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Strategic Planning is a comprehensive process for determining what a business should become and how it can best achieve that goal. It appraises the full potential of a business and explicitly links the business's objectives to the actions and resources required to achieve them. Strategic Planning offers a systematic process to ask and answer the most critical questions confronting a management team—especially large, irrevocable resource commitment decisions, source.

 

This is usually done through the annual planning process, this process plays an essential role. In addition to formulating at least some elements of a company’s strategy, the process results in a budget, which establishes the resource allocation map for the coming 12 to 18 months; sets financial and operating targets, often used to determine compensation metrics and to provide guidance for financial markets; and aligns the management team on its strategic priorities. The operative question for chief executives is how to make the planning process more effective—not whether it is the sole mechanism used to design strategy. CEOs know that strategy is often formulated through ad hoc meetings or brand reviews, or as a result of decisions about mergers and acquisitions, Source.

 

How Strategic Planning works:

A successful Strategic Planning process should:

  • Describe the organization's mission, vision and fundamental values
  • Target potential business arenas and explore each market for emerging threats and opportunities
  • Understand the current and future priorities of targeted customer segments
  • Analyze the company's strengths and weaknesses relative to competitors and determine which elements of the value chain the company should make versus buy
  • Identify and evaluate alternative strategies
  • Develop an advantageous business model that will profitably differentiate the company from its competitors
  • Define stakeholder expectations and establish clear and compelling objectives for the business
  • Prepare programs, policies, and plans to implement the strategy
  • Establish supportive organizational structures, decision processes, information and control systems, and hiring and training systems
  • Allocate resources to develop critical capabilities
  • Plan for and respond to contingencies or environmental changes
  • Monitor performance

Companies use Strategic Planning:

  • Change the direction and performance of a business
  • Encourage fact-based discussions of politically sensitive issues
  • Create a common framework for decision making in the organization
  • Set a proper context for budget decisions and performance evaluations
  • Train managers to develop better information to make better decisions
  • Increase confidence in the business's direction

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