“The nature of strategic management differs according to the type of organizations.” Discuss this statement with respect to the following types of organizations:
(a) Public sector organizations.
(b) Non-profit organizations.
Although the elements of strategic management are broadly the same irrespective of the type of organization or its context, the range and nature of strategic issues does to some extent differ according to the organization type and its context.
In other words, it would be wrong to assume that, for example, all the elements of strategic management are equally important in all circumstances, or indeed that their application is the same in all situations. Some of the key differences are discussed below for each of the different types of organization and contexts in the question.
(a) Strategic management in public sector organizations
Firstly it is important to recognize that the public sector itself comprises of a very wide and diverse set of types of business organization. In fact, the public sector comprises of a number of sub-sectors such as the nationalized organizational sector, government agency type organizations, and public service organizations such as hospitals, the police service etc. Each of these sub-sectors to some extent has its own special characteristics with regard to the application of the strategic management elements. However, recognizing this, it is possible to point to some of the general differences and special considerations which arise with regard to strategic management in the public sector organization.
Perhaps the main difference in this type of organization/context is the influence of political considerations and factors in the development of strategic plans. So, for example, public sector organizations are often constrained and/or directly influenced political considerations. A related issue is that public sector organizations are very much more accountable for their decisions to outside parties and indeed in the broadest sense, often to the public in general. Decisions managers in such organizations will often be taken in the context of such political/ regulatory requirements such as, for example, a requirement to buy from domestic suppliers.
Finally, public sector organizations are often very formal and bureaucratic and for this reason, may often be slow to respond to change.
(b) Strategic management in the voluntary and not-for-profit sector
As with public sector organizations, it is important to recognize that this sector contains many different varying types of organization. However, it is again possible to generalize
regarding the extent to which there are differences regarding the nature of strategic management in such organizations.
One of the key differences in this sector is that values and expectations of different stakeholder groups will play a very important part in the process of strategic management. Moreover, the range of stakeholder groups is often much wider and sometimes potentially conflicting compared to its profit making counterparts.
Funding for organizations in this sector may come from several sources including, for example, funding bodies and public donations, and because of this openness and effectiveness in the uses of funds is often a high priority. Because, definition, many of the organizations in this sector do not have profit objectives, clear objective setting is sometimes difficult and indeed objectives may often conflict.
Finally, in the past it has sometimes been the case that the management of companies in this sector have perhaps lacked some of the planning skills of their profit making sector counterparts. However, in recent years this has changed and now managers in this sector are now just as skilled in the strategic planning process and indeed often use the same concepts and techniques developed in the profit/commercial sector organizations.