Strategic planning refers to defining an organization's strategies, direction of guidelines, and making decisions on how the organization allocates its resources to pursue those strategies. The key resources of an organization include capital, land, properties and people (workforce). Allocation of such resources is a major function of strategic planning process. A company may use different techniques to implement its strategic planning such as SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis, PEST (Political, Economical, Social and Technological) analysis, STEER (Socio-cultural, Technological, Economic, Ecological and Regulatory) analysis, and EPISTEL (Environment, Political, Informatic, Social, Technological, Economic and Legal) analysis. Whatever the analysis technique is, the main purpose of making strategic planning for business is to set out the future courses of actions for an organization. Strategic planning process deals with the following questions: "What do we do?" "For whom do we do it?" and "How do we excel it?" or "How can we beat or avoid competition?" (Bradford & Duncan, page 1). Strategic planning is typically being made for 3 to 5 calendar years for most of the business organizations. However, some companies set their vision for up to 20 years.
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STRATEGIC PLANNING PROCESS
The preparatory phase of starting any new business both for profit making and not for profit organization relies greatly on setting strategies and making appropriate strategic planning. In order to do so, an organization analyses its current situation, objectives and marketing plans. Analysis of current situation mostly deals with the previous year's Business Trend analysis, Market analysis, Competitive analysis, Market segmentation, Marketing mix, SWOT analysis, Positioning-analyzing perceptions and analyzing Sources of information.
A company's Objectives and Marketing plans deal with the future Marketing strategies, Desired market segmentation, Desired marketing-mix, TOWS-based objectives as a result of the SWOT, Positions and perceptual gaps and Yearly sales forecasts.
APPROACHES TO STRATEGIC PLANNING
Among numerous approaches of making strategic planning, most organizations typically follow a three step process called 'Situation-Target-Path' technique, where an organization evaluates the current situation of the business and how it came about, defines its goals and objectives, and maps a possible route to implement those goals and objectives.
There is an alternative to this approach called 'Draw-See-Think' approach, where the company draws the ideal image or the desired end-states, sees today's situation and persisting gaps from the ideal and its possible reason, thinks what specific actions must be taken to close the gap between today's situation and ideal state.
FOR PROFIT AND NON-PROFIT STRATEGIC PLANNING
Different organization carries out the strategic planning process differently. This variation in strategic planning process depends more on the size and nature of the organization rather the profit/non-profit status of the entities. Small size organizations whether profit or not for profit carry out their strategic planning almost similarly that differs from large organizations. On the other hand, large for profit or large non-profit organizations tend to conduct similar planning activities that are different from those conducted in small organizations.
However, there are some differences in strategic planning process in terms of profit or non-profit status of the organization by the following criteria:
Non profit organizations give more emphasize on board development, fundraising and volunteer management, where in profit making organizations, emphasize is placed on activities to maximize profits more.
ROLES OF STRATEGIC PLANNING
Strategic planning plays an important role in the business area and also in the public areas such as education, healthcare or government. It is practiced and implemented widely everywhere both informally and formally.
In any business organization the roles of strategic planning depend on the nature of the organization's leadership, culture of the organization, complexity of the organization's environment, size of the organization, expertise of the planners etc. According to the diverse goals or objectives of different business entity, various technique of strategic planning is used, for example, goal-based strategic planning, issue-based, organic or scenario-based strategic planning, etc.
But in general, strategic planning serves the following purposes in almost every organization:
â-º Clearly defines the purpose of the organizations and set the objectives or goals
`` â-º Communicate those goals and objectives to the organization's constituents
â-º Develop a sense of ownership of the plan
Always on Time
Marked to Standard
â-º Use the organization's resources most effectively by focusing on key priorities
â-º Provide a base from which progress can be measured
â-º Listen to everyone's opinion to build consensus about where the organization
â-º Focus more on production most effectively and efficiently in order to grow the
â-º Works as a bridge between staffs/employees and board of directors
â-º Helps in team work with employees/staff and board members
â-º Works as a glue that keeps board members together
â-º Produce a sense of satisfaction among planners, especially around a common
â-º Solves major problems in the organization
It was thought in the old days that only the big enterprises need formulate strategies and adopt a strategic planning process. But with the span of time, the business environment has changed to a great extent. Today's business environment has become more competitive and challenging. To survive in this competition, any organization whether big or small should come forward with the best quality products or services that will satisfy the changing requirements of the customers. Customers have become choosier as they are getting more alternative products and services. They will take the products that will best serve their requirements, in terms of quality or price. Satisfying these customers is not so easy job. For that, an organization must come forward with the best products/services to remain in the leading position. For that reason, every business organization, small or big needs to formulate and implement its business strategies. Only the good strategies can make an organization successful in today's competition and helps them to survive.
Bigger companies will always be ahead in this race, as they have got rigorous strategies that are being planned and implemented throughout each of their levels. Smaller companies always thrive for survival and try to grow bigger.
Strategic planning provides an organization direction. With the help of this, organizations can know their position in the industry and take appropriate measures for future growth and expansion. Strategic planning also help them to process day to day business functions, which are very important to run the business successfully.
A company's mission/vision can never be attained without a proper strategic planning and the objectives of the company can not be achieved without it.
A strategic planning process helps an organization in meeting the following perspectives:
Focused purpose: Strategic planning helps the organizations to define their short term business purposes clearly, i.e. where they want to see themselves in a year or two years of time, making the profit targets, segmenting their market, and making different marketing mix. Strategic planning ensures that mission is realistic and achievable and being taken with due considerations of current business trend and analysis. Good planning serves the best interests of the stakeholders. Moreover, it defines a point of differentiation.
Future Perspectives: In considering the future perspectives of an organization, the strategic planning clearly defines the long term objectives, i.e. the vision of the organization, identifies the long-term interests of the stakeholders, and provides a foundation for decision-making to the management of the organization.
Strategic advantage: Strategic planning helps an organization achieving the competitive advantage over others and makes it clearly understood to all the stakeholders of the company. It also increases the employee productivity by clearly presenting the roles and duties they need to serve for the organization.
External assessment: A good strategic planning helps an organization in assessing the external factors outside the business entity, which is very important to be successful and to remain ahead of the competition. An external assessment reflects an organization's approaches to gather and analyze essential market data, e.g. studying macro and micro economic information, identifying industry opportunities and threats, and understanding what it takes to be successful in a given market.
Customer profiles: Customer profiling is an external business assessment by the organization that define reasons why the customers should buy its products or services and the benefits persisting with such products. It also defines the reason why the customers should not buy some products or services, assess the customers' bargaining power. Moreover, strategic planning helps the organization know the customers' preferences of different choices of distribution channels.
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Industry and competitive analysis: This is an important component of business strategy that helps the organization in identifying the primary competitors in the industry, determines potential and indirect competitors, also identifies their strengths, weaknesses, opportunities and threats, helps the organization in assessing the threats of substitute products or services or new entrants into the market place. A good planning helps the organization in comparing growth rate with industry standard, and evaluates ongoing market process.
Environmental assessment: Strategic planning does the following to assess the business environment for the organization; identifying the regulatory requirements; Assessing vulnerability to adverse business cycle, summarizing opportunities and threats due to economic condition, new technology, demographic structure, legal or political events, socio-cultural norms, and the natural environment.
Assessing key success factors: Strategic planning helps the organization in assessing the key success factors in doing business. Key success factors are identified with a critical thinking process that includes implementation of critical thinking process; measuring competitive intensity; setting the demand of products or services within the market; defining key drivers to success within the industry; and consistently monitoring key influences within the industry.
By making strategic plans, an organization can assess its internal factors which help the organization to evaluate its own strengths and weaknesses. Self assessment is very vital to sustain as a successful business entity. An organization's internal assessment process refers to the evaluation of its management process which includes:
Finance: Strategic planning determines whether an organization has enough fund available for investment or for ongoing business functions; sets up a comprehensive pricing model; keep the consistency of performance within a range of financial goal; makes a targeted long ranged financial plan; employs a cost benefit approach to resource allocation; makes a financial plan that allow flexibility and economic or environmental disruption.
Research & development: Having a strategic planning process empowers an organization to integrate all appropriate departments with R&D, maintain a creative and innovative process; and ensures that R&D department has all required resources to fulfill its functions.
Production: Strategic planning program helps an organization to integrate all of its departments to support the production process; maintains that the production process is cost-effective, flexible, fast and responsive.
Marketing: Strategies helps an organization in making coordination among all the departments to support marketing, defining marketing plans, branding the products or services, usage of database to track all the customers and market information, promotion of the products or services, and monitoring the ROI of all marketing campaigns.
Sales & Distribution: By planning its strategies, an organization consistently achieves sales goals, ensures that its sales personnel have got the required skills to achieve plan are being provided with necessary information to achieve their goals, employs a well defined sales management process, and coordinates all other departments to support sales process.
Customer servicing: If the organization takes the appropriate strategic planning, then it can define the standard of its customer service, meet the customer's expectations, measure the satisfaction level of the customers, achieve the customer loyalty by building a high commitment between employees and managers, and maintain a customer relationship management system that provides critical service information to make the best decision
IMPLEMENTATION OF PLANNING PROCESS
After formulating the strategies, a firm's main concern is how to implement those selected strategies. This is done by means programs, budgets and procedures that involve the firm's resources and motivation of the staffs to achieve such objectives.
In order to ensure that the planning process is not a document that ends up collecting dust on the shelf, an organization should follow some guidelines that will ensure that the planning is being implemented. An organization can do that by involving people who will be responsible for implementing the plan, can make a cross functional team combining representatives from each department who will be liable to ensure that the plan is realistic and collaborative. In order to that, the organization must continue asking them whether the plans are realistic or not, or can they really achieve all their goals or not.
The organization can organize the overall strategic plan into small action plans. In the overall planning document, the organization should specify who is doing what and by when it is going to be implemented. Some organizations may elect to include the action plans in a separate document from the strategic plan, which would include only the mission, vision, values, key issues and goals, and strategies.
The organization should also specify and clarify the plan's implementation roles and responsibilities in the implementation section of the plan and make a regular review on the progress of the implementation plan.
Translating the strategic plan's actions into job descriptions can stimulate the implementation process quicker.
When people involved in any process know that the action plans will be regularly reviewed, then the implementers tend to do their jobs before they are being checked. So organization needs to review the plan time to time and communicate with the personnel involved in the process.
Moreover, the organization can integrate the plan's goals and objectives into chief executive's performance review, this will get the implementation process more importance as the chief executive's involvement and support in the plan is a major driver to the plan's implementation.
Regular feedback on the implementation plan from the planning participants to the executive committee is also very important in strategy implementation. Make sure that the organization has designated rotating checkers to verify if each implementer completes his/her assigned tasks. The organization should also grow an attitude of helping each other among the implementers in the strategy implantation program.
The way by which the strategies are being implemented can have a significant impact on whether it will be successful or not. For this reason, care must be taken to communicate the strategies among implementers.
For a sustained and successful strategies carried out by an organization, the implemented strategies must be regularly viewed and monitored, and necessary adjustments should be made time to time.
Bradford and Duncan (2000). Simplified Strategic Planning. Chandler House.
Patrick L. Burkhart and Suzanne Reuss (1993). Successful Strategic Planning: A Guide for Nonprofit Agencies and Organizations. Newbury Park: Sage Publications.
Mintzberg, Henry, Lampel, J., Ahlstrand, B., Strategy Safari: A Guided Tour through the Wilds of Strategic Management