Strategic Planning

Updated on March 26, 2024
Article byShrestha Ghosal
Edited byShrestha Ghosal
Reviewed byDheeraj Vaidya, CFA, FRM

What Is Strategic Planning?

Strategic planning is a systematic process companies employ to create business strategies, execute them, and evaluate their impact to meet organizational goals. This planning aims to define their long-term goals and objectives while determining the most effective means of achieving them. It provides a structured framework for decision-making and resource allocation.

Strategic Planning

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The planning involves analyzing the organization’s internal strengths and weaknesses and external opportunities and threats in the business environment. Through this process, businesses assess their current position, envision their desired future, and devise a strategy to bridge the gap between the two. The system includes action plans, resource allocations, and timelines.

Key Takeaways

  • Strategic planning is how companies create and implement business strategies that align with organizational goals. This planning involves establishing a structure that will guide the company’s decision-making process to meet the desired objectives within a defined timeframe.
  • Its purpose is to set long-term organizational goals and outline the action plans for achieving them.
  • This process allows companies to determine their current status and devise strategies to tap into the arising business opportunities. Moreover, it aids them in minimizing potential risks by effectively responding to market fluctuations.

Strategic Planning Explained

Strategic planning is a comprehensive management process that organizations implement to establish a clear vision, allocate resources effectively, and achieve their long-term goals and objectives. It serves as a framework for decision-making and guides an organization’s actions, ensuring its efforts align with its mission. The process encourages active planning, enabling businesses to grab emerging opportunities and mitigate potential risks.

This planning involves an extensive evaluation of the internal and external factors that can impact an organization’s performance. It provides a realistic view of the organization’s current position and sets the stage for future planning. This planning aims to provide a structured framework that allows organizations to respond to shifts in the market promptly. Through planning, businesses promote a culture of alignment, collaboration, and adaptability across the entire organization.

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Process Steps

The steps in the process of strategic planning are:

  • Companies must identify the need for planning and define the plan’s purpose. They must establish clear and measurable objectives the organization aims to achieve over a specified period.
  • Then, they must conduct a thorough analysis of the internal strengths and weaknesses of the organization. They must assess the external opportunities and threats from the market, industry trends, regulatory changes, competition, and technological progress.
  • The next step is to break down the broader objectives into specific, actionable goals that align with the organization’s mission and vision. The business must set realistic goals that are achievable within the defined timeframe.
  • Companies must develop strategies that outline how the organization will achieve its goals and then break down each process into specific action steps and tasks. The management must assign responsibilities to individuals or teams for each job. They must establish timelines, milestones, and checkpoints to monitor progress.
  • One of the crucial steps in the process of strategic planning is to execute the plans according to the established timelines. The employees must address any difficulties or deviations promptly to ensure smooth implementation.
  • Finally, the management must periodically track the strategic initiatives’ progress to evaluate the strategies’ effectiveness and impact on the organization’s performance. They must identify any gaps or changes that require adjustments. Based on the evaluation, they must make necessary adjustments to the strategies.

Types

Some types of strategic planning in business are:

  1. Corporate Level Planning: This is the highest level of planning that focuses on the organization. It involves setting the overall direction, mission, and goals for the entire organization. Corporate-level planning includes long-term perspectives and shapes the framework for the individual business units or divisions.
  2. Business Unit Level Planning: Business units or divisions within a larger organization may conduct planning specific to their operations. This type of planning aligns with the overall corporate strategy while aligning the processes to meet each business unit’s unique needs and opportunities.
  3. Functional Level Planning: This planning focuses on specific organizational functions, like marketing, finance, operations, or human resources. Functional-level planning ensures that each domain’s strategies support the broader organizational goals.
  4. Operational Planning: It involves translating plans into detailed day-to-day actions. It focuses on resource allocation, task assignments, timelines, and specific performance metrics.

Models

The models for strategic planning in business include the following:

  • Basic Model: The basic model establishes the company’s mission, business objectives, and values. This model helps outline a company’s steps to reach its goals. Moreover, it helps monitor progress, keep everyone on target, and address issues as they arise.
  • Issue-based Model: This model involves assessing internal strengths and weaknesses and external opportunities and threats to inform strategic decisions. It can be done through SWOT analysis which stands for Strengths, Weaknesses, Opportunities, and Threats. This model is comprehensive and allows for flexibility.
  • Scenario Planning: The scenario planning model develops multiple potential scenarios instead of predicting a single future. It assists organizations in preparing for various possible outcomes and uncertainties.
  • Blue Ocean Strategy: This model encourages organizations to seek uncontested market spaces, also known as blue oceans, instead of competing in saturated markets or red oceans. It focuses on innovation and creating new demand.

Examples

Let us go through the following examples to understand this planning process:

Example #1

Suppose Jennifer owns a small bakery named “Sweet Treats”. She wants to create a plan to grow the business. Jennifer starts by analyzing the strengths, weaknesses, opportunities, and threats. She sets a goal to increase sales by 20% within a year. To achieve this goal, Jennifer launched an online store to reach more customers and introduce organic options. She allocates resources for website development, online marketing, and staff training. Her team breaks down tasks like creating the website, sourcing organic ingredients, and training staff in customer service.

Example #2

Cimbali Group, a popular coffee machine design and production brand worldwide, has launched its new plan to make a place in the US market. They aim to boost the company’s presence in North America and offer services. The Italian company has decided to integrate its offices, operations, and brand portfolio in a new headquarters in Washington. The company’s new US headquarters will be based in Seattle, allowing it to be at the heart of the coffee culture and aid in its expansion.

Importance

The importance of strategic planning is discussed below:

  • It provides a clear sense of direction and purpose for the organization, ensuring everyone is aligned toward common goals and objectives.
  • This planning coordinates various organizational departments and teams, promoting collaboration and efficient resource allocation.
  • It helps effectively allocate resources, including finances, time, and human resources, to achieve the organization’s priorities.
  • These plans offer a guideline for making informed decisions by considering long-term goals and their impact on the organization’s future.
  • Organizations face dynamic environments where this planning enables them to effectively adapt to changes, grab opportunities, and minimize threats.
  • This planning helps organizations identify their specific strengths, capitalize on them, and differentiate themselves from their competitors.
  • A significant importance of strategic planning is that it encourages innovation by promoting a forward-thinking approach and providing a platform to explore new ideas and techniques.
  • The plans include measurable goals, allowing organizations to track progress, hold teams accountable, and make timely adjustments.
  • The planning aids in building a foundation for long-term sustainability by aligning short-term actions with the organization’s overarching vision.

Strategic Planning vs Tactical Planning vs Operational Planning

 The differences are as follows:

  • Strategic Planning: This planning is the highest level of planning that sets an organization’s long-term direction and vision. It involves defining the organization’s overall goals, objectives, and strategies for achieving them. This planning comprises making critical decisions about the organization’s positioning in the market, resource allocation, and adapting to changes in the external environment. It usually spans several years and guides the organization’s actions toward achieving its mission and fulfilling its overarching vision. 
  • Tactical Planning: It falls between strategic and operational planning and focuses on breaking down the broader strategies outlined in the plan into specific action plans for various departments or business units within the organization. Tactical planning practically implements strategic goals, allocating resources, and defining responsibilities. It usually spans one to three years and emphasizes coordination among different units to achieve the organization’s strategic objectives.
  • Operational Planning: This planning is the most detailed level of planning, focusing on short-term execution and immediate tasks. It takes the tactical plans and furthers them into specific actions, procedures, and jobs that employees and teams need to carry out daily. Operational plans are detailed and cover a much shorter period, often weeks or months. They are essential for ensuring that the day-to-day operations run smoothly and efficiently. 

Frequently Asked Questions (FAQs)

Is strategic planning long-term?

Yes, this planning is a long-term process focused on defining an organization’s vision, mission, and objectives. Moreover, it is used for formulating high-level strategies to achieve them. The process involves analyzing internal and external factors, considering long-term trends, and setting the direction for the organization’s growth and development over several years.

How to facilitate a strategic planning session?

The management must begin by defining clear objectives, creating an agenda, and gathering relevant data to facilitate this planning session. They must encourage open communication among participants, promote brainstorming, and ensure that all perspectives are heard. They may use visual aids, like charts and diagrams, to enhance understanding. The management must allocate time for reflection and consensus building. Furthermore, they must document the outcomes to create a structured implementation plan.

Why does strategic planning fail?

This planning can fail for several reasons, like lack of leadership support, inadequate employee engagement, and poor alignment with organizational culture. Moreover, overly complex plans, insufficient resources, external market changes, and lack of regular review and adaptation can also contribute to its failure. When these factors are not addressed, this planning can become disconnected from reality, resulting in failed implementation and unachieved goals.

This article has been a guide to what is Strategic Planning. We explain its process, examples, importance, types, models, & comparison with operational planning. You may also find some useful articles here –

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