Definition: Strategic Planning can be understood as a systematic long-range planning activity, that an organization uses to fix priorities, strengthen operations, ascertain objectives and focus on the resources required and are to be allocated in order to pursue the strategy and attain the objectives.
It is a part of the strategic management process, which ensures that every aspect of the organization is working towards the achievement of the organization’s goals, i.e. in the right and intended direction.
Strategic Planning ascertains what an organization is, to whom it serves, where is it going and what are the paths, which are to be followed to follow its vision. It includes strategic decision making, strategic intent, strategic management model and strategy formulation.
Characteristics of Strategic Planning
- Strategic Planning is an analytical process which formulates strategic and operational plans for the organization. The implementation of strategic plans is possible through projects, whereas various units or divisions of the firm implement operational plans.
- It performs SWOT Analysis, i.e. during the planning process, the firm’s strengths, weaknesses, opportunities and threats are taken into consideration.
- It is a forward-looking activity wherein the future opportunities and threats are ascertained while considering its profitability, market share, product and competition.
- It presupposes that a firm should always be ready to adapt itself according to the dynamic business environment. For this purpose alternative strategies are developed for different circumstances, i.e. from best to worst, for the future
- It can be done for the entire organization or to a specific business unit.
- It is helpful in selecting the best strategy, among the various strategies taking into account the firm’s interest, personal values and corporate social responsibility.
- It acts as a guide to the executive to reduce the risk involved in the business and also to take the best possible advantage of the opportunities. So, in this way, it contributes to the success of the enterprise.
Strategic Planning is a logical effort, that envisions the desired future, by producing various alternative actions and decisions, to formulate an effective strategy, that brings success to the organisation. It helps in analysing and adjusting the organisation’s efforts as a whole, according to the changing business environment.
Strategic Planning Stages
- Generation of Strategic Alternatives: In this step, the firm seeks a number of strategic alternatives in the light of the firm’s business, industry and competition. These strategies may be acquisition and expansion, focusing on core competencies, increase in the market share, etc.
- Assessment of Strategic Alternatives: At this stage, the firm observes various strategies, on the basis of the benefits. It questions:
- Will it improve the firm’s position or market share?
- Will it increase existing strengths?
- Will it bring new opportunities?
- Will it maximise shareholder’s wealth?
- Selection of Strategy: The optimum strategy is selected at this stage, among various alternative strategies.
Both internal and external analysis of the firm is performed during the exercise; wherein internal analysis entails an evaluation of financial performance, operational limitations, current market position/share corporate culture, strengths and weaknesses.
On the other hand, external analysis concentrates on the analysis of competition, trends, changing business environment, opportunities and threats, latest technology and so forth.