Concept of strategic management

22/June/2025 18:36 Share:

Strategic Management – Definition and Components in Detail

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What is Strategic Management?

Strategic management is the process of formulating, implementing, and evaluating strategies to achieve long-term goals and maintain a competitive advantage. It involves analyzing internal and external environments, setting objectives, allocating resources, and continuously improving organizational performance.

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Definition of Strategic Management

> Glueck:

“Strategic management is a stream of decisions and actions which leads to the development of an effective strategy to help achieve corporate objectives.”

> Chandler:

“Strategic management is the determination of basic long-term goals and objectives of an enterprise, and the adoption of courses of action and allocation of resources necessary for carrying out these goals.”

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Components of Strategic Management

Strategic management includes five major components:

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1. Goal Setting (Vision, Mission, Objectives)

Vision Statement:

Defines what the organization wants to become in the future.

Example: “To be the world’s most customer-centric company.”

Mission Statement:

Defines the organization’s purpose, values, and scope of operations.

Example: “We deliver affordable and innovative healthcare solutions.”

Objectives:

Specific, measurable goals that the organization aims to achieve.

Example: “Increase market share by 10% in the next fiscal year.”

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2. Environmental Scanning (Internal and External Analysis)

Internal Analysis:

Evaluates the organization’s internal strengths and weaknesses.

Tools: SWOT, Value Chain Analysis.

Example: Strong R&D, poor customer service.

External Analysis:

Examines opportunities and threats in the market and industry.

Tools: PESTEL, Porter’s Five Forces.

Example: Technological advances (opportunity), economic downturn (threat).

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3. Strategy Formulation

Crafting strategies based on the data gathered from internal and external analysis.

Involves deciding:

Corporate-level strategy (e.g., growth, stability, diversification).

Business-level strategy (e.g., cost leadership, differentiation).

Functional-level strategy (e.g., marketing, operations strategies).

Example: A company might adopt a cost leadership strategy to beat competitors by offering lower prices.

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4. Strategy Implementation

Putting the formulated strategies into action.

Involves:

Allocating resources

Designing organizational structure

Communicating strategies across departments

Motivating employees

Example: Launching a new product line, hiring staff, updating IT systems to support strategic goals.

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5. Strategy Evaluation and Control

Monitoring the performance and effectiveness of the strategy.

Taking corrective actions when results deviate from the expected outcomes.

Evaluation involves:

Setting performance benchmarks

Reviewing internal reports and KPIs

Strategic audits and feedback systems

Example: A company reviewing quarterly sales data and adjusting its pricing strategy accordingly.

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Supporting Concepts

SWOT Analysis: Strengths, Weaknesses, Opportunities, Threats.

PESTEL Analysis: Political, Economic, Social, Technological, Environmental, Legal.

Balanced Scorecard: Measures performance from financial, customer, internal process, and learning perspectives.

Porter’s Five Forces: Competitive analysis of industry attractiveness.

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Conclusion

Strategic management is not just about planning but about leading an organization in a dynamic environment, adjusting continuously to changes, and maintaining a long-term vision. It helps firms become proactive rather than reactive, and enables sustained growth, profitability, and market relevance.