Strategic Management is mainly concerned with a company’s goals and objectives, which are guided by its mission and vision. These goals serve as milestones to support the overall purpose and direction of the organization. Clear communication of these goals throughout the company is essential, allowing all key individuals to understand and commit to them as the team strives to achieve them.
In the strategic management of an organization, involving various stakeholders in decision-making is crucial. These stakeholders have different expectations from different aspects of the organization. Managers must assess decisions’ impact on each stakeholder group, including owners, shareholders, employees, customers, suppliers, and the local community. Actions benefiting owners but compromising safety measures can have significant consequences for employees and the environmental well-being of the community.
Some companies may choose to cut costs in quality control and employee training in order to improve their financial performance. Although this strategy may result in higher profits initially, it will ultimately result in lower product quality and decreased consumer confidence. Additionally, there is a possibility of more warranty claims from customers. It is crucial to remember that effective strategic management involves balancing short-term goals with long-term objectives. Managers should not only concentrate on immediate requirements but also have a future-oriented perspective. Occasionally, managers may prioritize meeting production quotas or sales targets, which can impede the company’s long-term growth ambitions.
Salesmen with quotas may prioritize quick sales over building long-term customer relationships, potentially damaging the company’s reputation and fostering a culture of poor service and distrust. Strategic managers must recognize and address the balance between effectiveness and efficiency, known as “doing the right thing” or “doing things right”. They should make decisions that align with overall goals, achieve cost savings, implement best practices, and cultivate a positive corporate culture.
In a recent news story from West Virginia, it was revealed that Freedom Industries, a company in the state, made the costly decision to not report a chemical spill into the Elk River from their holding tanks. This action has resulted in over 300,000 residents now having contaminated drinking water and some individuals requiring hospitalization. The state Department of Environmental Protection had to investigate and identify one of Freedom Industries’ leaking tanks as the source of the incident before the company finally acknowledged it.
By neglecting and failing to report a leak, the company has created a reputation of untrustworthiness and may face legal action, greatly impacting stakeholders (both stockholders and the local community). In my business area, this local company is notorious for being a poor workplace with a negative culture. Additionally, they have had safety issues and have struggled to find skilled employees. However, their business supplying major automakers has experienced significant growth thanks to the recent surge in automotive sales.
Currently, the company is in need of expanding its building and acquiring additional equipment to meet the increasing demand and boost production. Unfortunately, management’s decision to reduce employee wages and overlook proper training reflects a short-term outlook influenced by the 2008 economic downturn. Consequently, there has been a significant turnover rate of 40%. Although substantial investments have recently been made in the expansion project amounting to millions of dollars, attracting prospective employees is proving challenging due to the negative reputation that the company has gained.
Having a poor culture within a company can have a lasting impact on its growth, and it may take several years to turn things around, even with the best strategic managers in place (Dess, 2014). A case in point is a West Virginia chemical company that faced difficult questions and challenges following a spillage incident (Ortiz, 2014). This highlights the importance of maintaining a strong and positive company culture for long-term success.