Strategic planning is the comprehensive master plan stating how the organization will achieve its mission and objectives. It is dynamic and long-range planning which focuses on the organization as a whole. Strategic planning is the process of determining how to achieve long-term goals, at least five years, with the use of available resources in a dynamic environment.
Basically, the top-level management consisting of the board of directors and chief executive formulate the strategic plan.
What is Strategic Planning? Definitions of Strategic Planning By Famous Writers/Authors
Strategic plans drive the organization’s efforts to achieve its goals in an uncertain environment. It focuses on environmental scanning to analyze the opportunities and threats that may arise due to the changing environment.
Generally, the strategic planning process consists of collecting information from the environment developing a mission, setting objectives, determining strategies, and preparing a portfolio plan.
According to Ricky W Griffin, “Strategic plan is a general plan outlining the decision of resource allocation, priorities and action steps necessary to reach strategic goals.”
According to Ivancevich, Donnelly, Gibson, “Strategic planning is a process that involves the review of market conditions; customers needs; competitive strength and weakness; socio-political, legal, and economic conditions; technological developments; and the availability of resources that lead to the specific opportunities or threats facing the organization.”
Formulation of Strategic Planning
Managers need to focus on mission and long-term goals in formulating strategic plans. In a strategic plan, formulation managers need to focus on organizational mission and long-term objectives to be achieved. Besides, it is necessary to scan environmental trends to analyze the opportunities and threats that may arise in the course of functioning.
Steps of Strategic Planning Formulation in Principles of Management
The formulation of strategic planning consists of die following steps:
- Identifying the Organization’s Current Mission, Goals, and Strategies
- Analyze the External Environment
- Identifying Opportunities and Threats
- Analyzing the Internal Environment
- Identifying Strengths and Weaknesses
- Formulating Strategic Plan
1. Identifying Organization’s Current Mission, Goals, & Strategies
The identification of an organization’s current mission, goals, and strategies is the initial step of strategic plan formulation. First, the mission is the reason for the existence of an organization. It tells who we are and what we do as well as what we would like to become. Mission also is developed by top-level management, which defines the fundamental unique purpose that sets an organization apart from other organizations of a similar type.
Second, goals are the planned results to be achieved. Goals specify what is to be accomplished by whom and should be shown in quantitative terms, if possible. They should be consistent with the mission of the organization.
Third, the strategy is a comprehensive master plan stating how the organization will achieve its mission and goals. It determines the basic long-term objectives of an organization and the adoption of courses of action and allocation of resources necessary to achieve the goals. It maximizes competitive advantages and minimizes competitive disadvantages.
2. Analyze the External Environment
The analysis of the external environment is the second step in the strategic planning process. It refers to forces and institutions outside the organization that can potentially affect the organization’s performance The external environment is made up of two components, the specific or task environment and the general environment.
- Specific / Task Environment: It consists of customers, suppliers, the government, pressure groups, competitors, financial ] institutions, and strategic allies.
- General Environment: It consists of politics, economy, society, culture, and technology.
3. Identifying Opportunities and Threats
After analyzing the external environment, managers need to identify opportunities that can be capitalized on and threats that an organization may face. Opportunities are the positive trends and scope in the external environmental factors and threats are the negative trend and challenges to the organization.
4. Analyzing the Internal Environment
All conditions and forces within the organization affecting business operations are internal environments. Managers need to analyze the internal environment to know about the position of resources. The components of the internal environment can be controlled by management. These components consist of owners or shareholders, the board of directors, resources and organizational structure, and organizational culture.
5. Identifying Strengths and Weaknesses
Analysis of the internal environment facilitates in identifying the strengths and weaknesses of an organization. Strengths are the activities that the organization does well or the unique resources that it has. Weaknesses are the activities that the organization does not do well or the resources it needs but do not possess. Therefore, in the formulation of the strategic plan, it is necessary to identify the strengths to capitalize and weaknesses to overcome them.
6. Formulating Strategic Plan
On the basis of identification of organizational mission and environmental analysis, strategies are developed for corporate, business, and functional levels. For this, managers need to develop and evaluate strategic alternatives and then choose a strategy that gives their organization the most favorable competitive advantages.
Implementation of Strategic Planning
Strategy implementation is the method by which strategies are operationalized or executed within the organization. A manager should implement a strategic plan to achieve defined goals. The formulation of a strategic plan becomes fruitful only after its proper implementation. For this, the manager should form the organization structure, divide works, and allocate resources. Besides, it involves direction, communication of information, motivation, and coordination of activities of subordinates.
Strategic Planning Implementation Steps:
The following strategies should be taken into consideration for the effective implementation of the strategic plan:
- Organizational Structure
- Provision of Resources
- Group and Teamwork
- Motivating Employees
- Monitoring and Evaluation
1. Organizational Structure
For proper implementation of the strategic plan, it is essential to develop an organizational structure. It is a network of assigned tasks, defined roles, and designed relationships among the organizational members. In the organizational structure, the division of activities, interaction, and behavior of the members are also specified. It defines the pattern of formal relationships between the superiors and subordinates and also their authorities and responsibilities.
All members concerned should be communicated with the strategic plan for its implementation. All the members of the organization must be clear about their respective duties and responsibilities. It is part of the top-level managers to communicate all strategic plans to their subordinates for proper implementation.
The technology consists of knowledge, equipment, method, and, the process implemented for production and distribution. Effective implementation of the strategic plan requires the application of new and advanced technology. For the introduction of new products, diversification of existing lines and for expansion develop new infrastructure facilities.
4. Provision of Resources
Organizational resources are the main source of implementation of the strategic plan. These resources consist of human, financial and physical resources, and technology. It is the duty of the top management to acquire the required resources for the effective implementation of the strategic plan.
5. Group and Teamwork
For effective implementation of the strategic plan, it is essential to focus on participative management. The concept of teamwork and group effort must be developed in the organization. The works should be assigned to different groups consisting of experts of different natures of works. The required authority and responsibility should be delegated to the team. The top-level management should play the role of a supervisor to provide guidance and suggestion.
6. Motivating Employees
Motivation is an important tool to inspire and encourage employees. For effective implementation of the strategic plan, there must be a reward and punishment system in the organization. Rewards may be financial and non-financial. The employees should be rewarded on the basis of their efficiency.
Effective leadership is necessary to implement the strategic plan. All the activities of the organization concentrate on the activity of the Leader. Therefore, the leader must be dynamic and energetic. He has to supervise, guide, motivate, and influence the subordinates for effective implementation of the strategic plans.
8. Monitoring and Evaluation
The manager should rnatutoT the activities of subordinates regularly to ensure their proper performance. Similarly, the Actual performance achieved should be evaluated with a planned performance at fixed intervals. Such timely evaluation of actual performance achieved with that planned performance helps to take corrective action which finally to facilitates achieving strategic goals.
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