The article is about the importance of a strategic/ business plan and how it is essential for a business to survive in the industry.
What is planning
When companies talk about planning or figure out innovative ways to plan so that achieving a particular target in a stipulated time period can be less complicated, it is crucial to understand certain key points that could serve as a guidepost to reach that goal or that target-
- How to make a plan?
- How does it work?
- How to ensure that a plan is followed by all people in a group?
- How to make changes in a plan considering the direction in which the plan is going that is towards the goals set up at the beginning of the plan.
Types of Planning
The planning process is followed in different ways by every company depending on various factors.
Strategic planning aims to ensure employees and the managers are all working towards a common goal and they are all focused towards achieving the company’s objective. The priority is specified at the bigger picture. The plan usually runs for longer durations.
An action plan is more focused towards the day-to-day activities of the employees. It is mainly applied on the short term projects.
Tactical planning is also for shorter durations. It is designed to cover the activities and ensure the closure of the shorter goals. The bigger tasks are cut down into smaller tasks.
Large companies often consist of many different departments and it becomes difficult to assign duties to each department individually. That is when operational planning comes into the picture. The purpose of operational planning is to ensure that different departments in the corporation are working independently on different projects.
Assumption-based Planning (ABP)
Companies spend weeks in formulating a plan. After which they expect certain results after a few weeks, months etc. Thus an ‘Assumption bases plan’ is prepared for the same reason.
Some corporations also prepare a contingency plan. This plan mentions the worst situations that could occur due to reasons that cannot be controlled by the company and specifies back-up plans to recover from that situation.
Strategic Planning - Definition
Corporations cannot survive without a strong and well-designed plan. Entrepreneurs and the higher management of the companies ensure that a plan is developed in such a way that the possibilities of an error and chaos are minimal.
A strategic plan contains steps which is followed by the individuals in a company to reach a common objective/goal. The plan involves analyzing all the factors, both internal and external.
Strategic planning is an organization’s process of defining its strategy or direction and making decisions on allocating its resources to pursue this strategy, including its capital and people.
It is essential to understand the steps to follow while making a plan so that the chances of it being successful is more.
Four steps of strategic management/planning are –
A strategy contains five elements the management must consider when making decisions:
Arenas, Differentiators, Vehicles, Staging and Pacing, and Economic Logic.
- Arenas- Where will we be active?
- Differentiators. How will we get there?
- Vehicles- How will we win against competitors in the marketplace?
- Staging- How fast or slow are we going to go with regards to our plans and sequence of steps?
- Economic logic- How will we gain profits?
Components / Elements of Strategy Planning
- Core Values
- Strengths, Weaknesses, Opportunities & Threats – SWOT
- Measurement of progress made
Strategic Planning Process Model
Identify and write down goals
Understand Internal factors
Understand external factors
Perform SWOT Analysis
Why is strategic planning essential for an organization?
It is absolutely necessary to have a business plan at every stage in a company for reasons that will eventually earn the company various benefits.
- Provides direction and lays down long term goals.
- Provides financial benefits like higher profits, lower costs and high earnings per share (EPS).
- Serves as a warning of possible obstacles as all the possible outcomes are written down.
- Optimal utilization of resources
- Provides motivation