Operations Management and Strategic Management · Strategic Analysis and Strategic Planning

Strategic Management Process and Levels of Strategy

Updated 10 October 2026 · Fact-checked

Strategic management is the continuous process of setting a firm's long-term direction, choosing strategies, putting them into action and checking results. Its stages run from analysis and formulation to implementation and evaluation. Strategy works at three levels: corporate (which businesses to be in), business (how to compete) and functional (how each department supports it).

Understand Strategic Management Process and Levels

A strategy is a long-term plan of action that links what an organisation wants to achieve with the resources it has and the environment it faces. It answers three questions: where are we going, how will we get there, and why will we win. Day-to-day routines are not strategy. Decisions that commit major resources, are hard to reverse and shape the whole firm are.

Strategic management is the full set of decisions and actions that create and carry out strategies. It is not a one-time plan. It is a cycle: you analyse, choose, act, check and then adjust.

The usual stages are:
- Strategic analysis: set vision, mission and objectives, and scan the external environment and the internal strengths and weaknesses.
- Strategy formulation: generate options, evaluate them and choose the strategy.
- Strategy implementation: turn the choice into action through structure, resources, leadership, systems and culture.
- Strategy evaluation and control: compare results with targets, find gaps and take corrective action. Findings feed back into the next round of analysis.

Strategy also exists at three levels. Corporate level is set by top management and covers the overall scope: which businesses to enter, keep, grow or exit, and how to spread resources among them. Business level (for a strategic business unit) covers how that unit competes in its market, for example through cost leadership, differentiation or focus. Functional level covers how departments such as marketing, production, finance and HR carry out the business strategy through plans and policies.

Example: a diversified Indian group decides to enter packaged foods (corporate). Its foods unit chooses to compete on affordable quality (business). The production department then plans low-cost, high-volume plants and the marketing department builds a wide distribution network (functional). Each level supports the one above it.

Key rules to remember

Stages of the strategic management process: Analysis → Formulation → Implementation → Evaluation and control (with feedback); Write the stages in this order. Some books split analysis into vision/mission setting and environmental scanning; mention both if asked for detail.
Three levels of strategy: Corporate (what businesses?) → Business (how to compete?) → Functional (how to execute?); Corporate is the widest and longest-term; functional is the narrowest and most operational.
Core question at each level: Corporate: scope and portfolio | Business: competitive advantage | Functional: efficient support; Use this one-line test to classify any example in an MCQ.

How to solve Strategic Management Process and Levels questions

Most questions ask you to explain the process, explain the levels, distinguish between levels or classify an example. Use this method.

1Read the verb. 'Explain' needs stages or levels with meaning; 'distinguish' needs a comparison on several points; 'identify' needs a label with a reason.
2Define strategy or strategic management in one or two lines first.
3List the items in correct order: four process stages, or corporate, business and functional levels.
4Give one or two lines of explanation for each item. Say what is decided and who decides.
5For comparisons, use fixed points: decision-maker, scope, time horizon, nature of decisions, focus, example.
6Add a short Indian example that matches each item.
7Show the link: levels support each other and evaluation feeds back into analysis.
8Close with one line on why the process or the levels matter for the organisation.

Quickest way: Scope test for classifying strategy levels

When to use it: Use for MCQs and short cases where you must decide whether a decision is corporate, business or functional.

Ask: does it decide which businesses the firm is in, or how money is shared among them? That is corporate.
Ask: does it decide how one product or unit wins customers against rivals? That is business.
Ask: does it decide how a department such as HR, finance or operations will do its job? That is functional.
If two seem to fit, choose the widest scope the decision truly covers.
For the process, recall the sequence: analyse, formulate, implement, evaluate.

Common mistakes in Strategic Management Process and Levels

Treating strategic management as a one-time plan made at the start.
Students memorise the stages as a straight list and miss the feedback.
Fix: State that evaluation findings feed back into analysis and formulation, so the process is continuous.
Mixing up corporate and business level strategy.
Both sound like 'top' decisions and both mention growth.
Fix: Corporate is about which businesses to be in; business is about how to compete in one chosen business.
Calling a routine departmental decision a strategy of the whole firm.
Functional plans use the word 'strategy' too, such as marketing strategy.
Fix: Label them functional strategies. They implement the business strategy and have a shorter time horizon.
Putting evaluation before implementation or merging the stages.
Students rely on memory of headings, not logic.
Fix: Remember you cannot evaluate what has not been done. Use the order analyse, formulate, implement, evaluate.
Writing a comparison without examples or fixed points.
Students write general paragraphs instead of structured points.
Fix: Compare on decision-maker, scope, time horizon and focus, then add one example for each level.

Worked examples

Example 1

Explain the stages of the strategic management process. (Short answer)

Show the solution

Define: strategic management is the continuous process of deciding the firm's long-term direction, choosing strategies, acting on them and reviewing results.
Stage 1, analysis: set vision, mission and objectives; scan the external environment for opportunities and threats; study internal strengths and weaknesses.
Stage 2, formulation: develop alternatives, evaluate them against objectives and resources, and choose the strategy at corporate, business and functional levels.
Stage 3, implementation: put the strategy into action through structure, resource allocation, leadership, systems and culture.
Stage 4, evaluation and control: measure performance against targets, find deviations and take corrective action.
Link: findings from evaluation feed back into analysis, so the cycle repeats as the environment changes.

Answer: The process has four linked stages: analysis, formulation, implementation, and evaluation and control, with feedback from evaluation to analysis.

Example 2

A diversified Indian group decides to enter the electric two-wheeler market. Its automobile unit decides to compete by offering low-priced scooters with low running costs. The HR department plans to train workers in battery assembly. Identify the level of strategy in each case with reasons.

Show the solution

Entering the electric two-wheeler market decides which business the group will be in. This is about scope and use of group resources, so it is corporate level.
Competing through low prices and low running costs decides how one unit will win customers against rivals. This is business level, using a cost-focused approach.
Training workers in battery assembly is a departmental plan that supports the business strategy. It is functional level.
Check the link: the HR plan supports the business strategy, which in turn serves the corporate decision.

Answer: Market entry is corporate level; low-price competition is business level; battery-assembly training by HR is functional level.

Exam tips

For 'distinguish between corporate and business level strategy', draw a two-column answer with four to six points such as decision-maker, scope, time horizon and focus.
In MCQs, apply the scope test: which businesses, how to compete, or how to execute.
Always write the stages in order and mention feedback, as many students omit it.
Give a short Indian company-style example for each level; it gains presentation marks without extra length.
If a question says 'explain with examples', do not stop at definitions; use at least one example for the process or each level.

Practice questions from Strategic Analysis and Strategic Planning

Strategic Management Process and Levels in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Strategic Management Process and Levels: frequently asked questions

What is the strategic management process in simple words?

It is a cycle of analysing the situation, choosing a strategy, putting it into action and checking results. The results then guide the next round of analysis. It is continuous, not a one-time plan.

What is the difference between corporate level and business level strategy?

Corporate level strategy decides which businesses the firm should be in and how to allocate resources among them. Business level strategy decides how one business unit competes in its market. Corporate is wider and set by top management; business is narrower and often led by unit heads.

What is functional level strategy?

It is the plan each department makes to carry out the business strategy. Examples are marketing, production, finance and HR plans. It has a shorter time horizon and is more operational.

Is the strategic management process the same as strategic planning?

No. Strategic planning is mainly the analysis and formulation part. Strategic management is wider and also includes implementation, evaluation and control.