Organizations undertake strategic planning to define the direction in which they want to proceed. Management first identifies the company’s long-term goals and vision and then devises strategies to attain them. Before an organization draws up its strategic plans, it first understands the external and internal environments it operates in. A well-drawn strategic plan does well for at least five to seven years. Continuous monitoring is required to see that no deviations creep up. Strategic plans always are documented on paper so that management can refer to them from time to time. There are several benefits of this typing of planning mechanism.
Strategic plans let managers know the direction in which they are proceeding. Management is able to decide on what product it will manufacture in the future. Management makes this decision after considering factors such as the current market scenario, the firm's vision, finances and skills. Strategic planning helps management set goals and targets for the company.
The organization is able to take stock of its internal and external environment. It acquaints itself with its competencies, weaknesses, prospects and perils. It then takes the appropriate steps to leverage on its competencies and prospects and allay its weaknesses and perils. For this it researches on ways and means it can gain a competitive advantage in the marketplace.
Allocation of Resources
The organization is able to formulate methods in which it can apportion its available resources in the best possible manner(s). The resources are both material resources as well as personnel resources. The company is able to contrast the availability of the resources with the actual requirements for the resources. It then transfers them from places where they are are available in abundance to areas where they are needed immediately. If the strategic plan were not in place, this could not have been achieved.
The organization is able to plan and budget for the future. When the organization knows in advance what it aims to achieve in the next two years, is able to take pertinent measures for it. For example, when the organization is diversifying into newer areas, it requires additional personnel. The strategic plan lets the organization budget for the additional wages and start with the hiring process well in advance. This way the organization is able to obtain the best talent in the market.