Elements of a Strategic Plan

In today's fast-paced economy, you must always be prepared to confront both internal and external challenges. It is the manager's challenge to continually evaluate his customer's needs and to strive to fulfill those needs. If you're in management or simply trying to manage your own workload, educate yourself in the elements of an efficient and effective strategic plan.

Planning and Strategy

According to Gareth R. Jones and Jennifer M. George's book, "Contemporary Management," planning identifies and selects "appropriate goals and courses of action." Strategy is a part of the planning process. Strategy are "decisions about what goals to pursue, what actions to take, and how to use resources to achieve goals." Basically, a strategy is the course of action that is needed to be taken in order to achieve these goals.

Jones and George list three steps in planning. First, determine the organization's mission and goals. You begin by defining the business and establishing its major goals. Companies define themselves using a mission statement. A mission statement is "a broad declaration of an organization's purpose that identifies the organization's products and customers and distinguishes the organization from its competitors." The mission statement reveals what is unique or important about the company while distinguishing and differentiating the company from competitors. Secondly, formulate a strategy by analyzing the present situation and developing a strategy. Strategies are developed to achieve organizational goals. Third, implement the strategy. The final step allocates responsibilities and resources amongst employees and are necessary to implement strategy.

Nature of the Planning Process

Understand the nature of the planning process. According to Jones and George, you first "establish and discover where an organization is at the present time, determine where it should be in the future, or its desired future state; and decide how to move it forward to reach that future state."

Jones and George state that planning is important because it "gives the organization a sense of direction and purpose." By stating which goals and strategies are important, an organization can remain focused and apply resources in an efficient and effective manner. Planning is also "a useful way of getting managers to participate in decision making about the appropriate goals and strategies for an organization." Effective planning allows managers of all levels to take part in the process. With a sense of empowerment through participation, they are more likely to accept these goals and move forward to achieving them. Also, all efforts from all levels of the organization are aligned toward the same goal. A plan can also be used as a tool to control various levels within the organization.

Levels of Planning

Three levels of management exist: corporate, business and functional. These levels are also known as upper-level management, mid-level management and low-level management. Every level within an organization allows for different types of planning that help benefit the organization. Jones and George state that corporate-level planning accounts for top management's "decisions concerning mission, over-all strategy, and structure." Business-level planning are "divisional managers' decisions pertaining to divisions' long-term goals, overall strategy, and structure." Functional-level planning are decisions pertaining to "the goals that they propose to pursue to help the division attain its business-level goals."

Time Horizons of Plans

Plans have different time horizons or the intended length of a plan. Long-term plans have a time horizon of 5 years or more. Intermediate-term plans have a horizon between the length of 1 and 5 years. Short-term plans have a horizon of 1 year or less. Corporate and business-level plans usually require long-term or intermediate-term plans, whereas, functional-level goals and strategies are typically intermediate-term and short-term plans.

Standing Plans and Single Use Plans

George and Jones state that "standing plans are used in situations in which programmed decision making is appropriate." When certain situations arise repeatedly, a standing plan is applied. Because such situations are familiar and expected, they can often be found in the company's operations manual. Single-use plans are created to handle "unusual or one-of-a-kind situations." These are typically in the form of programs or projects and take a certain degree of innovation to develop a customized plan to a unique situation.

Scenario Planning

Scenario planning, also known as contingency planning, take potential future situations into account when developing a plan. Jones and George define scenario planning as "the generation of multiple forecasts of future conditions followed by an analysis of how to respond effectively to each of those conditions." When conducting scenario planning, anticipate future opportunities and threats. The future is unpredictable; however, scenario planning will help managers to think strategically.

Formulating Strategy

According to Jones and George, SWOT analysis and the Five-Forces Model are common techniques used in strategic formulation. SWOT analysis identifies "internal organizational strengths (S) and weaknesses (W) and external environmental opportunities (O) and threats (T)." To develop a SWOT analysis, write a list that pertains to each of the four points in the SWOT acronym. SWOT analysis is helpful when applied to scenario planning in which environmental future opportunities and threats are taken into account. The Five Forces Model is also helpful during scenario planning. This technique focuses on threats in the external environment. Described by Jones and George, the five forces are as follows: level of industry rivalry, entry potential into the industry, power of large suppliers, power of large customers and threat of substitute products.

References

• Contemporary Management; Gareth R. Jones and Jennifer M. George; 2008

Resources

• Mind Tools: Quantitative Strategic Planning
• Mind Tools: Mission and Vision Statement
• Forbes.com: 'Mission Statement' Words