In the field of management, strategic management involves the formulation and implementation of the major goals and initiatives taken by an organisation’s top management on behalf of owners, based on consideration of resources and an assessment of the internal and external environments in which the organisation operates.
Strategic management provides overall direction to an enterprise and involves specifying the organisation’s objectives, developing policies and plans to achieve those objectives, and then allocating resources to implement the plans. Academics and practicing managers have developed numerous models and frameworks to assist in strategic decision-making in the context of complex environments and competitive dynamics. Strategic management is not static in nature; the models often include a feedback loop to monitor execution and to inform the next round of planning.
Michael Porter identifies three principles underlying strategy:
- creating a “unique and valuable [market] position”
- making trade-offs by choosing “what not to do”
- creating “fit” by aligning company activities with one another to support the chosen strategy
Corporate strategy involves answering a key question from a portfolio perspective: “What business should we be in?” Business strategy involves answering the question: “How shall we compete in this business?”
Management theory and practice often make a distinction between strategic management and operational management, with operational management concerned primarily with improving efficiency and controlling costs within the boundaries set by the organisation’s strategy.
“Strategy is the determination of the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.”