Within today’s competitive business environment, both small and large businesses need strategic planning to survive and flourish. During strategic planning, all stakeholders will define or reappraise the company’s mission, define clear objectives, assess the external business environment and the internal strengths of the company. This process enables directors, shareholders, senior managers, and other employees to commit themselves to implement the strategy and evaluate the company’s progress, in order to make adjustments and achieve long term success.
When it is done properly, strategic planning helps to achieve the following benefits:
1. Establish Focus and Direction
Strategic planning helps all stakeholders to redefine the organisation’s vision, mission and fundamental values. This makes it easier for all key decision makers to understand the primary purpose of the firm and appreciate the direction it will take while pursuing future business opportunities.
With the guidance of the corporate vision, the company’s executives can define measurable strategic and financial objectives for the whole company. The strategic objectives will state where the company hopes to be in terms of reputation and market share. Similarly, financial objectives will state the projected targets for sales and revenue growth.
2. Create Consensus
Effective strategic planning gives top management an opportunity to agree on key issues that affect the future of the company. There will always be individual differences and diverse opinions about certain corporate objectives. But strategic planning encourages all directors and corporate leaders to learn to cooperate and accept joint responsibility for success.
During the planning process, every participant will be encouraged to contribute to the formulation of of the final strategy. Also, leaders of various departments will have an opportunity to provide information and ideas that will make the overall strategy implementation successful.
3. Enhance Competitive Advantage
Companies that want to remain ahead of their competitors need to have a distinct advantage. Merely looking at competitors and trying to duplicate their best practices will not allow the company to provide unique value to their customers. To guarantee long term success and customer retention, the company needs to have a strategy that differentiates them from others in the same industry.
During planning, a detailed analysis of the company’s internal strengths and weaknesses can reveal areas where the company can derive maximum benefit and offer customers services and products that will enable it to attain superior profitability.
4. Control Resources Effectively
Successful strategy formulation must be backed by effective budgetary and operational controls to ensure full implementation. Planning makes it easier for all managers to manage the firm’s human, financial and material resources prudently and set control mechanisms to avoid waste.
This may be done by setting a time frame for all tasks and fixing budgetary limits for each department or project. Invariably, this will make it easier to achieve all strategic and financial objectives.
5. Minimize Risk
Another important reason why business leaders should make strategic planning a top priority is that it cuts down risk when there’s economic downturn or uncertainty. Since strategic planning involves an on-going evaluation process, it puts the company at an advantage. There will be constant assessment of the strengths, opportunities, threats, competitors and the business environment. Consequently, it will be easier for the company executives to be proactive and make wise business management decisions.
Instead of following after business opportunities and trends that may not last long, strategic planners can make more intelligent projections based on facts and figures.
6. Enhance Employee Motivation
Involving employees in strategic planning helps to ensure successful implementation. This is particularly true in smaller companies. When employees are allowed to make contributions, they naturally take ownership of the plan and help to ensure that it succeeds. Employees who participate in the planning process also have higher levels of enthusiasm and motivation than those who don’t.
In larger companies, it is easier to use questionnaires to get all the views and contributions of all employees. To enhance the quality of these contributions, management should offer appropriate rewards to employees who give brilliant ideas.
7. Achieve Long Term Success
Due to the rapid changes taking place in most industries and global markets, it could be quite difficult for companies that neglect strategic planning to survive. Such companies could be swept away within a few years by unexpected changes in technology, consumer demand, or intense competition.
Effective planning makes it possible for a company to discover new opportunities early and create strategies to exploit them. Hence, they will be able to take up a larger share of the new market and increase their profitability.
Those are the key benefits of strategic planning. To increase the rate of success for both planning and implementation, it is important for top management and key decision makers to be properly trained. Although the principles of this management tool can be learned by reading, effective application requires guidance from experts who have used this planning process to achieve outstanding success.