Strategic Planning
Why engage in Strategic Planning?
Strategic planning is a process through which business leaders define and align stakeholder goals to create a unified vision for organizational growth and transformation. Equally important to establishing a shared vision, the process of strategic planning should determine how to best achieve that vision.
Executive level decisions regarding how to prioritize efforts, allocate resources, and invest funds are just some of the topics that a well rounded strategic plan will address. Moreover, strategic planning supports the development of a firm’s market position and competitive advantage. Types of Strategic Planning:
There are four general categories of strategic planning that organizations may undertake to improve and coordinate the overall performance of the firm. While each category has as specific focus and scope, they are inherently interconnected and should be conceived in a way that considers the alignment of each planning effort relative to the others and the overall corporate / organizational strategic plan. -
Focuses on the overall scope and direction of the organization.
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Concentrates on how to compete successfully in specific markets.
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Involves strategies for specific departments or functions within the organization.
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Aims at increasing the organization’s market share and expanding its operations.
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To be effective, a firm’s strategy must be both coherent and fit.
Coherence refers to the consistency and integration of a strategy across all parts of its organization. (i.e. Finance, Marketing, Operations, etc.).
Fit refers to the firms ability to align its internal elements with its external environment (i.e. industry sector, supply chain, regulatory requirements, etc.).
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What drives firm performance? Why do some firms outperform others in the same industry?
In broad terms, firm performance is attributable to two primary components:
Industry Effects, performance resulting from external industry characteristics
Company Effects, performance resulting from unique attributes of the individual firm.
Research indicates that Company Effects account for the majority of explainable differences in firm performance across any given industry.
In other words, it’s company-level attributes, such as a firm’s capabilities, resources, strengths, and weaknesses, that generate the most impact on a firm’s ability to achieve success.
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When a firm’s capabilities, resources, and activities are all aligned, the resulting value is the firm’s Competitive Advantage.
Benefits of Strategic Planning:
01. Organizational Alignment
Strategic planning ensures all business units, functional departments, and support teams are cohesively aligned and working toward common, shared objectives.
This alignment empowers teams to identify and realize synergies, coordinate efforts, and work more efficiently together. Moreover, it enables firms to streamline operations, improve processes, and increase overall productivity across the organization.
02. Clear direction & purpose
Strategic planning provides a clear direction to focus and align organizational efforts and resources. It also defines specific goals and objectives that align with the overall vision and mission of the organization.
This enables employees at all levels to understand, support, and buy-into implementation of various key initiatives that are required to meet the strategic goals of the organization.
03. Longevity of business
To survive and thrive, businesses must adapt to an ever changing world. With the rise of the internet, businesses that have embraced a digital transformation strategy have flourished.
Thus, Strategic planning aims to present the potential internal/ external shocks and prepare the business to adapt to change and exploit new opportunities more effectively.
04. Competitive Advantage
Perhaps the most impactful benefit of strategic planning is the exploration and development of the firms’ competitive advantage.
By analyzing market trends and competitor strategies, businesses can identify underserved market groups and capitalize on new opportunities to develop unique value propositions.
By assessing their existing capabilities, resources, and activities, businesses can develop a competitive advantage and sustain long-term market growth.