What is Strategic Plan?
The strategic plan is a long-term plan that aims for better formulation and implementation strategy to achieve organizational goals and sustainable competitive advantage.
It specifies where an organization will go in the future, how it will get there, and how it will know whether it has there or not. A strategic plan is usually focused on the entire organization. As a result, it differs from a business plan in that it is frequently associated with a specific product, service, or program.
The effectiveness of an organization’s strategic plans is influenced by its leadership, culture, competency, size, and expertise of planners. A strategic plan typically lasts for more than five years. Strategic management emphasizes making strategic plans to better implement strategies.
Its goal is to adapt to the environment while also gaining a competitive advantage. It also has a section on resource allocation. It lays out the organization’s long-term approach and includes the creation of a vision, mission, objectives, and strategy.
The importance of top-level management in the success of a strategic plan cannot be underestimated. To earn lower-level employees’ support and dedication, top-level management should involve them in the strategic planning process. With correct revisions to company and operating plans, a strategic plan is created. This aids in the coordination of an organization’s various departments.
Usually, a comprehensive strategic plan contains the following:
- A clear statement of strategic intent covering the vision, mission, business definition, goals, and objectives.
- Results of environmental appraisal, major opportunities, and threats, and critical success factors.
- Results of organizational appraisal, major strengths and weaknesses, and core competencies.
- Strategies are chosen and the assumptions under which those strategies would be relevant.
- Contingent strategies to be used under different conditions.
- Strategic budget for the purpose of resource allocation for implementing strategies and the schedule for implementation.
- Proposed organizational structure and the major organizational systems for strategy implementation including the top functionaries and their roles and responsibility.
- Functional strategies and the mode of their implementation.
- Measures to be used to evaluate performance and assess the success of strategy implementation.
Characteristics of Strategic Plan
The strategic plan is a long-term action that determines the scope and direction of an organization. The following are some of the notable characteristics or features of the strategic plan.
It is a long-term plan. It normally covers a period of over five years. It provides long-term direction to an organization.
Based on Environmental Analysis
Strategic plans involve the development of the vision, mission, objectives, and strategies of an organization. It is prepared on the basis of environmental analysis.
It always aims at establishing strategic fit i.e. fit between strength and opportunity through a proper plan. Strategic fit leads an organization towards the way of competitive advantage.
Involvement of Top Management
Since it is related to the long-term growth and development of an organization, the involvement of top-level management is a must. Top-level management has to play a dominant role in the formulation and implementation of the strategy. Hence, the competency and commitment of the top-level management directly affect the effectiveness of the strategic plan.
Set of Priority
It sets the priority of an organization in terms of the product and market. However, the priority may change with the change in the business conditions.
A Means Only
A strategic plan is a means of achieving organizational objectives. However, it is not an end itself.
Steps in the Process of Strategic Plan
How to make a strategic plan? Strategic plans provide a long-term road map for the organization. It must be prepared systematically and scientifically.
The following are the most commonly used steps in the strategic planning process. They are:
Define Vision and Mission
In the first step of the strategic planning process plan, vision, and mission of the organization are developed.
Vision: The expected picture of the future is called vision. It demonstrates what an organization’s ultimate goal is. As a result, a vision statement helps to determine a company’s desired future.
A vision statement, in other words, signals the direction of where an organization wants to go in the future. It reflects a company’s ideals and goals. It aims to win the hearts and minds of both employees and stakeholders. It should be short and sweet, making it simple to remember.
Mission: In terms of consumers, employees, suppliers, and the community, a mission statement defines a company. It reflects all aspects of the company, including product range and nature, cost, performance, service, market position, growth potential, technology utilization, and relationships with customers, employees, suppliers, competitors, and the community.
It also aids in the clarification of the company’s scope and objectives.
In the second step of the strategic planning process, an analysis of the business environment is done. It helps to collect information on the nature and trends of the environment.
Analysis of Internal Environment: It involves the analysis of resources, organizational policy, organizational structure, and objectives to assess the relative strength and weakness of the business.
Analysis of External Environment: The task and distant environments make up a company’s external environment. Customers, suppliers, shareholders, and trade unions make up the task environment, which is generally near to the firm.
A remote environment, similarly, is made up of political, legal, economic, socio-cultural, technological, environmental, and global elements. A company’s external environment is beyond its control. Business opportunities and threats are influenced by the external environment.
Determine Long-Term Goal
The long-term goal is decided in the third step of the strategic plan. A long-term goal is a business’s desired outcome over a long period of time. A company’s whole operation is focused on reaching a long-term goal.
To be most effective, the goal should be explicit, measurable, acceptable, realistic, time-bound, and flexible.
This is the last step of the strategic planning process. It involves selecting a particular strategy from among various strategies. A strategy is a long-term action plan formulated for achieving a competitive advantage. It defines a business and leads to sustainable growth and development. The strategy follows the vision, mission, and long-term goal.
Importance of Strategic Plan
Why a strategic plan is important? It is a means to achieve organizational long-term goals and objectives. The major importance of strategic planning can be mentioned below:
To realize the desired goals and objectives an organization should be strategically fit. Strategic fit by definition is the ideal balance between the opportunities of the organization and the resources it has. To achieve desired goals they must be linked in a proper manner. Strategic plans ensure strategic fit so they offer more likely to achieve the organizational goals.
It is obvious that strategic plans are directed to achieve a competitive advantage. By definition, it is the gain a company gets over its competing companies. To get a competitive edge a company should strive to offer goods and services which is ideal to competitors and also attract and are acceptable to customers.
Strategic plans provide enough insights to the organization about the market competition, condition, competitors’ strategy, price, product quality, and consumers’ tastes, and preferences. In addition, it also gives an idea to the firm about how to best perform in the competitive environment.
To go to the final destination an organization should have a clear direction to achieve goals as the vision statement looks like. A strategic plan helps the company to define a positive and clear direction in which the company should walk and also sets clear goals following the vision and mission statements that aid in achieving the ultimate goals of the organization.
A strategic plan provides a necessary foundation for a business to expand, take necessary steps, evaluate its steps, recompense its personnel, and set boundaries for effective decision-making.
Organizational Effectiveness and Efficiency
With the right and understandable plan and strategy, a manager becomes able to communicate with employees in an understandable way. When employee teams understand the tasks they are asked to do they do it in the most efficient and effective way.
In addition, the strategic plans are along with the employee’s competencies and organizational goals which eventually add up to the enhanced performance, productivity, overall efficiency, and effectiveness.
Hence a strategic plan is typically more than five years of plan to achieve organizational strategic goals and objectives. It is determined by the top manager hence while determining the manager should take into account all relevant considerations and also participate subordinate employees in order to come up with the most fit actionable strategic plan.