5 steps of the strategic management process
It's common to view the strategic management process as five steps: identification, analysis,
formation, execution, and evaluation.
1. Define the direction.
The initial stage of the strategic management process involves identifying the direction and
specific goals and determining what needs to happen to achieve them.
2. Analyze the current situation.
The second step is analysis and research. By using tools like SWOT analysis and examining the
organization's resources, including budget, time, staff, and more, you'll gain a better
understanding of how to leverage what's working and eliminate what's not.
3. Outline the strategy and plan of action.
Next is formulating a strategy and plan of action based on situational analysis. This step involves
crafting a specific and realistic plan to help the organization achieve its goals.
4. Execute the plan.
Executing the plan is the fourth step in the strategic management process. This step involves
implementing the plan and monitoring its progress. If you take a more descriptive approach to
strategy, you may have to adjust the plan as circumstances change.
5. Evaluate the plan.
Evaluation is the fifth and final step in the strategic management process. Here, you'll assess
whether the organization has achieved its goals. If not, you can adjust your plan and implement it
in innovative ways. Feedback and analysis are essential to evaluating and preparing for an optimal
business future.
Here's a video on OKR (objectives and key results), an important process in strategic management:
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The two components of an OKR are an objective that specifies what needs to be achieved in the
medium or longer term and results. These are specific shorter-term actions that we need to take
to fulfil that objective.
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Strategy Implementation
What Is Financial Management?
At its core, financial management is the practice of making a business plan and then ensuring all
departments stay on track. Solid financial management enables the CFO or VP of finance to
provide data that supports creation of a long-range vision, informs decisions on where to invest,
and yields insights on how to fund those investments, liquidity, profitability, cash runway and
more.
ERP software can help finance teams achieve these goals: A financial management system
combines several financial functions, such as accounting, fixed-asset management, revenue
recognition and payment processing. By integrating these key components, a financial
management system ensures real-time visibility into the financial state of a company while
facilitating day-to-day operations, like period-end close processes.
Video: What Is Financial Management?
The functions above can be grouped into three broader types of financial management:
Capital budgeting
Relates to identifying what needs to happen financially for the company to achieve its short- and
long-term goals. Where should capital funds be expended to support growth?
Capital structure
Determine how to pay for operations and/or growth. If interest rates are low, taking on debt might
be the best answer. A company might also seek funding from a private equity firm, consider selling
assets like real estate or, where applicable, selling equity.
Working capital management
As discussed above, is making sure there’s enough cash on hand for day-to-day operations, like
paying workers and purchasing raw materials for production.
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What Is an Example of Financial Management?
We’ve covered some examples of financial management in the “functions” section above. Now,
let’s cover how they all work together:
Say the CEO of a toothpaste company wants to introduce a new product: toothbrushes. She’ll call
on her team to estimate the cost of producing the toothbrushes and the financial manager to
determine where those funds should come from — for example, a bank loan.
The financial manager will acquire those funds and ensure they’re allocated to manufacture
toothbrushes in the most cost-effective way possible. Assuming the toothbrushes sell well, the
financial manager will gather data to help the management team decide whether to put the
profits toward producing more toothbrushes, start a line of mouthwashes, pay a dividend to
shareholders or take some other action.
Throughout the process, the financial manager will ensure the company has enough cash on hand
to pay the new workers producing the toothbrushes. She’ll also analyze whether the company is
spending and generating as much money as she estimated when she budgeted for the project.
NetSuite: Financial Management for Startups a
