Strategic Management

The strategy pursued by an organization has a distinct impact on the way that the organization chooses to operate. The five steps of strategy are crucial in the design of the operations.

Strategic management entails five steps: analysis, formation, goal setting, structure, and feedback.


Learning Objective

Identify the five general steps that allow businesses to develop a strategic process

Key Points

  • Strategic management analyzes the major initiatives, involving resources and performance in external environments, that a company’s top management takes on behalf of owners.
  • The first three steps in the strategic management process are part of the strategy formulation phase. These include analysis, strategy formulation, and goal setting.
  • The final two steps in strategic management constitute implementation. These steps include creating the structure ( internal environment) and obtaining feedback from the process.
  • By integrating these steps into the strategic management process, upper management can ensure resource allocation and processes align with broader organizational purpose and values.

Key Terms

  • objectives: The goals of an organization.
  • implementation: The process of moving an idea from concept to reality. In business, engineering, and other fields, implementation refers to the building process rather than the design process.


Strategic management analyzes the major initiatives, involving resources and performance in external environments, that a company’s top management takes on behalf of owners. It entails specifying the organization ‘s mission, vision, and objectives, as well as developing policies and plans which allocate resources to drive growth and profitability. Strategy, in short, is the overarching methodology behind the business operations.

Strategic management framework: The above model is a summary of what is involved in each of the five steps of management: 1. analysis (internal and external), 2. strategy formation (diagnosis and decision-making), 3. goal setting (objectives and measurement), 4. structure (leadership and initiatives), and 5. control and feedback (budgets and incentives).


Five Steps of Strategic Management

As strategic management is a large, complex, and ever-evolving endeavor, it is useful to divide it into a series of concrete steps to illustrate the process of strategic management. While many management models pertaining to strategy derivation are in use, most general frameworks include five steps embedded in two general stages:



  1. Analysis – Strategic analysis is a time-consuming process, involving comprehensive market research on the external and competitive environments as well as extensive internal assessments. The process involves conducting Porter’s Five Forces, SWOT, PESTEL, and value chain analyses and gathering experts in each industry relating to the strategy.
  2. Strategy Formation – Following the analysis phase, the organization selects a generic strategy (for example, low-cost, differentiation, etc.) based upon the value-chain implications for core competence and potential competitive advantage. Risk assessments and contingency plans are also developed based upon external forecasting. Brand positioning and image should be solidified.
  3. Goal Setting – With the defined strategy in mind, management identifies and communicates goals and objectives that correlate to the predicted outcomes, strengths, and opportunities. These objectives include quantitative ways to measure the success or failure of the goals, along with corresponding organizational policy. Goal setting is the final phase before implementation begins.



  1. Structure – The implementation phase begins with the strategy in place, and the business solidifies its organizational structure and leadership (making changes if necessary). Leaders allocate resources to specific projects and enact any necessary strategic partnerships.
  2. Feedback – During the final stage of strategy, all budgetary figures are submitted for evaluation. Financial ratios should be calculated and performance reviews delivered to relevant personnel and departments. This information will be used to restart the planning process, or reinforce the success of the previous strategy.

Source: Lumen Learning,
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Last modified: Wednesday, April 5, 2023, 2:02 PM