Strategic planning is an organization's
process of defining its strategy, or direction, and making decisions on allocating
its resources to pursue this strategy, including its capital and people. In
order to determine where it is going, the organization needs to know exactly
where it stands, then determine where it wants to go and how it will get there.
The resulting document is called the "strategic plan." While
strategic planning may be used to effectively plot a company's longer-term
direction, one cannot use it to reliably forecast how the market will evolve
and what issues will surface in the immediate future. Therefore, strategic
innovation and tinkering with the "strategic plan" have to be a
cornerstone strategy for an organization to survive the turbulent business climate.Strategic
planning is the formal consideration of an organization's future course. All
strategic planning deals with at least one of three key questions:
"What do we do?"
"For whom do we do it?"
"How do we excel?"
In business strategic planning, some authors phrase the
third question as "How can we beat or avoid competition?" (Bradford
and Duncan, page 1). But this approach is more about defeating competitors than
about excelling.
In
today's highly competitive business environment, budget-oriented planning or
forecast-based planning methods are insufficient for a large corporation to
survive and prosper. The firm must engage in strategic planning that clearly defines objectives and assesses
both the internal and external situation to formulate strategy, implement the
strategy, evaluate the progress, and make adjustments as necessary to stay on
track. A simplified view of the strategic planning process is shown by the
following diagram:
The Strategic Planning Process
Mission and Objectives,
Environmental Scan: The environmental scan includes the following components:
Internal analysis of the firm, Analysis of the firm's industry (task
environment), External macroenvironment Strategy Formulation: Strategy
Implementation:Evaluation & Control: Evaluation and control consists of the
following steps:
- Define
parameters to be measured
- Define
target values for those parameters
- Perform
measurements
- Compare
measured results to the pre-defined standard
- Make
necessary changes