Strategic management is a process of analyzing the major initiatives that contain resources and performance in external environments, which a firm’s top management manages on behalf of the company owners.
The following diagram illustrates the five important steps of strategic management process.
Strategic management is a very large, complicated, and always-evolving endeavor. Therefore, it is handy to group it into a set of solid steps to describe the process of strategic management. The most common and used frameworks of strategic management include five steps, grouped in two general stages − Formulation and Implementation.
● Analysis − Analysis involves comprehensive market, financial and business research on the external and competitive environments. The process includes conducting Porter’s Five Forces, SWOT, PESTEL, and value chain management analyses and combining expertise in each industry that are part of the strategy.
● Strategy Formation − After analyzing internal and external environments, the organization arrives at a generic strategy (for instance, low-cost, differentiation, etc.) that is based upon the value-chain implications. It is done for deriving and maximizing core competence and prospective competitive advantages.
● Goal Setting − Goal setting is the next step of strategy formation. As the defined strategy is in hand, management now tends to find out and communicates the goals and objectives of the company that are linked to the predicted results, strengths, and opportunities.
● Structure − The implementation phase has the basic function of structuring the management and operational processes. As there is a strategy in place, the business now wants to solidify the organizational structure and leadership patterns (making many changes if required).
● Feedback − Feedback is the final stage of strategic management process. In this final stage of strategy, all of the budgetary figures are collected and disseminated for evaluation. Financial ratios calculation and performance reviews are delivered to relevant managers, executives and concerned departments.