The 5-Step Strategic Management Process

By Indeed Editorial Team

Updated March 5, 2021 | Published October 7, 2019

Updated March 5, 2021

Published October 7, 2019

*Strategic management can increase your effectiveness as a manager or leader. It can help you create a clear direction for your company and guide it toward a goal. However, a strategic management process has to be appropriately planned and executed to deliver the desired results. In this article, we will discuss the strategic management process and the steps you need to take to implement it successfully.

What is strategic management?

Strategic management is the evaluation of an organization and its customers and competitors to establish and maintain the best management practices. It helps a company better align its strategic objectives and policies to achieve long-term success. The strategic management process framework typically involves setting clear goals, devising plans, aligning business activities and allocating resources to meet the objectives.

Strategic management can be beneficial to a company, department or team in many ways. It enables an organization or group to:

  • Identify strengths and weaknesses.

  • Determine strategic direction.

  • Focus on strategically important factors.

  • Simplify complex situations and develop appropriate strategies.

  • Improve overall performance and ability to achieve goals.

  • Increase employee productivity.

  • Understand the changing environment and the presence of external threats.

  • Gain a sustainable competitive edge.

  • Support long-term survival in a competitive marketplace.

Elements of a strategic management process

You can adapt strategic management for different needs and goals, depending on your organization. However, most successful strategic management processes have certain standard components, including:

Finance

Finance has a direct impact on the scope and effectiveness of a strategic management process. If your company is financially stable, it can set higher goals, undertake more substantial projects, devise more elaborate strategies, and assign more employees, funds and resources to its strategic management efforts. The financial ability of an organization depends on many factors, including revenue, cash flow, equity, return on investment, expenses and liabilities.

Forecasting

A company has to continually make adjustments to its strategic management process, even if its goal is to maintain its current level of profitability. Market shifts, labor market transitions, customer base fluctuations and technological advances are some of the indications that change is inevitable. Forecasting is the act of making predictions about future situations based on the analysis of past and present data. In the business context, it involves the evaluation of factors that can affect an organization’s growth or expansion. As such, the ability to make accurate forecasts is vital to the development of an effective strategic management plan.

External factors

External factors are an important consideration for an organization when it is identifying and analyzing opportunities and challenges. An example of an external opportunity is the availability of qualified vendors to provide the goods and services you need to manage your team strategically. In contrast, an external challenge can be a competing company offering high salaries and generous benefits, which you have to match to attract top talent. Other external factors that can impact an organization include demographics, weather conditions, infrastructure development, emerging technologies and changes in federal, state or industry regulations.

When you combine the three elements above, you should have all the information and resources you need to implement your strategic management plan. However, you may have to fine-tune your plan to keep up with changes that may occur along the way. To execute your strategic management plan successfully, you should use critical and creative thinking, make sound decisions based on all of the elements, and clearly communicate your vision and expectations to all the staff members you’ve tasked with carrying out the plan.

Related: SWOT Analysis Guide (With Examples)

Types of strategic management

To get the best results from your strategic management process, you should choose a strategy that works best for the goals you want to achieve. There are three main types of strategic management:

Business strategic management

This type of strategic management mainly focuses on how a business organization should approach the marketplace. It requires you to make considerations such as:

  • Which consumer segment to market to

  • Which geographical areas to cover

  • What products or services to offer

  • How to position your company against your competitors

  • How to stand out from your competitors

  • How to create new markets

For example, you are a marketing manager in a company that specializes in producing clothes for young adults. As part of your business strategy, you actively promote your products on social media websites that are popular among this age group.

Operational strategic management

The primary purpose of operational strategic management is to turn your business strategy into an actionable plan. It takes into account factors such as:

  • Which capabilities and processes to create or improve

  • What technologies you need

  • What skills you need

For example, your company is receiving more customer inquiries than it can handle. As the head of the customer service department, you decide to hire more customer service representatives and use automated solutions such as chatbots and ticket-routing optimizers to respond more quickly to customer inquiries.

Transformational strategic management

Transformational strategic management involves the transformation of an entire company or organization. It is a highly complex process that may require radical changes, which is why it is not as common as the other two types of strategic management. It may involve a change in direction, processes, policies or other important aspects of an organization. If you are undertaking this type of strategy management, you are responsible for guiding the changes that take place in the company and managing employee morale, which can be challenging in times of change.

For example, your company is planning to make significant updates to its product line. As a transformational leader, you should clearly communicate the organization’s new direction to the employees, including its latest products, target consumers, and business processes. You will also be responsible for motivating the team to adhere to the company’s new vision while increasing productivity. 

How to develop a strategic management process 

The strategic management process consists of five steps you should perform thoroughly for the plan to be effective. Follow this guide to create and implement an effective strategic management plan:

  1. Clarify your vision

  2. Collect and analyze information

  3. Devise a strategy

  4. Execute your strategy

  5. Evaluate and control

1. Clarify your vision

Setting well-defined goals should clarify your vision for your organization. This stage comprises three important tasks: identifying your short-term and long-term objectives, determining the process for accomplishing your goals and customizing the process for your staff. Your objectives should be realistic, detailed and in line with your values. For the final task, consider writing a mission statement that clearly communicates your objectives to your shareholders and staff. Make sure you assign each of your staff members a task they can perform effectively.

Related: SMART Goals: Definition and Examples

2. Collect and analyze information

This stage is important because the information you gain can have an impact on the next two steps. Collect as much knowledge as you can on how to achieve your vision. During the analysis, you should focus on identifying your company’s needs for sustaining itself, the strategic direction it is taking and the initiatives that can help it grow. You should also examine any internal or external factors that can have an impact on your ability to accomplish your objectives.

3. Devise a strategy

When you are making a plan, you should first review the information you have obtained in the analysis stage. Then, identify the resources currently available in your organization that can help you reach your objectives. Also, find out if you need external resources. Next, create a list of problems that are affecting your company in order of importance. Once you have completed these tasks, you can proceed to develop your strategy. Since economic and business situations can change, you should also have alternative approaches for each stage of your strategic management plan. 

Related: Ultimate Guide To Strategic Planning

4. Execute your strategy

Implementing your strategy is the action stage of your strategic management process. Everybody in your company should have a clear idea of what they need to do and how they will contribute to the overall goal. Also, you should have already secured all the funds and resources required for the project at this point. Once your staff is ready and the resources are in place, you can start implementing your strategy.

5. Evaluate and control

To evaluate and control the effectiveness of your strategic management plan, you have to create and use performance measurements, regularly review internal and external factors, and take corrective measures when necessary. Successful strategy evaluation starts with determining the parameters to be measured. Make sure the parameters reflect the goals you set in the first stage. You can evaluate your progress by comparing the actual results with your plan.

By monitoring internal and external factors, you will be able to react quickly to any significant changes that can affect your organization and its ability to reach its objectives. If you find that your strategy is not helping your company achieve its goals, you have to take corrective actions. If your plan remains ineffective, consider starting a new strategic management process. 

Related: Using Key Performance Indicators (KPIs) to Achieve Goals

Strategic management process examples

The following are examples of strategic management processes:

Example 1: Basic strategic management process

A restaurant wants to generate more revenue by investing in a catering business. It begins by evaluating its current ability to operate the business. Then, it forecasts sales, devises a business plan, launches the catering business and adjusts its strategy based on the initial results.

Example 2: Departmental strategic management process

A company decides to sell its products online to increase sales. Its management team develops a strategy and turns the implementation of the plan over to the sales department. The sales department decides how it should execute the plan and carries out the project with the help of the accounting, marketing and IT departments. The company can also let the IT department handle the project instead and have its manager provide regular updates.

Example 3: Strategic management of a project

A company wants to replace its direct sales business model with one that relies on intermediaries, such as external sales firms, retailers, distributors and wholesalers. If it is unfamiliar with such distribution methods, it can hire an external project manager to do research and implement the strategy. Alternatively, it can assign the project to one or more of its employees.

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