Every company’s dream is to achieve long-term profit and success that is competitive. For this, they have to create plans that chase the changing business climate and surpass the competition. One such plan is the strategic plan that enables companies to sustain themselves in the future. Here we will discuss, what strategic planning is, its components, how you can make it, and its importance.
What is Strategic Planning?
Strategic planning is the continuous process in which a business creates a long-term plan aiming to achieve its vision, mission, and objectives in an uncertain environment. It is a process that intelligently aligns the company’s vision, mission, and available resources toward the achievement of desired goals.
Strategic planning is the road map to lead an organization from where it is now to where it would like to be in certain years of time (3 to 5 years, or more). It is a tool for organizing the present on the basis of the projections of the desired future.
The main outcome of strategic planning is the strategic plan. It is different than business planning – a strategic plan focuses on the whole organization and aims to change the direction of the business. Whereas a business plan is on short to mid-range plans and is particularly focused on products or business units.
Usually, the time span of strategic planning is 3-to-5 years, and even more with the nature of business. Top-level executives and BODs have a significant role in creating result-driven strategic plans.
Strategic plans are developed to achieve the long-term goals of the business that positively supports the achievement of the vision of the company. Thus it is worth doing you should continually update your strategy as your business encounters new challenges and opportunities.
Objectives of Strategic Planning
The following are the main objectives of strategic planning.
- Helps to achieve the long-term goals of the organization.
- Grab the potential opportunities and overcome the threats.
- Gives clear directions to the whole organization.
- Secure the future of the firm.
- Enables firms to compete and realize competitive advantage.
Elements of Strategic Planning
Strategic plans are the top-level plans for the formulation of strategy in any organization. To make the strategic plan effective, the following components should be included in your strategic plans.
- Vision, mission, and values of the business – where do organizations currently stand? Where do organizations want to be in the future?
- Objectives – what would the organization like to achieve?
- Directly responsible individuals – Who is responsible for these goals?
An organization’s vision statement is a declaration of a principle’s goals or the direction it is aiming for. The greatest levels of an organization’s aspirations for itself are shown in the company vision.
The broad description of what an organization aspires to be in the future is called its vision. It is a representation in visual form of what the company hopes to create, develop, or become noted for.
The organization’s mission outlines the rationale for its existence. It describes the service or product that the company is offering to society, such as hospitality or tangible commodities. A company’s mission statement outlines its distinct purpose and describes the range of its offerings in terms of the markets it serves.
The mission statement said simply, explains why the organization was founded and why it wants to keep operating. The response to the question “what is our business?” is typically found in the mission statement.
Values are the beliefs and moral principles that lie behind the organization’s culture. The organization’s norms and behavior standards have relevance because of its values.
Corporate values are frequently implicit in businesses and can only be recognized by recognizing the philosophical underpinnings of managerial actions. Values can provide a rationale for behavior that is just as strong as a strategy.
The results of the planned activity are the objectives. It specifies what has to be done by when and, if at all possible, should be quantified. The accomplishment of business goals should lead to the accomplishment of the corporate mission.
A goal is the specific value of the scale that the company aspires to achieve. An objective is made up of three components: the characteristic that is selected as a measure of efficiency, the scale by which the attribute is measured, and the goal.
Process of Strategic Planning
How to formulate a strategic plan? Strategic plans provide guidelines for organizational activities. If plans are wrong, then resources and efforts will be directed in the wrong direction.
So desired goal attainment becomes impossible. Therefore, it is a crucial activity to make a successful strategy. The following are the most common step in the strategic planning process you can take to make effective strategic plans.
Identify Mission, Goals, and Objectives
In process of formulation of strategic plans first of all you must identify the organization’s mission, goals, and objectives. You should have a clear idea about what purpose the organization is established for and what it needs to achieve.
The destination of the organization must be clear so that activities to attain that destination can be easily identified.
Analyze External Environment Factors
The external environment provides opportunities and threats to the organization. It should be analyzed for the formulation of strategic plans. For this, components of the external environment (political, economic, social, technological, legal, environmental, and global) must be scanned properly.
Identify The Opportunities and Threats
The main objective of strategic planning is to grab opportunities by overcoming threats. So, potential opportunities and threats must be identified to make strategic plans.
Analyze the Internal Environment Factors
The internal environment of the organization is composed of strengths and weaknesses of the organization. It provides what can be done and what can not be. Resources like human skills, technology, raw materials, etc. are the factors influencing an organization’s strengths and weaknesses.
Identify The Strengths and Weaknesses
With the analysis of the internal environment of the organization, its weak points and strong points need to be listed. All the supporting factors like enough capital, skilled and dedicated manpower, easy supply of raw materials, advanced technology, good market position, etc. are the strengths while the unavailability of such factors is the weaknesses.
With the identification of strengths and weaknesses, you can set targets, set prioritize activities, allocate resources, and finally attain the goals. Thus, while making strategic plans organizational strengths and weaknesses must be identified.
Formulation of Strategy
Once you have successfully conducted the analysis of the internal and external environment the strengths, weaknesses, threats, and opportunities can be easily identified. On the basis of such information, different strategic plans for the different levels of the organization can be identified.
Alternative plans for setting objectives, their hierarchy of priorities, and the allocation of resources are also formulated at this stage. Plans prepared at this stage are declared as final plans and need to be communicated as necessary.
Implementation of Strategy
Though this is not the formulation of strategic plans. But it is worthless of formulating strategic plans if they can not be implemented. This step facilitates getting feedback for future plans.
Evaluate The Results
For finding the effectiveness and required changes in plans, evaluation is necessary. Evaluation helps to get feedback about what extent the plan is working to attain the desired goals. This provides sufficient ground for the amendment of plans if the activities are deviating from the mainstream.
Importance of Strategic Planning
A strategic plan includes the best way of allocating resources and prioritizing necessary activities to attain goals. The following are the reasons that clarify why strategic planning is important.
Provides Clear Direction
Strategic planning aims to create a strategy that is effective yet understandable. It helps to design a clear direction for the firm with clear messages to all the organizational members which enables lesser conflicts and more contribution from employees.
Identify Opportunities and Threats
The goal of the strategic plan is to overcome potential threats and grab opportunities. As we discussed, while setting the strategy it also helps to specify the likely positiveness and negativeness of the future environment.
Helps to Achieve Long-Term Goals
Especially all the strategic plans have a life span of more than 3-5 years. All are made up for the achievement of organizational long-term goals. Because of effectiveness, clarity, and better projections strategic plans increase the likelihood of achieving organizational long-term goals.
The firm can learn enough from strategic plans about market competitiveness, conditions, rival strategies, prices, product quality, and consumer preferences. It also gives the company insight into how to perform at its peak in a cutthroat market enabling the potential to realize a competitive advantage.
Efficiency and Effectiveness
Management can communicate with staff in an understandable manner if they have a clear communication strategy and plan in place. Employee teams perform tasks in the most effective and efficient ways when they are aware of what is expected of them. This ultimately adds up to the overall firm’s efficiency and effectiveness.