What Is Strategic Management?

By WILL KENTON Updated May 24, 2023

Reviewed by JULIUS MANSA

Fact checked by PATRICE WILLIAMS

Investopedia / Alex Dos Diaz

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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.

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.

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