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What Is Strategic Planning: Complete Guide and Recommended Books

PESTLEanalysis Team
PESTLEanalysis Team
strategic-planning-process
Table of Contents
Table of Contents

Strategic planning itself can be slow and unrewarding, but thankfully the benefits from occasionally redirecting your organization can be huge.

Strategic planning is the managerial process of deciding on a clear goal (or set of goals) and the means by which to achieve it -- in other words: deciding on a strategy. A good strategic plan allows companies to set their priorities, effectively use any available resources, and eventually achieve their desired goals with good success.

There are many different ways to actually carry out strategic planning, including various different tools and techniques such as PEST(LE), Five Force or SWOT analyses, all of which will be discussed further below.

Strategic planning is often confused with SWOT analyses (and occasionally the others) because of their inherently similar nature. To sum up the differences, strategic planning is the broad framework through which managers build a ‘plan of attack’, while a SWOT analysis is simply a tool used to provide information about the present or future situation of a company or venture.

Another common misconception is that a business plan is the same thing as a strategic plan. The main purpose of a business plan is to decide how a business will operate and generate revenue on a much smaller scale, while a strategic plan is designed to help a company get from where they are now to where they want to be within. If you’d like to know more about business plans, as opposed to strategic planning, we have an entire article dedicated to them.

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How do I carry out Strategic Planning?

As mentioned before, strategic planning is simply deciding how a company or other organization should achieve its goals over a given timespan -- taking it from where it is now to where it wants to be.

A good strategic plan should analyze what the means are to achieving an end, and also, take into account any factors which will make achieving that end any harder or easier.

This short step-by-step guide will help is one approach to designing your strategic plan:

  1. Make a reasonable decision as to where you want to be in x number of years
  2. Decide (quite primitively) how it is that you intend to get there
  3. Employ various analyses to help anticipate any threats which might slow you down, opportunities you could leverage, or factors which make your goals hard to achieve
  4. Repeat steps number 1 and 2 with this new knowledge in case you need to redirect your path to something more realistic/effective, or find new approaches to getting there

As you can see, step number 3 is undoubtedly the most important. The goals you set or the means to achieving them are very much dependent on the circumstances that an organization finds itself in (or will find itself in), but it’s still good to set out with some idea of what you intend to achieve and how you might do it.

Another way you might build a strategic plan is to answer these questions:

  1. Where are you?
    • What is the purpose of your organization?
    • What do you do well, and what do you do poorly?
    • Do you have any current opportunities or threats?
  2. Where do you want to be?
    • Will the purpose of your organization have changed?
    • What will you have improved on?
    • Will there still be any opportunities or threats?
  3. How will you get there?
    • What will you do to get from here to there?
    • What milestones or goals will you use to track your progress?
    • How will you iron out weaknesses and negate threats?
    • How will you make the most of your strengths and leverage opportunities?

With this plan, steps 1 and 2 both include an analysis of the circumstances (or future circumstances) to help you pick the most realistic goals and find a clear path from A to B -- you can’t go anywhere if you don’t know where you’re going!

How you actually form your strategy is entirely up to you. If you fully appreciate how you need to get from one exact point to another, it should be quite clear how to get there.

What Analyses Can Be Used in Strategic Planning?

A lot of the different business analyses covered on this website can be used in strategic planning. To name the three most popular:

SWOT Analysis: A SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) provides a framework for analyzing the internal and external factors a company faces or could face. SWOT analyses are particularly useful in strategic planning because they help you to understand what challenges you might face, and which aspects of your organization might be the most helpful. Making a ‘before’ and ‘after’ SWOT analysis (i.e. one for where you are, and one for where you want to be) is particularly useful, as it allows you to clearly see what it is that needs to be changed.

PEST (PESTLE, STEP, STEEP, STEEPLE) Analysis: A PEST analysis looks at the Political, Economic, Social, and Technological (and sometimes Ethical, Environmental or Legal) aspects of a plan or venture. Similar to a SWOT analysis, a PEST analysis is another way to look at the status, or potential status, of a company or venture. Once again, this clearly exposes any boundaries, focus areas, alternative paths.

Five Forces Analysis: A Porter’s Five Forces Analysis is especially useful in competitive commerce industries, where it looks at the threat of substitutes or new entrants in a market, competitive rivalry, and the bargaining power of suppliers and buyers. A well-executed Five Forces analysis can help you pick better goals, or minimize risk in dynamic stages of your organization’s growth.

How PEST Analysis Helps with Strategic Planning

Enterprises depend on long-term planning for strategic management and successful running of the business. Different firms use different analyses according to their needs and structure. Internal and external factors are highlighted in order to properly understand the complexity of the business environment and challenges. The PEST analysis is widely used among firms and focuses on the external factors instead of internal factors. It is regarded effective in long-term strategic planning and works from a macroeconomic perspective. The Political, Economic, Social and Technological factors allow firms to get a deeper understanding of the trends.

Political Factors

Legal factors include taxes, labor laws, CSR (Corporate social Responsibility), social and environmental obligations, audits, fiscal and monetary policies, all influence business’ decision making. Political factors affect businesses to a great extent as government decisions and policies cause changes in the business environment plus business cycle.

Political and government intervention is not feasible for a healthy firm and damages the long-term plans. In order to overcome these barriers, firms need to maintain favorable relations with governments to receive special considerations and incentives. Government trade regulations can affect a firm’s international market and clients and increase expenses. Laws of labor affect the workforce and can change internal dimensions of the business as well as rights.

Economic Factors

Weak and unstable economies are risky and can harm the business as inflation rate, interest rate, employment/unemployment rate and economic growth indicators are important factors that need to be analyzed when making decisions. Economic factors are interlinked with political factors. An enterprise cannot progress if the economy in which it is established is shrinking or isn't stable.

Inflation affects demand and supply as well as leading to unfavorable investment conditions. Consumer purchasing power falls and currency devalues, resulting in a loss for the enterprise. Exchange rate affects the cost of import and export by increasing overall trading costs of the company. Moreover, interest rate plays a vital role as it influences the expansion and growth of the company

Social Factors

Social factors involve the trends of population, domestic markets, cultural trends and demographics. These factors help businesses assess the market and improve their products/service accordingly. The service/product provided by the company must be according to the compatibility of the market or else it will fail.

Demographic aspects and population growth rates, age distribution and domestic markets influence firms and help them evaluate the dynamics of existing and new markets and consumer needs. Domestic markets should be carefully judged and studied before a product or a service is launched to check the consumers’ spending power and living standards. Prices should be kept accordingly. These factors are important during market research.

Technological Factors

Technology is a crucial component of any business, as it determines whether or not a business can increase productivity and compete in the market. This includes research and development activity, automation and incentives. Firms need to keep themselves updated with latest innovations and technologies to compete with the emerging competition, old technology gets outdated and obsolete. Technological factors include research and development activity, automation and innovation.

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Importance of PEST Analysis in Strategic Planning

  • It informs about both internal and external factors that affect a firm’s failure and success
  • It gives an overview of the business’ current position
  • It forecasts future and sheds light on current situation
  • Evaluates business environment and allows firms to make strategic decisions
  • Provide companies with a reality check of their performance and loopholes
  • Enables firms to understand the economy and market and expand
  • Provides a mechanism to identify threats and opportunities
  • Enables companies to learn markets and enter new markets, nationally or globally
  • Prevents future failures and creates a system of continuous success
  • It helps firms assess the report and take countermeasures for improvement and to analyze threats

Implementation of PEST analysis for Strategic Planning

Companies go through strategic planning processes usually once a year. This allows them to reassess the strategic elements of PEST. When it comes to decision-making or strategy planning, evaluating all the information and compiling it in one place is as important as having an effective team. When a company wants to achieve a goal, it should come up with an effective strategy to achieve it. By conducting a reassessment, firms can detect emerging strengths and opportunities as well as threats or external factors.

After all, economic conditions fluctuate constantly and social shifts and changes in values can affect the way the company's brand and products succeed in the market. Behind every achievement of a company, there is a dedicated team and effective strategic planning. A PEST analysis is a crucial part of any strategic planning process and without a general idea about the external factors that would affect the company or its strategies, reaching the targets or accomplishing goals is virtually impossible.

The comprehensive insight gained from a PEST analysis will ensure the strategies will be successful. A PEST analysis is not just about listing political, economic, social and technological factors but seeking information from professionals who are aware of current conditions with regards to each area. The strategy should set priorities, allocate resources, decide on timeframes for achieving goals, and come up with controlling mechanisms as well as assigning employees accordingly to the planning.

This information would be immensely valuable for building effective strategies. After independently gathering information for the relevant factors, the PEST diagram will be useful in comparing them with other factors. This makes it easier to come up with solutions for threats and ways to make the best of the opportunities available to help the company achieve its goals.

Strategic planning is important when entering a new market or expanding as well as for conducting market research in the domestic market. The PEST analysis works on external factors to make sure firms accurately research and implement the findings according to the needs of the consumers. The analysis offers a wide and broader aspect of the market with options and alternatives to select from.

What is SWOT Analysis’ Purpose in Strategic Planning

When a company feels their business isn’t doing as well as forecasted, it means there is an issue somewhere. But a problem found doesn’t make it fixed; the issue will require a particular set of steps to revise it.

This is where business analysts come in. They study businesses, both internally and externally, and note issues found throughout their stay. They utilize strategic planning and available tools to sniff out problems and correct them.

Strategic planning is a method used to set goals, assess resources, and strengthen internal operations within a business setting. It’s used to assure stakeholders the firm is working towards objectives and determines which results are occurring.

Strategic planning helps shape an organization, including who the organization serves and how it’ll grow in the future. The planning outlines steps to make positive progress and analyze results to ensure everyone involved — team members and managers— are working within their roles correctly.

In order to assure this, business analysts who utilize strategic planning may do what is called a SWOT analysis.

What is SWOT analysis?

SWOT analysis is a tool used in strategic planning that outlines strengths, weaknesses, opportunities, and threats for a corporation or a particular function within the organization.

Strengths and weaknesses are internal: communication methods, locale, sales, marketing, and business processes are a few things to consider. Any one of these things, and sub-topics within them may be a strength or weakness.

If they’re a strength, they are positive. They enforce the success of the business. But if the above are a weakness, they must be addressed before they do irreparable damage to the firm.

Opportunities and threats are external: outside factors such as legislative laws, social norms, and legislative bills affect a business. But these things can’t be changed by those within the company.

Opportunities can be searched out, acknowledged, and used to a company’s advantage. Threats seek to hurt the business but can be dealt with once known.

How do SWOT analysis and strategic planning fit together?

As said above, SWOT analysis is a tool used in strategic planning, often by the business analyst. It’s one of many avenues the analyst can use to address complications or issues within the framework of a firm.

It seems simple, but the results can significantly help companies understand what they’re doing right (competitive edge) and what they’re wasting funds and/or resources on. A business cannot grow if weaknesses are overturning every positive stride taken, after all.

Other types of analysis, such as PESTEL, can take longer. That type of analysis only focuses on external factors. SWOT concentrates on both the internal and external to provide a well-rounded view.

When SWOT analysis is completed accurately, a business analyst will use the information to take steps towards fixing the business framework. They can also do a risk assessment of threats and weaknesses.

Strategic planning helps organizations address complications. When someone, preferably a business analyst, begins strategic planning they utilize tools. SWOT analysis is one of these tools.

SWOT identifies strengths, weaknesses, opportunities, and threats within an organization. It helps to address what’s working, what’s not, assess risks and utilize advantages.

So, You’re in Charge of Strategic Planning?

Once you have decided on a strategy for getting to where you want to, it’s essential to manage all of the different facets of your organization. This is called strategic management, and it’s about perfecting areas from marketing to sales, and everything in-between! If you’d like to know more about actually executing a strategy, and doing it well, from an administrative point of view, check out this article on strategic management.

That’s all there is to strategic planning. Like most kinds of planning, the process itself can be slow and unrewarding, but thankfully the benefits from occasionally redirecting your organization can be huge. With this information, you should be able to set clear, achievable goals, and hopefully, find an effective strategy to realizing them.

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Why Strategic Planning May Fail: 3 Criterias

Strategic planning should be a straightforward process. It’s a tool to help you plan for future success. But it’s easy for planning to fail.

We use strategic planning to reach a particular result in the most efficient method. But things don’t always go as planned.

Why does the plan fail? Typically, because crucial elements aren’t answered. Specifically:

  • Do you know who your company serves?
  • What are your primary goals?
  • Which strategies are necessary to reach those goals?

By answering the above questions, you’re on track to prevent your strategic plan from failing before the execution.

Mission statement

In a single sentence, can you clearly say what your business does? Do you know exactly who your customer is? And what sets you apart from the competition?

Your mission statement helps create goals. The statement must be accurate, easy to understand, and known by everyone in the company. Every business decision is made to follow the mission statement.

Your strategic planning efforts are no different.

Goals

It’s simple: if you don’t have a goal, you have a problem. This is especially true when you’re doing strategic planning. The goal is the result. It’s the reason behind choosing a strategy. And it’s a measurement to determine whether efforts were successful or not.

Set goals based on your mission statement. For example, do you help find forever homes for puppies? Your goal, then, can be to provide X amount of puppies a home in Y amount of months.

But the more fleshed out the goal, the better chance your plan will succeed.

The strategy

The chosen strategic planning strategy must be efficient to reach objectives. Your strategy is the blueprint for results. If it’s not selected specifically for the purpose at hand, you may never see results.

A strategy ensures:

Checking off this list may require a thorough analysis of the company, workers, and expected results. A business analyst might be the best option to conduct the analysis.

But what if you want to take shortcuts? You needed results yesterday, so why not skip the analysis or the mission statement to get moving? Well, because it’s not a good idea if you want your strategic plan to be successful.

Analysis weeds out problems regarding poor communication, vague ideas, and bad resource usage. If you skip this, the company may survive today. But in a few months, it might not be so lucky.

By using any old strategy, the chances may be in your favor. Maybe it’ll all work out. Maybe you’ll reach your goals. Or maybe you’ll waste massive amounts of investments. Either way, you don’t want to leave it up to chance. Even casinos don’t gamble like this.

Get the right strategy by doing the right footwork. Allow analysis. Seek out several strategies to reach solutions. And ensure everyone is on the same page.

Without identifying your mission statement, selecting goals, and choosing an appropriate strategy, your strategic plan will fail. These three components are the foundation for successful planning. Don’t skip it to reduce workload or meet deadlines — you might regret it.

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3 Strategic Planning Books to Study

Business models change. Technology advances. Objectives shift. These changes are critical to the foundation of an organization. You must be ready to update strategies and processes to benefit a growing company.

That means keeping up on your strategic planning knowledge. Whether you’re a business analyst, stakeholder, entrepreneur or love understanding what makes or breaks a business.

Below are highly rated strategic planning books to sink your teeth into.

Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers

Published: July 13, 2010

Price: $16.60 (Kindle); $20.19 (Paperback)

This is a handbook for strategic planners, business owners, and stakeholders who seek to abandon legacy business models.

Companies must adapt to new realities, which can require a change in focus, resources, and strategy. The strategy is key; without it, you can’t bypass competitors. This is where Business Model Generation comes into play.

This book features practitioners from over 40 countries. Each has contributed designs of strategic ideas and tools that anyone can easily implement into their organizations. This book highlights key patterns within Business Models, based on leading business thinkers’ concepts, to use in your own organizations.

You’ll learn how to implement business models and how to understand current models in order to revamp them, if possible. Additionally, as the models are learned, you’ll understand value propositions, customers, distribution channels and revenue streams on a deeper level.

This book is perfect for strategic planning since it provides practical techniques to innovate businesses, provided by leading consultants and companies worldwide.

Crafting & Executing Strategy: The Quest for Competitive Advantage: Concepts and Cases (Irwin Management) - 20th Edition

Published: January 20, 2015

Price: $23.00 - $285.00 (depending on seller and type)

This textbook is an excellent guide to analytic tools and core concepts behind strategy and organizations. The 20th edition adds modern concepts and presentations. While it’s used primarily in a classroom setting, with new and existing cases to dissect and understand, it is still useful for single study.

It’s over 900 pages, so you may decide to just pick and choose the most relevant chapters to your situation. Rather than digesting the entire textbook.

The 4 Disciplines of Execution: Achieving Your Wildly Important Goals

Published: April 12, 2016

Price: $14.82 (Kindle), $15.90 (Hardcover), or $11.55 (Paperback)

Organizations need to know two things: what strategies to execute and how efficient performance will be. This novel explores companies who have successfully executed strategies to accomplish goals several times over.

When businesses die, it’s not always a loud crash. It’s not necessarily obnoxious. Some organizations fail quietly, with no one noticing. This book teaches you 4 Disciplines of Execution (4DX). It’s a straightforward and repeatable formula to execute strategic priorities. It promises to help leaders achieve results, even when the strategy requires changes from teams (who may not be thrilled to do so).

4DX is a proven set of practices, tested by hundreds of organizations over many years. This book highlights a new way to achieve a continuous competitive advantage.

Some of these books sound too good to be true. A mixture of buzzwords, positivity, and big promises. But it doesn’t hurt to take a look. Start with the book that intrigues you most. Read through it (or the relevant chapters) once.

Then read it again and take notes.

But most importantly execute what is being taught. None of these books can help if the information sits in your skull, collecting dust. Start making changes to innovate organizations immediately.

Images: "The Strategy Of Chess" by Ken Teegardin is licensed under CC BY-SA 2.0, Writing Pencil” by home thods is licensed under CC 2.0,"Trip planning" by Shawn Harquail is licensed under CC BY-NC 2, Pressmaster, Mathias Rosenthal/Shutterstock.com



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