Importance of Strategic Management in Business, Why is Strategic Management Important in Business? Due to the strategic management company receives the following type of economic and non- economic importance. There are some importance or advantages of Strategic Management Business-
Importance of Strategic Management
- Alertness in Employees: The alertness among the employees increases the success of objectives and targets due to strategic management. While framing the strategy management studies the capability and weakness of employees and resources and taking the steps to improve them, the employees become more alert about their own performance and the group activity.
- Increase in the Efficiency of the Employees: The officers and experienced employees of all the three levels of re-engagement are included in strategic management process. The necessary inter-process in being done with them and for the success of strategy necessary training is also given to them. By this there is a notable increase in efficiency of employees and they get inspiration to work more.
- Increase in Profitability: The profitability of a unit depends upon-the maximum use of limited resources. Through strategically management process, the managers cannot only make the maximum use of financial resources but also they can use maximum man power to increase the overall productivity and profitability of the unit.
Why is Strategic Management Important in Business?
- Reduction in Fixed and Flexible Expense: The capital invested in the fixed assets is a fixed capital. Instead of purchasing the fixed assets, the managers may buy such assets on rent to decrease the fixed capital investment. In the same way, the flexible expenses can also be reduced through collection arrangement. Making changes in packing, of making changes in full, by acceptance, the strategy of machinery resources in management etc.
- Motivation to Group Activity: By taking strategic decisions through the group, integration between group members increases on accepting various optional strategies which result in to co-operation and unity. Not only that, but the managers can also get the advantage of special strength of group members.
- Reduction in cost of capital: It is a fact that the unit which is successful in raising the capital of the lowest possible cost is almost eligible to face the competition right from the beginning. After getting the estimate of capital requirement the managers select the sources of capital from where they can acquire the capital in a strategically manner. The strategic management has been proved to be very useful to raise the estimated capital at lowest possible rate, simple conditions for mortgage, return of borrowed capital and conversion of borrowed capital into owner’s capital.
- Acceptance of Organizational Changes: Normally the employees do not accept the changes made in the organization, because due to that the change occurs in their roles also. As a result the necessity to giving training of the new work to the employees arises. Not only that but because of such changes many departments also have to be closed. In these circumstances the problem of the safety of job arises. In strategic management process the capability of employees is also considered. Not only that, but for its development, efforts are made through training programmed so no question arises for the employees for not accepting the changes.
- Increase in rate of return on investment: Due to the strategic management there is a noble increase in the rate of return on investment made in the project. On the basis of the information received through analysis of internal and external environment the managers can increase the rate of return on investment by making a maximum use of resources.
- Prevention of Overlapping of Work: Due to the interaction with employees and officers working at all the levels of the organization the question does not arise at all for the distribution of one work to more than one employee or event he overlapping work is also not possible. When the same activity is done by more than one employee. At that time there is wastage of time and materials. The problem of co-ordination also arises. With the help of strategic process, the managers can prevent the overlapping of work.
- Prevention of Organizational Gap: Out of the departmental activities organization if any activity is not allotted to any employee, that activity is known as organizational gap. If the allotment of any work is left out by mistake, then none of the employees can be held responsible for it. In strategic management process, because of the interacting process being done with each employee, all the employees are given equal works and so there does not arise a questions of organizational gaps.
- Increase in trading on equity: Trading on equity depends upon many factors. Among on this, by making a maximum use of borrowed capital in a creative manner through strategic management process, the profitability of the unit can be increased and the equity share holders can be paid maximum dividend. If an appropriate strategically arrangement is not made for the use of financial resources, then its profitable use will not be successful and the interest on the borrowed capital will also become burdensome. There is more information about What is Strategic Management in Business?