions of management range from very simple statements, like the one of Frederick Taylor - "knowing exactly what you want people to do and then seeing that they do it in the best and cheapest way" (Taylor, 1903, p. 21) to complex postulates listing managerial activities and objectives (Davidson & Griffin, 2003, p. 5), their common denominator points to a set of deliberate actions to achieve organisational efficiency - "using resources wisely" (Davidson & Griffin, 2003, p. 7) and effectiveness - "making the right decisions" (Davidson & Griffin, 2003, p. 7).

Accompanied by a large volume of the theoretical work, management practice, can therefore be broadly described as a constant search for the optimal performance methodologies. Thus, from the historical point of view, it can be proposed that strategic management is a twentieth century form of the management discipline that emerged as a result of the evolution process necessitated by the changes in the organisational internal and external environment. The environmental changes of management have been occurring throughout the history on social, economic and political arenas. Social forces, represented by "norms and values that characterise the people in a culture" (Davidson & Griffin, 2003, p. 35) influence demand of the management process stakeholders. Economic factors encompassing "systems of producing, distributing and consuming wealth" (Bartol, Martin, Tein & Matthews, 1998, p. 92) impose economic ground rules on the management activities. Political elements define legal boundaries in which the management process occurs. These dimensions are dynamic and evolve adequately to the cultural and technological progress of the civilisation. In consequence, they affect the search for the optimal performance.

Management has been practised for thousands of years. It is believed that Egyptians "proposed limits to the number of men that one supervisor could effectively manage" (Davidson & Griffin, 2003, p. 38) around 1750 BC. Remarkable assembly-like production system of the Venetian shipyard in the Middle Ages is often thought of as a precursor of the Operations Management. The importance of the field has been emphasised by the theoretical work since Socrates and Plato. As a field of knowledge, however, management developed due to the environmental changes posed by the industrial revolution and growth of factories in the early 1800s. Wealthy factory owners expected better returns for their resources input into the production system and workers expected better remuneration for their effort. Political system evolved to its capitalist stage from the previous feudal form and new technological inventions provided opportunities and threats to the business world. The search for the optimal performance has begun.

At the end of the nineteenths century, Bethlehem Steel's productivity was significantly increased "from 16.3 tonnes shovelled per worker per day to 60.2" (Davidson & Griffin, 2003, p. 41) through the realisation of the plan developed by the factory employee F. W. Taylor who, by posteriority, has been named the father of scientific management. Primarily, Taylor emphasised a need for the study of methods to improve worker efficiency. His fundamental contribution to the search for managerial excellence, however, was imposing the responsibility for the performance outcome on the managerial methods, which introduced the concept of performance improvement. The environmental forces continued to impact industrial arena. Developments in psychology provided opportunity to seek efficiency by focusing on human behaviour. Industrial psychologist, Hugo Munsterberg, and political scientist Mary Parker Follet proposed that individuals work better under specific psychological conditions (Bartol et al., 1998, p.68). Hawthorn studies, conducted by Elton Mayo, empirically proved that there is a relationship between productivity and working conditions. Human Relations movement, represented by Maslow and McGregor (Robbins, Millett, Cacioppe & Waters-Marsh, 2001, p. 198) advocated improving efficiency through motivation techniques. Quantitative management philosophy stemming from the military theory saw better performance as a result of using mathematics and statistics (Miller & Fieldman, 1986, p.58).

By the late 1960s the omnipresent social, economic and political forces were changing the organisational environment very rapidly demanding innovative and effective methods to gain high profitability. Industrial leaders and management theorists realised that environmental changes are constant and unavoidable and the search for the optimal performance was transforming into the search for survival. Competition, technological advances and the increasingly international nature of the business changed its context into the war-like area requiring a strategic approach in order to survive. Initially, the essence of the strategic approach, as stated by the Harvard Business School, was "to match the internal capabilities of the organisation with the demands of the environment" (Hubbard, 2000, p.3). It was then further defined by the works of Porter (Hubbard, 2000, p.3) to analysis of a particular industry and establishing generic strategies. Recent research underlines the need of flexibility in strategic management caused but hypercompetition. Farjourn (2002) observes