Strategic management is the continuous process of analysing an organisation's position, choosing a long-term direction and implementing it, then evaluating results to adjust. Its core stages are strategic analysis, strategic choice and implementation, supported by models such as PESTEL, Porter's Five Forces, SWOT, the Ansoff matrix and the balanced scorecard.
Strategic management is the discipline that turns "we need a strategy" into an organisation that actually performs better. It covers how leaders analyse their situation, choose a direction and make it happen, then learn and adjust. This guide explains the process stage by stage, shows which models to use at each stage (with links to detailed guides), gives real-world examples and covers the main debates, such as planned versus emergent strategy.
What is strategic management?
Strategic management is the continuous process of analysing an organisation's environment and capabilities, choosing a long-term direction and competitive approach, implementing it through structure, resources and people, and evaluating results to adjust course.
The idea has deep roots. Business historian Alfred Chandler's 1962 book Strategy and Structure (reviewed in the Journal of Economic History) defined strategy as setting an enterprise's basic long-term goals and choosing the actions and resources to achieve them, and argued that an organisation's structure should follow its strategy. Igor Ansoff's Corporate Strategy (1965) added systematic tools for growth decisions, including the matrix that now carries his name. Today the UK's most widely used textbook, Exploring Strategy, frames strategy as the long-term direction of an organisation (see the fuller definition summarised by ICAEW).
Why is strategic management important?
- Direction: everyone knows what the organisation is trying to achieve and why.
- Focus: resources go to the few priorities that matter instead of being spread thinly.
- Anticipation: regular analysis surfaces threats and opportunities before they become crises.
- Coordination: functions pull in the same direction because their plans link to one strategy.
- Accountability: clear objectives and measures make performance visible to the board and stakeholders.
What are the stages of the strategic management process?
Textbooks describe the process in three to six stages. Johnson, Scholes and Whittington use three: strategic position, strategic choices and strategy in action. I find five stages easier to apply in practice, so I use those below, with the three-part grouping shown in the diagram.
Stage 1: Set direction (mission, vision and objectives)
Start by clarifying purpose. The mission says why the organisation exists; the vision describes where it wants to be; objectives turn that into measurable targets. Stakeholder expectations shape all three, so this stage includes understanding who has power and interest. Useful tools: stakeholder theory, Mendelow's matrix and, for governance context, agency theory.
Stage 2: Strategic analysis (where are we now?)
Analysis looks outward at the environment and inward at the organisation's resources and capabilities.
- External (macro): PESTEL analysis for political, economic, social, technological, environmental and legal trends.
- External (industry): Porter's Five Forces for industry profitability and competitive pressure.
- Internal: the value chain for how activities create value, VRIO for which resources give lasting advantage, the McKinsey 7S model for organisational alignment and the cultural web for culture.
- Portfolio: the BCG matrix for multi-business organisations.
- Bringing it together: SWOT to summarise, and TOWS to turn it into options.
The aim is not a long list of facts but a sharp diagnosis. Richard Rumelt calls this the first part of the "kernel" of good strategy: a diagnosis that identifies the critical challenge (McKinsey Quarterly, 2011).
Stage 3: Strategic choice (where do we want to go and how?)
Choice works at three levels:
- Competitive (business-level) strategy: how to win in a market. Tools: Porter's generic strategies (cost leadership, differentiation, focus) and Bowman's strategy clock.
- Direction of growth: which products and markets. Tool: the Ansoff matrix.
- Method of growth: organic growth, acquisition or alliance.
Options are then evaluated using the suitability, acceptability and feasibility test: does it fit the analysis, will stakeholders accept the risks and returns, and do we have the resources to do it? Michael Porter's "What Is Strategy?" (1996) adds a vital check: does the choice create a distinct position with real trade-offs, or does it simply copy what rivals do?
Stage 4: Implementation (strategy in action)
Most strategies fail here, not at the choice stage. Implementation covers:
- Structure: organising people and decision rights to support the strategy (Chandler's "structure follows strategy").
- Resources: budgets, people, technology and data aligned to priorities.
- Change management: moving people from the current state to the new one. Tools: Lewin's change model, Kotter's 8 steps and the types of change framework.
- Leadership: setting direction and motivating people through change. See transformational leadership and types of leadership.
- Projects: turning priorities into funded, managed projects with owners and milestones.
Stage 5: Evaluation and control
Finally, measure whether the strategy is working and adjust. Robert Kaplan and David Norton's balanced scorecard (HBR, 1992) remains the best-known tool. It tracks financial measures alongside customer, internal process and learning and growth measures, so leaders see leading indicators rather than only last quarter's profit. See the balanced scorecard guide. Risk should be monitored at the same time, using enterprise risk management, the COSO framework and a risk matrix.
At what levels does strategic management happen?
Strategic management operates at three levels, and confusion between them causes many problems.
| Level | Key question | Who leads it | Example decisions |
|---|---|---|---|
| Corporate | What businesses should we be in, and how do we add value to them? | Board and group executive | Acquisitions, disposals, portfolio balance, capital allocation |
| Business (competitive) | How do we win in this market? | Business unit leadership | Positioning, pricing approach, target segments |
| Functional (operational) | How does each function support the business strategy? | Function heads | Marketing plans, IT roadmap, HR and finance policies |
Each level should support the one above. A brilliant marketing plan for a premium position is wasted if the business-level strategy is cost leadership. In a group with several businesses, corporate strategy also asks whether the head office adds or destroys value, which is why portfolio tools such as the BCG matrix sit at this level. In smaller organisations the three levels may be handled by the same few people, but it still helps to know which question you are answering at any moment.
Which models are used in strategic management?
| Stage | Model | Question it answers |
|---|---|---|
| Direction | Mendelow's matrix | Whose expectations must the strategy satisfy? |
| Analysis: external | PESTEL | What is changing in the wider environment? |
| Analysis: external | Five Forces | How attractive and competitive is the industry? |
| Analysis: internal | Value chain | Which activities create value and cost? |
| Analysis: internal | VRIO | Which resources give sustained advantage? |
| Analysis: internal | McKinsey 7S | Are structure, systems, style and skills aligned? |
| Analysis: summary | SWOT / TOWS | What does it all mean and what options follow? |
| Choice | Generic strategies | How will we compete? |
| Choice | Ansoff matrix | Where will growth come from? |
| Choice | BCG matrix | How should we balance a portfolio? |
| Evaluation of options | SAF | Is this option right, acceptable and doable? |
| Implementation | Kotter's 8 steps | How do we lead the change? |
| Control | Balanced scorecard | Is the strategy working? |
| Risk | ERM | What could stop us, and how do we manage it? |
The full library is in the strategy models hub.
Is strategy planned or emergent?
The five-stage process suggests strategy is designed at the top and rolled out. Henry Mintzberg challenged this view. In their 1985 Strategic Management Journal paper "Of strategies, deliberate and emergent", Mintzberg and James Waters showed that realised strategy combines deliberate strategy (intentions that were carried out) and emergent strategy (patterns that formed as people responded to events). In "The Fall and Rise of Strategic Planning" (HBR, 1994) Mintzberg argued that formal planning cannot create strategy on its own, though it can support it.
| Rational (planned) approach | Emergent approach | |
|---|---|---|
| How strategy forms | Top-down analysis, then choice, then implementation | Patterns emerge from decisions across the organisation |
| Strengths | Clarity, coordination, accountability | Responsive to change, uses frontline knowledge |
| Weaknesses | Slow, can be rigid, may miss signals | Can lack direction; risk of drift |
| Best suited to | Stable environments, large capital decisions | Fast-changing markets, innovation |
Most effective organisations combine the two: a clear deliberate direction with room to learn and adapt. The danger of too little deliberate strategy is strategic drift, where an organisation gradually falls out of step with its environment.
What are examples of strategic management?
A supermarket responding to discounters
Analysis (Five Forces, PESTEL) shows discount entrants and squeezed household budgets increasing buyer power. The choice is to protect core customers with a price-matching scheme on staples while differentiating through loyalty data and own-brand quality (a hybrid on Bowman's clock). Implementation involves supplier renegotiation, store format changes and a loyalty app. The balanced scorecard tracks basket size, price perception, supplier cost and app adoption.
A professional services firm moving into advisory
A mid-sized accountancy practice sees compliance work being automated (PESTEL: technology). Its value chain and VRIO analysis show its real advantage is long client relationships. Using Ansoff, it chooses product development: advisory services for existing clients. Implementation includes training staff, recruiting specialists and changing incentives from chargeable hours to client outcomes, led by the partners using Kotter's steps.
A charity rethinking its funding model
Stakeholder mapping shows that a major funder is reducing grants. The charity uses SWOT and TOWS to generate options, evaluates them with SAF, and chooses to develop a paid training service using its expertise. Emergent learning matters: the first courses reveal stronger demand from local councils than from businesses, and the strategy adapts.
How does strategic management differ in the public and not-for-profit sectors?
The process is the same, but three things change. First, objectives are about outcomes for citizens or beneficiaries rather than shareholder returns, so success is harder to measure and the balanced scorecard often replaces profit with service and impact measures. Second, stakeholders are more numerous and more powerful: ministers, regulators, funders, trustees, volunteers and the public all have legitimate claims, which makes the acceptability test in SAF especially important. Third, competition is often for funding, talent or attention rather than customers, so Five Forces needs adapting. Value for money (economy, efficiency and effectiveness) usually becomes the central performance lens.
How are data and technology changing strategic management?
Technology affects strategic management in two ways. It changes the content of strategy: digital platforms, automation and artificial intelligence reshape industry structure, lower barriers to entry in some markets and create new ones. It also changes the process: real-time dashboards make it possible to monitor strategy continuously rather than quarterly, scenario models can be run quickly, and customer data can reveal emergent patterns earlier. The risk is that more data produces more analysis without better choices. Rumelt's point still applies: strategy needs a clear diagnosis and a guiding policy, not just more information. Chapters 15 and 16 of my book cover information technology and online marketing from this strategic angle.
How do you apply strategic management in an exam answer?
In my experience coaching ACCA SBL students, the marks go to application, not description. Four rules help:
- Use the scenario's facts in every point. "Buyer power is high because the three supermarket chains take 70% of sales" beats "buyer power can be high".
- Pick the model that fits the question. A question about growth options calls for Ansoff, not a full PESTEL.
- Always add the "so what". End each point with what it means for the organisation's strategy.
- Recommend. Strategic management is about choices, so finish with a justified recommendation.
The SBL exam guide and professional skills guide explain the marking approach in more detail.
Who is responsible for strategic management?
The board sets and approves strategy, challenges management's proposals and monitors performance and risk. The executive team develops options and leads implementation. Middle managers translate strategy into operational plans and are often the source of emergent strategy. In well-governed organisations, internal audit and risk functions provide assurance that strategic risks are being managed. This link between strategy, governance and risk is central to the ACCA Strategic Business Leader exam.
What are the most common reasons strategic management fails?
| Failure | Symptom | Remedy |
|---|---|---|
| Goals mistaken for strategy | "Our strategy is to grow 15% a year" | Diagnose the challenge and choose a guiding policy (Rumelt) |
| Analysis paralysis | Endless reports, no decisions | Time-box analysis; decide on the best available evidence |
| No trade-offs | Every option approved | Explicitly rank priorities and stop some activities |
| Weak implementation | Strategy document but no change | Owners, budgets, milestones and change leadership |
| Lagging measures only | Problems spotted after profits fall | Balanced scorecard with leading indicators |
| Ignoring culture | Staff quietly resist | Use the cultural web; involve people early |
How is strategic management different from strategic planning and strategic leadership?
| Term | Focus | Typical output |
|---|---|---|
| Strategic planning | The formal, periodic process of setting objectives and plans | A strategic plan and budget |
| Strategic management | The whole cycle: analysis, choice, implementation, evaluation | An organisation that performs and adapts |
| Strategic leadership | The people side: setting direction, aligning and inspiring others | Commitment and capability to deliver the strategy |
| Strategic thinking | The individual mental skill of seeing the big picture | Insights and options |
See the strategic planning process, strategic leadership and strategic thinking guides for each in depth, and what is strategy? for the foundation.
How do I learn strategic management?
Start with a solid grasp of the core models, then practise applying them to real organisations, beginning with your own employer. Professional qualifications such as ACCA's Strategic Business Leader exam and CMI's Level 7 qualification in strategic management and leadership test exactly this kind of applied judgement.
My book, Becoming A Strategic Business Leader, follows the strategic management process closely: Chapter 1 Strategic Planning, Chapter 2 Strategic Analysis, Chapter 3 Performance Analysis, Chapter 4 Strategic Choice and Chapter 5 Strategic Development, followed by chapters on governance, risk, change and project management. It is a concise guide to the core models, originally written for the ACCA SBL exam and useful for any manager. You can read the first three chapters free.
Bottom line
Strategic management is a cycle: set direction, analyse your position, choose a strategy, implement it and evaluate the results. Each stage has proven models, from PESTEL and Five Forces to Ansoff, SAF and the balanced scorecard. The process works best when it combines deliberate planning with openness to emergent learning, and when as much effort goes into implementation as into analysis.
FAQs
What are the 5 stages of strategic management?
A common five-stage version is: set direction (mission, vision and objectives), strategic analysis (external and internal), strategic choice (generate, evaluate and select options), implementation (structure, resources, people and change) and evaluation and control (measure results and adjust). Johnson, Scholes and Whittington group these into three: strategic position, strategic choices and strategy in action.
What is the difference between strategic management and strategic planning?
Strategic planning is the formal, usually annual process of setting objectives and writing plans. Strategic management is broader: it covers the whole continuous cycle of analysis, choice, implementation and evaluation, including how strategy emerges and adapts between planning rounds. Planning is one tool within strategic management, not the whole of it.
What models are used in strategic management?
Common models include PESTEL and Porter's Five Forces for external analysis, the value chain, VRIO and McKinsey 7S for internal analysis, SWOT and TOWS to summarise, Porter's generic strategies and the Ansoff matrix for choice, the suitability, acceptability and feasibility test for evaluating options, Kotter's eight steps for change and the balanced scorecard for control.
Who developed strategic management?
No single person. Alfred Chandler's 1962 book Strategy and Structure linked strategy with organisational structure, Igor Ansoff's 1965 Corporate Strategy added systematic growth planning, Michael Porter developed competitive strategy from 1980, and Henry Mintzberg showed how strategy also emerges from action. Johnson, Scholes and Whittington's Exploring Strategy pulled these ideas into a widely taught framework.
What is an example of strategic management?
An accountancy firm sees routine compliance work being automated. It analyses its environment and strengths, finds its advantage lies in long client relationships, chooses to develop advisory services for existing clients, retrains staff and changes incentives to implement the move, and tracks client satisfaction and advisory revenue on a balanced scorecard, adjusting as it learns.
Why do most strategies fail?
Most strategies fail during implementation rather than choice. Common causes include mistaking goals for strategy, failing to make trade-offs, underinvesting in change management, ignoring organisational culture and relying only on lagging financial measures. Rumelt's advice is to start with a clear diagnosis, set a guiding policy and follow through with coherent, coordinated actions.
Sources
- Whittington, R. et al. Exploring Strategy: Text and Cases, 13th edition (Pearson)
- ICAEW: How to further develop your strategic role
- Review of Chandler, A.D. (1962) Strategy and Structure, Journal of Economic History
- Porter, M.E. (1996) What Is Strategy? Harvard Business Review
- Mintzberg, H. and Waters, J.A. (1985) Of strategies, deliberate and emergent, Strategic Management Journal 6(3)
- Mintzberg, H. (1994) The Fall and Rise of Strategic Planning, Harvard Business Review
- Kaplan, R.S. and Norton, D.P. (1992) The Balanced Scorecard: Measures That Drive Performance, Harvard Business Review
- Rumelt, R. (2011) The perils of bad strategy, McKinsey Quarterly
- ACCA: Strategic Business Leader study resources