Strategic Planning: Fundamentals and Applications

By Fouad Sabry

What Is Strategic Planning

The process of determining an organization's strategy or direction and making decisions regarding how those resources should be allocated in order to achieve strategic goals is referred to as strategic planning.

How You Will Benefit

(I) Insights, and validations about the following topics:

Chapter 1: Strategic planning

Chapter 2: Scenario planning

Chapter 3: SWOT analysis

Chapter 4: Balanced scorecard

Chapter 5: Porter's five forces analysis

Chapter 6: Growth-share matrix

Chapter 7: VRIO

Chapter 8: PEST analysis

Chapter 9: Strategy map

Chapter 10: Responsive evaluation

(II) Answering the public top questions about strategic planning.

(III) Real world examples for the usage of strategic planning in many fields.

Who This Book Is For

Professionals, undergraduate and graduate students, enthusiasts, hobbyists, and those who want to go beyond basic knowledge or information for any kind of strategic planning.

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• Language: English
• Publisher: One Billion Knowledgeable
• Release date: Jul 6, 2023

Book preview

Chapter 1: Strategic planning

An organization's strategic planning is the method it uses to determine its overall course of action and how its resources will be deployed to achieve its long-term objectives.

Control mechanisms for directing the strategy's execution may also be included. In the 1960s, strategic planning emerged as a key component of successful business strategy, and it has only grown in importance since then. Strategists and strategic planners carry it out by conducting an in-depth analysis of the company and its external competitive environment. Strategic decisions are typically made by an organization's upper management. Both intentional and emergent strategies exist, depending on whether the organization is trying to adapt to its environment or compete in the market.

Strategic planning helps coordinate the processes of strategy, which include formulation and execution. In contrast to the synthesis (or connecting the dots) required by strategy formation, strategic planning is analytic in nature (i.e., it requires finding the dots). Therefore, the activity of strategy formation serves as the center of subsequent strategic planning.

Inputs, activities, outputs, and outcomes are all components of the strategic planning process. There are limits to this process, as there are to all processes. It can be either formal or informal, and it usually involves cycles with feedback loops. It's possible that some parts of the process are continuous while others are carried out as separate projects with clearly defined beginnings and endings. Strategic thinking, in turn guided by inputs from strategic planning, forms the basis for the actual strategy. Evaluation of the organization's mission and strategic issues is a standard part of the strategic planning process used to bolster existing practices and identify gaps in coverage.

In his 1980 article, Michael Porter outlined the four factors that must be taken into account when formulating a competitive strategy:

Pros and cons of the company; Key implementers' morals and ethics (i.e., management and the board); Potential benefits and risks for the industry; Higher general standards. The entire strategic planning procedure takes into account these factors.

Primary research (such as visiting or observing competitor locations or comparing prices), secondary research (such as industry studies or reports of the organization's performance), interviews with key executives, reviews of publicly available documents on the competition or market, etc. This could be a part of a business intelligence initiative. Information is gathered so that a starting point can be established, and so that the opportunities and threats in the market can be evaluated. Knowledge of the priorities of the board, shareholders, and upper management is another important factor. A company's vision and mission statements can embody these principles.

Connecting a company to its surroundings is the crux of developing a competitive strategy.

Michael Porter

Meetings and other forms of communication between managers and employees are essential parts of the strategic planning process because they help everyone gain a shared understanding of the external environment and the best way to respond to it. Strategic planning can involve using a wide range of planning instruments.

Organizational leaders may have a number of concerns they'd like addressed during the strategy development and stakeholder input phases.

The strategic plan is a document and set of communications that result from the strategic planning process and describe the organization's strategy and how it should be implemented. An analysis of the competitive landscape, a policy outline for getting the job done, and a list of concrete steps to take are all elements that could make up an organization's strategy. A strategic plan may span several years and be revised on a regular basis.

Organizations can use tools like a balanced scorecard or strategy map to track their development toward their strategic goals and KPIs. As part of the goal-setting process inherent in developing a strategic plan, organizations may also plan their financial statements (i.e., balance sheets, income statements, and cash flows) for multiple years in advance. The term operational budget is commonly used to refer to a company's projected annual financial performance. The backbone of any strategic plan is the allocated funds for capital expenditures, and this is especially true in the ever-expanding realm of information and communication technology (ICT).

While deliverables are generated during the planning phase, results are generated during strategy implementation. These results are guaranteed to deviate from the intended course of action. Their alignment with the strategic goals and vision will determine the plan's success or failure. The problem could also arise from unintended consequences. In order for the process of developing and implementing a strategy to be a true learning experience, these factors must be attended to and understood.

Strategic planning employs a wide range of analytic instruments and methods. Companies and management consultancies created these to serve as a basis for the process. Among these instruments are:

Consider the political, economic, social, and technological factors of the far-off external environment with a PEST analysis (PESTLE includes legal/regulatory and ecological/environmental factors as well); Scenario planning is a method of analyzing potential outcomes that was developed for use in the military but has since found widespread application in large businesses. The process for labeling a phenomenon as a scenario in the intuitive logics tradition is laid out in the flowchart to the right; The Porter five forces model considers the bargaining power of buyers and suppliers, the threat of substitute products, and the threat of new market entrants to determine the attractiveness and competitiveness of a given industry; The SWOT analysis compares a company's internal strengths and weaknesses to the opportunities and threats it faces in the external environment; The growth-share matrix, which guides decisions about which companies to keep and which to sell off in a portfolio; and

Measure and manage strategy with precision using tools like balanced scorecards and strategy maps.

Using a constructivist evaluation approach, responsive evaluation pinpoints the results of set goals to inform subsequent strategic planning efforts.

The competitive advantage of a good or service can be calculated using the Value, Rarity, Imitability, and Organization (VRIO) Framework.

Strategic planning does not consist of simply extending financial statement projections into the future without taking into account the competitive environment. The term financial plan is commonly used in the business world to refer to a company's projected financial results for upcoming time periods. The term budget is commonly used to refer to an annual financial plan. A forecast is typically compared against plan or budget and prior performance, as it is a combination of actual performance year to date and expected performance for the remainder of the year. Projection of financial results over a period of three to five years is common in the financial plans that accompany a strategic plan.

Strategic management is at the top of McKinsey & Company's capability maturity model, which was developed in the 1970s to characterize the level of sophistication of planning processes. The four phases consist of:

Budgeting and functionalism dominate conventional financial planning, which gives little thought to ecological impacts; Using projections, businesses can allocate resources more effectively across departments and over longer time periods; Planning with an eye toward the outside world, including an exhaustive analysis of the current environment and an evaluation of the competition; Management with a focus on strategy, wherein a standardized strategic framework is used, and wherein strategic thinking is pervasive.

Strategic planning falls under categories 3 and 4, while non-strategic or essentially financial planning falls under categories 1 and 2. An organization at Stage 4 has finished tasks in all four categories, building on the foundation laid in Stages 1-3.

Some have argued that strategic planning is flawed because it tries to systematize what Henry Mintzberg calls inherently creative activities involving synthesis or connecting the dots Strategic planning, according to Mintzberg, is something that happens around the strategy formation process as opposed to being a part of it. It may not be helpful in bolstering strategy efforts if it is located far from the front lines or direct contact with the competitive environment (i.e., in business, facing the customer, where the effect of competition is most evident).

Strategic planning has been the subject of much criticism, but there is evidence that it can be effective. Strategic planning has a positive effect on organizational performance, according to a meta-analysis of nearly 9,000 public and