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Why has strategic management become so important to todays corporations?

Strategic management become important to todays corporations for several reasons. First, strategic management emphasizes long-term performance, enabling organizations to maintain a high-level of performance for a longer period of time. Second, strategic management helps an organization to balance its environment with its strategy, structure, and processes. In the text, Wheelen and Hunger point out that research shows that companies that engage in strategic management generally out-perform those that do not. Finally, strategic management helps an organization to clarify its strategic vision, to focus on what is important to the organization, and to better understand its changing environment.

How does strategic management typically evolve in a corporation?

Strategic management typically evolves in four phases. The first phase is basic financial planning, which is typically initiated during budget-planning periods for the next fiscal year. Little analysis is conducted, and most of the information is provided internally. The second phase is forecast-based planning, which is longer-term than basic financial planning. Along with internal data, managers consider more environmental data to forecast current trends three to five years into the future. The third phase is externally-oriented (strategic) planning, in which management begins to take a truly strategic approach to planning. Planning begins to be taken out of the hands of lower-level managers and becomes more centralized with staff whose task is to strategically plan for the organization. Consultants are often brought in to assist in this phase. The final stage is strategic management, in which all levels of the organization begin to think strategically and to become involved in planning. Long-term plans become less specific and begin to emphasize probable scenarios and contingencies.

Why are strategic decisions different from other kinds of decisions? Strategic decisions differ from other kinds of decisions in three ways: first, strategic decisions are rare. In most decisions, the decision-makers are able to study similar situations and the results of the decisions that were made in them; strategic decisions involve unique situations that have no precedents to draw from. Second, strategic decisions are consequential; strategic

decisions place demands on an organizations resources. Third, strategic decisions are directive, setting precedents for future decision-makers to draw from in similar situations.

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