Nature of Strategic Planning Meaning, Definition and Reasons for the Growth

Table of Contents:-

  • Strategic Planning Meaning
  • Strategic Planning Definition
  • Nature of Strategic Planning
  • Reasons for the Growth of Strategic Planning

Strategic Planning Meaning

Strategic planning is not synonymous with corporate planning. It is a constituent of corporate planning. Strategic planning is a systematic process of determining goals to be achieved in the foreseeable future. It is the managerial process of developing, monitoring, and maintaining a viable fit between the organisation’s objectives, skills, and resources and its changing opportunities. Strategic planning aims to shape the company’s businesses, products, services and messages so that they achieve targeted profits and growth.

A good strategic planning process shares the “vision” of the organisation with the employees and creates a strong organisational culture. Once goals and objectives are established, strategies are developed to assist in achieving goals and objectives. The strategic plan gives shape to the philosophy and culture of the organisation The organisation and information systems are designed to optimise the contributions of people and other resources within the organisation. Formal goals and strategies operationalisation and break this vision into tasks and activities that can be programmed and assigned to responsible individuals for implementation.

Strategic Planning Definition

According to William Glueck, “Strategic planning is a stream of decisions and actions, which lead to the deployment of an effective strategy or strategies to help achieve corporate objectives decisions and actions, which determine whether an enterprise excels, survives or dies”.

According to Hayes and Wheelwright, “Strategic planning is planning that is long-term, wide-ranging and critical to organisational success, in terms of the costs of the resources it affects and the outcomes it envisions”

Strategic planning is fundamental to developing competitive advantage. Successful CEOs understand that strategic planning using the combined experience, education and perspectives of the management team is a highly effective means of developing a focus on management and competitive advantage in the marketplace. A strategic business plan describes the overall direction an organisation will pursue within its environment and also guides the allocation of resources. Strategic planning covers the entire activities of the organisation, including all of the strategic business units (SBU) and each functional area. It provides the logic that integrates the perspectives of functional departments and operating units and points them all in the same direction.

Nature of Strategic Planning

Strategic planning has the following features:

  1. Accountability
  2. Balance
  3. Flexibility
  4. Prioritisation
  5. Manageability
  6. Realism
  7. Specificity
  8. Effective Utilisation
  9. Sustainability
  10. Forming Hedge in Uncertainties
  11. Futuristic Planning
  12. Proactive Decision Making
  13. Provides Growth Objectives and Strategies

Nature of Strategic Planning

The nature of Strategic Planning is explained as follows:

1) Flexibility: A mechanism for changing and updating the plan is built into the process.

2) Accountability: Responsibility is assigned for the successful completion of initiatives.

3) Balance: The plans guide not only financial decision-making but also operational and human resources issues.

4) Prioritisation: Priorities are established whenever there are multiple interdependent action plans.

5) Specificity: Expected results and milestones are clearly defined, along with the specific actions for implementation and the deliverables for each step.

6) Manageability: In-process measures are identified to ensure processes are working as intended, critical performance issues are addressed, resources required are projected, and methods of status reporting are in place.

7) Effective Utilisation: It ensures the best utilisation of the firm’s resources among the product-market opportunities.

8) Realism: The question of what the organisation can do versus what it would like to do is addressed rationally, though the tone is optimistic.

9) Forming a Hedge in Uncertainties: It serves as a hedge against uncertainty arising from environmental turbulence.

10) Sustainability: A sufficient period is covered to close performance gaps.

11) Provides Growth Objectives and Strategies: It lays down the growth objectives of the firm and also provides strategies needed for achieving them.

12) Futuristic Planning: Prepares the firm to not only face the future but even shape the future in its favour.

13) Proactive Decision Making: It helps the firm understand trends in advance and provides the benefit of a lead time for taking crucial decisions and actions.

Reasons for the Growth of Strategic Planning

The main reasons for the increasing growth of strategic planning are:

  1. Long-term Business Plas Orientation
  2. Offset Uncertainty and Changes
  3. Increasing Rate of Technological Change
  4. Increasing Organisational Effectiveness
  5. increasing Complexity of the External Environment
  6. Provides Better Basis for Making Judgments
  7. Focus Attention on Objectives
  8. Continuous Process
  9. Meet the Challenges

1) Long-term Business Plan Orientation

The long-term strategic plan orientation from the corporate world’s angle is evident through the changed view of the business firms. Business firms we concentrated on short-run profits in the past. However, they actively build relationships that can produce long-term results.

2) Offset Uncertainty and Change

There is a continuous change in the business environment and the organisation has to work to accelerate change. This change is reflected in both tangible and intangible formats. Tangible changes are in the form of changes in market forces, technology, government policies, rules and regulations, etc. Intangible changes reflect changes in values, attitudes, cultures, etc. To cope with the requirements of such changes, the organisation must look ahead for its future course of action which is provided by the planning process. Strategic planning does not stop changes in the environment but gears the organisation to take suitable actions so that it is successful in achieving its overall objectives.

3) Increasing Rate of Technological Change

Technological changes witnessed significant growth, particularly during the last quarter of the 1990s. The revolution in information technology, Enterprise Resource Planning (ERP), Business Process Re-Engineering (BPR), e-commerce, paperless office, online marketing and like, brought phenomenal developments in the operations of business.

4) Increase Organisational Effectiveness

Strategic planning ensures organisational effectiveness in several ways. The concept of effectiveness is that the organisation can achieve its objectives within the given resources. Thus, for effectiveness, it is not only necessary that resources are put to the best of their efficiency but also that they are put in a manner which ensures their maximum contribution to organisational objectives. Taking appropriate planning can do this.

5) Increasing Complexity of External Environment

The external environment is becoming increasingly complex. The economy has shifted from communistic/socialistic to capitalistic; technology has shifted from traditional to high-tech. The shifts in the economic, political and technological factors brought remarkable changes in the way of life and other social factors. Changes include increasing awareness and concern towards nature and ecology, decreasing government interference in the business, increasing concerns of the workers towards the quality of life at the workplace, challenging work and change management. The shift from rule-bound industrial relations to human relations is another field, which complicates the business environment.

6) Provides a Better Basis for Making Judgments

A strategic plan provides the top management with a better basis for making judgments about the overall balance among the different parts of the company. Business plans provide a starting point in the analysis of the proposed programme.

7) Continuous Process

Strategic planning is a continuous process. This process is aided by modern sophisticated computers.

8) Focus Attention on Objectives

Strategic planning focuses on organisational objectives and the direction of action to achieve these objectives. Sometimes people in the organisation may not be specific about in objectives because of a lack of clarity and precise definitions. When planning action is taken, these objectives are made more tangible and concrete.

9) Meet the Challenges

Employees of the new millennium concentrate on productivity, management challenges, quality, service and the like. A business plan foresees the management challenges, plans for and formulates the strategies and tactics to meet the challenges with the commitment of the employees.

Strategic planning states the objective of the organisation in the context of given resources. Therefore, each organisation resource has a specific use at a particular time. Thus, production planning and control ensure that resources are put into action in a way in which these have been specified.

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