Strategic Management Process

Strategic management is an essential component of business success and involves

setting a direction for a company and guiding it toward its objectives. The
strategic management process consists of steps designed to identify and
implement strategies to help a company achieve its goals.
The strategic management process is not linear but cyclical – each step provides
information that feeds into the other steps, making adjustments as necessary.

Here’s an outline of the typical strategic management process:

1st step: Mission and Objectives
The first step in the strategic management process, establishing the mission and
objectives, is a foundational step that lays the groundwork for all future
strategic decisions.
Mission: The mission statement concisely explains the organization’s reason for
existence. It describes what the organization does, whom it serves, and how it
differs from similar organizations. A well-crafted mission statement gives
employees a clear direction and helps customers and stakeholders understand the
organization’s purpose. Here are a few characteristics of effective mission
statements:
• Customer-oriented: They describe the company’s purpose in terms of the
value or benefits it provides to customers rather than describing its
products or services.
• Motivating: They inspire employees and give them a sense of purpose.
• Distinctive: They make clear how the company stands apart from its
competitors.
For example, Google’s mission statement is “to organize the world’s information
and make it universally accessible and useful.” This explains what Google does
(organizes information), whom it serves (the world), and what makes it unique
(making information universally accessible and useful).
Objectives: The objectives are specific, measurable, achievable, relevant, and
time-bound (SMART) goals that the organization sets to guide its efforts and to
provide benchmarks for assessing performance. Objectives should align with the
company’s mission and vision. They could relate to various areas like sales,
customer service, product development, market share, etc. For instance, a
company might want to “increase sales by 10% over the next 12 months.”
Objectives serve multiple purposes:
• Direction: They provide direction to the organization and help align the
efforts of all departments and individuals.
• Performance Evaluation: They serve as a standard against which the
actual performance can be measured and evaluated.
• Motivation: They motivate employees by setting a clear target for them to
aim for.
• Resource Allocation: They help decide where to allocate resources based
on the more important objectives.
The mission and objectives are critical elements of the strategic management
process because they help define where the organization is going (the mission)
and how it plans to get there (the objectives). They provide a unifying focal point
for the organization and help to guide decision-making at all levels.
2nd Step: Strategic Analysis
Situation analysis, sometimes referred to as internal and external environment
analysis, is a crucial step in the strategic management process. It allows a
company to understand its current context to develop effective strategies.
Situation analysis generally involves evaluating both internal and external
factors:
Internal Analysis: This involves evaluating an organization’s internal
environment, including its resources, capabilities, and core competencies. It
allows an organization to understand its strengths and weaknesses.
• Resources: These include the company’s physical, financial, and human
resources.
• Capabilities: The company can do these based on its resources, processes,
and past experiences.
• Core Competencies: These unique capabilities give a company a
competitive advantage in its industry.
Techniques such as a resource-based view (RBV) or a value chain analysis can
be used to perform the internal analysis.
External Analysis: This involves evaluating factors outside the organization that
could affect its performance, including opportunities and threats in its industry
and the broader environment.
• Industry Analysis: This involves examining the competitive forces in a
company’s industry. Tools like Porter’s Five Forces model can be useful
here. This model considers the competition among existing firms, potential
new entrants, substitute products or services, suppliers’ bargaining power,
and customers’ bargaining power.
• PESTEL Analysis: This tool analyzes broader macro-environmental
factors that can impact an organization. It considers Political, Economic,
Social, Technological, Environmental, and Legal factors.
• Opportunities and Threats: Based on the industry and PESTEL analysis,
an organization can identify opportunities (environmental conditions that
could benefit the company if leveraged properly) and threats (conditions
that could hinder company performance).
• The situation analysis results are often summarized in a SWOT (Strengths,
Weaknesses, Opportunities, Threats) matrix. The SWOT analysis helps
create strategies that align with a company’s strengths and opportunities
and address its weaknesses and threats.
Understanding the current situation is necessary for setting appropriate goals and
formulating strategies to enable the organization to achieve these goals. This is
why a thorough situation analysis is important in strategic management.
3rd Step: Strategy Formulation
Strategy formulation is the third step in the strategic management process and one
of the most critical stages. During this step, strategies are developed to determine
the direction in which the organization should head based on its mission,
objectives, and the analysis of its internal and external environments.
The strategy formulation step aims to create a strategic plan that leverages the
company’s strengths and opportunities while addressing or mitigating its
weaknesses and threats.
Key activities during the strategy formulation stage often include:
1. Identifying Strategic Alternatives: Several strategic alternatives can be
considered based on the SWOT or PESTEL analysis. These could involve
entering new markets, launching new products, alliances with other firms,
cost leadership, differentiation, or focus strategies.
 2. Strategy Evaluation: Each alternative is evaluated based on feasibility,
suitability, and acceptability. The feasibility analysis checks whether the
organization has the necessary resources and capabilities to implement the
strategy. The suitability analysis checks whether the strategy would help
the organization achieve its objectives. The acceptability analysis checks
whether the strategy is acceptable to the stakeholders.
3. Choosing a Strategy: One or more strategies are determined based on the
evaluation. This choice must consider the external competitive
environment and the company’s internal capabilities and resources.
4. Developing the Strategic Plan: This detailed plan lays out the chosen
strategy and how it will be implemented. It includes defining the strategic
objectives, tactics, timelines, resource allocation, roles, and
responsibilities.
Strategy formulation requires a clear understanding of the organization’s mission
and objectives, a comprehensive analysis of its internal and external
environments, and a good measure of foresight about future market trends and
changes.
Once the strategy is formulated, the next step is strategy implementation, where
the organization mobilizes its resources and executes the strategic plan.
Remember, strategy formulation and implementation should be a dynamic and
flexible process that allows for adjustment based on feedback and changes in the
business environment.
4th Step: Strategy Implementation
Certainly, strategy implementation is the fourth step in the strategic management
process and involves putting the developed strategies into action. It’s the stage
where planning meets execution. Although it comes after strategy formulation, it
is often considered the most challenging step in the strategic management
process.
Here are the key aspects involved in the strategy implementation process:
1. Mobilizing Resources: At this stage, the necessary resources—financial,
human, and material—are allocated to support the strategy. This may
involve securing funding, hiring or training staff, or investing in new
facilities or equipment.
2. Establishing Organizational Structure: The organization’s structure may
need to be adjusted to facilitate strategy implementation. This could
 involve creating new departments or teams, changing reporting
relationships, or developing new roles.
3. Executing Strategic Plans: The specific actions outlined in the strategic
plan are executed. This includes launching new products or services,
entering new markets, or initiating new processes.
4. Setting Performance Metrics: To track progress and ensure the strategy
is moving the organization toward its objectives, key performance
indicators (KPIs) are established. These metrics provide a way to measure
success and identify areas for adjustments.
5. Monitoring Progress: Strategy implementation is not a “set it and forget
it” process. Regular monitoring is essential to ensure that actions have the
intended effect and to identify necessary adjustments. This might involve
regular reporting, meetings, or reviews.
6. Change Management: Strategy implementation often involves change,
and managing this change is a critical aspect of this step. This might
involve clear communication about why changes are being made, what
they involve, and how they will benefit the organization. Additionally,
providing training and support to help employees navigate changes can
also be a key aspect of this stage.
Strategy implementation requires strong leadership, clear communication, and
managing change effectively.. Even the most brilliant strategy can fail if it’s not
implemented effectively, so this stage is critical in the strategic management
process.
5th Step: Strategy Evaluation and Control
Sure. Strategy Evaluation and Control is the fifth step in the strategic management
process. It involves the continuous assessment of the progress toward achieving
the strategic objectives and determining if the implemented strategy is meeting
expectations or if adjustments are needed.
Here are the primary elements involved in this phase:
1. Performance Measurement: Key performance indicators (KPIs) defined
during the implementation phase measure the strategy’s effectiveness.
These could be financial metrics (like revenue, profit, and return on
investment), customer-related metrics (like customer satisfaction and
market share), internal process metrics (like operational efficiency and
product quality), or learning and growth metrics (like employee
satisfaction, training effectiveness).
 2. Comparing Actual vs. Expected Results: The organization’s actual
performance, as indicated by the KPIs, is compared with the expected
results or targets. This comparison helps to identify any deviations from
the plan and understand their causes.
3. Identifying Deviations: If there are significant deviations from the
expected results, it’s important to understand why these have occurred.
Deviations could be due to changes in the external environment (like
market conditions, competition, and technology) or internal factors (like
resource availability and execution issues).
4. Taking Corrective Action: Based on the analysis, corrective actions are
taken. This could involve making minor adjustments to the strategy or its
implementation, or it could require a major overhaul if it’s not delivering
the desired results.
Strategy Evaluation and Control is a crucial step that ensures the organization
remains on track to achieve its objectives. It creates a feedback loop to the
strategy formulation and implementation steps, allowing continuous
improvement and adaptation to changing circumstances. Regular evaluation and
control help the organization to stay agile and responsive to both internal and
external changes.
6th Step: Feedback and Adjustment
Feedback and adjustment are integral to the strategic management process,
ensuring the strategies remain relevant and effective in a dynamic business
environment. This process is often considered the final step, but it’s part of an
ongoing cycle. Here are the key elements of this phase:
1. Feedback: This involves collecting information about the company’s
performance and the strategy’s effectiveness. The feedback could come
from a variety of sources, including employees, customers, stakeholders,
market research, or the performance metrics defined during the strategy
implementation phase.
2. Analysis: The feedback is then analyzed to identify trends, opportunities
for improvement, and potential issues. The organization examines what’s
working well and what’s not, whether goals are being met, and whether the
strategy is still aligned with the company’s mission and objectives.
3. Adjustment: Based on the feedback and analysis, the company then makes
necessary adjustments to the strategy or its implementation. This could
 involve fine-tuning certain tactics, reallocating resources, changing
processes, or in some cases, redefining the strategy entirely.
4. Communication: Any changes to the strategy or its implementation are
then communicated to relevant stakeholders. This ensures everyone in the
organization understands the changes and why they were made, which is
crucial for effective implementation.
5. Continuous Monitoring: After adjustments are made, the company
continues to monitor performance and collect feedback, creating a
continuous improvement cycle. This ongoing process helps ensure the
strategy stays relevant and effective in a changing business environment.
The Feedback and Adjustment phase emphasizes that strategic management is not
a static, one-time process but a dynamic, ongoing cycle. It allows the organization
to be agile and responsive, adapting its strategies to achieve its goals and
objectives in a constantly evolving business landscape.
Example:
Strategic management is the process by which an organization defines its
direction and makes decisions on how to allocate resources to pursue that
direction. It’s not just about setting goals, but about creating a roadmap to achieve
those goals and stay competitive over time.
Think of strategic management as a cycle where a company:
1. Analyzes its environment.
2. Sets clear goals and strategies.
3. Implements those strategies.
4. Monitors and adjusts the plan as necessary.
Nike, a global leader in athletic footwear and apparel, is a great example of a
company that has excelled in the strategic management process."

2. Steps in the Strategic Management Process

Let’s break down the five key steps in the strategic management process and how
they apply to Nike.
Step 1: Environmental Scanning
"Environmental scanning is the process of collecting and analyzing information
about the company’s internal and external environment. This includes analyzing
competitors, market trends, consumer behavior, and internal strengths and
weaknesses.
Example: Nike
Nike continuously scans the market to understand customer preferences,
emerging fitness trends, and what competitors like Adidas or Under Armour are
doing. In the early 2010s, Nike noticed the rising demand for wearable
technology and fitness apps. They realized that fitness tracking was becoming
popular, and consumers wanted products that integrated technology into their
workouts."
Step 2: Strategy Formulation
"Once a company understands its environment, it can formulate a strategy to
achieve its goals. This is where a company defines long-term objectives and
decides how to position itself in the market.
Example: Nike
Nike formulated a strategy to tap into the growing fitness tech market by
developing products like the Nike+ app and Nike FuelBand. The strategy was
to go beyond just selling shoes and apparel and offer an entire fitness ecosystem,
integrating performance tracking with their products. This helped them
differentiate from other sports brands and stay ahead of the competition."
Step 3: Strategy Implementation
"After formulating the strategy, the next step is to put it into action. This means
mobilizing resources, launching initiatives, and making sure everyone in the
company understands their role in executing the plan.
Example: Nike
To implement their strategy, Nike partnered with Apple to integrate their Nike+
app with the iPod and Apple Watch. They invested in marketing campaigns,
product development, and technology. They also trained their sales teams to
promote these tech-enabled products. This implementation brought their strategy
to life and made Nike a key player in the fitness tech space."
Step 4: Strategy Monitoring and Evaluation
"Once a strategy is in place, companies need to continuously monitor and evaluate
how well it’s working. Are the goals being achieved? Are there unexpected
challenges? Based on this, adjustments can be made.
Example: Nike
Nike evaluated the success of the Nike FuelBand and realized that while it had
initial traction, competition from other fitness wearables like Fitbit and Apple
Watch was fierce. As a result, Nike decided to discontinue the FuelBand in 2014
and focus more on partnerships and improving their Nike+ app, allowing them
to shift resources towards their core strengths."
Step 5: Strategic Adjustment
"Finally, based on the results of their monitoring, companies may need to adjust
their strategies. This could mean changing tactics, introducing new products, or
pulling back from initiatives that aren’t working.
Example: Nike
After evaluating their tech strategy, Nike shifted focus away from developing
their own wearable hardware and instead partnered with established tech
companies like Apple. This allowed them to stay in the fitness tech space without
directly competing with tech giants. Nike adjusted their strategic focus and
maintained relevance in the market by emphasizing digital integration through
the Nike Training Club app and other fitness platforms."

3. Real-World Example in Action: Nike

Let’s go over Nike’s entire strategic management process in action.
1. Environmental Scanning: Nike identified trends in wearable fitness
technology and understood the need for digital integration in sports and
fitness.
2. Strategy Formulation: Nike developed a strategy to enter the fitness
technology market with digital platforms like the Nike+ app and fitness
tracking devices like the Nike FuelBand.
3. Strategy Implementation: Nike partnered with Apple, launched products,
and marketed heavily to align with the fitness-tech trend.
4. Monitoring and Evaluation: Nike realized the FuelBand wasn’t
succeeding as expected, especially in the face of competition from
established tech companies.
5. Strategic Adjustment: Nike shifted away from wearables, doubling down
on digital platforms and focusing on partnerships, leading to improved
offerings through their app ecosystem.
Nike’s ability to adapt its strategy based on market changes and consumer
preferences is a perfect example of why strategic management is important.

4. Why is Strategic Management Important?

"Strategic management helps companies stay competitive, innovative, and
aligned with their long-term goals. Without a clear strategy, businesses can
become reactive, losing market share to competitors or failing to adapt to industry
changes. Nike’s ability to constantly analyze, formulate, and adjust their strategy
has allowed them to maintain a leadership position in the global sports industry."