Elements in the Process of Evolution of Strategic Management

The concept of strategic management emerged to meet the decision makers’ challenges. Different key ideas have been developed in the last 40 years, which are used to link strategic management practices and the challenges faced by the managers.

3 Elements of Strategic Management

Three elements of strategic management will be more useful in understanding these ideas and challenges.

  1. It has its roots in practice
  2. It brings multidisciplinary tools
  3. Gaps between what it is and what ought to be to solve the business challenges

1. It has its roots in practice

As revealed in the evolution of strategic management, the roots of strategic management are in the cases and business histories. There is a significant role of institutionalists, economists, and behaviorists in the rooting process. In the late 1960s and early 197Os, the contributions were made by some institutionalists, including Chandler (1972), Quinn (1980), Pettigrew (1987), and Mintzberg (1978). They mainly described strategies and their processes from the perspective of top managers, both from within the firm and looking out at the environment. They were able to investigate a broad range of problems and issues related to business.

In the late 1970s and 1980s, the influence in strategic management came from economists such as Porter (1980). Porter mainly recommended the industrial characteristics that may constrain strategies to compete in the market. Later on, some economists developed and used game theory to solve business challenges. They have examined issues in the competitive environment associated with industry competition and competitive rivalry. The root of strategic management is also deeply embedded in the work of behavioral scientists, organizational psychologists, political scientists, and cognitive scientists.

2. It brings multidisciplinary tools

There are several tools of strategic decision-making adopted primarily from economics, behavioral and other social sciences to resolve the business-related problems. They include financial planning, long-range planning, strategic planning, and from the 1980s onward, strategic management. Financial planning focuses on budgets for one or two years. Long-range planning in the 1960s used a functional view of the firm and focused essentially on the arrangement of each of the other functions – marketing, personnel, production, finance – to achieve long-term goals.

Strategic planning has been in use since the 1970s, mainly focused on forecast-based planning, external factors, and internal functional factors. Strategic management focused on strategic planning and implementation, especially after the 1980s. Line managers started to be the main part of strategic management, responsible for formulating and implementing strategic planning.

3. Gaps between what it is and what ought to be to solve the business challenges

There are not always true links between theory and practice of strategic management. It indicates that there is still a need to fill the gap between what is known in theory and what is required by managers. In the process of linking the theory and practice of strategic management, it has been borrowing several concepts from economics, psychology, and political and behavioral sciences.

Moreover, the Changes in the style and practices of management over time also led to growth in the field of strategic management. For example, in the beginning, the concept of strategy was defined in a mechanistic way. For example, the strategy was described as ‘organizational fit’ – integration of organizational function or organization as a fit between the organization and its environment. Concepts are drawn from operational research, decision theory, game theory, and economics, also used to undertake research on strategy as planning and strategy as ends-mean.

The SWOT model and five forces model are examples of economic modeling to fit organizations and the environment.