It is highly important that the company designs and executes a specific strategy, as it will be the master plan with which it will pattern all its strategic moves and actions. Lack of a specific strategy is a "surefire ticket for organizational drift, competitive mediocrity, internal wheel-spinning and lackluster results (Thomson 2002)."
Second, Thomson argues that business entities need to devise and implement strategies, as the efforts of all the functional areas in the company should be molded into a "coordinated, compatible whole." A comprehensive strategy takes all the business units into account making each action mutually supportive. Without a well-laid out strategic plan, there will be no basis for uniting the efforts of all the functional areas, no clear direction on the business decisions and plans that the business takes, and no conscious business model for profit generation.
Kotler has argued that business entities are currently operating on hypercompetitive environment which is characterized by more stringent competition and higher buyer leverage. In this kind of situation, strategic management becomes more instrumental in the success and even mere survival of company. This report argues that strategic management directly and strongly affects the performance of an organisation. By organizational performance we refer to the ability of an organization to use its resources efficiently and to produce outputs that are consistent with its goals.
This in order for an organisation to measure its performance, it must first establish a set of goals and objectives that it wants to achieve to use as benchmark with its actual performance. Setting the company's direction will enable managers know where the company is heading as well as the strategies to be employed in order to for the company to achieve what it wants to become. Consequently, organisational performance is often dependent on how well the company handling its strategic management. By employing the tools devised for strategic management, a company is able to gain significant information about its external and internal environment, enabling it to tailor a strategy to align its strengths with opportunities. Formulating the right strategy will enable the company to enhance its organizational performance.
Strategic management is therefore one of the most crucial areas in management. Coming up with a specific strategy, which will be the basis of company's actions, processes and decisions is a must. A well-crafted strategy is indispensable to the company's performance and long-term success. It is therefore important that a business entity comes up with a unique strategy tailored for the achievement of its goals and objectives. Devising a purposeful and efficient strategy is a tedious task and managers should be armed with different techniques in diagnosing the company in order to prescribe the "right" strategy. The next section will look at the different models which are employed to aid managers in this strategy making process.
PESTEL stands for Political, Economic, Social, Technological, Environmental, and