Everything You Need To Know About Strategic Management
By Indeed Editorial Team
Updated 3 January 2023
Published 26 May 2021
The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.
Strategic management describes the process of enforcing effective strategies that meet organisational goals. It's a dynamic system that determines future sustainability and profitability. Strategic management brings a synergy between operations and management. This cultivates an environment of cohesiveness, as each individual works towards a shared purpose.
In this article, we discuss what strategic management is, why it's important, its key concepts and how to implement a strategic management process using five steps and an example.
What is strategic management?
Strategic management is the efficient handling and distribution of resources to meet organisational goals and objectives. The process involves comprehensive research to inform the direction of an organisation. Strategic managers analyse their market in relation to the current business environment to determine the course of action. They reevaluate previous goals and strategies to create an approach that's in the best interests of the entire organisation.
Related: What is Business Development?
Why is strategic management important?
Strategic management is important because it gives an organisation intentional goals and a plan of action to go about achieving them. Here are the major benefits:
Creating a framework
Strategic management creates an operational framework that leaders can communicate across an organisation. It helps them set a clear direction for their employees. This way, each individual can contribute their talents to a shared vision. It helps employees identify how their role contributes to the organisational mission and clearly establishes their responsibilities. In return, people feel a sense of belonging to the business and they feel empowered to perform to a high standard.
Responding to the dynamic environment
Strategic management is essential for an organisation to be competitive. It creates an ongoing system that encourages leaders to implement new goals and carry out new strategies. This helps businesses avoid complacency. It forces them to detect weaknesses, reevaluate them and stay up-to-date with new trends and technologies. Introspection and reinvention is key to an organisation's health and long-term survival.
For organisations to be successful, they need to have a system to measure risk. Strategic management meets this demand by measuring risk and putting mitigation plans in place. These contingency plans are integral to the wellbeing of a company because an efficient process helps them save time, resources and money.
Strategic management concepts
You can approach strategic management in a variety of ways. Below we will outline popular concepts of strategic management:
SWOT stands for strength, weaknesses, opportunities and threats. It's a valuable tool that helps you evaluate a company's activities relative to each of these considerations. It informs leaders about their position compared to their competitors and gives them precise objectives to build on their strengths and compensate for their weaknesses.
A SWOT analysis helps senior managers make the most of opportunities while establishing a proactive protocol for threats.
Related: SWOT Analysis Guide (With Examples)
A balanced scorecard is a strategic management performance metric used to identify and improve business operations and performance. Analysts collect and evaluate quantifiable data to provide actionable feedback to organisations. Managers then use this information to make better decisions on behalf of a company.
Balanced scorecards gather information from four aspects of a business:
Learning and growth: Researchers examine training resources to investigate how well an organisation disseminates information and how accurately it's understood.
Business processes: Analysts investigate business operations to determine the quality of a product or service.
Customers perspectives: Data on customer satisfaction is gathered to understand their insights into the quality and price of goods and services.
Financial data: Information on sales, balance sheets and other financial statistics inform the performance of an organisation.
The balanced scorecard method can generate timely reporting mechanisms that show all statistics related to the growth of the company.
Five steps of strategic management
The strategic management process helps you identify and describe strategies that achieve better performance and gain a competitive advantage. These five essential steps help business leaders make the right decisions based on stringent research and evidence. Here are the five steps in the strategic management process:
1. Identifying mission and goals
Any decisions you make on behalf of a business should align with its larger organisational mission. Thus, the first step in strategic management is evaluating your organisation's position in relation to overarching values and aspirations.
If your current operations agree perfectly, that means you are heading in the right direction. However, if you notice discrepancies, this is a good time to reassess your current strategy. A suitable method of doing this is by breaking down the larger mission into more attainable short-term goals.
2. Analysing strengths and weaknesses
Once you have identified your organisation's position, you need to analyse the details. This requires you to collect and scrutinise information carefully. Work with your team to examine what's working and what's not working. Conduct a SWOT analysis to get a better picture of your organisation's strengths, weaknesses, opportunities and threats. This is a reliable tool because it ensures you confront the facts and avoid personal bias.
3. Strategy formation
After clearly understanding the information available to you, it's time to create an action plan for reaching your goals. At this stage, it's important to think about how to communicate information in a logical and articulate way. Prepare guidelines that are clear, easy to understand and focused on your objectives. Make sure they address the needs at each level of an organisation, these include:
Corporate strategy: Key decision-makers develop long-term corporate goals to provide direction for an organisation. These objectives impact the next two levels.
Business strategy: Department heads give corporate goals an actionable strategy. They define how each business unit will deliver the planned tactics and ensure operations run smoothly.
Functional strategy: The day-to-day actions that deliver business and corporate strategies.
Follow the steps outlined in your strategic plan. Make sure you distribute resources effectively to key stakeholders to ensure every function of the business works cohesively. This ensures people feel competent enough to produce the desired results, resulting in an increase in overall efficiency.
Evaluate the final product. This is an important final step in strategic management because it gives you the opportunity to measure the effectiveness of your actions. Essentially, you are asking whether or not the goal has been achieved. Reflect on the results and revise your strategy as needed.
Example of strategic management
Here's an example of the five steps of the strategic management process to help you understand it in its context:
ABC company is a fresh start-up in the education industry that works with future business leaders to train their management skills. They wish to steadily increase student enrolment over the next three years. To help them reach this goal, they decide to implement strategic management to ensure enrolment rates are consistent and operate smoothly in all their five locations.
As a start-up, company ABC has struggled with a lack of resources to hire enough personnel to market all their tuition centres. Before they change their current marketing strategy, they run a SWOT analysis. Here are the results:
Quality customer service
Modern management modules
Several locations give convenience to customers
Lack of personal
Inconsistent marketing strategy
Poor communication between staff in different locations
Competitors are already well-established in the market
Using the results from their SWOT analysis, ABC company implements a strategic plan to boost enrolment in all five tuition centres. It includes providing consistent marketing collaterals to all locations. They also hire more freelance designers as a cost-effective solution to their human resources needs. Finally, they set up a new internal messaging system to facilitate communication between their various business locations.
After a month of strategic planning, ABC company provides the marketing collaterals to all their tuition centres. The freelance designers work alongside employees in each location and demonstrate how to implement the marketing collaterals efficiently. Next, human resource professionals provide employees with a guide on how to use the new internal messaging system.
ABC company reviews enrolment data after a month of implementing the new plan. They find that the marketing strategy drove customers to purchase more training courses. Through word-of-mouth; they also were successful in registering new students. However, they found employees underutilised the new internal messaging system because the application had many technical glitches.
Strategic managers use this feedback to learn from their successes and failures. They continue to monitor enrolment statistics over the next few months to ensure the strategy is effective for the long term. They decide that their next area of focus should be to create a more efficient internal communication system.
Explore more articles
- What Is an Invoice? (With Components and a Template)
- How to Make Time for Self-Care While Working From Home
- Fixed vs. Growth Mindset: Key Differences (With Tips)
- A Guide to Multimedia Journalist Skills (With Examples)
- What Does a Quality Controller Do? A Definitive Guide
- 8 Translator Skills (Plus How to Develop and Highlight Them)
- What Is an NGO? Definition, Types and Career Paths
- What To Do When You're Bored With Work
- How to Deal With a Difficult Boss: List of Helpful Tips
- What Does Chairing a Meeting Mean? Plus Meeting Chair Duties
- 16 Native or Bilingual Proficiency Careers (With Duties)
- What Is MSRP? (Including the Elements, Pros and Cons)