What Is Strategic Management and Why Is it Important?

By Indeed Editorial Team

Updated November 16, 2022 | Published May 17, 2021

Updated November 16, 2022

Published May 17, 2021

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Setting business goals is an important task for any organization, and strategic management can help you reach those goals. In this article, we explain what strategic management is, describe the steps it involves, and discuss its importance. We also list the skills you need for successful strategic management and use an example to show how strategic management works in an organization.

What is strategic management?

Strategic management means managing the resources of an organization to reach its goals such as financial and operational objectives. It involves identifying internal and external factors and understanding how they affect an organization. It's the process of determining the decisions an organization should take.

This process involves strategic thinking and strategic planning. Strategic thinking involves creating a vision for your plan and it requires strategic planning to develop the steps.

Small and large organizations can use strategic management to reach their goals. The process involves setting objectives, analyzing competitors, and assessing internal procedures. It also involves regularly evaluating the organization's strategies to ensure they're as effective as possible.

Strategic managers oversee an organization's strategic management process from start to finish.

Related: What Are Strategic Initiatives? (With Elements and Types)

What are the steps to strategic management?

You can either follow a prescriptive or descriptive approach to strategic management. A prescriptive model outlines the strategies a company needs to implement. It requires the team to anticipate issues they may experience. Whereas, the descriptive approach explains how an organization can develop new strategies for its goals.

Prescriptive and descriptive management requires management theory and practices.

Here are the four ordered steps to successful strategic management:

1. Intent and analysis

Before you implement a strategy, you must first define your goals. An organization's goals must be specific, measurable, attainable, realistic, and time-bound (SMART goals). Once you have your goals, the next step is to evaluate the present strategy of reaching them. Look at your strengths, weaknesses, opportunities, and threats (SWOT analysis). Alternatively, you can analyze your strengths, opportunities, aspirations, and results (SOAR analysis).

Read more: SMART Goals: Objectives for Your Career

2. Formulation

After setting your goals and analyzing the current situation, it's time to create a plan to reach your goals. Strategy formulation means choosing the right action plan. Steps to achieving this plan must be simple and clear for the management team to roll out a strategy across the organization.

3. Implementation

Strategy implementation means following the steps of a strategy to reach the organization's goals. It requires the management team to provide resources for implementation, use the best policies for improvement, and apply their leadership skills. For the process to be successful, there must also be a control system to get feedback from employees and motivate them.

4. Evaluation

Finally, the management team needs to evaluate whether the strategy it chose works. They must also assess how effective the strategy is by measuring performance and making changes where necessary.

Strategic management is a continuous process. Each component requires input from the previous one for the process to be successful. Therefore, strategic managers often have to revisit the previous component if the current one doesn't provide the required results. For example, if an organization gets to the evaluation stage and realizes there aren't targets to measure the performance of a new strategy, its managers need to go back to the strategic intent and analysis stage.

Related: What Is Strategic Planning? (With Benefits)

Why is strategic management important?

Here are some reasons strategic management is important:

Competitive edge

The purpose of strategic management is to help companies to have a competitive advantage. It encourages organizations to be more efficient and aware of their competitors' activities. Strategic management also motivates employees.

Achieve goals

Strategic management helps an organization achieve its goals by creating steps for new strategies and implementing them effectively. It also helps organizations that struggle to reach their goals to focus on their planning process.

Sustainable growth

An organization that wants to grow or sustain its growth must reach the goals its management team sets. Strategic management helps to increase the performance of an organization, which leads to sustainable growth.

Increased awareness and management engagement

Strategic management helps the management team to understand their organization and how internal or external factors affect performance. Following the process helps them think ahead and determine which risks to take.

Expect changes

Changes in workforce, resources, economic conditions, and related factors occur in competitive environments. Strategic management can help employees and managers cope and adapt to such changes.

What skills do you need for successful strategic management?

Here are the key skills you need for strategic management in your organization:

Leadership skills

Strategic management involves making key decisions. It requires strong leadership skills to manage others and ensure they perform their duties. Exemplary leaders will motivate people, ensure everyone is working toward the shared goal, and create a positive work environment when applying new strategies. They are also friendly, social, and willing to delegate tasks to the teammates they lead.

Read more: 10 Common Leadership Styles

Communication skills

For successful strategy management, you must communicate effectively with other members of an organization. You must also be able to give or receive feedback when necessary. You need to understand how to collaborate with stakeholders.

Read more: Communication Skills: Definitions and Examples

Analytical skills

Strategic management requires you to analyze various types of information such as financial statements, business trends, performance indications, market conditions, and other essential inputs. You must also be able to find patterns and understand why previous strategies didn't work.

Read more: Analytical Skills Defined and Explained

Problem-solving skills

Strategic management involves solving the problems of resource management for an organization. It requires you to overcome challenges, handle inefficient workflows, and compete with others.

Example of strategic management

Grill manufacturer, Food Grilling Company, plans to produce a new line of grills that customers want. The company's management team applies strategic management to make sure grill users receive the product. The team agrees to follow the steps to achieve the objectives set out in the strategic management plan.

1. Analysis

Food Grilling Company wants to produce grills for customers who prefer natural gas grills or use liquid propane units. The release date for the new line is at the end of the third quarter of the current year. In the past, the company had problems deciding on the type of grill to produce. Some customers wanted natural gas units because they didn't have to buy a propane tank or worry about refilling one. Others preferred liquid propane units because they could use them away from their homes and monitor the fuel consumption.

Before the company designs a new grill, it carries out a SWOT analysis to see what needs to change.

  • strengths: loyal customers, knowledgeable design team, fast production time

  • weakness: different customer demands

  • opportunities: unified market

  • threats: competitor released a new line of grills

Related: What Is an Internal Analysis and How to Conduct One

2. Formulation

Using the results of the SWOT analysis, Food Grilling Company considers various plans to meet their customers' needs. Teammates suggest the company includes a free propane tank to encourage customers who want natural gas grills to go for units that use liquid propane. Another member suggests that the new grills come with long fuel hoses to encourage customers who prefer liquid propane to buy natural gas units.

In the end, the management team decides not to include a propane tank or hose, but make the new line of grills convertible, meaning the grills work using both types of fuel. The team informs its designers to assess the plan and they get to work.

3. Implementation

Three months prior to the release date, the designers have a model that the production team can work with. They send their designs and the production team gets to work. After three weeks, the production manager gives a report on the number of grills the factory produces and ensures workers test them.

Six weeks before the release date, a member of the management team visits the factory to assess the production team's readiness. They also test the grills to determine whether they work with both liquid propane and natural gas.

4. Evaluation

Food Grilling Company reviews the data collected from sales after two months of releasing its new set of grills. It finds the new design attracted both natural gas and liquid propane customers. Food Grilling Company also assessed its sales and feedback to compare to its primary competitors. The company noticed it had more positive reviews. Customers had no issues switching from liquid propane to natural gas when cooking. The company could also meet its deadline and start making a profit early. The managers of Food Grilling Company agree to adopt this new design for all its grills in the future.

Related articles

How to Develop a Strategic Business Development Plan

Explore more articles