Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy. It may also extend to control mechanisms for guiding the implementation of the strategy.
Strategy has many definitions, but generally involves setting goals, determining actions to achieve the goals, and mobilizing resources to execute the actions. A strategy describes how the ends (goals) will be achieved by the means (resources). The senior leadership of an organization is generally tasked with determining strategy. Strategy can be planned (intended) or can be observed as a pattern of activity (emergent) as the organization adapts to its environment or competes.
Strategy includes processes of formulation and implementation; strategic planning helps coordinate both. However, strategic planning is analytical in nature; strategy formation itself involves synthesis via strategic thinking. As such, strategic planning occurs around the strategy formation activity.
A variety of analytical tools and techniques are used in strategic planning. These were developed by companies and management consulting firms to help provide a framework for strategic planning. Such tools include:
• PEST analysis, which covers the remote external environment elements such as political, economic, social and technological (PESTLE adds legal/regulatory and ecological/environmental);
• Scenario planning, which was originally used in the military and recently used by large corporations to analyze future scenarios;
• Porter five forces analysis, which addresses industry attractiveness and rivalry through the bargaining power of buyers and suppliers and the threat of substitute products and new market entrants;
• SWOT analysis, which addresses internal strengths and weaknesses relative to the external opportunities and threats;
• Growth-share matrix, which involves portfolio decisions about which businesses to retain or divest; and;
• Balanced Scorecards and strategy maps, which creates a systematic framework for measuring and controlling strategy;
• Responsive Evaluation, which uses a constructivist evaluation approach to identify the outcomes of objectives, which then supports future strategic planning exercises.
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