Strategic management is the process of defining an organization’s strategy, making decisions on allocating resources to pursue that strategy and implementing it through effective planning, organizing, and controlling of resources and activities.

The strategic management process typically involves several key steps, including:

1. Defining the organization’s mission, vision, and values
2. Analyzing the internal and external environment to identify strengths, weaknesses, opportunities, and threats (SWOT analysis)
3. Formulating strategies based on the analysis and the organization’s goals and objectives
4. Implementing the strategies through the development of action plans, allocation of resources, and communication of objectives and goals to stakeholders
5. Monitoring and evaluating the implementation of the strategy, and making necessary adjustments and improvements

Strategic management is important because it helps organizations to identify and pursue opportunities for growth, manage risks, and achieve their goals and objectives. It involves aligning the organization’s resources and activities with its strategy, and ensuring that everyone within the organization is working towards the same goals. Successful strategic management can lead to increased profitability, market share, and competitiveness.

3 Components of Strategic Management

The three main components of strategic management are strategy formulation, strategy implementation, and strategy evaluation and control.

1. Strategy formulation: This component involves defining the organization’s mission, vision, and values, and analyzing the internal and external environment to identify strengths, weaknesses, opportunities, and threats (SWOT analysis). Based on this analysis, the organization formulates strategies that align with its goals and objectives.
2. Strategy implementation: This component involves developing action plans, allocating resources, and communicating objectives and goals to stakeholders. It involves ensuring that everyone within the organization is working towards the same goals and that the organization’s resources and activities are aligned with its strategy.
3. Strategy evaluation and control: This component involves monitoring and evaluating the implementation of the strategy and making necessary adjustments and improvements. It involves identifying key performance indicators (KPIs) and using them to track progress towards the organization’s goals and objectives. It also involves identifying potential risks and developing contingency plans to mitigate those risks.

Successful strategic management requires effective execution of all three components. It involves a continuous cycle of planning, execution, evaluation, and adjustment to ensure that the organization is able to adapt to changing market conditions and achieve its goals and objectives.

What is Strategy?

Strategy is a plan or approach designed to achieve a specific goal or objective. It involves identifying the best course of action to take in order to reach a desired outcome, and involves making decisions about how resources should be allocated, what actions should be taken, and what trade-offs need to be made.

A good strategy should be based on a thorough analysis of the current situation, taking into account strengths, weaknesses, opportunities, and threats. It should also be adaptable, taking into account changes in the environment or unexpected events that may occur.

In business, strategy typically involves setting goals for the organization and then determining how to allocate resources, such as finances, personnel, and technology, to achieve those goals. However, strategy can be applied in many different contexts, including military, political, and personal decision-making.

Origins of Strategy

The origins of strategy can be traced back to ancient military and political contexts. The concept of strategy was first used in the context of war, where it referred to the plan of action that a commander would use to achieve victory over an opponent. The Chinese General Sun Tzu, in his book “The Art of War,” outlined principles of strategy that are still studied and applied today.

Over time, the concept of strategy was applied to other domains, including politics, business, and sports. In the 20th century, strategy became a formalized field of study, with the development of strategic planning methodologies and frameworks. During this time, management theorists and practitioners began to apply military strategy concepts to the business world, leading to the development of strategic management as a discipline.

Today, strategy is a key concept in many different domains, and it is studied and applied in a variety of contexts, including military, political, economic, and social arenas. While the origins of strategy may be rooted in the military and political contexts of ancient times, the concept has evolved and expanded to become an essential tool for success in a wide range of domains.

Strategy in the Business World

The concept of strategy has been around for centuries, but its application to business is more recent. All businesses need a strategy because they can’t do everything. Companies have to make choices which means giving some things up and taking risks.

When you choose to do something, you make a decision to not do everything else. The word Decide originates from the Latin word which literally means to cut off. So making decisions is a key part of running a business successfully.

Deciding what not to do is as important as deciding what to do. -Steve Jobs

Strategy refers to all the resource allocation choices that define the scope of an organization’s activities to ensure its development and sustainability. The purpose of strategy is to help managers make the best decision possible to maximize performance for durable success.

If you look closely, there are two aspects of formulating a strategy: the scope of activities (corporate-level strategy) and resource allocation choices (business-level strategy).

Strategy Formulation

Strategy formulation is the process of developing a strategy to achieve the goals and objectives of an organization. It involves analyzing the internal and external environment, identifying opportunities and threats, and developing a plan to leverage strengths and mitigate weaknesses.

Effective strategy formulation requires a deep understanding of the organization’s mission, vision, and values, as well as its resources, capabilities, and limitations. It also requires a thorough analysis of the external environment, including market trends, competition, and regulatory and social factors.

Business Strategy

Business strategy helps companies outcompete other firms that operate in the same domain, offer similar products & services or try to attracts the same customers.

Business strategy is a long-term plan of action designed to achieve specific goals or objectives for a company. It involves determining the company’s mission, vision, and values, and identifying how the company will differentiate itself from competitors in order to gain a competitive advantage.

Business strategy typically involves analyzing the company’s strengths and weaknesses and the opportunities and threats in the market. This analysis can help the company identify potential areas for growth and determine which products or services to focus on.

Once the company has identified its goals and areas for growth, it must develop a plan for achieving those goals. This plan may include marketing initiatives, product development, operational improvements, or other strategic actions. It may also involve identifying potential risks and developing contingency plans to mitigate those risks.

Business strategy should be dynamic and adaptable, as the business environment can change rapidly. As such, companies should regularly review and adjust their strategy to ensure it remains relevant and effective in achieving their goals.

Corporate Strategy

Corporate strategy is the choice of businesses and markets in which the company should compete , as well as the choices on how to grow

Corporate strategy is a high-level plan of action that defines a corporation’s overall direction and scope. It involves making decisions about which businesses or industries the corporation should be involved in, and how it can create value across those businesses or industries.

Corporate strategy focuses on the company as a whole, rather than on individual business units or product lines. It involves identifying the company’s strengths and weaknesses, as well as the opportunities and threats in the market, and using that information to make decisions about where to invest resources and how to allocate capital.

Corporate strategy may involve making decisions about mergers and acquisitions, divestitures, joint ventures, or other types of partnerships. It may also involve identifying potential risks and developing contingency plans to mitigate those risks.

Corporate strategy should be aligned with the company’s mission, vision, and values, and should be dynamic and adaptable to changing market conditions. It is typically developed by top-level executives and communicated to the rest of the organization to ensure that everyone is working towards the same goals.

What’s the Difference?

Business strategy and corporate strategy are closely related, but they are distinct concepts. Business strategy focuses on the actions and decisions necessary to achieve specific goals within a particular business unit or product line, while corporate strategy is concerned with the overall direction and scope of the entire organization.

In other words, business strategy is more tactical in nature, while corporate strategy is more strategic. Business strategy is focused on creating a competitive advantage within a specific market or industry, while corporate strategy is focused on creating value across multiple businesses or industries.

For example, a company may have a business strategy to expand into a new market segment by launching a new product line or improving an existing product. The corporate strategy, on the other hand, may involve identifying which businesses or industries the company should be involved in, and how it can create value across those businesses or industries.

In summary, business strategy is focused on specific actions and decisions within a particular business unit or product line, while corporate strategy is focused on the overall direction and scope of the entire organization.

Strategy Implementation

Strategy formulation is nothing if it is not implemented

Strategy implementation is the process of putting a strategy into action to achieve the goals and objectives of an organization. It involves translating the strategic plan into specific actions and initiatives, allocating resources, and aligning the organization’s structure, processes, and systems with the strategy.

Effective strategy implementation requires a clear understanding of the strategy, effective communication, leadership, and effective management of resources. It involves setting up a plan for execution, identifying specific tasks and milestones, and assigning responsibilities and accountabilities to individuals or teams. It also involves monitoring progress, measuring performance, and making adjustments to ensure the strategy is on track.

A key challenge in strategy implementation is ensuring that the organization’s culture, structure, and processes are aligned with the strategy. This often requires organizational structure, processes, and systems changes to support the strategy. It also requires effective communication and leadership to ensure that everyone in the organization understands the strategy and is committed to its success.

Ultimately, strategy implementation is a critical component of strategic management, as it determines the success or failure of the strategic plan. Effective strategy implementation can lead to improved performance, increased competitiveness, and long-term success, while poor implementation can lead to failure and missed opportunities.

Strategy Control and Evolution

Strategy control and evaluation is the process of monitoring and assessing the effectiveness of a strategy over time and making adjustments as needed to ensure that it continues to achieve its goals and objectives. It is a critical component of strategic management and involves a continuous feedback loop of planning, implementation, and evaluation.

The strategy control and evaluation process typically involves several steps, including:

1. Establishing metrics and benchmarks: This involves defining specific measures to evaluate the performance of the strategy, such as revenue growth, market share, customer satisfaction, or employee engagement. It also involves setting benchmarks or targets to measure progress over time.
2. Monitoring performance: This involves tracking performance against the established metrics and benchmarks and identifying areas where performance is falling short of expectations.
3. Analyzing results: This involves analyzing the data to identify the underlying causes of any performance gaps and identifying potential solutions or adjustments to the strategy.
4. Making adjustments: Based on the analysis, the organization can make adjustments to the strategy, such as reallocating resources, changing tactics, or revising goals and objectives.
5. Communicating results: This involves communicating the results of the evaluation process to stakeholders, including employees, customers, investors, and other partners.

Effective strategy control and evaluation requires ongoing monitoring and analysis of performance data, as well as a willingness to make adjustments to the strategy as needed. It also requires effective communication and collaboration among all stakeholders to ensure that the strategy remains aligned with the organization’s goals and objectives over time.

Strategy formulation and strategy implementation share a cyclic relationship in the sense that they impact one another. How we formulate what we want to do in the future will inform how we execute certain actions in the present. The performance we achieve from executing those actions will formulate what we want to do in the future