1.2 What is Strategic Management?

Defining Strategic Management

Issues such as those currently faced by Tesla are the focus of because they help answer the key question examined by strategic management—”Why do some firms outperform other firms?” More specifically, strategic management examines how actions and events involving top executives (such as Elon Musk), firms (Tesla), and industries (the electric car market) influence a firm’s success or failure. Strategic management involves the utilization or planned allocation of resources to implement major initiatives taken by executives on behalf of stakeholders to improve performance of firms in an environment. Formal tools exist for understanding these relationships, and many of these tools are explained and applied in this book. But formal tools are not enough; creativity is just as important to strategic management. Mastering strategy is therefore part art and part science.

This introductory chapter is intended to enable students to understand what strategic management is and why it is important. Because strategy is a complex concept, we begin by explaining what strategy is. Types of strategies and the history and critique of strategic management are introduced. Lastly, students are presented with the process of strategic management that firms use.

Defining is not simple. Strategy is a complex concept that involves many different processes and activities within an organization. It involves goals and objectives that an organization needs to achieve to be successful in the marketplace. The development of these goals, however, requires a strategic management process to be done correctly and thoroughly.

A strategy is typically a higher level, broad goal, without a lot of specifics. It is long-term in nature. It provides the direction that an organization wants to move toward to be more successful. New or revised strategies may be developed as a result of changes in the business environment, such as what happened during the COVID-19 pandemic. Firms also routinely revise or create new strategies, often annually, by assessing and reacting to external and competitive forces and to maximize organizational performance. By identifying their resources and capabilities, firms attempt to deploy these through strategies that will give them a competitive advantage, so consumers will buy their product or service instead of a competitor’s.

Five young adults looking at a laptop with a bulletin board in the background.
Figure 1.2: Strategic management within a firm is accomplished by a team of senior people.

Section Video

What is Strategic Management? What does Strategic Management mean? [03:48]

The video for this section further explains strategic management and strategies.

You can view this video here: https://youtu.be/g-wf6A0ailA.

Key Takeaway

  • Strategic management focuses on firms and the different strategies that they use to become and remain successful. Firms develop strategies, or longer range goals, to achieve success in the competitive marketplace. In the dynamic environment in which firms exist, firms may alter their strategies as conditions change.


  1. Have you developed a strategy to manage your career? Should you make it more detailed? Why or why not?
  2. What business that you visit regularly seems to have the most successful business model? What makes the business model work?


Markoff, J. (1996, May 14). Apple unveils strategic plan of small steps. New York Times. http://www.nytimes.com/1996/05/14/business/apple-unveils-strategic -plan-of-small-steps.html.

Porter, M. E. (1996, November–December). What is strategy? Harvard Business Review, 61–79.

Reuters. (2011, March 1). Philadelphia area pizza owner used mice vs. competition—police. Reuters. https://www.reuters.com/article/us-crime-pizza-idUSTRE7207MU20110301.

Image Credits

Figure 1.2: fauxels (2019). “Photo of people looking on laptop.” CC BY-SA 4.0. Retrieved from https://www.pexels.com/photo/photo-of-people-looking-on-laptop-3182812/.

Video Credits

Audiopedia. (2017, April 4). What is strategic management? What does strategic management mean? [Video]. YouTube. https://youtu.be/g-wf6A0ailA.


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Strategic Management by Reed Kennedy is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License, except where otherwise noted.

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