The magazine of Glion Institute of Higher Education
- Strategic planning vs business planning: how they’re both key to success
Any thriving hospitality business needs thorough planning to make sure it succeeds. If you’ve heard the terms business planning and strategic planning, you might think they’re interchangeable, but they’re actually two distinct things companies need at different times for continued success.
The biggest difference is that business plans are mostly used when you are starting to build a business so you can quickly and smoothly create your vision. Strategic planning is what existing companies use to grow and improve their businesses.
If you’re looking for a career in hospitality management, it’s important to know the difference between the two and how to use them to best effect. In this article, we’ll go over what strategic planning and business planning are and how they are important to running a successful hospitality business.
We’ll also look at how you can learn to harness different planning methods and get the skills needed to develop your career.
A business plan is one of the first things a fledgling business will draft. Alternatively, it can be used to set business goals when launching a new product or service.
The business plan will usually look at short-term details and focus on how things should run for around a year or less. This will include looking at concepts such as:
- What the business idea is
- Short-term goals
- Who your customers are
- What your customers need
- What investment or financing you will need to start your business
- How you make revenue
- What profitability to expect
- How you can appeal to potential shareholders
- What the short-term operational needs of the business are
- What the company’s values are
- What the budget is for different parts of the business
This means market analysis and research are vital when you are making a business plan.
What are the objectives of business planning?
The primary objective of a business plan is to have all the main details of your business worked out before you start. This will give you a roadmap to use when you launch your business or when you start offering a different product or service.
For example, if you wanted to become an event planner and open your own event planning business, your plan might include how to get funds to rent an office and pay staff.
A strategic plan is where you set out the company’s goals and define the steps you will need to take to reach those goals.
A strategic plan would include:
- What current capabilities the company has
- Making measurable goals
- A full strategy for business growth
- How the company’s values, mission and vision tie in with the services and products the company intends to offer
- Who in the organization will handle certain roles
- What the timeline is for reaching certain goals
- A SWOT analysis, looking at the strengths, weaknesses, opportunities and threats in the company
- Examining the external environment for factors that will affect your company using a PEST (political, economic, social and technological) analysis
A strategic plan can be a long-term blueprint. You might find you use basically the same strategic plan for several years.
What is the objective and strategy of planning?
The aim of a strategic plan is to provide a tool that allows you to improve your business, grow the company, streamline processes or make other changes for the health of your business. Strategy implementation and meeting strategic objectives should generally lead to growth.
What is the difference between business planning and strategic planning?
There are a few major differences between strategic planning and business planning, which are outlined below.
Scope and time frame
A strategic plan is usually long-term, typically covering at least two to five years. By contrast, a business plan usually covers a year or less, since this is roughly how long it usually takes for a business to become established.
A business plan focuses on starting a business in its early stages. A strategic plan is used to guide the company through later stages. Put simply, the business plan is about direction and vision, while the strategic plan focuses on operations and specific tactics for business growth.
A strategic plan will be presented to stakeholders and employees to make sure everyone knows what is going on in the company. This will help reassure everyone with a stake or role in the business.
By comparison, a business plan will often be shown to investors or lenders to help show the business idea is worth funding.
Flexibility and adaptability
A strategic plan typically has more flexibility. This is because it is meant to be in place for a longer period of time and the company should already be established. There is more leeway for refining strategy evolution, while your business plan should remain stable.
Similarities between business planning and strategic planning
Both of these activities will require some of the same analytical components, such as market analysis, financial projections and setting objectives you can track. Of course, both also require you to be highly organized and focused to ensure your business model or strategy development is appropriate for your business.
When to use strategic planning vs business planning
As we’ve already mentioned, you’ll generally use a business plan when you’re setting up a business or moving in a new direction. This will dictate much of the day-to-day running of a business. You would use strategic planning when you want to work on growth and drive innovation.
Can a business plan be used for strategic planning?
No, a business plan and a strategic plan are two different concepts with specific goals. While a business plan outlines short or mid-term goals and steps to achieve them, a strategic plan focuses on a company’s mid to long-term mission and how to accomplish this.
If you want to prepare for success, you need to make sure you are using the right type of plan.
Integrating strategic planning and business planning
While the two plans are different, you may end up using them together to ensure optimal success. As with any type of management role, such as hotel management , strategic and business plan management requires effective communication between different departments.
This includes different strategy managers as well as strategic and operational teams. You also need to make sure that, when you are using either plan, you find the right balance between flexibility and strict adherence to the plan. With strategic planning, this means constant strategy evaluation to assess your tactics and success.
Can strategic planning and business planning be used simultaneously?
In many hospitality careers , you’ll want to juggle growth and new directions, so you could end up using both planning types. However, it’s most common for the two to be distinct. This is because you’ll generally be using a business plan only when you are starting a new venture.
What are the career prospects in strategic and business planning?
There are plenty of options for what you can do if you have skills in strategic planning and business planning. Almost every management role will require these planning skills, including how to write strategic planning documents and measure success.
If you want to work in the hospitality sector, you could look into hotel planning and other careers with a business management degree . These will enable you to grow and nurture a business, but there is also a lot of scope to start your own business. Great planning skills can give you a real competitive advantage.
World-class degrees for making your mark in business
If you want the skills and insider knowledge to guide a business from inception to expansion, our courses provide expert teaching and real-world experience.
What skills do I need for a career in planning?
If you want to work in planning and management, you should work on various skills, such as:
- Analytical skills
- Risk assessment knowledge
- Market analysis and forecasting
- Team management
- Communication, both written and verbal
What qualifications can help with a career in strategic planning or business planning?
If you want to work in hotel planning and management, the most common route is to get a hospitality degree from a well-respected hospitality school in Switzerland . This will help you get the skills and knowledge you need to properly plan businesses as well as handle the execution of these plans.
Business degrees also teach you many transferable skills, such as good communication with your strategy team or data analysis, that you can use in almost any role in hospitality. They can also reduce the need to work your way up through the hospitality industry.
How can hospitality school help with planning careers?
Attending hospitality school can help you learn skills dedicated to hospitality as well as more general management, business and planning skills. This includes everything from how to handle a team to specifics such as hotel revenue management strategies .
If you find a hospitality school offering professional hospitality internships , you’ll also get experience in managing hotels and hospitality venues, helping you leap ahead in your career.
Hospitality degrees to kickstart your career
Our international business course combines leading industry expertise with essential internships to provide an exceptional foundation for a thriving career in the hospitality industry.
Both strategic and business planning are vital to build and grow a business. While business planning focuses on setting up the business and handling investment, vision and overall goals, strategic planning concentrates on growing the business and processing operational efficiency and resource allocation on a longer-term basis.
If you want to learn how to develop a hotel business plan or manage a hospitality venue, one of the best ways to get started is to study for a hospitality degree. This will give you hands-on experience of the strategic planning process or business management as well as the skills you need to succeed.
Photo credits Main image: Westend61/Westend61via Getty Images
View similar stories
Hospitality recruitment: how Mandarin Oriental makes its pitch for the brightest talents
First class experience: Bachelor students’ luxury field trip to Scotland’s capital
Polynesian paradise: how an internship in Bora Bora fueled one student’s passion for hospitality
Hospitality research: how technology is changing the face of data and publishing
The most expensive hotels in the world revealed
Exciting openings final edition: Europe revisited
Cook with Stéphane Décotterd #8: charcoal grilled wagyu beef short ribs with grilled cucumber
BUSINESS OF LUXURY
Talking luxury: fresh insights and lively debate at our inaugural Luxury Industry Panel
Featured Priority 3
Sustainability: meeting hospitality’s existential challenge
How to become a hotel manager
Top talents: winning Master’s students chosen for our Talent Connection mentoring program
Best industries to work in hospitality industry
Welcome to glion..
- Advisory Boards
- Business Coaching
- StratPro Leadership Transformation Program
- Strategic Leadership Tools
- Our Members
- Case Studies
- WHITE PAPERS
- Business Diagnostic
What is Strategic Business Planning?
The importance of strategic planning, the strategic planning process, six strategic planning examples, elements of strategic planning implementation.
Strategic Business Planning 101
Operating without a strategic plan is like sitting in the passenger seat of your own business. You see it accelerate into overdrive and pass one milestone after another. Eventually, however, you helplessly watch as it swerves aimlessly or, worse, crashes and burns.
Strategic planning puts you behind the steering wheel. It serves as a roadmap that defines the direction a company must travel, and that helps leaders prepare for potential roadblocks. Companies and markets without this foundation and foresight are far more likely to get lost, stuck, or wrecked.
Strategic planning is a systematic process for developing an organization’s direction. It also articulates the objectives and actions required to achieve that future vision, and outlines metrics for measuring success.
By helping you refocus on your foundational purpose, your goals, development and your opportunities, strategic planning reintroduces you to “the big picture.” It’s the basis for business owners to achieve their vision, which they communicate to stakeholders in a strategic business plan and program.
It’s common to confuse a strategic plan with a business plan, which is used to start a business, obtain funding, or direct operations and generally covers one year.
A strategic plan, on the other hand, is about high-level thinking and generally looks at 3 to 5 years. It can be created at any time and should be regularly revisited. Key points to review the plan include whenever a company begins a new venture (like launching a new product), if the economy or competitive landscape changes, or when new regulations or trends affect the business environment.
Taking the time to identify exactly where your business and your executive team are headed (and how you’ll get there) can help mitigate the risks associated with business growth. In fact, the strategic planning process can fuel long-term success by bolstering these five key areas:
Having a clear picture of your company’s future, plus a roadmap to get there, allows your company to be far more proactive. Rather than constantly reacting to outside forces beyond your control, you can strategically make moves designed to help you achieve your long-term objectives.
Strategic planning can even help you anticipate unfavorable scenarios before they happen and take precautions to avoid them. You can keep up with market trends and avoid common industry pain points.
Every company has a finite amount of human and financial resources. By defining exactly what activities are needed to achieve objectives, a strategic plan helps you assess costs and means to allocate resources in the most efficient way.
CEOs must be selective about which new opportunities they invest in and which they avoid. The strategic planning process makes it clear when to spend and when to pass.
The business landscape changes at a rapid pace. CEOs must contend with new government regulations, shifting workforce demographics, technological advances such as Facebook, and economic uncertainty. A strategic plan puts these challenges into perspective.
The process of reviewing your company’s strengths, weaknesses, and opportunities can help you rise above tricky situations. You’ll be prepared to respond to a competitor’s new product launch, a technology upgrade on your production floor, or an unhappy customer base. This degree of foresight can result in increased profitability and market share.
The strategic plan is essential for communicating your vision to investors, managers, and employees. It ensures that all key stakeholders are on the same page, rather than struggling (perhaps inadvertently) against one another.
Even more than building consensus, the strategic planning process can improve performance. As an example, it may generate ideas for restructuring to help employees reach their full potential. Sharing realistic goals and metrics for measuring them also motivates employees to keep up their efforts.
Running a business is a tumultuous endeavor; many CEOs are familiar with the feast-famine, boom-bust cycle. And organizations that don’t have a solid foundation—like the one a strategic plan provides—are the most likely to struggle.
According to a TAB Pulse Survey , business owners who say they have a high-quality strategic plan are much more likely to forecast sharp increases in profits and sales revenue over the next year than are owners who lack a plan.
How do you build a strategic business plan? There are many different frameworks you can use, but generally the planning process addresses four considerations.
Understand Your Business
Assess where your business is today. This includes reviewing core business information (such as key financial documents), and writing or revisiting your vision, mission statement, and core values. Do they still resonate with your vision? Changes in circumstances, leadership, or the marketplace may require you to rethink the core of your business from time to time. Take time for serious reflection to come up with something truly meaningful. You may also seek input from your staff, business owner advisory board, or a business coach. When writing these core business documents, ditch the jargon. What is the most idealistic version of your business? What are your most ambitious goals? What is the grandest vision for what your company could be?
Analyze Your Strengths, Weaknesses, and Threats
A SWOT analysis is a tool for critically evaluating your company's Strengths, Weaknesses, Opportunities, and Threats. It can provide insight into where your business should focus its marketing efforts, give you a better understanding of your industry and customers, clue you into your competitive advantages, and give you a heads-up on potential threats to your growth. Examples of the types of questions you might ask during the SWOT process include:
- What do we do well?
- What do our customers identify as our strengths?
- Which emerging trends can we capitalize on?
- Who are our competitors under-serving?
- What are the most common complaints we receive?
- What outdated technologies do we use?
- What external roadblocks are in the way of our progress?
- What are our competitors doing that’s different?
Even if you’ve done a SWOT analysis in the past, it’s useful to do another as part of the strategic planning process. Don’t love the SWOT method? Skip ahead to the next section to learn about a few alternatives.
Define Objectives and Set Goals
Drill down into specific objectives that will help you achieve your vision. These might include things like launching a new product, trying different marketing strategies, re-allocating financial resources, or improving employee culture. Also, determine the specific initiatives required to meet the big-picture goals. Setting goals is only effective if you actually meet them, so you must also establish how you’ll measure success. Key Performance Indicators (KPIs) are the specific metrics you’ll track to determine progress on goals. KPIs can include things like percentage of market share, customer acquisition cost, and average support ticket resolution time.
Put the Plan into Action
Objectives are future focused, so now you need short-term action steps. Unlike goals, tasks should take only a few days or weeks to complete. Break down tasks into the smallest possible steps. Keep asking yourself, “What needs to happen before we can take this next step?” For example, a goal of “upgrade aging equipment” could be broken down into individual tasks like “research suppliers,” “make appointments with reps at the next expo” and “purchase equipment.” Assign a responsible party to each task, set deadlines for completion, and create accountability. Finally, establish a timetable for reviewing your strategic plan (at least once a quarter). Regularly tracking and analyzing your plan ensures you’ll stay on track and make progress toward your goals. Ask hard questions during these reviews to avoid continuing on with an outdated plan.
SWOT is perhaps the most common tool used in the strategic planning process, but it’s not right for everyone. Some critics think it’s too limited in scope and doesn’t encourage deep analysis. That’s why business advisors have created several alternatives, each with its own structure.
- A SOAR analysis is a common, more positive twist on SWOT. It stands for Strengths, Opportunities, Aspirations, and Results, and the goal is to use appreciative inquiry to focus on what works, rather than perceived weaknesses or potential threats.
- NOISE stands for Needs, Opportunities, Improvements, Strengths, and Exceptions. This solution-focused process looks at what works and what should improve, and also encourages you to explore opportunities you didn’t realize existed.
- The Five Forces framework examines competitive rivalry, supplier power, buyer power, threat of substitution, and threat of new entry. It can help companies assess industry attractiveness, how trends will affect industry competition, which industries a company should compete in, and how companies can position themselves for success.
- Hambrick and Fredrickson’s Strategy Diamond framework consists of five essential parts that together should form a unified whole: Arenas, Vehicles, Differentiators, Staging, and Economic Logic. It’s intended to serve as a concise way to show how the parts of an organization’s strategy fit together.
- STEEPLE is an acronym for Social, Technological, Economic, Environmental, Political, Legal, and Ethical—and each is an external factor you’ll judge using this tool. (There are several similar variations on this external-focused model, including PEST and STEEP).
- A CORE assessment uses a strictly financial perspective to craft a business strategy and long-term plan. It looks at a company's capital investment, site, ownership involvement, risk factors, and exit strategy.
A strategic plan is useless if it sits on a shelf-collecting dust. That’s why implementation is perhaps the most critical step of the planning process. It’s what turns strategies and plans into actions and successes. The plan is the what and why, but implementation is the equally important who, where, when, and how.
Strategic plans fail for many reasons, including lack of ownership or confusion about the plan among stakeholders, lack of accountability or empowerment, not tying strategy to budgeting, not linking employee incentives to strategy.
Success hinges on a quality implementation plan. It starts with the top brass, who should take responsibility for spearheading execution. It’s essential, however, that all stakeholders are involved.
Start by assessing whether you have the appropriate and sufficient budget, people, resources, content and systems in place to execute on the plan. Shore up any weaknesses before trying to put the plan in motion.
As with most things, communication is key. Educate stakeholders about why the company participated in strategic planning, how the plan and specific objectives support the company’s mission and values, and how employees’ day-to-day work affects the company’s success.
Establish responsibility for tasks to the appropriate parties, a scorecard for tracking and monitoring progress, and a performance management and reward system.
Educate managers on how employee work translates into meeting goals, and regularly check in with them on progress. In fact, it should become the norm to hold structured performance conversations throughout the entire company.
Hold quarterly strategic reviews to monitor progress and make small or big adjustments as needed. During annual reviews, revisit all elements of the plan. Conduct new assessments and adjust objectives and KPIs accordingly.
Strategic planning should be an essential part of any company’s decision-making process. No matter how large or successful your organization is, TAB’s StratPro® process can help you to excel when faced with tomorrow’s business challenges.
The StratPro® process provides an effective framework for transforming your personal vision of your company into a clear and concise road map that will help to guide your organization’s response to every new challenge and opportunity.
TAB helps forward-thinking business owners grow their businesses, increase profitability and improve their lives by leveraging local business advisory boards, private business coaching and proprietary strategic services.
- Join Our Team
- Find a Local Board
- My TAB Login
keep in touch
- Terms & Conditions
- Contact sales
Start free trial
Strategic Planning in Business
Table of Contents
What is business strategic planning, the strategic planning process in 3 steps, what is a business strategic plan, key components of a business strategic plan, business strategic plan example, strategic plan vs. business plan.
Strategic planning is key for success in business. By planning strategically for the future, a business can achieve its goals. It’s easier said than done, but the more you know about strategic planning, the better chance you have at succeeding.
Business strategic planning is the process of creating a business strategy and an accompanying business strategic plan to implement a company’s vision and achieve its goals over time. The main goal of strategic planning is to take a company from its current state to its desired state through a series of business actions.
The business strategic planning process usually consists of defining business goals, doing a SWOT analysis to assess the company’s business environment and developing a business strategy. The leadership team is in charge of business strategic planning, as it has a very important impact on the overall direction of a company.
Get your free
Strategic Plan Template
Use this free Strategic Plan Template for Word to manage your projects better.
Strategic planning is very important, but it doesn’t need to be overly complex. Let’s simplify this process by breaking it down into three simple steps.
1. Set Business Goals
A business goal is simply an accomplishment that a company wants to achieve in the short, medium or long term. Business goals can take many forms such as increasing sales, revenue, customer satisfaction levels and brand positioning, among many other things.
2. Conduct a SWOT Analysis
The goal of a business strategy is to leverage the strengths of a business and minimize the impact of its weaknesses. Those two things are internal factors. The strengths of a company can become competitive advantages that can lead to business growth. There are many types of business strengths and weaknesses such as scale, speed, or R&D, just to name a few.
Threats and opportunities refer to external factors such as competitors or an untapped market. A successful business strategy considers all of these factors to define how a product or service will be created, marketed and sold, and a SWOT analysis is a great starting point.
3. Develop a Business Strategy & Strategic Plan
Once you’ve completed your SWOT analysis, you can create a business strategy that’s designed to help position your company in the market. Your business strategy guides how you produce, market and sell your product or service based on internal and external analysis.
Then, you’ll need a strategic plan to explain how you plan to execute that business strategy. To oversee the execution of a business strategic plan, managers need to manage time, costs and tasks. ProjectManager is a project planning tool that allows managers to plan, schedule and manage their team’s work. Plan your work with professional tools such as Gantt charts, kanban boards, task lists and calendars. Then track your progress in real time to stick to your strategic plan. Get started for free.
A business strategic plan is an implementation plan that’s meant to turn a business strategy into action items that can be executed over time. Business strategic plans are usually executed over the course of 3-5 years.
How to Develop a Strategic Plan
To develop a strategic plan, you should ask yourself the following three questions.
- Where Is the Business Now? Gather as much information on your business as possible including internal operations and what drives its profitability. Compare the business to competitors and note the similarities and differences in detail. This isn’t a day-to-day operational study, but a broader look at the business in context to itself and its environment. But don’t go crazy; stay realistic in terms of your business goals. Be detached and critical in your analysis.
- Where Do You Want to Go? Now it’s time to decide what your top-level objectives are for the future. Start with a vision statement , objectives, values, techniques and goals. Look forward to five years or more to forecast where you want the business to be at that time. This means figuring out what the focus of the business will be in the future. Will that focus differ from what it is now, and what competitive advantages do have you in the marketplace? This is where you build the foundation and initiate changes.
- How Can You Get There? Once you know where you are and where you want to go, it’s time to plan. What are the changes to the structure, financing, etc., necessary for the business to get there? Decide on the best way to implement those changes, the timeframe with deadlines and how to finance it. Remember, this is looking at the business at large, so consider major endeavors such as diversification, existing growth, acquisition and other functional matters. A gap analysis can be a big help here.
Once you’ve answered the above questions and have a way to achieve the long-term goals laid out in the strategic plan, the next step is making sure you have the right person to manage all of its moving parts. They must be analytical, a creative thinker and able to grasp operational detail.
That doesn’t mean the strategic plan is led by one person. It’s best to not do it alone; seek other opinions. The people in your organization, from bottom to top, are all great resources to offer perspectives from their standpoints. Don’t forget to take in the advice of stakeholders, including customers, clients, advisors and consultants.
To create a strong strategic plan, one must first have a strong understanding of the business that is to expand. How does the business work? Where does the business stand in relation to competitors in the marketplace? A strategic plan is built on the bones of the following foundational elements:
- Mission Statement: The mission statement describes what your company does.
- Vision Statement: The vision statement explains where your company expects to be in the future.
- Core Values: Guiding principles that shape your company’s organizational culture.
- Business Objectives: Consider using the SMART goal-setting technique . This simply means setting up specific, measurable, attainable, relevant and time-bound objectives that your company wants to achieve.
- SWOT Analysis: External and internal factors that make up your company’s business competitive environment.
- Action Plan: A plan outlining steps that will be taken to achieve the business objectives of your organization.
- Financials: A section that shows the financial performance expectations, the budget and the resources that will be required to implement the action plan.
- Performance Measurements: Performance indicators that will be used to measure the effectiveness of the action plan.
Never forget to check your strategic plan against reality. In addition to being achievable, it must be practical for your business environment, resources and marketplace.
Now let’s look at a simple business strategic plan example. This is a strategic plan for a small construction company.
1. Mission, Vision & Core Values
- Mission Statement: To build residential spaces that provide wellbeing for our clients.
- Vision Statement: To offer the best construction experience for our clients and expand our brand throughout the globe.
- Core Values: Sustainable innovation and respect for the environment.
2. Business Objectives
- Business Objective 1: Grow operating margin from 15% to 20% over the next year.
- Business Objective 2: Reduce operating costs by 5% over the next quarter
- Business Objective 3: Increase the number of new contracts generated by 10% over the next year
3. SWOT Analysis
- Strengths: Available financing, brand visibility and know-how.
- Weaknesses: Lack of PPE, human capital and expertise in construction areas such as plumbing, electrical work and masonry, which requires subcontractors.
- Opportunities: Lack of environmentally-friendly construction companies in the market.
- Threats: Larger construction companies compete for contracts in the area.
4. Action Plan
- Business Objective 1: To grow operating margin, new employees with plumbing, electrical work and masonry experience will be hired to cut down subcontractor costs. This must be done by the end of the first quarter.
- Business Objective 2: To reduce operating costs, the company will acquire property, plant and equipment. By doing this, the company will no longer rent equipment from third parties, which will reduce operating costs significantly in the medium and long term.
- Business Objective 3: To increase the number of new contracts generated, the leadership team will invest more in the PR, marketing and advertising departments. The company will also invest in key positions for the construction bidding process such as contract estimators.
- Financials: This section will explain in detail what are the costs associated with the work items in the action plan as well as the expected financial benefits for the company.
Our free strategic plan template helps leadership teams gather important information about their business strategy, which makes it the perfect tool to start shaping a strategic plan for your business or project.
A strategic plan is a type of business plan, but there are distinctions between the two. Whereas a strategic plan is for implementing and managing the strategic direction of a business, a business plan is more often the document that starts a business.
A business plan is used primarily to get funding for the venture or direct the operation, and the two plans target different timeframes in business history. A strategic plan is used to investigate a future period, usually between three-to-five years. A business plan is more routinely a year out.
A Different Intent
A strategic plan offers a business focus, direction and action to help the business grow from the point it presently resides to a greater market share in the future. A business plan, on the other hand, is more focused on offering a structure to capture and implement ideas that initially define a business.
With a strategic plan, existing resources are prioritized to increase revenue and return on investment. The business plan is different in that it’s seeking funding for a venture that doesn’t yet exist. Where a strategic plan is building a sustainable competitive advantage in the future, a business plan is designed to take advantage of a current business opportunity.
So, a strategic plan is communicating direction to teams and stakeholders in order to achieve future goals. A business plan isn’t talking to staff, which is likely nonexistent or minimal at this point. It’s speaking to banks and other financial supporters.
Strategic planning, like any planning, requires keeping a lot of balls in the air. That means having the right tool to plan, monitor and report on all the various tasks and resources. ProjectManager is online project management software that gives you control over every aspect of creating and implementing a strategic plan. Try it today with this free 30-day trial.
Deliver your projects on time and under budget
Start planning your projects.
Strategic Management And Planning- What Is It And Why Is It Important?
The difference between strategic management and strategic planning.
Strategic planning is setting goals, identifying the resources needed to achieve those goals, and creating a plan to allocate those resources. It is usually a formal process done by an organization’s management team and may involve input from employees or stakeholders.
On the other hand, strategic management is the ongoing process of making decisions that align with an organization’s goals and objectives.
It involves monitoring and adjusting the plan and making decisions to help the organization achieve its goals. It also involves analyzing the external environment to identify opportunities and threats and adapting the program accordingly.
In summary, strategic planning is the process of creating a program, while strategic management is the process of implementing and adjusting that plan.
Fundamental Concepts Of Strategic Management
1. goal setting- fundamental concepts of strategic management.
Goal setting is an essential step in the strategic management process. It involves identifying an organization’s overall vision, mission, and objectives. Setting goals help define the purpose and direction of the business and provides a framework for decision-making.
A company can set goals for different timeframes, such as short-term, medium-term, or long-term. Short-term goals typically focus on immediate objectives and can be achieved within a year.
Medium-term goals usually have a time frame of 1-3 years and are focused on intermediate objectives. Long-term goals have a time frame of 3-5 years, or even more, and are focused on long-term objectives.
When setting goals, it is crucial to ensure they are Specific, Measurable, Achievable, Relevant, and Time-bound (SMART).
SMART goals should be specific, measurable, achievable, relevant to the organization’s mission and objectives, and have a specific timeframe for completion.
Clear and specific goals can help organizations focus their efforts and resources on the most critical initiatives and provide a framework for monitoring progress and evaluating the strategy’s effectiveness.
It also allows employees to understand the company’s objectives and how their role contributes to its success.
2. Analysis Strategy Formation- Fundamental Concepts Of Strategic Management
Analysis strategy formation is an essential step in the strategic management process. It involves analyzing the internal and external environment to identify opportunities and threats that may impact the organization’s ability to achieve its goals. The SWOT analysis is another name for this stage of the process.
SWOT analysis includes the following steps:
Identifying the organization’s strengths involves identifying the resources, capabilities, and competencies that give it a competitive advantage.
Identifying the organization’s weaknesses involves identifying areas where the organization is at a disadvantage or lacks the resources, capabilities, or competencies to compete effectively.
Identifying opportunities involves identifying external factors such as technological changes, market trends, or emerging competitors that could provide the organization with new opportunities for growth or expansion.
Identifying threats involves identifying external factors such as economic downturns, regulation changes, or increased competition that could negatively impact the organization’s performance.
Using the outcome of the SWOT analysis, develop a strategic plan that will enable the organization to capitalize on its strengths, address its weaknesses, take advantage of opportunities, and mitigate threats.
Also, I would like to point out that you should periodically update the SWOT analysis to reflect changes in the internal and external environment. Doing so will help the organization to stay aware of potential opportunities and threats and make necessary adjustments to its strategy.
3. Strategy Formation- Fundamental Concepts Of Strategic Management
Strategy formation is developing a plan that outlines an organization’s specific actions and initiatives to achieve its goals. The evaluation of both the internal and the external environment comes into play during this phase of the strategic management process, making it a critical stage in its own right.
The strategy formation process typically involves the following steps:
Setting goals and objectives: This step involves identifying the organization’s vision, mission, and objective dreams
Conducting a SWOT analysis: This step involves analyzing the internal and external environment to identify the organization’s strengths, weaknesses, opportunities, and threats.
Identifying strategic options: Following the completion of the SWOT analysis, the company will determine the number of potential courses of action for achieving its objectives based on the analysis findings.
Evaluating strategic options: The organization will assess each option against criteria such as feasibility, alignment with the organization’s goals and objectives, and potential impact.
Selecting the final strategy: Based on evaluating the strategic options, the organization will choose the strategy it believes will most effectively achieve its goals.
Developing a strategic plan: After deciding on a strategy, the business will design a program detailing the steps and initiatives to implement the chosen method.
Implementing the strategic plan involves allocating resources and mobilizing employees to execute the plan.
Strategy formation is a critical step in the strategic management process. It helps the organization make informed decisions, allocate resources efficiently, and stay aligned with its objectives, increasing the chances of achieving long-term success.
4. Strategy Implementation- Fundamental Concepts Of Strategic Management
Strategy implementation is implementing a strategic plan. It is a crucial step in the strategic management process and involves executing the specific activities and initiatives outlined in the strategic plan.
The strategy implementation process typically involves the following steps:
Allocating resources: This step involves assigning the necessary resources, such as personnel, finances, and technology, to execute the plan.
Developing an organizational structure: This step involves creating an organizational structure that supports the implementation of the strategy, such as creating new roles, teams, or departments.
Communicating the plan: This step involves communicating with employees, stakeholders, and other relevant parties to ensure everyone knows the objectives and how their role contributes to achieving the goals.
Establishing performance metrics: This step involves setting metrics to track progress and measure the strategy’s effectiveness.
Training and development: This step involves providing employees with the necessary training and development to execute the plan effectively.
Implementing the plan: This step involves taking the necessary actions to execute the project, such as launching a new product, entering a new market, or implementing a new process.
Monitoring and evaluating progress: This step involves tracking the plan’s progress and assessing the strategy’s effectiveness. You can make adjustments to the planned project needed.
It is essential to put a plan into action that will ensure the most efficient use of resources and unify the efforts of all employees toward a common goal to achieve success.
By checking up on and analyzing data, businesses can ensure their plans are constantly evolving to meet the changing needs of their operations while remaining true to their original vision.
5. Strategy Monitoring- Fundamental Concepts Of Strategic Management
Monitoring strategies involve keeping tabs on developing a plan and gauging how well it works. In strategic management, it is an essential yet continual activity. In this way, businesses can ensure their strategies align with their ultimate goals.
The strategy monitoring process typically involves the following steps:
Establishing performance metrics: This step involves setting performance to measure the strategy’s effectiveness. These metrics should align with the organization’s goals and objectives and be used to track progress over time.
Collecting data: We gather information about key performance indicators and related statistics. These details help monitor development and identify issues when they arise.
Analyzing data: This step involves analyzing the data collected to identify trends, patterns, and areas for improvement.
Evaluating progress: This step involves assessing progress against the performance metrics and the organization’s goals and objectives.
Identifying areas for improvement: The company will determine where the plan may be enhanced by analyzing the data and assessing the results.
Adjustments: This step involves adjusting the strategy to address issues or concerns and staying aligned with the organization’s goals and objectives.
Communicating updates: This step involves communicating any updates or adjustments to the strategy to employees, stakeholders, and other relevant parties.
Regularly monitoring and evaluating the progress of a strategy helps organizations stay on track and make necessary adjustments to their plan as needed. It also enables them to take advantage of new opportunities, anticipate and address potential issues, and improve overall performance.
4 Key Concepts Of Strategic Planning
1. vision and mission statements- key concepts of strategic planning.
An organization’s vision statement lays out its long-term objectives and serves as an operation. A mission statement is an organization’s purpose and goals, outlining what the organization does and for whom.
Vision and mission statements are essential for strategic planning as they provide a clear direction for the organization and help align its members’ actions. The vision statement often provides the “big picture” view of the organization’s future, while the mission statement outlines an organization’s steps p to achieve that future. Together, they help to define the organization’s overall strategy and goals.
2. Financial/Operational Objectives- Key Concepts Of Strategic Planning
Financial objectives are goals related to an organization’s financial performance, such as increasing revenue, profitability, or return on investment. They are often used to measure the success organization’s overall strategy and resources.
Operational objectives are goals related to the day-to-day operations of an organization, such as improving efficiency, productivity, or quality. They are often used to measure the effectiveness of specific processes and identify improvement areas.
Both financial and operational objectives are essential for strategic planning as they help an organization set specific and measurable targets for performance and allocate resources effectively.
The financial goals indicate the organization’s overall financial health and success, while the operational objectives offer insight into its ability to execute its strategy effectively. Together, they help the organization achieve its goals and to remain competitive in the market.
3. Required Resource Estimation- Key Concepts Of Strategic Planning
Estimating the reThe required resource estimation is estimated by calculating the resources (such as money, people, and materials) needed to accomplish a given task estimation is a crucial part of strategic planning because it ensures the business has the means to put its strategy into action and reach its objectives.
The company estimates the time, money, and other resources to implement its strategy, including the price tag for necessary tools, personnel, and raw materials. The budget and expected income are compared with these predictions to see if the company has enough money to carry out its strategy.
The organization must adjust its strategy or find additional resources if it has the necessary resources. You can use fundraising, cost-cutting initiatives, and other financial strategies to accomplish this goal.
In summary, required resource estimation is a critical step in strategic planning. It helps to identify what resources are needed and in what quantity. Doing so will aid the organization in ensuring it has the necessary resources to execute its strategy and achieve its goals. It also helps the organization plan for contingencies and to identify ways to acquire additional resources if needed.
4. Summary Of Plans- Key Concepts Of Strategic Planning
A summary of plans is a condensed version of an organization’s strategic plan that highlights essential elements and critical actions. It serves as a quick reference guide for the organization and its members, providing a clear and concise overview of its goals, objectives, and strategy.
The summary of plans typically includes
The organization’s vision and mission statement
A summary of the organization’s goals and objectives
A brief overview of the organization’s current situation and external environment
A summary of the organization’s strategy, including significant actions and initiatives to attain the goals and objectives
A summary of the resources required to implement the strategy, including financial, human, and material resources
A summary of the KPIs used to monitor progress and success.
A summary of plans is vital for strategic planning as it helps to communicate the organization’s strategy and goals to all members, providing a clear and concise overview of the program that can be easily understood and followed. It also serves as a reminder of the organization’s priorities and goals, helping members to stay focused and aligned with the overall strategy.
A summary of plans is a condensed version of an organization’s strategic plan. It highlights the essential elements and critical actions.
It serves as a quick reference guide for the organization and its members, providing a clear and concise overview of its goals, objectives, and strategy.
It is essential for strategic planning as it helps to communicate the organization’s strategy and plans to all members and serves as a reminder of its priorities and goals.
Types Of Strategic Management And Planning Strategies
There are several different strategic management and planning strategies that organizations can use, including
1. Corporate Strategy- Types Of Strategic Management And Planning Strategies
This strategy focuses on the overall direction and scope of the organization. It addresses questions such as which businesses the organization should be in and how it should compete in those businesses.
2. Business Strategy- Types Of Strategic Management And Planning Strategies
This strategy focuses on how a specific business or unit will compete and create value.
3. Functional Strategy- Types Of Strategic Management And Planning Strategies
This strategy focuses on how specific organizational functions, such as marketing or production, will support the overall business strategy.
4. Growth Strategy- Types Of Strategic Management And Planning Strategies
This strategy focuses on expanding the organization’s operations through internal growth or acquisitions.
5. Turnaround Strategy- Types Of Strategic Management And Planning Strategie
This strategy focuses on improving the performance of an underperforming business or unit within the organization.
6. Stability Strategy- Types Of Strategic Management And Planning Strategies
This strategy focuses on maintaining the organization’s current performance and operations.
7. Retrenchment Strategy- Types Of Strategic Management And Planning Strategies
This strategy focuses on reducing the organization’s operations, often in response to financial difficulties or changes in the external environment.
8. Divestiture Strategy- Types Of Strategic Management And Planning Strategies
This strategy focuses on selling or spinning off a business unit or subsidiary.
Each of these strategies has its objectives, activities, and resources for achieving the organization’s objectives. Depending on the conditions and organizational context, organizations may employ one or a combination of these techniques to accomplish their objectives.
Importance Of Strategic Management And Planning In Business
Strategic management and planning are essential because they provide a framework for setting goals and objectives, aligning resources, and making decisions to help an organization achieve its long-term vision and mission.
1. Setting Direction- Strategic Management And Planning In Business
Strategic management and planning provide a clear direction for the organization, helping it to focus on the most critical issues and opportunities and to make better use of its resources.
2. Improving Performance- Strategic Management And Planning In Business
By setting specific and measurable goals and objectives, strategic management and planning help organizations improve their performance, increase efficiency, and achieve a competitive advantage.
3. Adapting To Change- Strategic Management And Planning In Business
Strategic management and planning help organizations identify and respond to changes in the external environment, such as shifts in market conditions or technological advancements, which can significantly impact the organization’s success.
4. Building A Strong Culture- Strategic Management And Planning In Business
A well-designed and executed strategic plan can create a strong organizational culture, giving all members a clear sense of purpose and direction.
5. Coordinate Resources- Strategic Management And Planning In Business
Strategic management and planning integrate resources with the organization’s goals and objectives, finding areas for consolidation or reallocation.
6. Facilitating Decision-Making- Strategic Management And Planning In Business
Decisions consistent with the organization’s overall strategy are more likely to be successful, reducing the risk of making decisions outside the organization’s overall strategy.
In summary, strategic management and planning are critical to the success of an organization as they provide a framework for setting direction, improving performance, adapting to change, building a solid culture, aligning resources, and facilitating decision-making.
Strategic Management And Planning: What Is It And Why Is It Important? – Conclusion
In conclusion, strategic management and planning are setting goals and objectives, aligning resources, and making decisions to help an organization achieve its long-term vision and mission.
It is a continuous process that allows organizations to adapt to external environment changes and improve performance.
Strategic management and planning are vital because it helps organizations to
Set direction and focuses on the most critical issues and opportunities
Improve performance and achieve a competitive advantage
Respond to changes in the external environment
Build a strong culture within the organization
Align resources with the organization’s goals and objectives
Facilitate decision-making and improve the quality of decision-making
An effective strategic management and planning process is essential for the success and sustainability of an organization in the long term. It provides a framework for making informed and strategic decisions that will help the organization to achieve its goals and to remain competitive in the market.
Strategic Management And Planning: What Is It And Why Is It Important – Recommended Reading
Strategic Planning: How to Create A Strategic Plan That Works (benjaminwann.com)
Strategic Planning – Definition, Steps, Examples, And Tips (benjaminwann.com)
Strategy Evaluation – What It Is And How To Build An Effective Evaluation Process (benjaminwann.com)
Why Is Strategic Planning Important? | HBS Online
The Difference Between Strategic Management And Strategic Planning (changinghighered.com)
(47) A Plan Is Not a Strategy – YouTube
Frequently Asked Questions- Strategic Management And Planning
1. how do i become a better strategist.
Becoming a better strategist requires combining knowledge, skills, and experience. Understand your industry and market and learn strategic management and planning to better your strategic thinking and planning. Build various networks, critical practice thinking and problem-solving, collect and evaluate data, learn from experience, and grow.
2. Are Strategic Management And Planning The Same?
Strategic management and strategic planning are related but distinct concepts. Strategic management is the overall process of managing an organization’s resources to achieve its goals and objectives.
In contrast, strategic planning is a specific aspect of strategic management that deals with developing a long-term plan for an organization. Both are important for the success and sustainability of an organization in the long term, but they have different scopes, processes, and outcomes.
3. How Do You Make A Strategic Plan?
Making a strategic plan involves defining the organization’s mission, vision, and values, conducting a situation analysis, setting goals and objectives, developing a strategy, creating an action plan, monitoring and evaluating progress, and continuously improving.
It’s essential to involve key stakeholders and ensure the plan is realistic, achievable, and aligned with the organization’s overall vision and mission.
Meet The Author
The Rise of Remote Work in Accounting: Pros and Cons
The rise of remote work in accounting presents numerous advantages and challenges. Benefits include increased flexibility, improved work-life balance, wider access to talent, reduced overhead costs, and boosted productivity. However, challenges include communication issues, potential teamwork difficulties, worries over data security, and the risk of isolation or burnout. Technology plays a critical role in this shift, with tools facilitating various accounting functions remotely. The COVID-19 pandemic further accelerated the adoption of remote work, and future advancements are expected to continue reshaping this landscape.
Cost Accounting Limitations – Explained and Overcome
Despite these limitations, cost accounting is a valuable tool that can help businesses make better decisions. By understanding its limitations and taking steps to mitigate them, companies can get more accurate information to make better decisions.
Is Leaving an Accounting Career Worth it?
Accounting is a demanding career that requires knowledge of mathematics, business, and accounting principles. However, recent studies have shown that there are other career options out there that may be more fulfilling. Some professionals in the accounting field say that it’s worth staying in the field if you enjoy working with numbers and meeting deadlines. Others say that a different career path would be more rewarding. Before deciding whether or not to leave the accounting field, it’s essential to consider all of your options and weigh them against the pros and cons of remaining in the field.
Subscribe to discover my secrets to success. Get 3 valuable downloads, free exclusive tips, offers, and discounts that we only share with my email subscribers.
- Terms of Service
- [email protected]
© Accounting Professor 2023. All rights reserved
How it works
Transform your enterprise with the scalable mindsets, skills, & behavior change that drive performance.
Explore how BetterUp connects to your core business systems.
Build leaders that accelerate team performance and engagement.
Unlock performance potential at scale with AI-powered curated growth journeys.
Build resilience, well-being and agility to drive performance across your entire enterprise.
Transform your business, starting with your sales leaders.
Unlock business impact from the top with executive coaching.
Foster a culture of inclusion and belonging.
Accelerate the performance and potential of your agencies and employees.
See how innovative organizations use BetterUp to build a thriving workforce.
Discover how BetterUp measurably impacts key business outcomes for organizations like yours.
A demo is the first step to transforming your business. Meet with us to develop a plan for attaining your goals.
- For Individuals
Best practices, research, and tools to fuel individual and business growth.
View on-demand BetterUp events and learn about upcoming live discussions.
The latest insights and ideas for building a high-performing workplace.
- BetterUp Briefing
The online magazine that helps you understand tomorrow's workforce trends, today.
Innovative research featured in peer-reviewed journals, press, and more.
Founded in 2022 to deepen the understanding of the intersection of well-being, purpose, and performance
We're on a mission to help everyone live with clarity, purpose, and passion.
Join us and create impactful change.
Read the buzz about BetterUp.
Meet the leadership that's passionate about empowering your workforce.
Strategic planning: Read this before it's that time again
Understand Yourself Better:
Big 5 Personality Test
Jump to section
What is strategic planning?
What is strategic plan management?
Benefits of robust strategic planning and management
10 steps in the strategic planning process.
Plans are worthless, but planning is everything. - Dwight D. Eisenhower
It’s that time again.
Every three to five years, most larger organizations periodically plan for the future. Many times strategic planning documents are shelved and forgotten until the next cycle begins. On the other hand, many smaller and newer organizations, propelled by urgency, may not devote the necessary time and energy to the strategic planning process.
Only 63% of businesses plan more than a year out. They fail to see that — contrary to Alice in Wonderland’s Cheshire cat — “any way” does not take you there.
For all organizations, a more rigorous annual planning process is critical for driving future success, profitability, value, and impact.
John Kotter, a former professor at Harvard Business School and noted expert on innovation says, “ Strategy should be viewed as a dynamic force that constantly seeks opportunities, identifies initiatives that will capitalize on them, and completes those initiatives swiftly and efficiently.”
There’s hardly a better case that can be made for dynamic planning than in the tech industry, where mergers and acquisitions are accelerating exponentially. Companies need to be nimble enough to navigate rapid change . In this case, planning should occur quarterly.
Strategic planning is an ongoing process by which an organization sets its forward course by bringing all of its stakeholders together to examine current realities and define its vision for the future.
It examines its strengths and weaknesses, resources available, and opportunities. Strategic planning seeks to anticipate future industry trends . During the process, the organization creates a vision, articulates its purpose, and sets strategic goals that are long-term and forward-focused.
Those strategic goals inform operational goals and incremental milestones that need to be reached. The operational plan has clear objectives and supporting initiatives tied to metrics to which everyone is accountable . The plan should be agile enough to allow for recalibrating when necessary and redistributing resources based on internal and external forces.
The output of the planning process is a document that is shared across the enterprise.
Strategic planning for individuals
Strategic planning isn’t just for companies. At BetterUp, strategic planning is one of the skills that we identify, track, and develop within the Whole Person Model . For individuals, strategic planning is the ability to think through ways to achieve desired outcomes. Just as strategic planning helps organizations realize their goals for the future, it helps individuals grow and achieve goals in a unified direction.
Working backward from the desired outcome, effective strategic planning consists of coming up with the steps we need to take today in order to get where we want to be tomorrow.
While no plan is infallible, people who develop this skill are good at checking to make sure that their actions are in alignment with the outcomes that they want to see in the future. Even when things don’t go according to plan, their long-term goals act as a “North star” to get them back on course. In addition, envisioning desired future states and figuring out how to turn them into reality enhances an individual’s sense of personal meaning and motivation.
Whether we’re talking about strategic planning for the company or the individual, strategic plans can go awry in a variety of ways including:
- Unrealistic goals and too many priorities
- Poor communication
- Using the wrong measures
- Lack of leadership
The extent to which that document is shelved until the next planning cycle or becomes a dynamic map of the future depends on the people responsible for overseeing the execution of the plan.
What is strategic plan management?
"Most people think of strategy as an event, but that’s not the way the world works," according to Harvard Business School Professor Clayton Christensen. "When we run into unanticipated opportunities and threats, we have to respond. Sometimes we respond successfully; sometimes we don’t. But most strategies develop through this process. More often than not, the strategy that leads to success emerges through a process that works 24/7 in almost every industry."
Strategic business management is the ongoing process by which an organization creates and sustains a successful roadmap that moves the company in the direction it needs to move, year after year, for long-term success. It spans from research and formulation to execution, evaluation, and adjustment. Given the pace of change, strategic management is more relevant and important than ever for assigning measurable goals and action steps
Many organizations fail because they don’t have the strategic management team at the table right from the beginning of the planning process. A strategic plan is only as good as its ability to be executed and sustained.
A strategic management initiative might be driven by an internal group — many companies have an internal strategy team — or an outside consulting firm. Ultimately company leaders need to own executing and sustaining the strategy.
Strategic management teams
In this Harvard Business Review article, Ron Carucci from consulting firm Navalent reports that 61% of executives in a 10-year longitudinal study felt they were not prepared for the strategic challenges they faced upon being appointed to senior leadership roles. Lack of commitment to the plan is also a contributing factor. In addition, leaders attending to quarterly targets, crisis management , and reconciling budgets often consider the execution of a long-term strategy a low priority.
A dedicated strategic management team works with those senior leaders and managers throughout the organization to communicate, coordinate and evaluate progress against goals. They tie strategic objectives to day-to-day operational metrics throughout the enterprise.
A good strategic management group can assist in creating a culture of empowerment and learning . It holds regular meetings with employees. It sets a clear agenda and expectations to make the strategic plan real and compelling to the organization through concrete objectives, results, and timelines.
Strategy development is a lot of work, but the benefits are lasting. After all, as the saying goes, "If you fail to plan, you plan to fail." Taking the time for review and planning activities has the following benefits:
- Organizations and people are set up to succeed
- Increased likelihood of staying on track
- Decreased likelihood of being distracted or derailed
- Progress through the plan is communicated throughout the organization
- Metrics facilitate course correction
- Budgets enterprise-wide are based on strategy
- Cross-organization alignment
- Robust employee performance and compensation plans
- Commitment to learning and training
- A robust strategic planning process gets everyone involved and invested in the organizations
- Employees inform management about what’s working or not working at the operational level
- Innovation is encouraged and rewarded
- Increased productivity
1. Define mission and vision
Begin by articulating the organization's vision for the future. Ask, "What would success look like in five years?" Create a mission statement describing organizational values and how you intend to reach the vision. What values inform and determine mission, vision, and purpose?
Purpose-driven strategic goals articulate the “why” of what the corporation is doing. It connects the vision statement to specific objectives, drawing a line between the larger goals and the work that teams and individuals do.
2. Conduct a comprehensive assessment
This stage includes identifying an organization’s strategic position.
Gathering data from internal and external environments and respective stakeholders takes place at this time. Involving employees and customers in the research.
The task is to gather market data through research. One of the most critical components of this stage is a comprehensive SWOT analysis that involves gathering people and bringing perspectives from all stakeholders to determine:
- W eaknesses
- O pportunities
Strengths and weaknesses — In this stage, planners identify the company’s assets that contribute to its current competitive advantage and/or the likelihood of a significant increase in the organization’s market share in the future. It should be an objective assessment rather than an inflated perspective of its strengths.
An accurate assessment of weaknesses requires looking outward at external forces that can reveal new opportunities as well as threats. Consider the massive shift in multiple industries whose strategy has been disrupted by the COVID-19 pandemic. While it was disastrous to the airline and restaurant industries’ business models , tech companies were able to seize the opportunity and address the demands of remote work.
Michael Porter’s book Competetive Strategy: Techniques for Analyzing Industries and Competitors claims that there are five forces at work in an industry that influence that industry’s ability to develop a competitive strategy. Since the book was published in 1979, organizations have turned to Porter’s theory to create their strategic framework.
Here are the 5 forces (and key questions) that determine the competitive strategy for most industries.
- Competitive rivalry : When considering the strengths of an organization’s competitors it’s important to ask: How do our products/services hold up to our competition? If the rivalry is intense, companies need to consider what capacity they have to gain leverage through price cuts or bold marketing strategies. If there is little competition, the organization has a substantial gain in the market.
- Supplier power: How might suppliers influence strategy? For example, what if suppliers raised their prices? To what extent would a company need a particular supplier for our product(s)? Is it possible to switch suppliers in a way that is more cost effective and efficient? The number of suppliers that exist will determine your ability to keep costs low.
- Buyer power: To what extent do buyers have the ability to shop around right into the hands of your competitors? How much power does your customer base have in determining price? A small number of well-informed buyers shifts the power in their direction while a large pool may give you the strategic advantage
- Threat of substitution: What is the threat of a company’s buyer substituting your services/products from the competition? What if the buyer figures out another way to access the services/products that it offers?
- Threat of new entry: How easy is it for newcomers to enter the organization’s market?
Considering the factors above, determine the company’s value through financial forecasting . While almost certainly to become a moving target influenced by the five forces, a forecast can assign initial anticipated measurable results expected in the plan or ROI: profits/cost of investment.
4. Set the organizational direction of the business
The above research and assessment will help an organization to set goals and priorities. Too often an organization’s strategic plan is too broad and over-ambitious. Planners need to ask, ”What kind of impact are we seeking to have, and in what time frame?” They need to drill down to objectives that will have the most impact.
5. Create strategic objectives
This next phase of operational planning consists of creating strategic objectives and initiatives. Kaplan and Norton posit in their balanced scorecard methodology that there are four perspectives for consideration in identifying the conditions for success. They are interrelated and must be evaluated simultaneously.
- Financial : Such considerations as growing shareholder value, increasing revenue, managing cost, profitability, or financial stability inform strategic initiatives.
- Customer-satisfaction: Objectives can be determined by identifying targets related to one or some of the following: value for the cost, best service, increased market share, or providing customers with solutions.
- Internal processes such as operational processes and efficiencies, investment in innovation, investment in total quality and performance management , cost reduction, improvement of workplace safety, or streamlining processes.
- Learning and growth: Organizations must ask: Are initiatives in place in terms of human capital and learning and growth to sustain change? Objectives may include employee retention, productivity, building high-performing teams, or creating a pipeline for future leaders .
6. Align with key stakeholders
It’s a team effort. The success of the plan is in direct proportion to the organization’s commitment to inform and engage the entire workforce in strategy execution. People will only be committed to strategy implementation when they're connected to the organization's goals. With everyone pulling in the same direction, cross-functional decision-making becomes easier and more aligned.
7. Begin strategy mapping
A strategy map is a powerful tool for illustrating the cause-effect of those perspectives and connecting them to between 12 and 18 strategic objectives. Since most people are visual learners, the map provides an easy-to-understand diagram for everyone in the organization creating shared knowledge at all levels.
8. Determine strategic initiatives
Following the development of strategic objectives, strategic initiatives are determined. These are the actions the organization will take to reach those objectives. They may relate initiatives related to factors such as scope, budget, raising brand awareness, product development, and employee training.
9. Benchmark performance measures and analysis
Strategic initiatives inform SMART goals to which metrics are assigned to evaluate performance. These measures cascade from senior management to management to front-line workers. At this stage, the task is to create goals that are specific, measurable, attainable, relevant, and time-based informing the operational plan.
Benchmarks are established against so that performance can be measures, and a time frame is created. Key performance indicators (KPI’s) are assigned based on organizational goals. These indicators align workers’ performance and productivity with long-term strategic objectives.
10. Performance evaluation
Assessment of whether the plan has been successful . It measures activities and progress toward objectives and allows for the creation of improved plans and objectives in order to improve overall performance .
Think of strategic planning as a circular process beginning and ending with evaluation. Adjust a plan as necessary. The pace at which review of the plan is necessary may be once a year for many organizations or quarterly for organizations in rapidly evolving industries.
Prioritizing the strategic planning process
The strategic planning meeting may have a reputation for being just another to-do, but it might be time to take a second look. With the right action plan and a little strategic thinking, you can reinvigorate your business environment and start planning for success.
It's that time to get excited about the future again.
Betterup Fellow Coach, M.S.Ed, M.S.O.D.
4 reasons why you can't afford to skip out on succession planning
Contingency planning: 4 steps to prepare for the unexpected, the only guide you’ll ever need for career planning, strategic plan vs. work plan: what's the difference, declining capabilities in productivity and wellness signal a need for worker support, how to excel at life planning (a life planning template), what is strategic plan management and how does it benefit teams, strategy versus tactics: planning and executing on your goals, what is an action plan how to become a real-life action hero, similar articles, everything you need to know about strategic leadership, when you need to set the direction, swot analysis is a classic tool, how organizational effectiveness enhances how you work and grow, strategy vs. tactics: the difference is execution, stay connected with betterup, get our newsletter, event invites, plus product insights and research..
3100 E 5th Street, Suite 350 Austin, TX 78702
- Platform Overview
- BetterUp Lead
- BetterUp Manage™
- BetterUp Care™
- Sales Performance
- Diversity & Inclusion
- Case Studies
- Why BetterUp?
- News and Press
- Leadership Team
- Become a BetterUp Coach
- BetterUp Labs
- Center for Purpose & Performance
- Leadership Training
- Business Coaching
- Contact Support
- Contact Sales
- Acceptable Use Policy
- Trust & Security
- Cookie Preferences
- SUGGESTED TOPICS
- The Magazine
- Managing Yourself
- Managing Teams
- Work-life Balance
- The Big Idea
- Data & Visuals
- Reading Lists
- Case Selections
- HBR Learning
- Topic Feeds
- Account Settings
- Email Preferences
Strategic Planning in Diversified Companies
- Richard F. Vancil
- Peter Lorange
The widely accepted theory of corporate strategic planning is simple: using a time horizon of several years, top management reassesses its current strategy by looking for opportunities and threats in the environment and by analyzing the company’s resources to identify its strengths and weaknesses. Management may draw up several alternative strategic scenarios and appraise them […]
The widely accepted theory of corporate strategic planning is simple: using a time horizon of several years, top management reassesses its current strategy by looking for opportunities and threats in the environment and by analyzing the company’s resources to identify its strengths and weaknesses. Management may draw up several alternative strategic scenarios and appraise them against the long-term objectives of the organization. To begin implementing the selected strategy (or continue a revalidated one), management fleshes it out in terms of the actions to be taken in the near future.
- RV Mr. Vancil is professor of business administration at the Harvard Business School and chairman of its Control Area faculty. His most recent HBR article was “Inflation Accounting—The Great Controversy” (March–April 1976). His book, Strategic Planning Systems, will be published next January by Prentice-Hall.
- PL Peter Lorange is the president of IMD International in Lausanne, Switzerland, where he is also a professor of strategy and holds the Nestlé Chair.