The European Union committed itself to becoming the most competitive and dynamic knowledge-based economy in the world by 2010, capable of sustaining economic growth with better jobs and greater social cohesion. Since 2000, progress has been slow uncertainty over the global economy has affected confidence and growth in the majority of Member States. Europe is suffering from an under-performance of its economy, low employment rates and levels of productivity. The Knowledge Society relies on the quality of human capital, education, and research and innovation policies, key to boost growth. At present, EU Member States only invest 1.96 % GDP in research compared to 2.59 % in the US and 3.12 % in Japan. The EU does not have sufficient scientists and researchers with only 5.3 per 1.000 inhabitants compared to 9 per 1.000 in the US and 9.7 in Japan. The importance of Higher Education is clearly recognized, but this requires major funding and governance reforms to modernize higher education institutions if they are to play a major role in the innovation process. The current study addresses the issue of strategic management in the area of academic organisations. The scope of the study is to review the changes in the European higher education as well as to evaluate how the strategic management concepts from the business sector can be used in the case of academic institutions and how these concepts can help academic organisations to improve their effectiveness and consequently their competitive advantage
