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Strategic Management Advantages and Disadvantages


Strategic Management Definition:

Strategic management essentially means the implementation and formulation of various strategies in order to achieve the goals of the company.

This is the detailed initiative which is taken by the top management – these strategic decisions are taken on the basis of available resources – they also take into consideration the effects of the external and internal environment on their decisions.

Strategic Management Advantages Disadvantages

Strategic Management vs. Strategic Planning:

Every process in an organization basically begins with strategic planning. Both the strategic planning process and strategic management process are totally different but work for the same goal of the organization.

The strategic planning process in every business decides the way the organization should lead along with its objectives.

On the other hand, strategic management plans the process to follow to achieve the defined objective.

Sectors in which strategic management accounting works well:

  • Improves in employee performance as well as the organization
  • Supply chain

Sectors in which strategic management accounting does not work well:

  • Substitution of SMA in inventory
  • Inventory
  • Master plan scheduling

Strategic Management Accounting in different Departments:

  • Value chain analysis:
  • Finance
  • Operations
  • Marketing
  • Actual financial reporting
  • Cost control
  • Transportation
  • Variance analysis

Strategic Management Process:

In 1981, Ken Simmonds defined Strategic management process as the collection of management accounting information about a business and its competitors for use in developing and monitoring the business strategy.

Strategic management helps in processing the ways in which the goals of the organization can be attained. The two important objectives of using the strategic management process are

  1. To obtain a higher level on your competitors
  2. Act as a guide which helps in business development.

It also helps in adapting new changes which are both internal as well as external. The internal changes comprise of company policies, procedures etc and the external factors like new changes which affect business, customer’s likes and wishes, competitors’ strategic steps, etc.

Strategic Management Process Model:

Defining strategic intent:

  • Establishing a vision
  • Designing mission
  • Setting objectives

Strategy formulation:

  • Performing environmental and organizational appraisal
  • Considering strategies
  • Carrying out a strategic analysis
  • Making strategies
  • Preparing a strategic plan

Strategy implementation:

  • Putting strategies into practice
  • Developing structures and systems
  • Managing the behavioural and functional implementation

Strategic Evaluation and Control

  • Performing evaluation
  • Exercising control
  • Recreating strategies

Importance of Strategic Management:

  • Shows the right direction to the organization
  • Helps companies or organizations to turn proactive rather than reactive
  • Guides the companies to prepare and face the challenges which may occur in future
  • Plays an important factor in decision making
  • Make sure to fight the competitions and have long term survival assurance
  • Have a competitive edge over the market
  • Last but not least, helps in business development and success

Steps of Strategic Management Process:

The strategic management plan has various facets which are being discussed here. The strategies are applied in order to have proper planning and appropriate allocation of funds for the accomplishment of the goals of the company.

Step 1: Formulation:

The formulation of the strategies essentially involves the environment within which every company has to survive. Here various important decisions are made in order to figure out how the company will reach out to the competition.

Here the external environmental analysis is done. The political, economic, legal and social aspects are assessed during the formulation of the strategies.

1. Industry Environment:

The strategic decision-maker checks for the competitor environment. They try to assess the resources available with the rivals and also their bargaining power with the customers. It is also important to understand the trend of the suppliers; check if there are any latest threats of the new entrants in the industry.

2. Internal Environment:

Though most of the companies do not take care about the internal environment this is amongst the most important while implementing strategic management fundamentals. You should have a clear SWOT analysis about your employees, processes, and resources.

Step 2: Implementation:

This is the next important step in strategic management – here the management has to take the decision as to how the resources will be utilized in order to reach out to the goals formulated by the company. The implementation phase also checks how the resources of the organization have been structured.

Advantages of Strategic Management Process:

The process of strategic management is a comprehensive collection of different types of continuous activities and also the processes which are used in the organization. Strategic management is a way to transform the existing static plan in a proper systematic process.

Strategic management can have some immediate changes in the organization. The following mentioned are few pointers that help you identify the relevance of strategic management and its benefits

1. Creating a better future:

There is always a difference between reactive and proactive actions. When a company practices strategic management – the company will always be on the defensive side and not on the offensive end. You need to come out victorious in the competitive situation and not be a victim of the situation.

It is not possible to foresee each and every situation but if you know that there are chances of certain situations then it is always better to keep your weapons ready to fight the situation.

2. Identifying strategic directions:

Strategic management essentially and clearly defines the goals and mission of the company. The main purpose of this management is to define realistic objectives and goals – this has to be in line with the vision of the company.

The strategic management provides a base for the organization on the basis of which progress can be measured and on the basis of the same, the employees can be compensated.

3. Make Better business decisions:

It is important to understand the difference between a great idea and a good idea. If you do have a proper and clear vision of your company – then having a mission and methods to achieve the mission always seems to be a very good idea. You need to make better decisions and that too within less time.

Here come the benefits of a strategic approach. It turns into a great idea when you decide what is the type of project that you want to invest your money; how do you plan to invest your time and also utilize the time of your employees.

Once you are clear with your ideas about the project and the time each of your employees and yourself will have to allocate, you will need to focus your attention on the financial and human resources.

4. Business Longevity:

The times are changing fast and there are dynamic changes happening every day. The industries worldwide are changing at a fast pace and hence survival is difficult for those companies which do not have a strong and perfect base in the industry.

The strategic management ensures that the company has a thorough stand in the related industry and the experts also make sure that the company is not just surviving on luck and better chances or opportunity. When you look at various studies you would know that the industries which are not following the strategic management will survive for not more than five years.

This suggests that companies should have a powerful focus on the longevity of the business. This suggests that without strategic management, it is not possible for a company to survive in the long run.

5. Increasing market share and profitability:

With the help of strategic management, it is possible to increase the market share and also the profitability of the company in the market. If you have very focused plan and strategic thinking then it is possible for all the industries to explore better customer segments, products and services and also to understand the market conditions of the industry which you are operating in.

Strategic management skills will help you to approach the right target market. The experts will guide for better sales and marketing approaches. You can also have a better network of distribution and also help you to take business decisions which at the end of the day results in profit.

6. Avoiding competitive convergence:

Most of the companies have become so used to focusing on the competitors that they have started imitating their good practices. It has become so much of competition that is becoming difficult to part the companies or identify them differently.

With the help of strategic management this magic is possible – try and learn all the best practices of a company and become a unique identity which will keep you apart from your competitors.

7. Financial benefits:

The firms which follow the process of strategic management proves to have more profits over a period of time as compared to the companies that do not opt for strategic management decisions.

Those firms which are involved in using strategic management use the right method of planning – these companies have excellent control over their future. They have a proper budget for their future projects; hence these businesses continue for a long time in the industry.

8. Non-financial benefits:

Companies using strategic management also provides various financial and non-financial benefits of strategic management. The experts informed that the firms which practice strategic management are always ready to defeat the external threats.

They have a better understanding of the strengths and weakness of the competitor and hence they are able to withstand the competition. This paves way for better performance and rewards for the company over a period of time.

The main feature of this management system is that it has the capacity of problem prevention and problem-solving skills. It also helps in bringing about discipline in the firm for all types of internal and external processes.

Disadvantages of Strategic Management Process:

The process of strategic management includes a set of long term goals and objectives of the company – using this method helps the company in facing the competition in a better manner and also increases its capabilities.

These are definitely some of the strategic management benefits but every coin has two sides – the same is the case with strategic management. Here are some of the limitations of strategic planning in management.

1. Complex process:

The strategic management includes various types of continuous process which checks all type of major critical components. This includes the internal and external environments, long term and short term goals, strategic control of the company’s resources and last but not the least it also has to check the organizational structure. This is a lengthy process because a change in one component can affect all the factors.

Hence it is vital that one understands the issues with all the concerned factors. This generally takes time and at the end, the growth of the company is affected.

Being a complex process it calls for lots of patience and time from the management in order to implement the strategic management.

In order to have proper strategic management, there should be strong leadership and proper structured resources.

2. Time-consuming process:

In order to implement strategic management, it is necessary that the top management spends proper quality time in order to get the process right. The managers have to spend a lot of time researching, preparing and informing the employees about this new management. This type of long term and time-consuming training and orientation would hamper the regular activities of the company.

The day to day operations are negatively impacted and in the long term, it could affect the business adversely. For e.g. there are many issues that require daily attention but this is not taken care because they are busy researching the details about strategic management.

In case, proper resolution of the problems are not done on time then there could be a great amount of attrition increase. Besides this, the performance of the employees will also go down because they are not getting the required resolution of their problems. This type of situation may lead the management to divert all their critical resources towards employee motivation and performance – while doing this your strategic management process will be sidelined.

3. Tough implementation:

When we speak the word strategic management then it seems to be a huge and large word. But it is also a fact that the implementation of this management system is difficult as compared to other management techniques. The implementation process calls for perfect communication among the employees and employer.

The strategic management has to be implemented in such a way that the employees have to remain fully attentive; there should be active participation among the employees and besides this, the employees have to be accountable for their work. This accountability is meant not only for the top management but for all employees across the hierarchy. The experts mention that implementation is difficult because they have to continuously strive to make the employees aware about the process and benefits of this system.

For e.g. if a manager was involved in forming of the strategic process and he/she has not been involved in the implementation process then the manager will never be accountable for any processes in the company.

4. Proper planning:

When we say management systems then it calls for perfect planning. You just cannot write things on paper and leave them. This calls for proper practical planning. This is not possible by just one person but it is a team effort.

When these types of processes are to be implemented then you need to sideline various regular decision-making activities which would adversely affect the business in the long run.


In recent years, most of the firms have understood the importance of strategic management – it plays a key role in the upbringing and downfall of any company. In a nutshell, we can conclude that the purpose of strategic management is possible if a company can provide dedicated resources and staff in order to formulate and implement the entire system.

If strategic management is implemented in the company thoroughly then there is no doubt that the company will survive all types of odds and competition and remain in the market for a long period of time. This is required in the present situation for all companies. It just calls for proper planning and the right people in order to implement them in the company.

You need to keep a regular check on all external and internal factors affecting your industry; besides this check all your financial resources whether they are enough to expand your business. If you could keep in mind these things, the implementation will become very easy and quick for any organization irrespective of their sizes.