Strategic Planning- What, Why, & When?

The term ‘strategic planning’, at an institutional level, essentially determines what the organization will be doing over the next year or so.

Planning basically acts as a guide to the respected organization, as it determines where it wants to be within that timeframe, and how it can reach that place.

An effective leader must have full understanding of strategic planning.

What is Strategic Planning?

Strategic planning is an organization’s process that is used to set priorities, focus resources, strengthen operations, and ensures that employees and other stakeholders are working toward common goals.

It is an organizational management activity of defining strategy, direction, and making decisions on allocating its resources to establish agreement around intended outcomes and adjust the organization’s direction in response to a changing environment.

Strategic Planning is another important addition in leadership skills list.

Strategic-planning produces fundamental decisions and actions that shape the organization illustrating the following basic issues:

“What an organization is, who it serves, what it does, and why it does it, with a focus on the future”.

Strategic Planning

The entire idea or the concept of strategic planning is to be able to focus on one area at a time so that the organization can take a step by step lead.

Instead of focusing on any specific areas till the end, the plan considers the entire organization at the same time in order to succeed.

The plan can vary depending upon the characteristics of those spearheading the plan as well as the nature of the organization itself.

This includes many factors like the complexity of the organizational structure, its culture, perspectives, and approach as well.

Strategic planning begins with the desired-end and works backward to the current status.
In strategic-planning the planner asks:

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A strategic plan helps business leaders determine where to spend time, human capital, and money.

A good leader should develop his/her skills of strategic planning as effective strategic planning articulates where an organization is going and determine what actions are needed to make progress and how it will know if it is successful.

Developing a strategic plan can be an overwhelming process. To understand strategic planning its necessary to read it in detail.

Things to Consider

When we make a plan, there are many things which we take in to consideration, including all external and internal factors, in order to meet our objectives, on which the plan is based upon.

However, when it comes to strategic planning, goal, organic, or issue based scenarios and the like need to be factored in as well.

Goal Based strategic planning

Plans that are goal-based re the most common ones, usually focusing on a particular aspect of the vision or mission of the organization.

The goal here is to work towards achieving the mission through different strategies and planning.

Issue Based Strategic Planning

Issue based strategic planning is focused on any and all issues which the organization might be facing, whether external or internal.

After identifying the particular issue or issues, an action plan is strategically created which will help in the elimination of the root cause.

Organic Strategic Planning

Organic based planning is done by first taking a note of the organization’s values and its vision.

After these things have been taken note of, the action plan is generated based upon the values and vision.

How to Develop a Strategic Plan

When you are going to develop a strategic plan you need to consider some issues. Here are some points that are helpful to develop a strategic plan.

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Determine Where the Organisation is Now

At the first step of strategic planning you need to analyze your organization’s external and internal environment.

To get a clear understanding of the marketplace, you may conduct a SWOT analysis which is an examination of your organization’s strengths, weaknesses, opportunities, and threats.

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You can also examine the specific external environmental factors that you consider harmful for your organization.

You will also carefully examine Porter Five Forces analysis that includes the specific external environmental factors, such as your rivals, the power of your suppliers, the power your buyers.

Whether there is a feasible threat that major clients or customers can effectively substitute your product or service, and whether there are any barriers to entry into a new market.

Later in this article the details of Porter Five Forces are available

Identify What’s Important for Organization

Here you need to focus on where you want to take your organization over time. You need to set the direction of the project over the long term.

You will clearly define an organizational vision and a mission statement that describes the future of your organization including its essential values, where it wants to be and what it wants do.

After that you can begin to formulate a detailed strategy to achieve them with the analysis of what your organization’s future should or could be.

After this analysis you can identify the most important issues which require full and immediate attention. Strategic plan should focus on priority issues.

Determine What You Must Achieve

At this step of strategic planning you can define the expected objectives that clearly state what your organization must achieve.

For example, an objective may be to increase market share year-over-year by at least five percent.
Produce a written strategic plan.

Every organisation should have a written plan for its future development. Your plan should have an outline how the organization plans to achieve its objectives.

It is important that your written plan should be comprised of full organization involving people at the earliest stage
This would not only be a paper exercise.

There are different organizations that can help you to develop a plan as well as they will assist you in deciding what type of written plan is most relevant for your organisation’s requirements.

Determine Who is Accountawble

At this stage you are ready to implement the action plan, strategies and budgets etc.

You have to examine how you will allocate time, money and human resource, to achieve the defined objectives as well as you need to identify the priority issues.

In some organizations leaders distribute various parts of the plan to different parts of the organization.

Monitor and Review Your Strategic Plan

At this step it’s a time to review whether the plan performs as designed or not.

You need to continually monitor the implementation of the plan to determine whether the plan is going to meet the objectives leading to the strategic plan.

You must keep in mind the regularly scheduled formal reviews of the process as well as you should refine the plan/process as necessary.

A strategic plan is a wonderful thing. It can help you take your small business to places you never thought possible.

If you haven’t already done so, take the time to lay out a strategic plan now. It will help keep your small business on track and you focused on the future.

Strategic Planning Model

There is no one perfect strategic planning model. Each organisation is unique, that’s why no formal model of strategic planning can be of any help.

Each organization should modify the best approach that suits its purpose of its planning, members and the current situation in and around the organization.

The strategic planning process should include a situational analysis.

This consists of following issues:

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  • Looking at the current external and internal environmental factors that can influence the performance of organization as well as assessment of the organization’s current and further strengths and weaknesses. It leads to understand the organization’s capabilities, customers and business environment.
  • Formulating organizational objectives and strategies based upon the environmental assessment,
    Developing procedures to implement and evaluate the strategic plan.
  • Strategic plans for business organizations often cover a three-to-five year period, but a shorter period may be advisable according to situation.

Non-Profit & Profit Strategic Planning

There are many factors which are associated with planning; most of the factors are the reason behind why different organizations use different approaches and take various different steps throughout the planning process.

One of the major reasons behind this is the size of the organization, not just in literal terms, but also in terms of profit and non-profit benefits.

Small organizations which are based on profit and non-profit are very similar in many terms, whereas larger ones have more differences than similarities.

Plans are based upon those facts, so, this means that naturally, non-profit organizations will formulate their action plans in a different manner than a profitable organization, depending on their size.

Another factor which contributes to this is that non-profit organizations are more focused towards fundraising, volunteer work, and awareness, whereas for-profit ones are focused on products or activities for revenue generation.

Tools and Approaches of Strategic Plan

Strategic planning is essential for organizational success. There are a range of analytical tools and techniques that are used in strategic planning.

These were developed by different companies and management consulting firms to provide a framework for strategic planning. Some of the tools and approaches of strategic planning are following.

PEST Analysis

PEST analysis is comprised of Political, Economic, Social and Technological analysis.

It describes a framework of macro-environmental factors used in the environmental scanning component of strategic management.

Scenario Planning

Scenario planning, also called scenario thinking or scenario analysis is a strategic planning method that some organizations use to make flexible long-term plans.

It is in large part an adaptation and generalization of classic methods used by military intelligence.

Porter Five Forces Analysis

Porter five forces analysis is a framework to analyze level of competition within an industry and business strategy development.

It draws upon industrial organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of an Industry. Attractiveness in this context refers to the overall industry profitability. An “unattractive” industry is one in which the combination of these five forces acts to drive down overall profitability. A very unattractive industry would be one approaching “pure competition”, in which available profits for all firms are driven to normal profit. This analysis is associated with its principal innovator Michael E. Porter of Harvard University.

Source: http://en.wikipedia.org/wiki/Porter_five_forces_analysis

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The Growth–Share Matrix

The growth–share matrix, also known as the product portfolio, is a chart. It was created by Bruce D. Henderson.

This helps the company to allocate resources. It is used as an analytical tool. It is used in the following areas.

  • Brand marketing
  • Strategic management
  • Portfolio analysis
  • Product management

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The Balanced Scorecard (BSC)

The balanced scorecard is a strategy performance management tool. It is used extensively in business and industry, government, and non-profit organizations worldwide to align business activities.

It was originated by Drs. Robert Kaplan (Harvard Business School) and David Norton.

It can be used for rang of purpose including the following:

  • To keep track of the execution of activities.
  • To monitor organization’s performance against strategic goals.
  • Improve internal and external communications,

SWOT Analysis

A SWOT analysis also known as SWOT matrix, is a structured planning method used to evaluate the strengths, weaknesses, opportunities and threats involved in a project or in a business.

It involves specifying the objective of the business or project and identifying the internal and external factors that are favourable and unfavourable to achieve that objective.

A SWOT analysis can be carried out for a product, place, industry or person.

Strengths

Characteristics of the business or project and internal factors that allow an organization to take advantage of opportunities.

Weaknesses

Characteristics and internal factors that stand in the way of an organization taking advantage of opportunities.

Opportunities

Elements, conditions and external situations that an organization could use to take advantage.

Threats

Elements, conditions and external situations that could limit an organization’s effectiveness and create trouble for the business or project.

SWOT Analysis Example

Here is a fantastic example of SWOT analysis.

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Benefits Associated with Strategic Planning

There are many benefits for all small, large, for-profit, and non-profit organizations which can be attained through planning strategically. Some of these benefits include;

  • Helps in resolving all minor as well as major issues and concerns within the organization
  •  Increase in productivity
  • Increase in efficiency
  • Increase in effectiveness
  • Higher rate of satisfaction from customers
  • Common vision
  • Keeps unity amongst employees as well as members of the board
  • Helps in the building and assembling of a strong team for problem-solving
  • Keeps all employees as well as all staff members, despite position, on the same page
  • Lets everyone give their opinion, and then based on it reaches a conclusion
  • Provides the basic format for progress to be quantified and measured
  • Helps in the development in the sense of ownership in everyone
  • Facilitates communication
  • Makes the goal, vision, mission, and all objectives clear
  • Develops a flexible timeframe
  • Helps in identifying the purpose of the organization

When Does it Need to be Implemented?

The development for the strategic planning process depends on the nature of business, the size of the organization, and many internal as well as external factors.

For example, if an organization’s products and services are in an industry that is changing rapidly services it needs planning frequently.

This planning should be done in a very comprehensive way as well as it might be carried out once or even twice a year.

On the other hand, if an organization is working from many years and is in a fairly stable marketplace, then planning might be carried out once a year.

It needs only certain parts of the planning process.

Here are some guidelines about when strategic planning should be done.

  • Strategic planning should be done when an organization is going to be start.
  • Strategic planning should also be done in preparation for a new major project.
  • Strategic planning should also be conducted at least once a year in order to identify the financial and managerial issue for the coming year as well as to see how many organizational goals are going to be achieved over the coming year and which resources are needed to achieve these goals.
  • The full strategic planning process should be conducted at least once every three years.
  • Action plans should be updated, every year.
  • When you are going to implement the plan you need to review the progress of the implementation of the plan at least on a quarterly basis.
  • It also depends on the changing situations in and around the organization.

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