What Is Strategic Management?
Strategic management is the management of an organization’s resources to achieve its goals and objectives.
Strategic management involves setting objectives, analyzing the competitive environment, analyzing the internal organization, evaluating strategies, and ensuring that management rolls out the strategies across the organization.
- Companies, universities, nonprofits, and other organizations can use strategic management as a way to make goals and meet objectives.
- Flexible companies may find it easier to make changes to their structure and plans, while inflexible companies may chafe at a changing environment.
- A strategic manager may oversee strategic management plans and devise ways for organizations to meet their benchmark goals.
Understanding Strategic Management
Strategic management is divided into several schools of thought. A prescriptive approach to strategic management outlines how strategies should be developed, while a descriptive approach focuses on how strategies should be put into practice. These schools differ on whether strategies are developed through an analytic process, in which all threats and opportunities are accounted for, or are more like general guiding principles to be applied.
Business culture, the skills and competencies of employees, and organizational structure are all important factors that influence how an organization can achieve its stated objectives. Inflexible companies may find it difficult to succeed in a changing business environment. Creating a barrier between the development of strategies and their implementation can make it difficult for managers to determine whether objectives have been efficiently met.
While an organization’s upper management is ultimately responsible for its strategy, the strategies are often sparked by actions and ideas from lower-level managers and employees. An organization may have several employees devoted to strategy, rather than relying solely on the chief executive officer (CEO) for guidance.
Because of this reality, organizational leaders focus on learning from past strategies and examining the environment at large. The collective knowledge is then used to develop future strategies and to guide the behavior of employees to ensure that the entire organization is moving forward. For these reasons, effective strategic management requires both an inward and outward perspective.
Strategic management extends to internal and external communication practices as well as to tracking, which ensures that the company meets goals as defined in its strategic management plan.
The 5 Phases of Strategic Management
Strategic management involves managing an organization's resources, analyzing internal and external forces, and developing strategies to realize goals and objectives. There are five key phases that can help businesses execute their strategies.
- An organization must first establish clear, realistic goals. Its goals should answer what the company wants to achieve and why. Once set, the company can then identify the objectives, or how the goals will be reached. During this phase, the company can articulate its vision and long and short-term goals.
- Organizations must then be able to examine, understand, and codify what internal and external forces affect their business and goals, as well as what it needs to remain competitive. Analytical tools, such as SWOT analysis, are helpful during this phase.
- Based on the results of the analysis, the company can then develop its strategy, outlining how the company will achieve its goals and how. In this phase, the company will identify the needed people, technology, and other resources; how these resources will be allocated to fulfill tasks, and what performance metrics are needed to measure success. It is also critical to gain buy-in from stakeholders and business leaders.
- Once the strategies are defined, it is time for execution. The strategy is taken from planning to implementation. During this phase, the allocated resources are placed into action based on their roles and responsibilities.
- The final stage of strategic management is to evaluate the effectiveness of implemented strategies using defined metrics. The company will also visit whether ineffective strategies should be replaced with more viable ones. The company should continue to monitor the business landscape and internal operations, as well as maintain strategies that have proven effective.
Example of Strategic Management
For example, a for-profit technical college wishes to increase new student enrollment and enrolled student graduation rates over the next three years. The purpose is to make the college known as the best buy for a student's money among five for-profit technical colleges in the region, with a goal of increasing revenue.
In that case, strategic management means ensuring the school has funds to create high-tech classrooms and hire the most qualified instructors. The college also invests in marketing and recruitment and implements student retention strategies. The college’s leadership assesses whether its goals have been achieved on a periodic basis.
Why Is Strategic Management Important?
Helping their company find ways to be more competitive is the purpose of strategic management. To that end, putting strategic management plans into practice is the most important aspect of the planning itself. Plans in practice involve identifying benchmarks, realigning resources—financial and human—and putting leadership resources in place to oversee the creation, sale, and deployment of products and services.
In business, strategic management is important because it allows a company to analyze areas for operational improvement. In many cases, they can follow either an analytical process, which identifies potential threats and opportunities, or simply follow general guidelines. Given the structure of the organization, a company may choose to follow either a prescriptive or descriptive approach to strategic management. Under a prescriptive model, strategies are outlined for development and execution. By contrast, a descriptive approach describes how a company can develop these strategies.
What Is Strategic Management?
Strategic management is the process of setting goals, procedures, and objectives in order to make a company or organization more competitive. Typically, strategic management looks at effectively deploying staff and resources to achieve these goals. Often, strategic management includes strategy evaluation, internal organization analysis, and strategy execution throughout the company.
What Is an Example of Strategic Management?
Consider a large company that wants to achieve more ambitious online sales rates. To meet these goals, the company will develop a strategy, communicate this strategy, apply it across various units and departments in the organization, integrate this with employee goals, and execute accordingly. If an effective strategy is applied, ideally, it will help the company achieve its targets through a single, coordinated process.
What Are the Key Elements of Strategic Management?
Strategic management is not a one-size-fits-all strategy. However, there are key elements that are found to be critical. These include goal setting, industry and organizational analyses, strategy formation, strategy implementation; and the measurement, monitoring, and controlling of strategies.
The Bottom Line
Strategic management is the assembling and management of resources to achieve a company's goals and objectives. Although it is often segmented into either prescriptive or descriptive schools of thought, many businesses subscribe to a combined philosophy, defining how a strategy should be developed and how the strategies will be employed. Strategic management helps companies set goals, gain a competitive edge, better manage their resources, and more. There is not one prescription for all. Companies must create and adapt a strategic management process that works best for their company and those they serve. Strategic management does not end with the successful implementation of strategies; it continues for the life of the business.