What is Strategic Planning, and Why is it Important?


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An explanation of what strategic planning is, who and what is involved, and why it is important to achieving organizational goals

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  • Notes:In order to understand Strategic Planning we must first understand what strategy is, and what it is not.Michael E. Porter (Harvard Business Review, 1996) says that a common mistake is to confuse operational efficiency and strategy. Strategy is not the same as operational efficiency, and should not be confused as such (p61-78). The many processes and actions that we implement and perform efficiently and effectively in an organization constitute the operational agenda. The effectiveness of the operational agenda is what assists us in achieving the strategic goals of the company. When we have achieved our goals, we have realized the vision of the organization.Operational efficiency is essential to successful strategy – and successful strategy depends on operational effectiveness. Operational efficiency depends on the structure of the organization which, in turn, supports the strategy of the organization. So, what then is strategy, strategy planning, and why is it important? Reference:Porter, Michael E. Harvard Business Review; Nov/Dec96, Vol. 74 Issue 6, p61-78
  • NOTES: OutlineThis presentation will explain what strategy is, the difference between operational planning and strategic planning, and the difference between goals and objectives as they relate to an organization’s strategies.It will shed light on why planning strategies is important in moving the company forward in order to achieve its goals and actualize its vision. It will also explain who should be involved in it; and the steps involved in strategic planning.The sources that I will be citing will be listed in the last slide labeled “References & Sources”.
  • NOTES: Strategy Strategy is management’s decision and commitment to grow the business by marshalling its resources, crafting plans and undertaking certain actions in order to get where it wants to be in the future. To move the company forward strategic planners need to ask: What’s the company’s present situation? Where does the company need to go from here? How should it get there?Strategy planners must involve the organization at all levels: “top level (strategic) managers; midlevel (tactical managers)… frontline (operational) managers…” (Bateman & Snell, 2009) – and its employees.
  • NOTES: The Managerial ProcessStrategic planners must establish the mission/purpose of the organization; develop a vision, an intention about the organization’s future, and establish goals and set objectives to get them there. They must assess the strengths and weaknesses within the business; the opportunities and threats that the company faces outside of the business, and the country-specific political, economical, social and technological (PEST) macro business environment.They must conduct a situation analysis and identify and form strategies to manage the industry’s micro-environment driving forces, and plan the management of their value-chain activities better than their competitors.
  • NOTES:Now that we know why strategic planning is important, we need to know how to start the planning process. That process begins with a process of inquiry. Strategic Planners need to ask the following questions: What are my business’s objectives? What are the best ways to achieve those objectives? What resources are required to make that happen? (Allbusiness.com)“Effective strategic management is lithe and nimble, enabling companies to move quickly in response to new challenges, and replace outmoded ideas and practices with processes that can help meet new needs as they present themselves.” (Allbusiness.com)
  • NOTES: Phase 1 (Mission/Vision/Goals/Objectives)Strategic Planners must establish: A Mission that explains the present purpose of the organization. A Vision that declares the organizations intentions about its future. E.g.: Where the company needs to goWho, and what, should its future customers, products, market and technology be. (Strickland, et al, 2008).Goals that will help the business achieve its vision. Objectives to support the goals.NB: goals are broad, but fixed; objectives are narrow and flexible, and can change in order to achieve the goal. When the goal is reached through the objectives, the vision is realized.
  • NOTES: Phase 2 (Environmental Scan)Conduct an environmental scan by asking and answering questions such as:Who are our current competitors?How many entry barriers to our industry?What kinds of substitutes exist for our product/service?Is the company too dependent on powerful suppliers and/or customers?Analyze internal strengths & weaknesses, external opportunities and threatsDevelop scenarios about what factors might influence the futureForecast how variables might change in the futureBenchmark to identify best practices in different areas.
  • NOTES: Phase 3 - 4 (Form Strategy; Select & Implement Strategy)Conduct a situational analysis (SA) in order to: study/examine past events; current conditions; attempt to forecast future trends.From the SA develop alternative future goals and plans to achieve those goals. Goals must be: Specific Measurable Attainable (but challenging) Relevant Time-boundEvaluate advantages, disadvantages and potential effects of each alternative goal and plan. Prioritize goals; evaluate cost of initiatives.Select most appropriate and feasible one(s); put it in writing. Communicate the plans throughout the organization. Support strategy with adequate resources and a reward system.Launch strategy.
  • NOTES: Monitor/ControlStrategic control systems enable managers to evaluate the organization’s progress regarding its strategy. (Bateman & Snell, 2009, p. 157)Strategic plans are not static. They must be continually monitored and adjusted as changes in the business environment occur. Corrective actions must be taken in order to keep plans on tract.Effective strategic control systems: Establish valid performance standards Provide adequate information to employees Ensure acceptability to employees Maintain open communication Use multiple approaches
  • NOTES: In conclusionStrategic planning has to do with long-term plans that guide the organization to its desired future.Strategic plans are important because the formation and implementation of these types of plans help companies actualize their vision through goals, and the objectives that support the goals.Companies that do not articulate a mission, have a vision for their companies or make strategic plans will not be as successful as companies that do.
  • What is Strategic Planning, and Why is it Important?

    1. 1. What is “Strategic Planning”?Why is it important? Copyright 2009. Ruth M. Tappin 1
    2. 2. 1. Cover Page2. Outline3. Strategy: What it is, and what it does4. Strategic Planning: What it is, and who should be involved in it5. The Importance of Strategic Planning6. Phase 1:Develop the Mission and Strategic Vision7. Phase 2: Scan the Environment8. Phase 3 - 4: Form the strategy; Implement and execute the strategy9. Phase 5: Monitor; evaluate; make corrective adjustments10. Summary11. References & Sources 2
    3. 3.  Moves a business forward to the intendeddestination. Evolves over time in response to changingcircumstances Must be supported by sufficient revenue tocover costs and earn a profit(Thompson, Jr., Arthur A; Strickland III, A.J & Gamble, John E. (2008). 3Crafting and Executing Strategy, 17th. Ed. (p. 5). McGraw-HillIrwin, Boston, MA.)
    4. 4. • Establish mission/purpose of organization• Develop vision (intent) about future• Establish goals, set objectives• Conduct SWOT Analysis• Conduct PEST Analysis 4
    5. 5. • It is the company’s road map to achieving competitive advantage• It is the company’s game plan for how to please customers and how toimprove financial performance• Companies that plan strategies are more successful than those that do not• No strategic planning puts a company at risk (Strickland et. al, 2008)• No strategic planning = No direction 5
    6. 6. 6
    7. 7. • Conduct an environmental scan by searching for and storing informationabout the business environment• Conduct SWOT ANALYSIS:• Develop scenarios of the future• Forecast in order to predict changes in future variables• Benchmark in order to identify best industry practices 7
    8. 8. • Conduct situational analysis• Generate alternate goals and plans• Select best goal and plan• Support with adequate resources• Communicate strategy throughout organization• Execute strategy 8
    9. 9. • Monitor actual performance against goals and plans e.g.: audits• Develop control systems to measure performance, e.g.: budgets• Tweak, adjust, make changes in order to keep on right track• Continuously improve 9
    10. 10.  Strategic planning = Long-term planning More and more involves the whole organization – from top level execs to employees Strategic plans must be clearly communicated throughout the organization These plans must be adequately supported and funded Once executed, they must be monitored and controlled Adjustments must be made as business environment changes “…good strategy planning and execution are the most trustworthy signs of managementeffectiveness” (Thompson, et al 2008) 10
    11. 11. Allbusiness.com (2009). Web page: http://www.allbusiness.com/management/2975129-1.html. Retrieved 8/5/09Bateman, Thomas S & Snell, Scott A (2009). Management: Leading & Collaborating in the Competitive World (pp. 67 – 69; 135– 137; 157; 594)Businessdictionary.com (2009). Web page: http://www.businessdictionary.com/definition/strategy.html. Retrieved 7/31/2009NetMBA.com (2009). Strategic Management: PEST Analysis section. Webpage: http://www.netmba.com/strategy/pest/. Retrieved8/5/09NetMBA.com (2009). Strategic Management: PEST Analysis section. Webpage: http://www.netmba.com/strategy/process/.Retrieved 8/5/09Porter, Michael E. Harvard Business Review; Nov/Dec. 96, Vol. 74 Issue 6, pp. 61-78Thompson, Jr., Arthur A; Strickland III, A.J & Gamble, John E. (2008). Crafting and Executing Strategy, 17th. Ed. (pp. 4 - 24).McGraw-Hill Irwin, Boston, MA.) 11