Strategic planning is the art of creating specific business strategies, implementing them and evaluating the results of the plan's execution against the overall long-term goals or desires of a company. It is a concept that focuses on the integration of various departments (such as accounting and finance, marketing and human resources) within a company to achieve its strategic goals. The term strategic planning is essentially synonymous with strategic management.
The concept of strategic planning became popular in the 1950s and 1960s and was popular in the corporate world until the 1980s, when it fell somewhat out of favour. However, enthusiasm for strategic planning was revived in the 1990s and strategic planning remains relevant in modern business.
The strategic planning process requires considerable thought and planning on the part of the company's management. Before deciding on a course of action and determining how to implement it strategically, management may consider many possible options. Ultimately, management will hopefully choose a strategy that is most likely to produce positive results (usually defined as an improvement in the company's bottom line) and that can be executed cost-effectively with a high probability of success, while avoiding excessive financial risk.
The development and execution of strategic planning is generally considered to involve three critical steps:
In the process of formulating a strategy, a company begins by assessing its current situation by conducting an internal and external audit. The objective is to help identify the organisation's strengths and weaknesses, as well as opportunities and threats (SWOT analysis). As a result of this analysis, managers decide which plans or markets to focus on or abandon, how best to allocate the company's resources, and whether to take actions such as expanding the business through a joint venture or merger.
Business strategies have long-term effects on the success of the organisation. Only senior managers are usually authorised to allocate the resources necessary to implement them.
Implementing the strategy
After formulating a strategy, the company must establish specific targets or objectives related to the implementation of the strategy, and allocate resources for the execution of the strategy. The success of the implementation phase is often determined by the quality of the work done by senior management to clearly communicate the chosen strategy throughout the company and to ensure that all employees "buy into" the commitment to implement the strategy.
Effective implementation of a strategy involves developing a sound structure, or framework, for implementing the strategy, optimising the use of relevant resources and redirecting marketing efforts in line with the strategy's goals and objectives.
Evaluating the strategy
Every wise businessman knows that today's success does not guarantee tomorrow's success. That is why it is important for managers to evaluate the performance of the chosen strategy after the implementation phase. Strategy evaluation involves three crucial activities: examining the internal and external factors affecting the implementation of the strategy, measuring performance and taking corrective action to make the strategy more effective. For example, after implementing a strategy to improve customer service, a company may find that it needs to adopt new customer relationship management (CRM) software to achieve the desired improvements in customer relations.
The three stages of strategic planning take place at three hierarchical levels: top management, middle management and operational levels. It is therefore imperative to foster communication and interaction between employees and managers at all levels to help the company function as a more functional and effective team.
Benefits of strategic planning
The volatility of the business environment leads many companies to adopt reactive rather than proactive strategies. However, reactive strategies are usually only viable in the short term, even though they may require a significant amount of resources and time to implement. Strategic planning helps companies to prepare proactively and approach problems with a longer-term view. It allows a company to exert influence rather than just react to situations.
The main benefits of strategic planning include the following:
Helps to formulate better strategies using a logical and systematic approach.
This is often the most important benefit. Some studies show that the strategic planning process itself contributes significantly to improving the overall performance of a company, regardless of the success of a specific strategy.
Improving communication between employers and employees
Communication is essential to the success of the strategic planning process. It is initiated by participation and dialogue between managers and employees, which shows their commitment to achieving the organisation's goals.
Strategic planning also helps managers and employees to show their commitment to the organisation's goals. This is because they know what the company is doing and why. Strategic planning makes the organisation's goals and objectives real, and employees can more easily understand the relationship between their performance, the company's success and compensation. As a result, both employees and managers tend to become more innovative and creative, which promotes business growth.
Empowering people in the organisation
Increased dialogue and communication at all stages of the process enhances the employees' sense of effectiveness and importance in the overall success of the company. This is why it is important for companies to decentralise the strategic planning process by involving managers and lower level employees throughout the organisation. A good example is the Walt Disney Company, which disbanded its separate strategic planning department and gave planning roles to the various Disney business divisions.
An increasing number of companies are using strategic planning to formulate and implement effective decisions. Although planning requires a significant amount of time, effort and money, a well thought-out strategic plan is effective in promoting business growth, goal achievement and employee satisfaction.
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