Strategic management is a field that deals with the major intended and emergent initiatives

taken by general managers on behalf of owners, involving utilization of resources, to enhance

the performance of firms in their external environments.[1] It entails specifying the
organization's mission, vision and objectives, developing policies and plans, often in terms of
projects and programs, which are designed to achieve these objectives, and then allocating
resources to implement the policies and plans, projects and programs. A balanced scorecard
is often used to evaluate the overall performance of the business and its progress towards
objectives. Recent studies and leading management theorists have advocated that strategy
needs to start with stakeholders expectations and use a modified balanced scorecard which
includes all stakeholders.

Strategic management is a level of managerial activity under setting goals and over Tactics.
Strategic management provides overall direction to the enterprise and is closely related to the
field of Organization Studies. In the field of business administration it is useful to talk about
"strategic alignment" between the organization and its environment or "strategic
consistency." According to Arieu (2007), "there is strategic consistency when the actions of
an organization are consistent with the expectations of management, and these in turn are
with the market and the context." Strategic management includes not only the management
team but can also include the Board of Directors and other stakeholders of the organization. It
depends on the organizational structure.

“Strategic management is an ongoing process that evaluates and controls the business and the
industries in which the company is involved; assesses its competitors and sets goals and
strategies to meet all existing and potential competitors; and then reassesses each strategy
annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it
has succeeded or needs replacement by a new strategy to meet changed circumstances, new
technology, new competitors, a new economic environment., or a new social, financial, or
political environment.”

Strategy formation
Strategic formation is a combination of three main processes which are as follows:

 Performing a situation analysis, self-evaluation and competitor analysis: both internal

and external; both micro-environmental and macro-environmental.
 Concurrent with this assessment, objectives are set. These objectives should be
parallel to a time-line; some are in the short-term and others on the long-term. This
involves crafting vision statements (long term view of a possible future), mission
statements (the role that the organization gives itself in society), overall corporate
objectives (both financial and strategic), strategic business unit objectives (both
financial and strategic), and tactical objectives.
 These objectives should, in the light of the situation analysis, suggest a strategic plan.
The plan provides the details of how to achieve these objectives.

Strategy evaluation
  Measuring the effectiveness of the organizational strategy, it's extremely important to
conduct a SWOT analysis to figure out the strengths, weaknesses, opportunities and
threats (both internal and external) of the entity in business. This may require taking
certain precautionary measures or even changing the entire strategy.

In corporate strategy, Johnson, Scholes and Whittington present a model in which strategic
options are evaluated against three key success criteria:[3]

 Suitability (would it work?)

 Feasibility (can it be made to work?)
 Acceptability (will they work it?)


Suitability

Suitability deals with the overall rationale of the strategy. The key point to consider is
whether the strategy would address the key strategic issues underlined by the organisation's
strategic position.

 Does it make economic sense?

 Would the organization obtain economies of scale or economies of scope?
 Would it be suitable in terms of environment and capabilities?

Tools that can be used to evaluate suitability include:

 Ranking strategic options

 Decision treesedit Feasibility

Feasibility is concerned with whether the resources required to implement the strategy are
available, can be developed or obtained. Resources include funding, people, time and
information.

Tools that can be used to evaluate feasibility include:

 cash flow analysis and forecasting

 break-even analysis
 resource deployment analysis

Acceptability

Acceptability is concerned with the expectations of the identified stakeholders (mainly

shareholders, employees and customers) with the expected performance outcomes, which can
be return, risk and stakeholder reactions.

 Return deals with the benefits expected by the stakeholders (financial and non-
financial). For example, shareholders would expect the increase of their wealth,
employees would expect improvement in their careers and customers would expect
better value for money.
  Risk deals with the probability and consequences of failure of a strategy (financial
and non-financial).
 Stakeholder reactions deals with anticipating the likely reaction of stakeholders.
Shareholders could oppose the issuing of new shares, employees and unions could
oppose outsourcing for fear of losing their jobs, customers could have concerns over a
merger with regards to quality and support.

The strategy hierarchy

In most (large) corporations there are several levels of management. Strategic management is
the highest of these levels in the sense that it is the broadest - applying to all parts of the firm
- while also incorporating the longest time horizon. It gives direction to corporate values,
corporate culture, corporate goals, and corporate missions. Under this broad corporate
strategy there are typically business-level competitive strategies and functional unit
strategies.

Corporate strategy refers to the overarching strategy of the diversified firm. Such a
corporate strategy answers the questions of "which businesses should we be in?" and "how
does being in these businesses create synergy and/or add to the competitive advantage of the
corporation as a whole?" Business strategy refers to the aggregated strategies of single
business firm or a strategic business unit (SBU) in a diversified corporation. According to
Michael Porter, a firm must formulate a business strategy that incorporates either cost
leadership, differentiation, or focus to achieve a sustainable competitive advantage and long-
term success. Alternatively, according to W. Chan Kim and Renée Mauborgne, an
organization can achieve high growth and profits by creating a Blue Ocean Strategy that
breaks the previous value-cost trade off by simultaneously pursuing both differentiation and
low cost.

Functional strategies include marketing strategies, new product development strategies,

human resource strategies, financial strategies, legal strategies, supply-chain strategies, and
information technology management strategies. The emphasis is on short and medium term
plans and is limited to the domain of each department’s functional responsibility. Each
functional department attempts to do its part in meeting overall corporate objectives, and
hence to some extent their strategies are derived from broader corporate strategies.

Many companies feel that a functional organizational structure is not an efficient way to
organize activities so they have reengineered according to processes or SBUs. A strategic
business unit is a semi-autonomous unit that is usually responsible for its own budgeting,
new product decisions, hiring decisions, and price setting. An SBU is treated as an internal
profit centre by corporate headquarters. A technology strategy, for example, although it is
focused on technology as a means of achieving an organization's overall objective(s), may
include dimensions that are beyond the scope of a single business unit, engineering
organization or IT department.

An additional level of strategy called operational strategy was encouraged by Peter Drucker
in his theory of management by objectives (MBO). It is very narrow in focus and deals with
day-to-day operational activities such as scheduling criteria. It must operate within a budget
but is not at liberty to adjust or create that budget. Operational level strategies are informed
by business level strategies which, in turn, are informed by corporate level strategies.
Since the turn of the millennium, some firms have reverted to a simpler strategic structure
driven by advances in information technology. It is felt that knowledge management systems
should be used to share information and create common goals. Strategic divisions are thought
to hamper this process. This notion of strategy has been captured under the rubric of dynamic
strategy, popularized by Carpenter and Sanders's textbook [1]. This work builds on that of
Brown and Eisenhart as well as Christensen and portrays firm strategy, both business and
corporate, as necessarily embracing ongoing strategic change, and the seamless integration of
strategy formulation and implementation. Such change and implementation are usually built
into the strategy through the staging and pacing facets.