PRINCIPLES OF MANAGEMENT
Why Is Strategic Thinking Important to the Success of Business?
by Audra Bianca
Strategic thinking helps you recognize and take advantage of windfall opportunities. If you’re always thinking about what problems your company faces, you have little time left to plan for the future. Windfall opportunities are those that could result in rapid business growth, such as a chance to recruit away disgruntled workers from your competitor or buy out inventory from a competitor’s liquidation sale.
Focusing on Problem Solving
Strategic thinking also encourages you to take a long view of your company’s business model and operations. Your company could have persistent operational problems that prevent it from maximizing success, so you and your employees must think critically about the root causes of problems. For example, you could study overhead costs such as printing, looking for the core reasons why your business wastes paper and toner. Then you can revise your policies and procedures so printing is no longer a drain on your overhead budget.
Creating a Clear Strategy
Employees also benefit from the strategic mind-set of a small-business owner. A business strategy should clearly explain to employees what roles they play in reaching company goals. Some strategic plans are short term, outlining how your company will achieve an end goal in a few months’ time. Other plans, such as your strategic plan, explain how your company will realize long-term goals over five or 10 years.
If you’re planning ahead and addressing present business conditions simultaneously, you can choose appropriate actions when the economy shows early signs of trouble. Plan for how your business will succeed in tougher times. If consumer demand is decreasing or supply costs are rising, you can begin cutting costs in your overhead budget, ensuring that your overhead will not cripple you when the market declines. Without a deliberate strategy, your business decisions will be reactive instead of proactive.
Strategic Management Vs. Strategy
by Audra Bianca
When you hear the term “strategy,” you might think of a plan addressing a question like this: How can the business achieve a certain level of profits this year? A strategy is not a plan, nor is it a way of aligning resources toward specific goals. A major difference between a strategy and a plan is that a business needs just one strategy, a single, targeted combination of business operations that will produce a profit. The strategy may not always be effective during ebbs and flows in the business cycle, but it defines a business.
A business can have a strategic plan with clear goals to guide business operations over a period of one to 10 years. The company leadership can align budget dollars toward a body of strategic goals. Strategic management is how leaders implement the business’ strategy and the current strategic plan. Leaders must monitor employees, teams and other organizational units for achievement of specific targets along the way. They must direct employee activities and expenditures according to the plan.
Small Business Strategy
If you’ve ever written a business plan, somewhere you defined exactly how you planned to achieve a profit after recovering your startup expenses. Your strategy could also evolve over time if you redirect your business focus to different markets or change offerings of products or services. Learn how to explain your business strategy to potential investors, lenders and customers. You can build their interest in your business by explaining how your company turns a profit by fulfilling a specific consumer need.
Strategic Management Advantage
As a small-business owner, you enjoy the advantage of running your business strategically because of the scale of the business. Get closer to day-to-day operations and influence what employees do according to your business expertise. Being close to customers and the line workers who serve them in your company permits you to make changes every day that will make customers more satisfied. You want to make it easy for customers to buy more of what you sell. For help with strategic management, you might need to hire people with vast experience in your industry and familiarity with your business model.
Importance of Mission Vision in Organizational Strategy
by Audra Bianca
If you’re looking for how to plan differently for your small business, consider developing or revisiting your organizational strategy. It’s a plan showing how you will intentionally organize business operations around a mission and vision. The plan will also need appropriate short-term and long-term goals.
Businesses should use a systematic approach to planning their organizational strategy. You could research and select from among different organizational strategies, but the mission and vision are common to many of them. A mission is a statement of the purpose of your company, including how it serves a specific need in a target market. A vision is a statement of what your company aspires to achieve, usually an overarching objective or long-term goal.
In the beginning of the planning process, before setting the company’s mission and vision, consider the internal and external environments in which you operate. For example, your analysis might include deciding which advantages your company has over competitors and then you should decide which strategic options to use to make the most of those advantages. Picking the best options means you’re maximizing your advantages, not just sitting back and trusting the status quo to carry you forward successfully.
Importance of Mission
The mission is a statement that helps employees and customers understand why the company exists. You might have a mission that’s similar to that of other companies in the same market, such as providing pizza to local customers. Or, your business could have a unique mission, such as selling a one-of-a-kind product that customers can’t buy anywhere else. Update the mission when your company shifts away from current product or service offerings to new markets. It’s important to keep the mission at the focus of organization strategy so you aren’t wasting resources on extraneous business activities.
Importance of Vision
Employees may understand the mission of your company, but the vision will also link the mission to strategic business goals. A well-written vision will frame those strategic goals in a meaningful context, explaining to employees why those goals are good for business. For example, your vision may be to become your region’s most preferred source for home-delivered pizza. Some businesses will use the strategic goals as long-term targets and will also describe their business model in more general terms. The final strategy is a roadmap for the staff, and they should work towards the business goals incrementally to attain your vision.