Strategic Management: Definition, Process, and Implementation

Posted on Mar 2, 2025 in Labor Relations and Human Resources

Strategic Management: Definition

Strategic management is the process where managers establish the long-term direction of an organization, set specific performance objectives, develop strategies to achieve these objectives considering all relevant internal and external circumstances, and undertake to execute the chosen action plans. The modern definition includes the analysis, decisions, and actions an organization undertakes to create and sustain competitive advantages.

Key Attributes of Strategic Management

  1. Direction towards overall goals and objectives: Strategic management directs the organization towards achieving its long-term goals.
  2. Inclusion of multiple stakeholders in decision-making: It considers the participation of various stakeholders.
  3. Incorporation of short-term and long-term perspectives: Balances attention between immediate and future results.
  4. Recognition of trade-offs between efficiency and effectiveness: Understands the need to balance operational efficiency with strategic effectiveness.

Strategic Thinking

Thinking strategically involves answering three fundamental questions:

  1. Where are we now?
  2. Where do we want to go? (strategic and financial outcomes)
  3. How will we get there?

Strategic Management Process

The process includes:

  1. Scanning external and internal environments: Evaluating internal and external factors that affect the organization.
  2. Defining the Business and Developing a Strategic Vision & Mission: Clarifying what the organization does and where it is headed.
  3. Establishing Financial & Strategic Objectives: Defining clear and measurable goals.
  4. Crafting a Strategy: Designing plans to achieve the objectives.
  5. Implementing & Executing Strategy: Putting the designed plans into action.
  6. Evaluating Performance and Making Corrective Adjustments: Continuous monitoring and adjustments as needed.

Defining the Business

From an economic perspective, a business combines production factors to create profitable outputs. From a strategic perspective, it focuses on satisfying customer needs, identifying customer groups, and how needs are met through distinctive competencies.

Developing Vision & Mission

Developing vision and mission involves:

  1. Understanding the business the firm is in.
  2. Communicating the vision and mission clearly, excitingly, and inspiringly.
  3. Deciding when to alter the firm’s strategic course and change the mission.

Setting Objectives

Objectives convert the mission into specific, measurable performance targets that push the firm to be innovative, intentional, and focused. Objectives are divided into:

  • Financial Objectives: Related to improving the firm’s financial performance.
  • Strategic Objectives: Focused on enhancing competitiveness and long-term market position.

Crafting Strategy

Crafting strategies addresses how to:

  • Achieve desired strategic and financial objectives.
  • Out-compete rivals and gain competitive advantages.
  • Respond to changing industry and competitive conditions.
  • Defend against threats to the firm’s well-being.

Implementing Strategy

Strategy implementation is an internal, operations-driven activity involving organizing, budgeting, motivating, culture-building, supervising, and leading to “make the strategy work” as intended. This includes:

  • Creating fits between how things are done and what is needed for effective strategy execution.
  • Allocating ample resources to strategy-critical activities.
  • Establishing strategy-supportive policies.
  • Instituting best practices and programs for continuous improvement.
  • Tying the reward structure to the achievement of results.

Evaluating Performance

Managers must continuously evaluate performance, monitor the situation, and decide how well things are going, making necessary adjustments.

These ideas provide a comprehensive view of how organizations can formulate and execute effective strategies to maintain competitive advantages in a dynamic and changing environment.