financial benefits of strategic management

The Sales, productivity & profitability is much more in the organizations that apply strategic management concepts than the other ones. The following mentioned are few pointers that help you identify the relevance of strategic management and its benefits… [1] This article discusses the role of finance in strategic planning, decision making, formulation, implementation, and monitoring. Improved understanding of competitors’ strategies . Strategic account management focuses sales resources on retaining the customers most likely to generate high levels of revenue and profitability. [20] R.S. It helps a business to actualize the right strategies for the business so that higher profitability and brand exposure can be achieved. Harvard Business Review, 74, no. This is the bottom-line contribution on a risk-adjusted basis and helps management to make effective, timely decisions to expand businesses that increase the firm’s economic value and to implement corrective actions in those that are destroying its value. Lai and J.C. Rivera, Jr., “Using a Strategic Planning Tool as a Framework for Case Analysis,” Journal of College Science Teaching, 36, no. Thus many strategic management benefits can be realised based on this definition of strategic management. [17], To formulate a long-term strategy, Porter’s generic strategies model [18] is useful as it helps the firm aim for one of the following competitive advantages: a) low-cost leadership (product is a commodity, buyers are price-sensitive, and there are few opportunities for differentiation); b) differentiation (buyers’ needs and preferences are diverse and there are opportunities for product differentiation); c) best-cost provider (buyers expect superior value at a lower price); d) focused low-cost (market niches with specific tastes and needs); or e) focused differentiation (market niches with unique preferences and needs). Strategic management establishes the objectives by which management performance will be measured. Market share is increased by keeping the business in a good position to anticipate customer demand and trends to improve product quality. Managerial accounting is the practice of analyzing and communicating financial data to managers, who use the information to make business decisions. Changes in business environments will require organizations to constantly assess their strategies for success. Strategic management enables a firm to come up with the best strategy and tactics to trump the competition and remain solvent. It Allows Fewer Resources And Less Time To Be Devoted To Correcting Erroneous Or Ad-Hoc Decisions. [16] B. Jovanovic and G.M. The major benefits of strategic management for businesses include identification, prioritization and exploration of the opportunities. 10 (2006): 22–29. The business environment continually changes as it acted upon by many factors both men made and imposed upon us. Strategic management involves setting objectives, analyzing the competitive environment, analyzing the internal organization, evaluating strategies, and ensuring that management rolls out the strategies across the organization. Enterprise risk management (ERM) is a business strategy that identifies and prepares for hazards that may interfere with a company's operations and objectives. This research focuses on three key dimensions of leadership: charismatic leadership, instrumental leadership, and political connections. It Helps To Increase Market Share And Profitability. The organizations that are potential & high … A company will apply strategic financial management throughout its organizational operations, which involves designing elements that will maximize the firm's financial resources and using them efficiently. This means that when strategic management is practised properly, it keeps management abreast of important changes in the environment including new opportunities and markets. Required fields are marked *. Empirical studies have shown that a vast majority of corporate strategies fail during execution. A good strategic plan includes metrics that translate the vision and mission into specific end points. [19], 5. Identify, analyze, and mitigate uncertainty in investment decisions. [22] Peter Grant, “How Financial Targets Determine Your Strategy,” Global Finance, 11, no. It helps a business to know its threats, weaknesses and loopholes. This article discusses the role of finance in strategic … In essence, department heads and segment leaders review top leadership’s strategic vision to make sure the firm can implement it. Companies should leverage new cost savings, optimize critical assets, and be purposeful with building or sustaining their company culture in a digitally distributed environment, while taking into consideration the human factor more than ever before. [27] Q. Lawrence, “Hedging in Perspective,” Corporate Finance, 115, no. It can provide some financial benefits and some no economic benefits to the corporate and helps grow industry according to the goals and set strategies. [3] The process requires five distinct steps outlined below and the selected strategy must be sufficiently robust to enable the firm to perform activities differently from its rivals or to perform similar activities in a more efficient manner.[4]. The key point here is that strategic management allows a business to orient itself according to its target markets, clients and customers. However, some of the more common elements of strategic financial management could include the following. 2 (1987): 109–116. Broadly, the benefits of business strategic management can be divided into two distinctive sections. Powered by WordPress -Web Hosting by GreenGeeks, Finance, Business Studies and Accounting Study Notes, It Allows For Identification, Prioritization, And Exploitation Of Opportunities. [26] H.D. Working capital management is a strategy that requires monitoring a company's current assets and liabilities to ensure its efficient operation. Strategic management identifies the competitive advantages that can be generated through strengths of the organization and take necessary steps to effectively obtain it. In the absence of this, a business may be tempted to focus on trends in the market which are pushed by competitors or market segments that are not the target market of the business. It is proved through research that those organizations that apply the concepts of strategic management are more successful & profitable than those that do not take into account strategic management. [27] Moreover, new initiatives, acquisitions, and product development projects must be weighed against their tax implications and net after-tax contribution to the firm’s value. Executives can learn how to leverage this framework in the Strategic Financial … important changes in the environment including new opportunities and markets. [10] R.K. Johnson, “Strategy, Success, a Dynamic Economy, and the 21st Century Manager,” The Business Review, 5, no. Occupational Safety and Health Administration: Strategic Management Plan, Minnesota Occupational Safety and Health: Strategic Management Plan, National Aeronautics and Space Administration: NASA Strategic Management Handbook. A certified public accountant and certified financial manager, Codjia received a Master of Business Administration from Rutgers University, majoring in investment analysis and financial management. [22] It represents the net cash available after deducting the investments and working capital increases from the firm’s operating cash flow. Those relationships are important because, in many companies, 20 percent of customers account for 80 percent of revenue. Strategic account management teams aim to build strong relationships throughout the customer organization, particularly at senior level. The offers that appear in this table are from partnerships from which Investopedia receives compensation. Failing to understand opportunities keeps a business diverted from its main goals that can generate true revenues for them. Evaluate the potential for financial exposure; examine capital expenditures (CapEx) and workplace policies. [25] B.T. 2] Non-Financial Benefits: The section above discuss some of the tangible benefits of strategic management.

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