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.

KEY TAKEAWAYS

 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.

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.

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