Strategic Management and Corporate Finance · Introduction to Strategic Management

Strategic Management Process: Stages and Steps Explained

Updated 11 October 2026 · Fact-checked

The strategic management process is the sequence of steps a firm follows to decide where it wants to go and how to get there. It runs from vision, mission and objectives, through environmental scanning, strategy formulation and implementation, to evaluation and control. It is a continuing cycle, not a one-time exercise.

Understand Strategic Management Process

A company cannot plan every action in advance. It needs a method to decide its direction, choose how to compete, put the choice into action and check whether it is working. The strategic management process is that method.

Think of it as a journey. First you decide the destination: the vision, mission and objectives. Then you study the road and your vehicle: environmental scanning of outside opportunities and threats, and internal analysis of strengths and weaknesses. Next you pick the route: strategy formulation. Then you drive: strategy implementation. Finally you check the map: evaluation and control.

The stages are usually grouped into three phases. Formulation covers direction setting, scanning and strategic choice. Implementation covers structure, resources, policies, plans and leadership. Evaluation and control covers measuring results against objectives and taking corrective action.

The process is a cycle. Evaluation results feed back into the earlier stages. If performance falls short, the firm may change the strategy, the objectives or even the mission. Different textbooks draw the model with slightly different boxes, so learn the logic and not one fixed diagram.

Example: a mid-sized Indian packaged-foods company sets an objective of becoming a top regional brand. It scans the market and sees rising demand for healthy snacks (opportunity) and cheap imports (threat). It chooses a product-development strategy, funds a new plant, sets sales targets and reviews results every quarter.

Key rules to remember

Core sequence of the process: Vision, mission and objectives → Environmental scanning (external + internal) → Strategy formulation → Strategy implementation → Evaluation and control → feedback to earlier stages; Stage names vary by author. Keep this order and say that the process is continuous.
Three phases: Formulation + Implementation + Evaluation and control; Use these as headings when the question asks for the process in brief.
Scanning outputs: External scan → Opportunities and Threats; Internal analysis → Strengths and Weaknesses; These four together form SWOT, which feeds strategic choice.

How to solve Strategic Management Process questions

Use this method for any question on the process, whether it asks you to explain, describe stages, illustrate with a diagram or apply it to a case.

1Define strategic management process in one sentence and say it is continuous.
2List the stages in order: direction setting, scanning, formulation, implementation, evaluation and control.
3Explain each stage in two or three lines: what is done and what the output is.
4Draw a simple flow diagram with arrows and a feedback arrow from evaluation back to the start.
5If a case is given, link each stage to facts in the case, naming the vision, the opportunity or threat, the strategy chosen and the control measure.
6Show the link between stages, for example scanning feeds SWOT and SWOT feeds strategic choice.
7Close with a conclusion: why the process matters and that feedback allows correction.

Quickest way: Five-box recall

When to use it: When you have only 5 to 7 minutes for a 5 to 8 mark answer.

Write the five boxes: Direction, Scanning, Formulation, Implementation, Control.
Add one line for each: what it decides and its key output.
Draw arrows between the boxes and one feedback arrow back.
Add one line of illustration from an Indian company.
Finish with one sentence on why the cycle is continuous.

Common mistakes in Strategic Management Process

Treating the process as a straight line with no feedback.
Textbook diagrams often show only forward arrows.
Fix: Always draw a feedback arrow from evaluation and control back to earlier stages and mention it in writing.
Mixing up formulation and implementation.
Both involve action, so students blur choosing a strategy with executing it.
Fix: Formulation is deciding what to do. Implementation is organising structure, resources and people to do it.
Skipping environmental scanning or covering only the external side.
Students think scanning means PESTEL only.
Fix: State that scanning covers external opportunities and threats plus internal strengths and weaknesses.
Listing stage names without explaining them.
Memorising a sequence feels enough.
Fix: Add what is done and the output at each stage, in at least two lines.
Giving a case answer without linking to facts.
Students write a theory answer from memory.
Fix: Quote or paraphrase case facts at each stage, then conclude.

Worked examples

Example 1

Explain the strategic management process with a suitable diagram. (Model answer)

Show the solution

Definition: the strategic management process is the continuing set of steps by which a firm sets direction, analyses its environment, chooses and implements strategy and checks results.
Diagram: Vision, mission, objectives → Environmental scanning → Strategy formulation → Strategy implementation → Evaluation and control, with an arrow from evaluation and control back to the first two boxes.
Stage 1, direction: the firm states its vision, mission and measurable objectives.
Stage 2, scanning: it studies the external environment for opportunities and threats and its internal resources for strengths and weaknesses.
Stage 3, formulation: it generates and evaluates options and selects a strategy at corporate, business and functional levels.
Stage 4, implementation: it sets structure, budgets, policies, systems and leadership to execute the strategy.
Stage 5, evaluation and control: it compares actual results with targets and takes corrective action.
Conclusion: because results feed back, the process is a cycle that keeps the firm aligned with a changing environment.

Answer: The process moves from direction setting through scanning, formulation and implementation to evaluation and control, with feedback to earlier stages.

Example 2

A textile company in Surat has a mission of supplying quality fabric to export markets. A new import duty change by a key buyer country reduces demand, and domestic competitors are growing. Management wants to respond. Identify the stage of the strategic management process at which each of the following occurs: (a) noticing the duty change, (b) deciding to enter premium home-furnishing fabrics, (c) setting up a new unit and hiring designers, (d) reviewing quarterly sales against targets.

Show the solution

(a) The duty change is an external factor. Spotting it is environmental scanning, and it is a threat.
(b) Choosing to enter a new product segment after weighing options is strategy formulation.
(c) Creating the unit, funding it and hiring people puts the choice into action. This is strategy implementation.
(d) Comparing actual sales with targets is evaluation and control.
If sales fall short, the feedback loop leads management back to scanning or formulation to revise the strategy.

Answer: (a) Environmental scanning; (b) Strategy formulation; (c) Strategy implementation; (d) Evaluation and control.

Exam tips

Always draw the diagram, even a simple one. It earns marks quickly and organises your answer.
In case questions, tag each fact to a stage by name, so the examiner sees analysis and not recall.
Mention feedback and continuity in the conclusion. It separates a good answer from an average one.
If the question says 'briefly', use five boxes with one line each. If it says 'discuss', add outputs and links between stages.
Use the stage names your ICSI study material uses, and note that other authors label stages differently.

Practice questions from Introduction to Strategic Management

Strategic Management Process 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: frequently asked questions

What are the steps in the strategic management process?

The usual steps are setting vision, mission and objectives, environmental scanning, strategy formulation, strategy implementation, and evaluation and control. Feedback from the last step goes back to the earlier ones. Some authors split or merge steps, so the names may differ.

How do I draw the strategic management process diagram?

Draw boxes in a row for each stage and join them with forward arrows. Add a feedback arrow from evaluation and control back to the first boxes. Label each box with its main output.

What is the difference between strategy formulation and implementation?

Formulation is deciding what the firm will do, based on objectives and analysis. Implementation is putting that decision into action through structure, resources, policies and leadership.

Why is evaluation and control part of the process?

Strategies are made under uncertainty, so results must be checked against objectives. Control allows corrective action and feeds lessons back into future planning.