For any business to succeed, it is important to constantly evaluate, assess and adapt. A strategic management model can help a business achieve this in a measured and quantifiable manner.
A strategic management model can help you take stock of your present environment and plan smartly for the future.
There are a host of time-tested models that have helped millions of businesses large and small:
- Transform their organizational structures
- Improve their operations efficiency
- Increase their market share and profitability
Let’s look more closely at how a strategic management model can help your small business grow and thrive. Keep reading for a list of five popular models.
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How to create and apply a strategic management model
To select and use an appropriate strategic management model, entrepreneurs or business leaders will need to work through these six elements.
1. Creating a mission statement
A mission statement clearly defines the core objective of the business:
- What the business does
- Who it serves
- How it serve its customers, community and other shareholders
Having a clear mission statement makes it easier to communicate the business purpose to customers, employees and investors.
It will help you weave your values across everything your business does and keep it true to its goals.
Here is Tesla’s mission statement for example:
“To accelerate the world’s transition to sustainable energy.”
Notice the use of the word “accelerate,” a word commonly used with vehicles, and how the statement suggests the end goal is to improve the world (not just sell cars).
A well-written mission statement like this can be used to guide all business decisions.
2. Defining business goals
Clear and measurable milestones help businesses achieve their intended mission. You’ll want to create a blueprint of:
- How the goals are to be achieved
- How long it could take
- What resources are required, etc.
The objectives serve as the basis for creating policy and gauging performance to ensure that the business is moving in the right direction.
3. Assessing the business environment
An important part of most strategic management models is assessing the present business environment.
There are many models you can use for performing this analysis. The SWOT grid (Strengths, Weaknesses, Opportunities and Threats) analyses both the internal and external environmental factors and is popular for this purpose (scroll down for more on this).
4. Formulating the appropriate strategy
Once you have solidified your business objectives, the next step is to design a thorough and robust plan that will help achieve them.
A Balanced Scorecard (more below) can help you break your business goals down into smaller pieces and clearly define your strategy.
5. Carrying out the strategy
This next stage involves the actual implementation of the proposed strategy. This can be tedious and time-consuming, sometimes taking several months or even years.
It could take some time for the strategy percolate through every layer of business, depending on:
- The size of your business
- How long it’s been in operation
- The degree of change needed
Working through the strategic management process before launching a business is ideal, as there will be no entrenched beliefs or behaviours to overcome.
6. Evaluation and control
The final step in applying a strategic management model is continuous review and adjustment of the strategy.
Sometimes the change in the external environment, like competition or regulatory changes, may suggest an alteration. An internal shift in business objectives or leadership may also require a review of your strategic plan.
With regular evaluation (quarterly, yearly, etc), businesses can swiftly realign or pivot their strategies to adapt to changing situations.
5 popular strategic management models
Here is a quick look at some of the most well-known strategic management models:
Whether you are mapping out a strategy for a new business or refreshing one for a large-scale corporation, a SWOT analysis is the first step towards strategic planning.
Strengths and weaknesses are a part of the internal environment and can be directly managed. Opportunities and threats come from the external environment, therefore your business can only anticipate and react to them.
For a SWOT analysis to work, you’ll need to come up with appropriate recommendations as to:
- How to capitalise on your strengths and opportunities
- How to minimise your weaknesses and threats.
A Balanced Scorecard (BSC) can be used to design a framework for tracking and managing your strategy. A BSC characterises goals into four distinct perspectives that are interconnected — financial, customer, process and people goals.
Based on these parameters, a BSC helps a business bring its strategy to life, communicate it across the organization and track the performance through periodic reports.
A Strategy Map can be used along with other models to identify and communicate critical information across the organization via a visual representation. This is an effective way to get others’ support, improving your chances of accomplishing every milestone.
Needs Gap Analysis
This is a useful tool for existing businesses that are not growing as they’d like to. A Needs Gap Analysis or Need Assessment can be used to chart a course of action after identifying specific internal deficiencies.
This exercise allows you to bridge the gap between where your business is and where you want it to be. You can learn more on how to do this type of analysis here.
Related: Implement a business growth strategy
Porter’s Five Forces
A model that helps identify a business’ strength and weaknesses relative to its industry, Porter’s Five Forces looks at five competitive forces, viz:
- Existing competition in the industry
- Potential for a new entrant
- Power of suppliers
- Power of customers
- Threat from substitutable products
This can be used to measure the competition, business viability and profitability of a market. It’s also useful in designing a strategy to achieve a competitive advantage.
There are almost a dozen other strategic management models, and if you would like to read up on them, we suggest you head here.
There is no one perfect strategic management model. More often than not, for a well-rounded strategic management, business leaders will have to rely on a combination of various tools to keep pace with customer needs, competition and evolving technology.
Although this type of planning takes time, every minute you spend on it will pay off in the long run.