How does strategy relate to planning

Four Drivers of Strategy Execution. Strategic Plan Template. Ready to improve your plan execution? Related Articles. Goal Setting , Strategic Planning. Stay in the know. Enjoying the sneak peek? Get in touch for a live walkthrough. Fill out the form below to get your free guide to the Four Drivers of Strategy Execution! All members of an organization can benefit from learning about it in more detail. Understanding the key aspects of the process and effective implementation strategies is especially critical.

This article will define what strategic planning is, discuss when to use strategic planning, share helpful next steps and answer a few frequently asked questions.

Related: How to Grow Your Business. Strategic planning is a process used by organizations to identify their goals, the strategies necessary to accomplish those goals and the internal performance management system that will be used to monitor and evaluate progress.

Most organizations use a SWOT or gap analysis to identify the underlying factors driving their current performance. This, in turn, informs the selection of the most high-leverage strategies to create change.

While each organization is unique, the essential elements of any strategic plan include:. Creating a strategic plan when you first start a business is a helpful strategy to set your business up for success. Doing so can create a structure to guide the initial brainstorming that businesses are already engaged in when first starting up.

In this case, the strategic plan would be one component of the larger business plan that also includes a financial plan, marketing plan and operational or management plan. Strategic planning is especially helpful for new businesses to stay focused on a few key priorities. Related: 10 Steps to Starting a Business. Exhibit II, of course, makes no pretense of depicting the planning process as it is universally practiced; it is only illustrative. Nor is the process as neat and orderly as it appears here.

Moreover, while managers plan, the world keeps turning; so during a cycle events may oblige them to hold many meetings involving two levels. The first cycle of a formal planning process serves a dual purpose: 1 to develop a tentative set of agreements between corporate management and the division managers about overall strategy and goals, and thereby 2 to provide focus for the more detailed planning in the next cycle.

The process of reaching these initial agreements requires three discrete activities: establishing corporate objectives, drawing up division charters, and setting corporate goals. The ensuing discussion centers on these activities in a hypothetical but representative corporation whose fiscal year corresponds with the calendar year.

Naturally, its scope and the degree of detail provided vary greatly from one company to another. The preparation of such a statement gives division managers guidance as they begin strategic planning for their businesses.

So as a minimum the statement must include the intended company policies for allocating resources among the divisions. Therefore, the delineation of an explicit statement of corporate strategy is often deferred until the final step in the first cycle. In general, the more diverse the corporation, the less feasible it is to develop an explicit, cohesive strategy for its businesses and, therefore, the more desirable it is to make the resource allocation policies explicit at an early stage.

On the other hand, less diversified companies frequently delay preparing a strategy statement until the division heads have developed strategic proposals for their own businesses. Many large corporations are divisionalized, but not so many are highly diversified.

The more common practice is to delay the definition or redefinition of corporate strategy until it can be stated in fairly explicit terms. Giving the initiative to the division manager at this step challenges him to think strategically about the scope of his activities and then propose a charter broad enough to permit him to contribute significantly to achieving corporate objectives.

Formalizing this step in the planning process is an important device by which corporate management widens the horizons of division heads. An explicit charter also serves two secondary purposes: 1 it increases the likelihood of clear agreement between the top executives and the division manager about the scope of his activities, and 2 it reduces the risk of redundant efforts or competition between divisions. Obviously, the decision based on this analysis is crucial because the long-term performance of any division is a function of the strategy it adopts, and the performance of the company as a whole is likewise a function of the strategies of its particular businesses.

Although the initiative for identifying and analyzing strategic options lies with the division manager, guidelines that headquarters gives him for presentation of his proposals affect the way he pursues the task. Increasingly common is a request by corporate management that when he proposes a strategy and specifies goals, at the same time he also present a statement of the alternative strategies which he has evaluated and rejected.

The recommendations may also include a general statement of the action programs that would be developed to implement the strategy developed in more detail in the second cycle and a crude estimate of the resources that would be required. Detailed financial data are usually not included at this step because such information is not necessary to evaluate the strategy and because the effort of preparing it may go to waste if the recommendations are modified.

In the ensuing discussions, which extend over several meetings in late spring, corporate management and each division chief work toward reaching an agreement about the appropriate division strategy and goals. By the middle of June top management has prepared an explicit statement of corporate strategy and goals. In some companies this document is, in effect, a set of decisions on how resources are to be allocated among the divisions, as well as a forecast of the results expected from each.

In most cases, however, the statement is not intended to constitute a final resource allocation decision; rather, it is designed to provide feedback to the division managers about the corporate implications of the agreed-on business strategies. The presentation and discussion of corporate strategy and goals are also commonly used as a device to initiate the second cycle of the planning process. The sum of the recommended division goals is likely to be inadequate to achieve the goals envisioned by headquarters for the entire organization.

It can improve division performance by pressing, during the review of division recommendations, for more aggressive strategies and more ambitious goals. It can divert company resources into more promising businesses. This move may give rise to an acquisition program.

Momentum is a factor in the continued success of a diversified corporation—as with a rocket headed for the moon—and a wise chief executive does not dissipate it needlessly. Occasionally—perhaps inevitably—a major corporate shift is necessary, affecting one of its businesses.

Care must be taken to isolate the effect on the remaining businesses. In late spring a couple of years ago, for example, top management of a major diversified corporation went through its usual review of division strategic plans. But the eventual profits will be enormous. With minor modifications, top management approved the proposal. Three months later the company abruptly announced that the business would be discontinued and the investment written off.

Poor planning? Obviously, the decision to enter the business was a mistake. Taking the time to establish a comprehensive strategic plan means your business has a better awareness of its strengths and weaknesses and where it stands in the market, both individually and in relation to competitors. With a definitive mission and clear goals and objectives to work towards, your staff will know their efforts count towards something and will be motivated to do their job.

Strategic planning: Why do we need to do it? It outlines a clear path for your company No business can hope to succeed by not having a plan and simply hoping to stumble across success. It brings a sense of focus Because a strategic plan establishes a direction for your business to take, it will help it sharpen its focus in order to get there.