Every organization aims for two big goals—maximize profits and gain a competitive edge in the market. If a company earns more than the industry average, it’s considered to have a competitive advantage. This is where strategic management comes into play. It helps managers figure out and implement strategies that bring better results and long-term growth.
In simple terms, strategic management is a collection of decisions and actions that guide managers in making the right choices to ensure the company’s progress.
A Quick Background
Interestingly, what we now call strategic management was once known as business policy. Over the years, thanks to the contributions of researchers and practitioners, it has evolved into a blend of science and art.
The concept took root in the 1950s and 1960s, drawing inspiration from the word strategy, which comes from the Greek word strategos meaning general. Originally, the term strategy was linked to politics and warfare, not business. But after the 1960s, many organizations began using it in the corporate world.
Some key figures—Alfred Chandler, Peter Drucker, Igor Ansoff, Bruce Henderson—played an important role in adapting the idea of strategy for businesses.
Defining Strategic Management
Different experts have defined strategy in their own ways. One well-known definition comes from Alfred Chandler, who said:
"Strategy is the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals."
By the 1980s, companies like General Electric shifted from strategic planning to strategic management, and soon, many large organizations followed the same path.
Phases of Strategic Management
In the real business world, strategic management usually goes through four main phases:
Phase I: Basic Financial Planning
At this stage, managers mainly prepare the annual budget for the next year. The planning is based on internal information with little external analysis. While it helps in financial control, it’s often time-consuming and not very forward-looking.
Phase II: Forecast-Based Planning
Here, managers extend their view beyond one year and start working on three to five-year plans. Long-term projects are considered, and information is collected from both internal and external sources. This stage allows better preparation for the future compared to basic budgeting.
Phase III: Externally Oriented Planning
Now, planning becomes more strategic. Instead of being limited to lower-level managers, planning is handled by upper management and consultants. The focus shifts to formal strategy formulation, with top management driving the process. Input from lower-level managers is minimal at this point.
Phase IV: Strategic Management
By the time a company reaches this stage, it sort of clicks that strategy can’t only be cooked up in the boardroom. The big bosses still make the final calls, but honestly, good ideas often come from folks on the ground too. When everyone has a chance to throw something in, the plan feels a lot more real and practical.
This phase isn’t just about looking five years ahead anymore. It’s more like, “Okay, let’s plan, but also be ready if things flip upside down.” So, companies set up contingency moves and make sure info flows across departments instead of being hidden at the top. The whole thing becomes less rigid, more open, more about adjusting when needed.
Final Thoughts
Strategic management didn’t start off as anything fancy. Back in the day it was mostly number-crunching and putting together the yearly budget. Slowly, it grew into something bigger—tying short-term needs with long-term goals, and letting people at different levels have a say instead of keeping it all at the top.
These days, it’s less about drawing up some perfect plan and more about staying flexible, thinking ahead, and reacting quickly when the market changes. That balance—having some structure but not being stuck to it—is what actually keeps a business moving forward.
