It involves the process of defining goals, establishing strategies for achieving these goals, and developing plans to integrate and coordinate activities. Every organization needs to plan for change in order to reach its set goal. Effective planning enables an organization adapt to change by identifying opportunities and avoiding problems. It provides the direction for the other functions of management and for effective teamwork. Planning also enhances the decision-making process. All levels of management engage in planning in their own way for achieving their preset goals. Planning in order to be useful must be linked to the strategic intent of an organization. Therefore, planning is often referred to as strategic in nature and also termed as strategic planning.
Strategic Planning: Top level managers engage chiefly in strategic planning or long range planning. Strategic planning is the process of developing and analyzing the organization's mission, overall goals, general strategies, and allocating resources.
The tasks of the strategic planning process include the following steps:
Define the mission:
A mission is the purpose of the organization. Thus, planning begins with clearly defining the mission of the organization. The mission statement is broad, deconcise, summarizing what the organization does. A mission statement should be short – and should be easily understood and every employee should ideally be able to narrate it from memory. An explicit mission guides employees to work independently and yet collectively toward the realization of the organization's potential. The mission statement may be accompanied by an overarching statement of philosophy or strategic purpose
designed to convey a vision for the future as envisaged by top management.
Conduct a situational or SWOT analysis
A situation or SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is vital for the creation of any strategic plan. The SWOT analysis begins with a scan of the external environment. Organizations need to examine their business situation in order to map out the opportunities and
threats present in their environments. Sources of information may include stakeholders like, customers (internal and external), suppliers, governments (local, state, federal, international), professional or trade associations (conventions and exhibitions), journals and reports (scientific, professional, and trade).
SWOT analysis provides the assumptions and facts on which a plan will be based. Analyzing strengths and weaknesses comprises the internal assessment of the organization.
For assessing the strengths of the organization the following questions are important:
1. What makes the organization distinctive?
2. How efficient is our manufacturing?
3. How skilled is our workforce?
4. What is our market share?
5. What financing is available?
6. Do we have a superior reputation?
For assessing the weaknesses of the organization the following questions are important:
1. What are the vulnerable areas of the organization that could be exploited?
2. Are the facilities outdated?
3. Is research and development adequate?
4. Are the technologies obsolete?
For identifying opportunities the following elements need to be looked at:
1. In which areas is the competition not meeting customer needs?
2. What are the possible new markets?
3. What is the strength of the economy?
4. Are our rivals weak?
5. What are the emerging technologies?
6. Is there a possibility of growth of existing market?
Identifying threats involves the following:
1. In which areas does the competition meet customer needs more effectively?
2. Are there new competitors?
3. Is there a shortage of resources?
4. Are market tastes changing?
5. What are the new regulations?
6. What substitute products exist?
In general terms, the best strategy is one that fits the organization's strengths to opportunities in the environment.
The SWOT analysis is used as a baseline for future improvement, as well as gap analysis. Comparing the organization to external benchmarks (the best practices) is used to assess current capabilities. Benchmarking systematically compares performance measures such as efficiency, effectiveness, or outcomes of an organization against similar measures from other internal or
external organizations.
Set goals and objectives
Strategic goals and objectives are developed to fill the gap between current capability and the mission. They are aligned with the mission and form the basis for the action plans of an organization. Objectives are also called performance goals. Generally, organizations have long-term objectives for
factors such as, return on investment, earnings per share, etc. It also helps in setting minimum acceptable standards or commonsense
minimums.
Develop related strategies (tactical and operational)
Tactical plans are based on the organization's strategic plan. In turn, operational plans are based on the organization's tactical plans. These are specific plans that are needed for each task or supportive activity comprising the whole. Strategic, tactical, and operational planning must be accompanied by controls to ensure proper implantation of the plans, necessary to maintain competitive advantage in the said market.
Monitor the plan
A systematic method of monitoring the environment must be adopted to continuously improve the strategic planning process. To develop an environmental monitoring procedure, short-term standards for key variables that will tend to validate and support the long-range estimates must be established. Feedback is encouraged and incorporated to determine if goals and objectives are feasible. This review is used for the next planning cycle and review.
