A strategic plan is the intended long-term relationship between an organization and its external environment. It is also called grand or master strategy, and is always the prerogative of top management. A strategic plan defines the overall character, mission and directions of an organization. A strategic plan is a high-level overview of the entire business, its vision, objectives, and values. This plan is the foundational basis of the organization and will dictate decisions in the long-term. The scope of the plan can be two, three, five, or even ten years. It answers such relevant questions as:
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1. What business are we in now and in what business will we be in the next 10 years?
2. Who are our customers and who should they be?
3. How do we compete?
4. What kind of organization are we?
5. What are we trying to achieve?
It should be noted that every organization operates in an environment harbouring certain controllable factors, such as economic and technological changes, competitors‘
actions, control and regulation of government and its agencies/agents, labour unions, customers unpredictable behaviour, and so on. All these factors not only affect the realisation of an organization‘s goals, but its very survival. In strategic planning, emphasis is usually placed upon predicting the future behaviour of external (uncontrollable) variables and the development of alternative courses of action in readiness for expected and unexpected events.
Since strategic planning involves more than long-range planning, it must therefore adopt a more systematic and integrative approach to all the organization‘s activities.
In doing so, there should be a detailed analysis of 1. The corporate structure of the company 2. The economy of the country
3. The position of the company in its markets and that of competitors 4. Trends in the economic and political arena
5. Possible future trends
6. Organizational audit or capability profile which analyses or diagnoses an organization‘s weaknesses, opportunities, threats and strengths.
An objective analysis and diagnosis of the above-mentioned factors is very important because once a strategic decision is made and implemented, the organization is irreversibly committed to large expenditures. As such a serious mistake in strategic planning can be disastrous. The perils are increased because of the uncontrollable nature of relevant factors. For example, a company may build a N50m
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plant which may become useless because its competitors also have overbuilt. Strategic planning is especially complicated in many highly technical industries that are subject to the ―law of acceleration‖ This law suggests that changes tend to occur at an increasing rate.
Finally, because of the complex and unpredictable nature of strategic plans, only qualified, experienced and dedicated high-level managers should participate in their formulation and implementation. Managers at every level will turn to the strategic plan to guide their decisions. It will also influence the culture within an organization and how it interacts with customers and the media. Thus, the strategic plan must be forward looking, robust but flexible, with a keen focus on accommodating future growth.
The crucial components of a strategic plan are:
a. Vision
Where does the organization want to be five years from now? How does it want to influence the world?
Vision describes set of ideals and priorities, a picture of the future, a sense of what makes the organization special and unique, a core set of principles that the organization stands for, and a broad set of compelling criteria that will help define organizational success.
A framework for examining vision is put forward by Collings and Porras (1991). They conceptualize vision as having two major components: a guiding philosophy, and a tangible image. They define the guiding philosophy as a system of fundamental motivating assumptions, principles, values and tenets.
The guiding philosophy stems from the organization‘s core beliefs and values and its purpose.
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b. Mission
Mission statement is the first stage of strategic planning. A well-defined mission statement can be described as a message that a business sends to its internal and external environments in which its business (goods and services produced, production activities, markets), values, philosophy, business approaches and differences from other businesses are described (Ülgen ve Mirze, 2005). An effective mission statement should also cover values of all stakeholder. To whom, where, and to which processes the business provides goods? What is its business philosophy, values, and its difference from other businesses in the same sector? Answers to these questions are found in business‘ mission statement. The difference of a business from others is stated by explaining employed technology, business values and philosophy. With similar approach, mission statement includes business‘ activity, main competitive advantages, differentiating features from others, philosophy, image, style, standards, and approach towards stakeholders.
c. Values
Values are standards or ideals with which we evaluate actions, people, things or situations e.g. Honesty, Peace, Justice. In thinking about values, it is useful to distinguish into three kinds
a. Personal Values – Values endorsed by an individual
b. Character Values – Character values are the universal values that you need to exist as a good human being.
c. Work Values – Work values are values that help you find what you want in a job and give you job satisfaction.
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As you can see, there are really no rules to writing the perfect strategic plan. This is an open-ended, living document that grows with the organization. You can write whatever you want in it, as long as it dictates the future of your organization.
For inspiration, just search for the value/mission/vision statement of your favorite companies on Google. Or, consider taking this course on business planning for average people.
3. Contingency Planning: In addition to the other types of plans – strategic, tactical, single use and standing plans, a contingency plan is also an element of an effective planning system. Contingency planning is the development of alternative courses of action to be taken if an intended plan is unexpectedly disrupted or rendered inappropriate. For example, suppose Mr. Biggs (a fast food subsidiary of U.A.C PLC) has made a plan of opening 30 new outlets in all major towns of the country in each of the next 5 years. Mr Biggs‘ top managers should realise that a shift in the economy and a change in consumer preferences might call for a different rate of expansion. In the light of this, the firm should develop two contingency plans alongside the long-term plan:
1. If the economy begins to expand beyond certain anticipated level (contingency event), then the rate of the firm‘s growth will increase from 30 to 50 new outlets per year (contingency plan).
2. If the economy takes a further down turn coupled with high rate of inflation, the expansion rate may be reduced from 30 to 15 outlets per year.
As part of a development process, organizations and their managers usually consider various contingency events. Since there is an infinite array of contingency events, only those with high probability of occurring and whose effects would have a substantial impact on the organization, should be pinpointed and used in the contingency planning process.
4. Succession Planning: Succession planning is a process for identifying and developing internal people with the potential to fill key business leadership positions
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in the company. Succession planning increases the availability of experienced and capable employees that are prepared to assume these roles as they become available.
What if your manager or an executive left suddenly? Is your organization prepared to replace a major player on your team? While ―missing‖ them is one thing, making sure your organization continues to grow beyond their departure is crucial to your overall success (obviously!). To make sure you don‘t skip more than a beat, you need to beef up your succession planning process.
Succession planning, however, needs to be more than just naming a successor for major company positions. A strong succession plan creates opportunities for managers as well as succession candidates because with a developed successor in place, managers are primed to move into new positions and pursue opportunities when those arise as well. Therefore, succession candidates must be groomed, developed and prepared to step into a new role when the opportunity arises so that the multi-shift can happen simultaneously as needed (not to put off until candidates are ―ready‖). You won‘t experience that lag time trying to figure out who can take over their responsibilities and continue on your path to growth without wasting time or additional resources.