Remember the dialogue between Alice and the Cheshire Cat, where she asks which way she should go to get somewhere? The Cat replies: “Oh, you’re sure to get somewhere if you only walk long enough.” In this brief exchange, Lewis Carroll unknowingly captured a common problem for many companies—operating without a clear strategy.
He likely never imagined that exactly 100 years after the publication of his masterpiece about Alice, in 1965, the concept of strategic management would be developed—helping many companies grow wealthy and plan their success decades into the future.
So what exactly is strategic management, what processes does it involve, and how far ahead should a corporate strategy look to ensure the company survives for decades instead of briefly peaking and fading away? Read on to find out.
What Is Strategic Management?
Strategic Management is a series of actions taken by a company to achieve long-term goals that allow it to survive in a competitive environment and thrive under any external conditions. The more unstable the environment, the greater the need for a clear strategy.
Strategic management is also referred to as strategic governance, as it involves overall management of the company while implementing its strategy. It encompasses a range of activities required for effective company performance: planning, environmental analysis, resource allocation, control, and regulation.
The Strategic Management Process in a Company
To explain strategic management in simple terms, let’s use an analogy.
Everyone is familiar with traffic jams in big cities. From an operational management perspective, the solution might be to widen the highway. But if you consider that the number of cars increases every year, you’d have to keep expanding the city endlessly. A better strategic solution would be to reduce the number of cars—through parking restrictions, tolls, public transport development, etc.
That’s how strategic management works: it helps businesses look at the bigger picture and make long-term decisions, rather than chasing short-term gains or quick fixes.
The History of Strategic Management
Strategic management emerged as early as the 1920s, with large corporations intuitively applying its principles. (For instance, in 1926, General Motors doubled its market share with the strategy of “a car for every purse and purpose,” taking many customers from Ford.)
However, the term “strategic management” was only coined in 1965 by American researcher Igor Ansoff, who introduced it into academic discourse to distinguish strategic-level management from operational management, which is concerned with departments and production.
The theory was born in response to rapid scientific and technological advancements and a changing business landscape, requiring companies to adopt long-term strategies, reevaluate their goals, and shift focus from operations to strategic planning.
Elements of a Strategic Management System
Strategic management includes defining a company’s mission and goals and taking action to achieve them. To create an effective corporate strategy, management must answer three key questions:
- What is our current situation and what resources and capabilities do we have?
- Where do we want to go?
- How will we get there?
To reliably achieve desired outcomes, all core elements of the system must be used:
- Analyze the internal and external environment
- Define the company’s mission and goals
- Develop a strategic plan
- Analyze the business portfolio
- Build the organizational structure
- Select a management system
- Set company policies across all areas
- Implement the strategy
- Gather feedback and monitor results
- Refine the strategy in response to experience, changes, and new opportunities
As we can see, strategy is not static—it’s a cyclical process that incorporates continuous feedback and goal adjustments.
Strategic Management vs. Strategic Planning
Strategic management and strategic planning go hand-in-hand. However, strategic management is a comprehensive process focused on executing the strategy, while strategic planning involves analyzing the current situation and determining the next steps toward the goal.
Let’s explore both concepts using examples from well-known companies.
Strategic Management in Practice
Strategic management is an ongoing process of governing the company to develop and implement strategy. A strategy connects the company’s goals with the behaviors and choices needed to achieve them.
The main role of strategic management is to realize the company’s mission, enhance its competitive advantage, reduce costs, and help it reach its desired outcomes.
Example 1: Cisco’s Strategy Focused on Human Capital
Cisco Systems expanded rapidly during the internet boom, acquiring 70 companies and doubling its workforce. After the dot-com crash, the company pivoted from growth through hiring to developing internal talent. Cisco founded its own university, trained staff, and regained market leadership in just three years.
Strategic Planning in Practice
Strategic planning helps management assess the current market situation and plan the company’s future. Properly organizing strategic planning means continuously evaluating external threats, identifying potential opportunities, and determining next steps based on thorough analysis.
Strategic planning typically includes five stages:
- Defining the mission, vision, and goals
- Environmental analysis (information gathering, opportunity and risk assessment, competitor and organizational analysis)
- Choosing and formulating the strategy
- Implementing the strategic plan
- Evaluating and monitoring results
This process results in a strategic plan document, which includes both strategic and tactical plans supported by research and factual data.
However, creating such a document is time-consuming. To ensure the cost of strategy development doesn’t outweigh its benefits, it’s wise to track expenses related to strategic planning sessions. This helps move from planning to action more quickly.
Example 2: Nucor Steel’s Risk Assessment and Tech Investment
In 1986, Nucor’s president Ken Iverson faced a decision: invest in a new steel casting technology or not. The innovation promised major cost reductions but required large investments and hadn’t yet been approved by regulators. Iverson decided to take the risk and built the first plant in 1989. As a result, Nucor became the largest steel producer in the U.S.
Strategic Goal System: How Long Should a Strategy Cover?
According to A. Prigogine, a good strategy should include three distinct types of goals, unrelated hierarchically:
- Task goals – reflect the external mission (outward-facing)
- Orientation goals – address employee needs and values (inward-facing)
- System goals – ensure organizational stability and integrity
In practice, this might mean: increasing labor productivity by 5% over three years, boosting customer loyalty in the service market, and reducing the turnover cycle of working capital.
Having even a one-year strategy is a good start, but it’s still short-term. According to global best practices, a company should have a long-term strategy for at least 3–5 years (and 10–15 years for multinational corporations), along with medium-term (2–3 years) and short-term (up to 1 year) plans.
When developing goals, always remember: the company exists for the customer and because of the customer.
So goal-setting should be based on:
- Forecasting future decisions (target segments, intended markets, expected challenges)
- Efficient resource allocation (budgeting, capital investments, investment strategy)
- Personnel strategy (employees should understand the company’s direction and their role in it)
Strategy is also a management tool, giving employees a sense of stability about the company’s future. That’s why it’s essential to effectively communicate the strategy to all staff—empowering them to contribute more meaningfully to profitability and success.
