What Is Strategic Management?

Strategic management is the practice of planning a business’s high-level, long-term direction, based on internal and external factors. This differs from general management, which focuses on coordinating business efforts to achieve a main goal. Strategic management arose when increased market density and competition called for a greater awareness of the market as a whole. It pairs a traditional approach with an increased analysis of the business’s competitors, positioning, challenges, and opportunities for a more dynamic interaction with these forces. Strong programs in business administration immerse students in traditional management methodologies as well as a broader understanding of market forces and ways to set a long-term vision and goals.

Setting a Business’s Long-Term Direction

Strategic management is the highest level of critical inquiry, decision-making, and planning within a company. When practiced effectively, strategic management integrates a company’s mission, vision, and values with the realities of the competitive market and business needs. Leaders gather information about external and internal factors to support decision-making. Those factors can include the following:

• External Factors: Market forces, government regulations, consumer desires

• Internal Factors: Workforce size and talents, organizational structure, team budgets

With this information, leaders then look for ways to mitigate risks, overcome anticipated challenges, and capitalize on opportunities. In this way, strategic management is a dynamic approach to setting the direction by staying highly informed and active as a player in the market.

Strategic Management vs. Other Types of Management

From afar, other types of management may seem similar to strategic management, but upon closer look, they differ in their functions and purposes. Different but common types of management include the following:

• Operational Management: Implementing higher-level strategies by attaching people and tools to execute them

• Financial Management: Turning higher-level strategy into a resource-backed operation by allocating appropriate funds in the right places

• Personnel Management: Ensuring that staff members can conduct their work in an appropriate environment that meets all regulations

• Team Management: Ensuring that group leaders have what they need for teams that contribute to the overall direction and vision

5 Benefits of Using Strategic Management to Lead a Company

Ultimately, the purpose of strategic management is to stay on top as a business — to outperform competitors, achieve the company’s vision, and earn profits. To do so, business leaders must ward off stagnation. Rather than set a goal once and work toward it in a vacuum, they engage dynamically with external and internal factors at regular intervals. They do so by analyzing:

1. Intelligence about competitors and positioning

2. What consumers want and how that has changed or could change

3. Anticipated market or regulatory headwinds or challenges

4. Potential opportunities for “organic” growth, such as creating a new product line

5. Opportunities for “inorganic” growth, such as merging with or acquiring another company

Business leaders are successful in practicing strategic management when they leave planning sessions aligned and committed to the business’s direction, able to communicate a consistent message, and ready to deliver clear guidance to managers who’ll help execute plans.

5 Stages of Strategic Management

Leaders generally divide strategic management into five stages.

1. Set the company mission and vision. Leaders delineate the big idea and the why behind their business.

2. Collect and analyze external and internal information. Market research and trend tracking help leaders make informed choices, while ongoing company data helps them create ambitious but realistic plans.

3. Develop direction and strategy. Leaders analyze and discuss data, metrics, ideas, and opinions to ultimately come to a professional consensus about the best direction for the company.

4. Implement plans with operators. Leaders then turn to operators and managers to convey the overarching strategy and how it should be executed.

5. Evaluate progress and obstacles. In time, the leadership team takes a look back at intended, and perhaps unintended, outcomes of their strategy and planning efforts.

By dividing the process into manageable stages, leaders can prepare for, engage in, and reflect on the company’s efforts in an organized fashion. At each of these stages, the company’s people and systems must be functioning well for the work to happen effectively. Essential elements of that work include the following:

• Data collection and interpretation to begin and propel the conversation

• Financial analysis and forecasting so that plans are realistic

• Strong communication channels

• Positive culture among leaders and higher-level staff

• Clear organizational structure for managers and their teams

• Talented business operators who can execute the plan

Become a Strategic Leader with NCCU Online’s Bachelor of Business Administration

Whether you want to be a business leader, a strong manager or operator, or an individual contributor who understands how businesses run, a degree in business administration can help get you there. With North Carolina Central University’s online Bachelor of Business Administration (BBA) degree completion program, you can begin a career in business or elevate the one you already have.

Find out how NCCU Online’s BBA can help you take charge of your career.

Recommended Readings

What Is a BBA Degree?

HR Manager Career Overview

Industrial Production Manager Salary and Career Path

Sources:

Atlassian, How a Strategic Planning Framework Can Help You Achieve Your Big Goals

Indeed, Strategic Management: Definition, Purpose and Example

Indeed, Strategic vs. Operational Management: How They Compare

Investopedia, “What Is Strategic Management?”

TechTarget, “Strategic Management”