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Definition Of Strategic Management Its Importance And Need

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What not to do, as opposed to what to decide to do, is one of the things when discussing strategy. Strategy is an action that leaders take to achieve one or more of the organization’s goals. Strategy can also be defined as a general direction set for the company and its various components to achieve a desired state in the future. Strategy is the result of a detailed strategic planning process. Strategic management consists of the analysis, decisions, and actions an organization undertakes in order to create and sustain competitive advantages and this analyzes the major initiatives taken by a company’s top management on behalf of owners, involving resources and performance in internal and external environments (Nag et all, 2007). In order for the organization to apply this process, the upper management must be able to think strategically first. The strategic management process is best implemented when everyone within the business comprehends and understands the strategy. It is essential to know the correlation between the two concepts of the strategic management process and strategic leadership.

Strategic management is important because it permits companies to analyze their current capabilities and their operating environment, to be able to identify either opportunities or even long-term threats, and collect the company’s resources to address them. The objective of strategic management is to achieve better alignment of corporate policies and strategic priorities. In other words, the strategic management process is important to the leaders in the organization to be able to align the company towards the organization’s objectives, developing policies and plans to achieve these objectives, and allocating resources so as to implement those plans. It is the highest level of managerial activity, usually performed by the company’s Chief Executive Officer (CEO) and executive team. It provides overall direction to the whole enterprise. The three stages of the strategic management process are Strategy Formulation, Strategy Implementation, and Strategy Evaluation. The process involves matching the companies’ strategic advantages to the business environment the organization faces. One importance of an overall corporate strategy is to enable strategic leaders to put the organization into a position to carry out its mission effectively and efficiently. A good corporate strategy should integrate an organization’s goals, policies, and action sequences (tactics) into a cohesive whole. To tackle the many obstacles created by today’s global business environment, strategic leaders must be able to develop, employ, and evolve focused strategies that address and attack the ever-changing landscape in which they operate. Understanding the importance of the strategic management process enables leaders to critically analyze the potential shifts in their industry, evaluate opportunities to create value, and learn how to employ effective leadership techniques to shepherd an organization through necessary strategic shifts.

Business activities of an organization are carried out by formulating a strategy called Strategy Formulation. The following elements are developed in the strategic formulation stage; vision and mission that include the organization’s goal, strengths weaknesses identifying the organization’s strong and weak points, as well as opportunities and threats associated with the organization’s external environment. By understanding the elements developed during the strategy formulation stage, strategic leaders will be able to decide and consider how to allocate resources, enter or maintain business, consider mergers or joint ventures, liquidate or divest the business, enter foreign markets, consider business expansion and notice and manage resistance to takeover. The process of formulating a strategy essentially involves six major steps. Although these steps do not follow a rigid chronological order, they are very rational and in this order can be easily followed. First, setting the goals of the organization is the key component of any statement of strategy in setting the organization’s long-term goals. Strategy is generally known to be a medium for achieving organizational goals. Objectives emphasize the state of being there, while strategy emphasizes the process of getting there. The strategy includes both setting goals and the means to be used to achieve those goals. Strategy is therefore a broader term that believes in the way resources are deployed to achieve the goals. Once the goals and factors that influence strategic decisions are determined, strategic decisions are then easy to take. Evaluating the organizational environment is the next step in evaluating the organization’s overall economic and industrial environment. This includes a competitive position review of the organizations. A qualitative and quantitative review of an existing product line of an organization is essential. The purpose of such a review is to ensure that the factors that are important for competitive market success can be discovered so that management can identify their own strengths and weaknesses as well as the strengths and weaknesses of their competitors. After identifying its strengths and weaknesses, an organization must keep track of the moves and actions of competitors in order to identify likely opportunities for threats to its market or sources of supply. The next step is to set the quantitative target as the organization has to set quantitative target values for some of the organizational goals in practice. The underlying idea is to compare with long-term customers in order to assess the contribution that different product zones or operating departments could make. The next step is aiming in context with the divisional plans where contributions made within the organization by each department or division or product category shall be identified and strategic planning for each sub-unit shall be carried out accordingly. In which, macroeconomic trends need to be carefully analyzed. Performance analysis is then administered which includes the discovery and analysis of the gap between the performance planned or desired. The organization must carry out a critical evaluation of the past performance of the organization, present condition, and desired future conditions. This critical assessment identifies the degree of gap between the actual reality and the organization’s long-term aspirations. The organization then attempts to estimate its likely future condition if current trends persist. Finally, the strategic choice is the ultimate step in formulating a strategy. After consideration of organizational goals, organizational strengths, potential, and limitations as well as external opportunities, the best course of action is actually chosen.

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Strategic implementation is the second phase of the strategic management process which is also dubbed as the “action stage” of the strategic management process. Annual objectives are established along with the formulation of policies. Furthermore, the employees of the organization are motivated & resources are allocated in order to implement the formulated strategies. Strategy implementation further includes developing a strategy of pro-culture that is supportive, creating an effective organizational culture, redirecting marketing efforts, budget preparation, developing and utilizing information systems, connecting compensation of employees to the organizational performance. At this process, strategic leaders are able to mobilize their managers & employees into the implementing phase so that the formulated strategies are executed. This process is also considered the most difficult stage amongst the other stages of strategic management due to the requirement of personnel discipline, commitment, and sacrifice. Interpersonal skills are of particular importance for successful strategy implementation as this stage is considered as utmost critical in the stages of the strategic management process for leaders by creating answers as to “How best can we get the job done?” to stimulate their employees throughout the organization to work with pride and enthusiasm towards achieving the organization’s objectives.

Strategy evaluation is as important as formulating a strategy because it sheds light on the efficiency and effectiveness of the comprehensive plans to achieve the desired outcomes. With socio-economic, political, and technological innovations, strategic leaders can also assess the appropriateness of the current strategy in today’s dynamic world. Strategic evaluation is an important means for strategic leaders to assess how well the organization has performed, relative to its goals. This is the final stage of the strategic management process. Organizational evaluation ‘measures, compares and analyses the coherence between results and specific objectives and between specific objectives and general objectives of institutional projects, programs or plans’ (Hernan, 1987). It’s an important way for leaders to reflect on achievements and shortcomings. At this stage is important for the organization to be able to re-examine their current goals, which may have been set at a different time, under different circumstances. Three fundamental strategy evaluation elements are to review external and internal factors that are bases for current strategies, measure performance, and lastly to take corrective actions. It is crucial for leaders to have sufficient awareness about the problems and if strategies are not working well. Moreover, future modifications are in lieu of strategies due to forces of external & internal factors. Any successful evaluation of the strategy begins with defining the parameters to be measured. This stage is important to leaders as they can determine the organization’s progress by measuring the actual results versus the plan. By monitoring internal and external issues will further enable leaders to react to any substantial change throughout their organization. If the leaders determine that the strategy is not moving the company toward its goal, then they take steps for corrective actions. If those actions deem successful, then repeat the strategic management process. Because internal and external issues are constantly evolving, any data gained in this stage should be retained to help with any future strategies.

For most organizations, the major advantages of strategic management include identifying, prioritizing, and exploring opportunities. The process will greatly assist an organization in launching new products or penetrating new target market groups. It allows strategic leaders to understand whether or not the business is in a profitable position. Broadly speaking, the benefits of strategic business management can be divided into two distinct sections. One is a financial advantage and the other is non – financial advantage. It has been widely noted that companies with skilled strategic leaders always profit better than their competitors. The reason is strategic management helps an organization to stay focused on its goals. Many people see strategic planning and management processes only for large-scale businesses. In fact, even a startup requires strategic services of management. In fact, start-ups or small businesses require better strategic planning to ensure business growth in the shortest possible time frame. Many startups have their vision scattered. They lack good strategic planning, so they don’t understand their chances. Failure to understand opportunities keeps a business away from its main objectives that can generate real income for them. In Malaysia, large numbers of startups or small businesses are failing to thrive because they lack support for quality strategic management. Only tangible benefits of strategic management have been highlighted so far. In addition to the tangible benefits, strategic management also offers certain non-financial benefits to strategic leaders. It helps an organization to understand its threats, weaknesses, and gaps thus to better understand its business rivals. Strategic management’s most important non – financial advantage is that it helps strategic leaders become more disciplined and organized. It bridges a connection between performance and employee rewards. A company grows rationally under proper strategic planning, understanding its financial feasibility. If the organization is planned to be expanded by strategic leaders, they should aim for meticulous strategic management to find the feasibility or viability of business expansion at this stage.

Any organization can follow to the letter any of many strategic management frameworks, but there may still be chances of failure at execution. This is where the strategic management process is crucial for leaders to be successful in the leadership team that they must have the requisite strategic management competencies or at a minimum be working toward building these competencies. Strategic leaders must be competent with the vision and direction for the growth and success of an organization and a good strategic plan allows their business to be able to assess resources, allocate budgets, and maximize ROI (investment return). In order to successfully deal with change within an organization, all executives need the skills and tools for both strategy formulation and implementation. Managing change and ambiguity requires strategic leaders who not only provide a sense of direction but who can also build ownership and alignment within their teams to implement change. Summing up the following can be stated that strategic management is the process of specifying an organization’s objectives, developing policies and plans to achieve these objectives, and allocating resources so as to implement the plans. This process is important to molding strategic leaders to manage, motivate and influence the whole organization to share that same vision.

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Definition Of Strategic Management Its Importance And Need. (2021, July 30). Edubirdie. Retrieved February 1, 2023, from
“Definition Of Strategic Management Its Importance And Need.” Edubirdie, 30 Jul. 2021,
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