Strategic planning

Strategic planning
See also
Methodology for strategy definition Structure of enterprise planning system Importance of strategic management Strategy Nature of strategic management Organizational planning Strategy deployment Strategic management Strategic management model

Strategic planning is a formal strategic planning process focused on the long-term activities specifying and implementing the objectives of the organization. Is characterized by the following features:

• Applies to basic issues. Strategic planning provides answers to such questions as: "what do we do and what we should concern ourselves with", "who are we, and who should be our customers?".
• Provides a framework for the planning of the tactical and operational activities, and everyday decisions. In view of the need to make decisions manager ask: "which of the possible lines of action will best match our strategy?"
• It is associated with a longer time horizon than other types of planning.
• Makes it easier to focus energy and resources on the most important activities.
• It is activity of head managers of organization, which must have sufficient knowledge and experience, in order to take into account all aspects of the functioning of the organization. Commitment of head managers is also necessary in order to induce and sustain engagement at lower levels of organization.

Fig. 1. Strategic planning process in the company

The strategic planning Process

The strategic planning process is first in a sequence of management activities whose goal is to introduce and implement the best strategy for the company. Diagram of this process is shown in the figure below.

Fig. 1. puts the elements of strategic analysis (analysis of the company and the environment) as part of the planning system. Separation of the strategic analysis subsystem from the planning subsystem is desired. Strategic analysis is the basis for planning but is used also for other activities of the management, such as: monitoring, implementation of strategy, analysis of the company situation, etc.

The starting point in determining strategic plans is to develop enterprise mission and vision. Vision is a compact script, image of the future company, which should contain the following elements:.

• description of the perceived environment of business, in particular the social change leading to the reproach of old and generation of new ideas,
• domain definition for detailing potential areas of the market in which the company intends to operate,
• a description of the characteristic (permanently outstanding) competences in the company now or in the future,
• understanding the likely route from the place now occupied by the company to the place which it is hoping to take by constantly creating its distinctive competence.

Planning and decision-making

Strategic planning steps remains in close connection with the decision making process. This connection occurs already at the stage of formulation of the objectives of the company (in the case of strategic management: its mission and vision), then the acceptance of variants of different strategies (programs) and, finally, in monitoring of their implementation. Interactions between these features are very strong, but in the financial planning only preparation activities prevail, while the decision making applies to the allocation of financial resources between the different business units, determining the key products and scale of production, defining the field of diversification, the development of pricing strategy.

Strategic planning role

Strategic planning should be an integral part of the management of the enterprise and, therefore, must take into account the limitations imposed by considerations such as: conflicting interests, financial barriers, resource constraints, lack of information, strategic potential, lack of competence, the expected change in an environment, competition, etc.

Examples of Strategic planning

• Developing a Vision Statement: A vision statement is a short statement that outlines the organization’s long-term goals and aspirations. It is used as a guiding principle for decision-making and helps to ensure that the organization is working towards the same goals.
• Creating a Mission Statement: A mission statement is a statement that outlines the organization’s purpose, values, and objectives. This statement should be concise and serve as a reminder of why the organization exists and what it wants to achieve.
• Defining Objectives: Objectives are defined as the specific goals that the organization wants to achieve. These objectives should be measurable, achievable, and realistic.
• Identifying Strategies: Strategies are the means by which the organization will achieve its objectives. They can be both short-term and long-term strategies and should be tailored to meet the organization’s needs and resources.
• Developing Action Plans: Action plans are the specific plans of action that will be taken to achieve the objectives. These plans should include timelines, resources, and responsibilities.
• Allocating Resources: Resources should be allocated to each of the action plans to ensure that they are completed in a timely and efficient manner. This includes both financial and human resources.
• Evaluating Progress: Progress should be monitored and evaluated regularly to ensure that the objectives are being achieved. This should involve both internal and external stakeholders.

Advantages of Strategic planning

A strategic planning process is advantageous in that it:

• Aids in identifying goals and objectives that align with the organization's mission, vision, and values.
• Develops a plan of action for achieving the desired outcomes of the organization.
• Creates a framework for decision-making that is based on measurable goals and objectives.
• Ensures that resources are allocated in the most efficient and effective manner.
• Provides a structure for tracking and evaluating progress toward meeting established goals and objectives.
• Brings together people from across the organization to dialogue about the organization’s future.
• Improves communication throughout the organization and with external stakeholders.
• Helps to build consensus and collective commitment to organizational goals and objectives.

Limitations of Strategic planning

• Strategic planning is a long-term process requiring significant effort and resources to achieve desired results.
• Strategic plans can be complex and difficult to implement, as they involve a variety of stakeholders and potential solutions.
• Strategic plans can become outdated quickly, as the external environment is always changing.
• Strategic plans can be time-consuming to develop and may not be feasible in the short-term.
• Strategic plans can be expensive to execute, as they require significant resources, including personnel, funds, and materials.
• Strategic plans can fail if there is a lack of communication and coordination among stakeholders.
• Strategic plans can be difficult to measure and evaluate, as success is often determined by vague criteria.
• Strategic plans can become too narrow in focus and fail to account for potential risks or opportunities.

Other approaches related to Strategic planning

• Introduction: There are several approaches related to strategic planning that organizations can use to develop and implement their strategies.
• Scenario Planning: Scenario planning is a process where a company develops multiple scenarios for its future and plans for each one. It offers the opportunity to prepare for potential changes in the external environment and prepare contingencies for each potential outcome.
• Balanced Scorecard: The Balanced Scorecard is a strategic planning tool used to measure and monitor the performance of a company in terms of its financial, customer, internal process, and learning and growth objectives.
• SWOT Analysis: SWOT Analysis is a strategic planning tool that helps identify the Strengths, Weaknesses, Opportunities and Threats of an organization. It is used to assess the competitive environment and develop strategies that can be used to capitalize on the opportunities and mitigate the threats.
• Strategic Maps: Strategic Maps are a visual representation of the organization's strategy. It includes all the components that contribute to the organization's success such as objectives, goals, tactics, and KPIs.
• Strategic Thinking: Strategic thinking is the process of analyzing the organization's current and future situations, understanding the external environment, developing innovative solutions, and setting realistic goals.
• Summary: Strategic planning is a formal process for the long-term activities of an organization. There are several approaches related to strategic planning such as Scenario Planning, Balanced Scorecard, SWOT Analysis, Strategic Maps, and Strategic Thinking. These approaches provide organizations with the tools to develop and implement their strategies.

References

• Mintzberg, H. (1994). The fall and rise of strategic planning. Harvard business review, 72(1), 107-114.

Author: Krzysztof Wozniak