Question

Operations Management

Strategic Management consideratons for successful decisions

Answer 1

Strategic Management
Strategic management is a process of setting long-term goals and objectives based on where you want to see your company in the future. For example, you might set strategic goals of becoming a national business, diversifying into new markets, franchising your company, maintaining financial benchmarks for debt and cash flow management or setting yourself apart from competitors. When you set long-term strategic goals, you will sometimes walk away from short-term opportunities because they don’t support your strategic objectives.

Crunching the Numbers
When you have a financial decision to make, the lowest cost or highest profit will not be your sole determining factor if you use strategic decision-making. For example, if you have strategic goals of keeping debt service and overhead costs at specific levels, you might decide to fund an equipment purchase with your cash reserves, rather than credit, to maintain your debt-service goals. You might decide to hire a more expensive contractor to get the best-quality work if the extra expense keeps you within your overhead range. When you look at your pricing, you might decide to make a smaller profit margin per item in order to boost sales to the point you hit your gross profit goals. If your strategic goal is to reach a specific percentage return on investment, you might take the opposite tack.

Managing Your Brand
If you have a strong brand that helps you compete at a high level in your marketplace, many of your day-to-day decisions will have to take into consideration your strategic brand-management goals. Your marketing messages will need to send the correct message consistently, such as not offering coupons if you sell an upscale product or service. If your brand targets younger consumers, you might rely more on Internet sales, even if your margins are slightly lower. If your strategic goal is to increase or maintain market share, you might lower your prices to make it harder for businesses to compete with you.

Building Your Organization
Your business doesn’t run itself, and quality employees are key to your success. Creating a strategic plan to attract and retain a high-quality workforce will impact your decision-making processes throughout the year. Any time you consider adding a new product or service, you must consider the effect it will have on your staff. Increasing employee workloads, even with pay increases, can reduce morale or make your company less enjoyable for workers. If you try to cut costs by reducing benefits and perks or offering less training, you might find yourself losing more money in the end because of decreased productivity and high employee replacement costs. Create a succession plan that helps keep you effectively staffed for years to come and review key decisions you make in terms of how it will affect your organization.