Long-term planning and strategic management are common phrases used in the business world. Both are essential to the effective management of an organization. Long term planning and strategic management have many similarities, and the terms are sometimes used interchangeably. While some organizations may use what is referred to as long-term strategic planning, this is a hybrid of the two separate planning methods. There are a few essential distinctions which are important to understand when undertaking either long-term planning or strategic management.
Long-Term Planning Definition
The Business Dictionary website defines long-term planning as an “exercise aimed at formulating a long-term plan, to meet future needs estimated usually by extrapolation of present or known needs. It begins with the current status and charts out a path to the projected status, and generally includes short-term (operational or tactical plans) for achieving interim goals.” Long-term planning commonly makes use of the PEST analysis to identify external factors such as political, economic, social and technological factors which may affect the organization’s ability to maintain a sustainable competitive advantage. The organization then develops a plan to combat these external factors over the long term.
Strategic Management Definition
Strategic management is a specific process used to develop goals designed to align the day-to-day activities of the organization with its overall mission statement. Strategic management begins with a mission statement which concisely communicates the organization’s reason for being in existence. This process typically makes use of the SWOT analysis to identify the organization’s Strengths, Weaknesses, Opportunities and Threats. Leaders and managers then develop SMART goals to take advantage of these strengths and weaknesses and combat weaknesses and threats. SMART goals are goals which are Specific and Measurable, reasonably Achievable, Relevant to the mission statement and tied to a Timeline for completion. The organization then develops policies and procedures designed to achieve these specific goals.
Long-term planning and strategic management consist of many common elements. For example, both methods include some form of assessment of the organization’s current position in relation to its desired position. Both long-term planning and strategic management involve the development of goals or plans for achieving success. Additionally, some of the methods used for each, including the SWOT analysis and PEST analysis, may be used in the other.
Strategic management typically relates to organizational goals leaders wish to achieve over the midterm, typically two to four years into the future. Long-term planning, by definition, relates to organizational planning designed to create and maintain a sustainable competitive advantage over the long term. Long-term planning, in relation to midterm strategic planning, would then relate to a period of more than four years into the future. Additionally, strategic management generally includes the setting of specific and measurable goals which are related to the organization’s mission, while long-term planning includes the mapping of a specific path the organization will take to achieve its projected status. Long-term planning often focuses on combating external influences, while strategic management also involves the development of internal core competencies.