Advantages and disadvantages of strategic planning
This detailed article explores the key advantages and disadvantages of strategic planning. When done correctly, strategic planning can help organisations make the most of their resources, create a sense of direction, and remain competitive. However, it has several drawbacks as well.
What is strategic planning?
According to Cote (2020) strategic planningis the ongoing organisational process of using available knowledge to document a business’s intended direction.
It is a process used by organisations to plan for the future and set long-term goals. It involves analysing the current situation of the business, forecasting potential changes, and creating plans to achieve desired outcomes.
Advantages and disadvantages of strategic planning
While strategic planning has a number of advantages, it in fact has some disadvantages too. However, advantages usually outweigh disadvantages and therefore, many organisations spend a considerable amount of time and money in strategic planning.
List of the advantages of strategic planning
Sense of direction
Strategic planning helps to create a sense of direction and focus. It helps to ensure that everyone in the organisation is working towards the same goals, and that their efforts are being directed towards the most important tasks. This can help to improve employee morale.
Risk management
No business is without risks. Therefore, organisations need to have some mechanisms in place to identify these risks. One of the most important advantages of strategic planning is that it helps organisations identify and manage risks.
Creativity
Strategic planning forces managers to think. It can encourage creativity and initiative by tapping the ideas of the management team (BPP Learning Media, 2010). It may include both top-down and bottom-up approaches to engage employees in the strategic planning process.
Clarification of aims and objectives
Aims and objectives may sometimes need clarity. Strategic planning clarifies aims and objectives of an organisation. It requires planners to define what they would like to achieve.
Identifying resistance to change
Managers entrusted with strategic planning need to inform the whole organisation of the aims and objectives, strategic changes, future plans etc. This dissemination of information helps them identify resistance to change and take remedial actions as necessary.
Collaboration
Organisations consist of different departments and carry out a number of tasks. Consequently, they need collaboration and cooperation across the spectrum.
However, managers in finance, marketing, operations, HRM etc. often compete rather than collaborate. So, what is the solution? The solution is strategic planning as it facilitates collaboration among the managers.
Allocation of resources
Organisations need to allocate resources e.g. people, money, land, and time to implement strategic plans. Moving people from one team to another or moving the facilities from one country to another may be necessary sometimes. This allocation of resources help organisations identifies right resources for right place which is a key to the success of strategic planning.
List of the disadvantages of strategic planning
Vulnerable to outside influences
Strategic plans often fail due to outside influences such as changes in the economic environment, competitor actions and/or technological change. Macro-environmental factors may sometimes change extremely rapidly which may frustrate any strategic plans.
Costly and time-consuming
If organisations carry out strategic planning thoroughly, it becomes a costly, rigid, and time-consuming process. It may sometimes take five or more years to implement a strategic plan. Consequently, benefits of strategic planning may not be immediately visible.
Organizations must dedicate resources to analyse the current situation, forecast changes, and create plans to respond to them. This can be difficult for smaller organisations, especially if they lack the resources or expertise needed to develop a comprehensive plan.
Complexity
Strategic planning is a very complex process. It involves addressing several things: hence the complexity.
Lack of success
According to several studies cited in Olson (2022) 60-90% of strategic plans never fully launch. When implemented, some of them fail as well.
Components of a good strategic plan
Creating a successful strategic plan requires careful consideration and a thorough understanding of the organisation and its goals. Here are some of the key components of a good strategic plan:
Mission statement
A mission statement should clearly articulate the organisation’s purpose and goals.
Aims and objectives
Clear aims and objectives. Objectives should follow the SMART criteria i.e. Specific, Measurable, Achievable, Realistic, and Time-bound.
Strategies
Strategies should be developed to achieve the aims and the objectives. They should be designed to take advantage of the organisation’s strengths and address its weaknesses.
Action plans
Action plans should be developed to ensure that the strategies are implemented in a timely manner. They should include a timeline, a budget, and a list of tasks to be completed.
Evaluation
Strategic plans should be evaluated regularly to ensure that they are still relevant and are achieving the desired results.
Strategic planning tools
There are a number of tools available to help organisations with their strategic planning. Here are some of the most popular ones:
SWOT Analysis
A SWOT analysis is a tool used to assess an organisation’s Strengths, Weaknesses, Opportunities, and Threats.
Gap Analysis
A Gap analysis is a tool used to assess the gap between an organisation’s current state and its desired state. It can help organisations identify areas for improvement and develop strategies to bridge the gap.
PESTEL Analysis
A PESTEL analysis helps organisations identify different macro-environmental factors that can impact on their plans and operations.
Summary of the advantages and disadvantages of strategic planning
Strategic planning is a valuable tool for managing a business. It involves looking at the big picture, allowing organisations to identify opportunities for growth and create plans to capitalise on them.
By leveraging strategic planning, organisations can ensure that they are well-positioned for long-term success. However, as discussed above, strategic planning has several drawbacks that they need to be aware of.
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Last update: 03 January 2023
References:
BPP Learning Media (2010) Business Essentials: Business Strategy, 2nd edition, London: BPP Learning Media Ltd
Cote, C. (2020) What is strategic planning, available at: https://online.hbs.edu/blog/post/why-is-strategic-planning-important (accessed 02 January 2023)
Olson, A. (2022) 4 common reasons strategies fail, available at: https://hbr.org/2022/06/4-common-reasons-strategies-fail (accessed 03 January 2023)
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Author: Joe David
Joe David has years of teaching experience both in the UK and abroad. He writes regularly online on a variety of topics. He has a keen interest in business, hospitality, and tourism management. He holds a Postgraduate Diploma in Management Studies and a Post Graduate Diploma in Marketing Management.
