What is it?
Strategic planning is the process of developing the strategy or direction and action plan to achieve the goals of an organisation.
Key elements of any strategic planning process are:
- developing an understanding of vision, mission and values
- a current-state assessment of the most salient internal and external factors affecting the organisation that will contribute to an informed selection from strategic alternatives.
The vision, mission and values of the organisation are foundational elements of the strategic planning process. Well-defined vision and mission statements provide direction and focus for the organisation. The values of an organisation provide the context for decisions.
- Values are the shared set of beliefs that determine the culture of an organisation.
- Vision statements are future oriented and describe the desired or ideal state of the organisation or enterprise. They answer the question – where do we want to be?
- Mission statements describe the fundamental purpose of the organisation, why it exists and what it is trying to do to achieve its vision. Mission statements answer the question – what do we do?
Common tools for performing an assessment of the internal and external factors impacting on strategic decisions are SWOT, and PEST or PESTEL analysis.
SWOT (strength, weaknesses, opportunities, threats) analysis is a method for analysing the internal strengths and weaknesses, and the external opportunities and threats facing the enterprise.
Strengths include a company’s capabilities and resources that enable it to provide value and generate competitive advantage.
Weaknesses are issues that limit a company’s ability to exploit its strengths.
Opportunities provide an organisation with the chance to improve its competitive position.
Threats may come from competitors, individuals, organisations, regulatory bodies or other factors in the greater business environment.
PEST (political, economic, social, technology) analysis is a macro framework for expanding a SWOT analysis to include political and regulatory issues, economic factors, social norms and attitudes as well as demographics, and technological developments.
Some organisations expand the PEST analysis to include legal and environmental concerns (PESTEL).
Source: Improving Finance Function Effectiveness Tool. CGMA
What benefits do Strategic Planning Tools provide?
Strategic planning enables an organisation to set priorities, allocate resources and align employees with its mission and vision. Effective mission and vision statements reduce ambiguity and provide clarity and direction. Comprehensive SWOT and PEST analyses help an organisation to understand how to exploit its strengths, neutralise its weaknesses and take advantage of its opportunities.
Questions to consider implementing Strategic Planning Tools
- What are we doing today? How are we doing it? Who are we doing it for?
- Where do we want to go? What do we want to do going forward? How are we going to do it?
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Effective performance management with the Balanced Scorecard
A case study focusing on the Customer Solutions and Support business unit of BAE Systems (formerly British Aerospace Engineering) included in the referenced Balanced Scorecard (BSC) Report illustrates the role of vision, mission, values and SWOT/PEST analysis in the strategic planning process.
Step 1 involved a review of the competitive position of the company, technological trends and financial performance by the CEO.
Step 2 was a comprehensive SWOT analysis undertaken by a broader group of managers and employees.
Step 3 took the form of a vision statement based on BAE’s five fundamental values. This was created to clarify the direction the company needed to move and create consensus.
Strengths and weaknesses identified in the SWOT analysis were used to focus growth in three main areas in order to regain market dominance. Long-term targets were translated into short-term performance goals for individuals and project goals that linked to strategic objectives. Scorecard performance measures were tracked with a modified ‘traffic light’ system and shared with employees to reinforce their shared commitment.
Related and similar practices
Tool: Strategy mapping tool
Article: SWOT Analysis
Article: Pest Analysis
‘Strategy is about the basic value you're trying to deliver to customers, and about which customers you're trying to serve.’
Michael Porter. Fast Company, February 2001