The strategic planning process requires considerable thought and planning on the part of a company’s upper-level management - executives may consider many possible options.
The development and execution of strategic planning are typically viewed as consisting of being performed in three critical steps:
Strategy Formulation
In the process of formulating a strategy, a company will first assess its current situation by performing an internal and external audit. The purpose of this is to help identify the organization’s strengths and weaknesses, as well as opportunities and threats (SWOT Analysis). As a result of this analysis, managers decide on which plans or markets they should focus on or abandon, how to best allocate the company’s resources, and whether to take actions such as expanding operations through a joint venture or merger.
Strategy Implementation
After a strategy is formulated, the company needs to establish specific targets or goals related to putting the strategy into action, and allocate resources for the strategy’s execution. The success of the implementation stage is often determined by how good a job upper management does in regard to clearly communicating the chosen strategy throughout the company and getting all of its employees to “buy into” the desire to put the strategy into action.
Effective strategy implementation involves developing a solid structure, or framework, for implementing the strategy, maximizing the utilization of relevant resources, and redirecting marketing efforts in line with the strategy’s goals and objectives.
Strategy Evaluation
It involves three crucial activities: reviewing the internal and external factors affecting the implementation of the strategy, measuring performance, and taking corrective steps to make the strategy more effective. For example, after implementing a strategy to improve customer service, a company may discover that it needs to adopt a new customer relationship management (CRM) software program in order to attain the desired improvements in customer relations.
Benefits of Strategic Planning
Among the primary benefits derived from strategic planning are the following:
- Helps formulate better strategies using a logical, systematic approach
This is often the most important benefit. Some studies show that the strategic planning process itself makes a significant contribution to improving a company’s overall performance, regardless of the success of a specific strategy.
- Enhanced communication between employers and employees
Communication is crucial to the success of the strategic planning process. It is initiated through participation and dialogue among the managers and employees, which shows their commitment to achieving organizational goals.
- Empowers individuals working in the organization
The increased dialogue and communication across all stages of the process strengthens employees’ sense of effectiveness and importance in the company’s overall success. For this reason, it is important for companies to decentralize the strategic planning process by involving lower-level managers and employees throughout the organization. A good example is that of the Walt Disney Co., which dissolved its separate strategic planning department, in favor of assigning the planning roles to individual Disney business divisions.
Source: CFI
