Strategic Management: Definition, Typology, and Process

Strategic management is one of the many disciplines that stem from strategy and simultaneously connect management with strategy. Strategic management is considered by many as a tool for implementing strategy.

Here’s what you will learn in this article:

What Is Strategic Management?

Strategic management is the art and science of planning and implementing strategies that align with an organization’s goals and objectives. It involves making decisions and taking actions that guide the company towards achieving a sustainable competitive advantage.

The Importance of Strategic Management

Strategic management is not just an option; it’s a necessity for businesses aiming to thrive in a dynamic and competitive environment. We’ll explore why it’s critical and how it impacts the overall success of an organization.

The Typology of Management Decisions

Several typologies can exist based on the selected criteria:

The criterion for the subject of the decision

This criterion proposed by Ansoff (1965) leads to distinguishing strategic (see here), tactical, and operational decisions.

Strategic decisions: concern the company’s relationship with its environment (e.g., the decision to produce a new type of car for emerging countries);

The characteristics of strategic decisions:

  • They concern the long-term directions of an organization;
  • They aim to gain a competitive advantage;
  • They are complex by nature;
  • They are developed in situations of uncertainty;
  • They affect operational decisions;
  • They require a comprehensive approach (internal and external to the organization);
  • They involve significant changes.

Tactical decisions (or administrative decisions): relate to resource management (e.g., the decision to acquire a patent, organize training for employees…).

Operational decisions: focus on the day-to-day operation of the company (establishment of schedules, decisions on spare parts replenishment…).

The criterion of the time frame and scope of involvement

By crossing the criterion of the decision’s timeframe (short, medium, and long term) with the criterion of the scope of involvement (the decision concerns a small group, one or more departments, or the entire organization), we obtain three types of decisions:

Planning decisions: concern the overall development goals of the company in the medium and long term (internationalization, acquisition, merger…).

Steering decisions: concern the medium and short term; they focus on more specific goals such as performance, quality, market share, monitoring, and control…

Regulation decisions: concern the short term; they address the daily functioning of the company (inventory management, treasury management…).

Strategic Management Vs. Operational Management

It is essential to first understand the difference between strategic management and operational management.

Strategic management, which concerns market management in relation to the company’s potential, prioritizes the organization/environment relationship. In other words, strategic management consists of defining and implementing the company’s strategic directions.

Operational management concerns processes specific to the company: defining the organizational structure, managing information, determining procedures, and staff management. It focuses on the organization’s functioning.

The Strategic Management Process

Once the difference between strategic and operational management is addressed, it is necessary to understand the strategic management process:

The first step is strategic diagnosis, which determines the organization’s strategic position;

The second step is strategic choices, which involve formulating possible options and selecting the most appropriate one;

The third step is strategic deployment, which involves both implementing the chosen strategy and managing the changes it requires.

Strategic Diagnosis

Strategic diagnosis (see here) aims to understand and analyze the factors influencing the company and, therefore, strategy formulation. These factors include: the environment, strategic capabilities (resources and competencies), and the expectations of stakeholders.

The environment: it consists of all the elements that can have a direct or indirect influence on the company. To address this, the company must not only analyze and understand past events but also predict future developments in its environment to be able to address threats and seize the opportunities it presents. We mainly distinguish three types of environments: micro, meso, and macro environments.

Strategic capability: internal analysis of the company will focus on its resources and competencies and will highlight its strengths and weaknesses, which will greatly influence its strategic decisions. The company should seek the optimal combination of its resources and competencies to gain a competitive advantage that will allow it to outperform the competition.

Corporate governance: this is a fairly recent concept that is gaining more and more importance. It is essential to consider the company’s stakeholders, their expectations, and their powers when developing a strategy. Gaining the support and support of stakeholders is essential for the success of any strategy.

Strategic Choices

Strategic choices include selecting future strategies, whether at the level of strategic business units or at the level of the entire company, as well as identifying the directions and modalities of strategic development.

It is necessary to make choices at the level of strategic business units. This involves identifying the foundations of competitive advantage, both externally (key success factors in the environment) and internally (the organization’s strategic capability);

Corporate-level strategy concerns defining the overall scope of activity. This includes decisions about the portfolio of activities and the extent of the markets covered. For many organizations, international development is a key element of the overall strategy.

Strategies can follow various orientations. Each company chooses its strategy based on several factors that it knows perfectly well, or at least it is supposed to know them and even master them. While one company chooses a growth strategy, for example, another company in the same sector may choose a completely different strategy.

Strategic Deployment

Strategic deployment involves implementing the strategy. It is not enough just to have the idea or develop a plan. The strategy only makes sense when it is truly applied in the field through operational actions. And for this, three aspects are necessary:

The nature of the organization must promote the achievement of the expected objectives. This involves making choices regarding the structure, processes, and coordination, as well as interactions between these three elements;

Several strategic levers facilitate the success of strategies, or even form the resource base from which strategies are developed. Hence, the need to analyze the combination of technology-information-know-how;

Strategies often involve the implementation of change processes. Therefore, it is essential to know the barriers to change, to analyze them, and, above all, to support change in order to remove these barriers.

Conclusion

In summary, strategic management is a continuous process aimed at improving a company’s long-term performance by identifying and exploiting competitive advantages, managing resources effectively, and adapting to changes in the competitive environment. Managers who master this aspect of management are better equipped to guide their organization to success.

Frequently Asked Questions

Q1. Why is strategic management essential for organizations?

Strategic management is essential as it aligns an organization’s goals with its strategies, providing a roadmap for success in a competitive environment.

Q2. What is the difference between strategic and tactical decisions?

Strategic decisions focus on long-term goals, while tactical decisions concern resource management for day-to-day operations.

Q3. How can a company effectively implement a chosen strategy?

Implementing a strategy requires a blend of effective planning, resource allocation, and management of organizational changes.

Q4. What role does stakeholder expectation play in strategic management?

Considering stakeholder expectations is vital in developing strategies that gain support and lead to overall success.

Q5. How can an organization ensure it maintains a competitive advantage over time?

Continual strategic management and adaptation are key to maintaining a competitive edge in an ever-changing business landscape.

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