Strategic management involves making decisions and taking actions that can help organisations achieve their objectives by adopting a systematic way of formulating the strategy, implementing the strategy, and evaluating and controlling the strategy implemented. Strategic management, therefore, integrates various functional areas like marketing, management, finance, accounting, human resources, production and information systems in a formal and systematic manner consistent with the objectives of the organisation and superior performance. This definition also suggests that strategic management comprises three key components, namely, strategy formulation, strategy implementation and strategy evaluation and control.
There are three major components in strategic management, namely, strategy formulation, strategy implementation and strategy evaluation and control as shown in Figure. There are several elements that make up each component.
In the strategy formulation component, the key elements are vision, mission, goals and objectives of the organisation. The other elements are the external analysis, internal analysis, industry analysis and competitive analysis. Identifying strategic alternatives and selection of the strategic choices also form part of the strategy formulation component.
In the strategy implementation component, there are at least three key elements that affect strategy implementation. These are organisational structure, people and leadership, and organisational systems and processes. It is in this component where action begins for the organisation and it presents a major challenge to many organisations.
In the strategy evaluation and control component, the key elements are the evaluation model and processes, evaluation criteria, and control methods and mechanisms for improving organisational performance and meeting the organisational objectives.
The strategic management model identifies concepts of strategy and the elements necessary for development of a strategy enabling the organization to satisfy its mission. Historically, a number of frameworks and models have been advanced which propose different normative approaches to strategy determination. However, a review of the major strategic management models indicates that they all include the following elements:
- Performing an environmental analysis.
- Establishing organizational direction.
- Formulating organizational strategy.
- Implementing organizational strategy.
- Evaluating and controlling strategy.
The foundation of the strategy is a definition of organisational purpose. This defines the business of an organisation and what type of organisation it wants to be. Many organisations develop broad statements of purpose, in the form of vision and mission statements.
Assessing both the external and internal environments is the next step in the strategy process. Managers need to assess the opportunities and threats of the external environment in the light of the organisation’s strengths and weaknesses keeping in view the expectations of the stakeholders.
This analysis allows the organisation to set more specific goals or objectives which might specify where people are expected to focus their efforts. With a more specific set of objectives in hand, managers can then plan how to achieve them.
The analysis stage provides the basis for strategic choice. It allows managers to consider what the organisation could do given the mission, environment and capabilities a choice which also reflects the values of managers and other stakeholders. These choices are about the overall scope and direction of the business.
Since managers usually face several strategic options, they often need to analyze these in terms of their feasibility, suitability and acceptability before finally deciding on their direction.
Implementation depends on ensuring that the organisation has a suitable structure, the right resources and competencies (skills, finance, technology etc.), right leadership and culture. Strategy implementation depends on operational factors being put into place.
There are different models of strategic management process. The one, which was described in this article, is just one more version of so many models that are established by other authors.
David Model of Strategic Management Process
Three-Stage Strategic Management Process
- Strategy Formulation
- Strategy Implementation
- Strategy Evaluation
Steps in strategic management process
- Develop Vision and Mission Statements
- Perform External Audit
- Perform Internal Audit
- Establish Long-Term Objectives
- Generate, Evaluate, and Select Strategies
- Implement Strategies; Management, Marketing, Finance, R&D Issues
- Measure and Evaluate Performance
Thompson and Martin Strategic Management Process
Steps in strategic management process
- Where are we?
- Where are we going?
- How are we getting there?
- How are we doing?