Strategic management analyzes the major initiatives taken by a company's top management on behalf of owners, involving resources and performance in internal and external environments. It entails specifying the organization's mission, vision and objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve these objectives, and then allocating resources to implement the policies and plans, projects and programs.
Strategic management can be viewed as bottom-up, top-down, or collaborative. In the bottom-up approach, employees submit proposals to their managers who funnel the best ideas up the ladder. This is often part of a capital budgeting process. Proposals are assessed using financial criteria such as return on investment or cost-benefit analysis. Incorrect estimates of costs and benefits are common errors. Approved proposals implicitly form the substance of the strategy without a strategic design or architect.
The top-down approach is the most common by far. In it, the CEO and the Board of Directors, decides on the overall direction the company should take. The strategy flows down through the organization as each unit adapts to the new approach.
Some organizations employ collaborative techniques that surface new ideas in the process leveraging advances in information technology. It is felt that knowledge management systems should be used to share information and create common goals.