In today’s fast-changing economy, there is no doubt that strategic management tools are important parts of the management process.
Reason being that every brand is trying to assess its performance regularly.
And to survive, companies are taking steps to expand by accessing new markets; making products and prices more attractive; satisfying customers; developing new strategies.
The question is – what are strategic management tools and how can they benefit your organization?
Without wasting time, let’s dive into them.
What are Strategic Management Tools?
Strategic management tools can help your business determine where it’s now, where it’s going, and what metrics and initiatives need to be tracked to get there.
They provide a structured approach to analyze the internal and external costs of the products/services, get market information, and product costs, analyze customer needs and wishes, predict and assess organizational performance, as well to ensure competitive advantage in production activities.
These tools enable your business to achieve its strategic objectives efficiently and effectively.
The Benefits of Strategic Management Tools
1. Enhances your decision-making
These tools help you to have a holistic view of your organization’s current state and the external environment. That will ultimately lead to better decision-making, reducing any likelihood of costly mistakes and maximizing opportunities.
2. Improves resource allocation
To achieve critical goals, effective resource allocation needs to be followed. With strategic management tools, you’ve insights into resource availability, utilization, and optimization.
By utilizing these tools, you can allocate your resources wisely, ensuring that they are aligned with your strategic priorities.
The end result? – Resource allocation optimization reduces waste, and enhances overall performance.
3. Increased competitive advantage
To accurately analyze market trends, identify customer needs, and assess competitors you need Strategic management tools.
You can develop strategies that differentiate you from your competitors, giving your company a competitive advantage.
4. Alignment of objectives
Strategic management tools build alignment within an organization. They help in cascading strategic goals and objectives throughout different levels and departments.
With a clear understanding of the overall strategic direction, your employees can align their efforts and work collaboratively towards common objectives.
This promotes synergy, minimizes conflicts, and improves your organizational performance.
Best Strategic Management Tools
1. SWOT analysis
This is a tool that your business can use to evaluate your internal and external strengths and weaknesses and your competitive position.
SWOT is the acronym for:
- Strengths
- Weaknesses
- Opportunities
- Threats
The first two components “strengths and weaknesses” look at internal factors within your business, whereas the latter represent external factors that may impact your company.
Let’s look at what each component refers to and how they can be used to measure your opportunities and weaknesses:
- Strengths: Here are those things your company is good at and things that give you an advantage over your competitors.
- What do you do well? What do others (such as your clients or customers) see as your top strengths? Perhaps, a strong brand image, for example.
- Weaknesses: Here, you assess those things stopping your company from performing at its best. You’ll need to be honest about what is holding you back as a company and where to improve to match or compete with your competitors.
- Opportunities: Look at those factors your business can use to gain a competitive advantage.
- Threats: Finally, identify what factors have the potential to harm your company’s success. Common threats include increasing competition and rising costs for materials.
2. OKR
They’re a way for your team to track progress and encourage engagement around setting challenging and realistic goals.
To set OKRs, you write an objective with three to five supporting “key results” underneath, which outline how the objective will be measured.
The objective here is simply what you plan to achieve.
Ensure that this objective is action-oriented and inspirational, one that encourages you or your employees to have something inspiring to work towards.
Effective key results are specific, time-sensitive, and measurable, meaning there’s no gray area or room for negotiation – you either meet the requirements of the key result or you don’t.
You’ll need to set a period to review objectives to check whether they were met.
3. PESTLE analysis
It’s one of the key strategic management tools to dive into the external factors that affect your organization and its success.
Here are the different elements that make up a PESTLE analysis that may affect your business:
- Political: The government controls and influences can affect the economy or industry of your work. This may include employment law, taxation, and environmental regulations.
- Economic: Factors such as interest, exchange rates, and inflation can affect your business’ finances.
- Social: Explore the demographics and culture that impact the environment of your industry such as lifestyle choices, health, religion, and ethics or education.
- Technological: Technological factors may or may not affect you. Here, you’ll look at how technological innovations impact your business, such as technological advancements, automation, and your customers’ technological awareness.
- Legal: Legal factors may or may not affect your business. These include consumer laws, environmental regulations, and consumer protection.
- Environmental: Your organization can be affected by weather conditions, climate change, and location. These factors are likely to impact specific industries more than others, particularly tourism or agriculture.
4. Balanced scorecard
Balanced scorecard encourages you to look at past performance data to help you make better, more informed decisions.
Balancing strategic measures with traditional financial measures offers a more “balanced” view of your business’ performance – which is where the name comes from.
This can help you measure your business’s intellectual capital and give you a competitive advantage.
To achieve this, you will collect your business data and information and then look at it from four different perspectives:
- Learning and growth
- Business processes
- Customer perspectives
- Financial data
By measuring the above metrics, you’ll gain insight into what your business is doing well and where you need to invest in your employees’ training to meet your goals.
5. VRIO framework
The VRIO framework is a great way to analyze your business’s internal resources and find your competitive advantage.
VRIO is the acronym for:
- Value
- Rarity
- Imitability
- Organization
With these tools, you can categorize your resources (such as financial resources, human resources, material or non-material resources) depending on whether they hold certain traits outlined in the framework:
- Value: Is the resource valuable and offers a benefit to your organization?
- Rarity: If a resource is unique and not used by most other organizations, you can consider it rare. A rare resource gives you more of a competitive advantage in your industry.
- Imitability: Is the resource hard to imitate? If so, it’s less likely your competitors will acquire it. This is usually if it’s protected by legal means such as trademarks.
- Organized: Is the resource organized to capture value? This will be the case if your business’s processes, structure, and culture support it. It’s unlikely that a resource will offer any competitive advantage to your company if it’s not organized to capture value.
Strategic management tools are a great way for your business to assess its performance and competitive advantage.
By leveraging them, you can navigate the complexities of the business environment and drive sustainable growth for your company.
Reference:
- https://www.cjournal.cz/files/193.pdf
- https://blog.i-nexus.com/strategic-management-tools
