Strategic planning

Meaning of strategic planning

• Planning is the process of deciding in advance, what
should be accomplished and how it should be realised. It
involves selecting objectives and how to achieve them.
Strategic planning is one of planning. But unlike short
term planning, strategic planning involves an extended
time frame, the deployment of a large percentage of the
resources of the organisation, a wide spectrum of
activities and a major eventual impact.
• ALFRED CHANDLER: It is concerned with determination
of basic long term goals and objectives of an enterprise,
and the adoption of courses of action and allocation of
resources necessary, for carrying out these goals.
features
• Strategic planning is long term in nature.
• It tends to be top management responsibility.
• It requires looking outside the organisation for threats and opportunities.
• It also requires looking inside the organisation for finding weaknesses and
strengths.
• It tries to equip the organisation with capabilities needed to confront future
uncertainties by taking a holistic view of the entire organisation.
• Its focus is clearly on the jungle and not on the trees.
• Explain the business to others in order to inform, motivate and involve
assist benchmarking and performance monitoring
• Strategic plan provides foundation for business plan.
• It should be attainable and reliable to allow managers and entepreneurs to
think strategicalliy and act operationally.
• Strategic plan should be in written.
• It should be reviewed perriodically.
Comparison between strategic
planning and operational planning
Strategic plan Intermediate plan Operational plans

Long range plan Intermediate plan Short range plans

Time frame 3 or more Time frame 2-3 years Time frame one year
years
Top management Performed by managers Done usually at lower
responsibility at middle level level
Concerned with broad Concerned with Covers day to day
objectives of the integrating the work of operations
organisation various departments in
the organisation.
Focus on planning and Focus on coordination Focus on control
forecasting
Why strategic planning
• It provides the road map for the firm.
• It helps the firm to utilize its resources in the best possible manner.
It allows more effective allocation of time and resources for
identifying opportunities.
• The firm can respond to environmental changes in a better way by
exploiting opportunities to its advantages and avoiding costly
mistakes in investment decisions.
• It minimizes the chances of mistakes and unpleasant surprises. It
seeks to prepare the firm to confront future challenges through
certain proactive steps and even shape the future to its best
advantage.
• It provides a basis for clarification of individual responsibilities.
Pitfalls of strategic planning

• Strategic planning is loborious and time

consuming.
• Immediately results are rarely obtained.
• There are very few satisfactory shortcuts.
• Establishing and maintaining formal system
involves many expenses.
• Trying to reach 100% perfection can never be
achieved through strategic planning.
Key steps towards strategic plan
• The preparation of a strategic plan is a multi-step process covering
vision, mission, objectives, values, strategies, goals and programs.
These are discussed below.
• The Vision
• The first step is to develop a realistic Vision for the business. This
should be presented as a pen picture of the business in three or
more years time in terms of its likely physical appearance, size,
activities etc. Answer the question: "if someone from Mars visited
the business, what would they see (or sense)?" Consider its future
products, markets, customers, processes, location, staffing etc.
Here is a great example of a vision:
• I will come to America, which is the country for me. Once there, I
will become the greatest bodybuilder in history.......... I will go into
movies as an actor, producer and eventually director. By the time I
am 30 I will have starred in first movie and I will be a
millionaire...... I will collect houses, art and automobiles. I will
marry a glamorous and intelligent wife. By 32, I will have been
invited to the White House. Attributed to Arnold Schwarzenegger
who was elected Governor of the State of California in 2003.
Mission

The nature of a business is often expressed in terms

of its Mission which indicates the purposes of the
business, for example, "to design, develop,
manufacture and market specific product lines for
sale on the basis of certain features to meet the
identified needs of specified customer groups via
certain distribution channels in particular
geographic areas.
values

• The next element is to address the Values

governing the operation of the business
and its conduct or relationships with
society at large, customers, suppliers,
employees, local community and other
stakeholders.
objective

• The third key element is to explicitly state the business's

Objectives in terms of the results it needs/wants to
achieve in the medium/long term. Aside from
presumably indicating a necessity to achieve regular
profits (expressed as return on shareholders' funds),
objectives should relate to the expectations and
requirements of all the major stakeholders, including
employees, and should reflect the underlying reasons for
running the business. These objectives could cover
growth, profitability, technology, offerings and markets.
strategies
• Next are the Strategies - the rules and guidelines by which
the mission, objectives etc. may be achieved. They can
cover the business as a whole including such matters as
diversification, organic growth, or acquisition plans, or they
can relate to primary matters in key functional areas, for
example:
– The company's internal cash flow will fund all future
growth.
– New products will progressively replace existing ones
over the next 3 years.
• Use SWOTs to help identify possible strategies by building
on strengths, resolving weaknesses, exploiting
opportunities and avoiding threats.
goals

• Next come the Goals. These are specific interim

or ultimate time-based measurements to be
achieved by implementing strategies in pursuit
of the company's objectives, for example, to
achieve sales of $3m in three years time. Goals
should be quantifiable, consistent, realistic and
achievable. They can relate to factors like
market (sizes and shares), products, finances,
profitability, utilization, efficiency.
programs

• The final elements are the Programs

which set out the implementation plans for
the key strategies. These should cover
resources, objectives, time-scales,
deadlines, budgets and performance
targets.