Strategic planning helps companies set long-term goals and priorities, discover their strengths/weaknesses, identify new opportunities and consider many other aspects of the business.
Types of strategic planning
There are the following types of strategic planning:
- Long-term (prospective) planning. Since the development of plans goes from the future to the present, plans designed for a shorter period become an integral part of the long-term. Long-term plans reflect long-term goals and a general strategy of action. Alternative methods being developed are not included in the project but are reflected in special programs contained in the annexes. Long-term goals include indicators and proposals reflected in generalized, often financial, indicators. Long-term plans are developed for a period of 5 to 10 years.
- Medium-term planning. They are based on the real demand for the organization’s products, changes in its characteristics, restructuring of production technology, financial constraints, market conditions, the risk of losing a partner, etc. Medium-term plans are developed for a period of 1 to 5 years.
- Short-term planning. Such planning covers several weeks or months. It is aimed at regulating the current use of resources and is implemented through the preparation of calendar programs for production and control over it, the management of inventories and loans received.
- Operational planning. The task of operational planning includes monitoring the daily loading of equipment, the sequence of operations, the placement of workers, etc.
In practice, three main schemes for organizing strategic planning procedures are usually used:
Top-down planning (typical for specialized enterprises) At the same time, basic information, the tasks of each unit, and key strategies are formed at the level of the enterprise as a whole and serve as a guiding line for operational teams.
“Bottom-up” planning (typical for diversified enterprises) means that the goals of departments and production plans are initiated by operational units. The prerogative of the strategic planning department is the coordination of projects. However, the main elements of the strategy (especially financial indicators) are still developed by top management.
Interactive planning is a cross between the two strategic planning schemes described above. Ideas are formed in the interaction process between top management, the planning department, and the operational divisions of the enterprise. Top management sets goals and directions for activities.
Advantages of strategic planning
The main advantage of strategic planning lies in the greater validity of planned indicators and the greater likelihood of implementing the planned scenarios to develop events.
The current pace of economic change is so fast that strategic planning seems to be the only way to predict future problems and opportunities formally. It provides the company’s top management with the means to create a plan for the long term, provides a basis for decision-making, helps reduce risk in decision-making, and ensures the integration of the goals and objectives of all structural divisions and performers of the company.
Disadvantages of strategic planning
Strategic planning does not and cannot, due to its nature, give a detailed picture of the future. Strategic planning does not have a precise algorithm for drawing up and implementing a plan. His descriptive theory refers to a particular philosophy or ideology of doing business.
Strategic planning for its implementation requires a significant investment of resources and time compared to traditional planning.
As a rule, the negative consequences of strategic planning errors are much more serious than in traditional, long-term planning.
Mechanisms should complement strategic planning for the implementation of the strategic plan, i.e., the effect can be produced not by planning but by strategic management, the core of which is strategic planning.