Why strategic management important for a corporation's competitive advantage

Full Answer Section

• Optimize resource allocation: Strategic management ensures that resources are allocated efficiently and effectively to support the organization's goals and objectives.
• Mitigate risks and uncertainties: By anticipating potential challenges and developing contingency plans, corporations can better manage risks and uncertainties in the business environment.

Evolution of Strategic Management

The evolution of strategic management within a corporation typically follows a cyclical process:

1. Strategic Planning: The organization defines its mission, vision, and goals, and conducts a SWOT analysis to identify internal strengths, weaknesses, external opportunities, and threats.
2. Strategy Formulation: Based on the SWOT analysis, the corporation develops strategic alternatives and selects the most appropriate strategy to achieve its objectives.
3. Strategy Implementation: The chosen strategy is put into action through operational planning, resource allocation, and organizational change.
4. Strategic Evaluation and Control: The organization monitors performance, evaluates the effectiveness of its strategy, and makes adjustments as needed.

Example: A technology company might initially focus on product development and market penetration. As the company matures, it may shift its strategy to focus on innovation, customer retention, and international expansion.

Board of Directors and Corporate Governance

A board of directors is essential for a corporation because it provides oversight, guidance, and accountability. The board is responsible for:

• Setting strategic direction: The board works with the CEO to establish the corporation's overall direction and strategic priorities.
• Monitoring performance: The board reviews the corporation's financial performance, operational results, and compliance with laws and regulations.
• Overseeing risk management: The board ensures that the corporation has adequate risk management processes in place.
• Ensuring ethical conduct: The board promotes ethical behavior and accountability within the organization.

Corporate governance refers to the system of rules and practices that govern the operation of a corporation. It encompasses various aspects, including board oversight, executive compensation, and stakeholder relations. Social responsibility is the obligation of a corporation to act in a way that benefits society, not just its shareholders.

Example: A corporation might implement sustainable practices to reduce its environmental impact, support community initiatives, or promote diversity and inclusion. These actions demonstrate social responsibility and can enhance the corporation's reputation and long-term sustainability.

Industry Competition in the Saudi Market

Saudi Arabian Mining Company (Maaden) is a leading mining and metals corporation in the Saudi market. The forces driving competition in its industry include:

• Bargaining power of buyers: The mining industry is often characterized by a few large buyers, such as steel mills and manufacturing companies. These buyers can exert significant bargaining power over suppliers, influencing prices and terms.
• Bargaining power of suppliers: While the mining industry may have a limited number of suppliers for certain minerals, the availability of substitutes and the potential for new entrants can constrain supplier bargaining power.
• Threat of new entrants: The mining industry can be capital-intensive, requiring significant investments in exploration, development, and infrastructure. However, new entrants can be attracted by rising commodity prices and favorable government policies.
• Threat of substitute products: While some minerals have unique properties and applications, there may be substitute materials or technologies that can limit the demand for certain products.
• Rivalry among existing firms: Competition within the mining industry can be intense, driven by factors such as price competition, product differentiation, and market share gains.

Maaden must carefully analyze these competitive forces to develop effective strategies and maintain its position in the market.

Sample Answer

Strategic management is crucial for a corporation's competitive advantage because it provides a framework for making informed decisions, aligning resources, and adapting to a changing business environment. By developing and implementing effective strategies, corporations can:

• Identify and capitalize on market opportunities: Strategic management helps organizations identify emerging trends and market niches, enabling them to seize new opportunities and gain a competitive edge.
• Differentiate themselves from competitors: By developing unique value propositions and competitive strategies, corporations can distinguish themselves from rivals and attract customers.