Derived from the Greek word 'strategos' which translates to the art of the general, strategy can be defined as a plan of action that is designed to achieve a specific overall or long-term goal. Strategic planning refers to the organizational management activity used to set priorities, strengthen operations, allocate resources, and ensure that all the stakeholders are working in harmony to achieve the set goal. Strategy has become a buzz word as more organizations realize its importance in a business environment that is getting increasingly competitive and unpredictable. Unfortunately, most businesses confuse strategy with plans (Latham, 2017). As a result of the confusion, strategic planning in most organizations does not hit the target. Therefore, there is a need for organizations, especially new businesses and entrepreneurs, to fully comprehend strategy and strategic planning. Since strategic planning became popular in the 1950s, various strategic planning frameworks have been developed. This paper will use the AFI framework to analyze the key components of strategic planning, assess the value of using strategic planning framework, and explain the role of leadership in the strategic planning process.
Key Components of a Strategic Planning Framework
A strategic planning framework provides a structure to the long-term planning. The key components of a strategic framework are mission, vision, core values, time frame, and objectives. The vision statement gives a picture of the future that the organization seeks to have. The mission statement gives the reasons for the existence of the organization and the goals it seeks to achieve. The core values refer to the principles set to guide the organization. The time frame gives the amount of time in which the company hopes to accomplish its goals. Finally, the strategic objectives are the goals that the organization seeks to achieve (Krach, 2016). To escape the pitfalls associated with the process, the strategy statement should be kept simple, logic must be made explicit, and it must be recognized that strategy is not all about perfection (Martin, 2014).
To achieve the objectives within the set time, and without violating the guiding principles, strategic planning is critical. The most common components of the strategic planning process are strategic analysis, strategic formulation, and implementation. Some models also have a monitoring phase. The AFI strategy framework links three independent components of strategic management tasks to help organizations come up with and implement strategies that can enhance performance and give the organization a competitive advantage. The three are analysis, formulation, and implementation (Jurevicius, 2013).
This involves an analysis of the internal environment, the external environment, the competitive advantage, as well as the performance of the organization. Identification of the value chain, support activities, resources, competencies, and capabilities using the VRIO analysis helps in the evaluation of the internal environment. The vision and mission of the organization are also important in the internal analysis. PESTEL and the porter's five forces analysis are some of the tools used in the analysis of the external environment. Comparison with peers and competitors and assessment of competitive advantage helps in the analysis of the performance of the firm as well as its competitive advantages (Jurevicius, 2013).
This component analyzes the business-level strategy and the corporate-level strategy of the organization. The business-level strategy includes cost leadership, integration, differentiation, innovation, as well as strategic entrepreneurship. The corporate-level strategy involves diversification, vertical integration, and potential alliances, networks, and acquisitions. For businesses with international operations, the international strategy falls under this component (Jurevicius, 2013).
This component explains how a business can put the strategies formulated, following the analysis of the organization's performance and competitive advantage, into action and synchronize them with the strategy/structure relationship. Organizational culture, structure, and design fall under this component. Business ethics and corporate governance are also captured in this component.
The Value of Using Strategic Planning Framework
Strategic planning helps make decisions that determine how well the business thrives in the industry. The decisions relate to capital investments, operations, marketing, hiring, among others. Without a strategic framework, businesses risk moving in different directions, a factor that leads to confusion, squanders profits, and accomplishes little. Strategic planning also helps an organization establish realistic goals that are aligned to the vision and mission. By doing this, a solid foundation from which the organization can grow and excel is built. By aligning the functional activities of the organization to the set goals, strategic planning also helps enhance operational efficiency (Bryson, 2018). Resultantly, market share and profitability rises, leading to success. Therefore, the primary importance of using a strategic planning framework is the guidance and sense of direction that it provides (Latham, 2017).
A strategic planning framework enables an organization to see their future and adequately prepare for it. The organization, therefore, becomes proactive instead of reactive. This is particularly important in the modern business environment that is highly volatile and unpredictable. Organizations that use a strategic planning framework can weather these storms better since they can anticipate various unfavorable situations and respond swiftly to any changes in the market. The ability to respond to the ever-changing trends is often the line that separates the organizations that thrive from those that fail. A strategic planning framework, therefore, offers this competitive advantage to organizations that use it. The ability of an organization to foresee and prepare for future calamities determines its durability and sustained success.
The Role of Leadership in the Strategic Planning Process
The leadership of an organization plays a central role in the strategic planning process. The leadership helps develop the mission and vision of the organization and also facilitates the execution of the formulated strategies to achieve the goals set. To ensure effective implementation of the strategies formulated, the leadership must clearly explain them to all the stakeholders. This helps bring everybody on board and hence get all to share in the vision created and work towards the achievement of the set objectives (Herman, 2016). The leadership must also listen to the complaints and feedback from the employees to prevent conflicts and resistance, which would compromise the success of the strategy. Delegation of duties and monitoring of the progress is also a role of the leadership. The leadership also allocates the resources needed to implement the strategies.
To survive and thrive in the modern business environment, businesses must embrace strategic planning. The process helps the businesses foresee future challenges and prepare for them adequately. This contributes to the sustained success of the business and serves as a competitive advantage. According to the AFI strategic planning, analysis, formulation, and implementation are the key components of the strategic planning process. The leadership of an organization plays a critical role in the success of the strategy formulated by providing resources, guidance, and motivation. Though strategic planning is usually presented as the silver bullet that can slay all the problems facing businesses, caution must be taken to avoid the pitfalls that several businesses have fallen into in this pursuit. The strategy statement should be kept simple, logic must be made explicit, and it must be recognized that strategy is not all about perfection.
Bryson, J. M. (2018). Strategic planning for public and nonprofit organizations: A guide to strengthening and sustaining organizational achievement. John Wiley & Sons. Retrieved from https://books.google.com/books?hl=en&lr=&id=xqVFDwAAQBAJ&oi=fnd&pg=PR14&dq=importance+of+strategic+planning+framework&ots=VrgkWGhdos&sig=faWx-4LfatQvo6NCDoD6BiEJtpU
Herman, R. D. (2016). Executive Leadership. The Jossey-Bass handbook of nonprofit leadership and management, 167. Retrieved from https://onlinelibrary.wiley.com/doi/pdf/10.1002/9781119176558#page=199
Jurevicius, O. (2013, February 13). Strategic Management & Strategic Planning Process. Retrieved from Strategic Management Insight: https://www.strategicmanagementinsight.com/topics/strategic-planning-process.html
Krach, K. (2016, September 6). 5 Key Components of a Powerful Strategic Plan. Retrieved from Medium Corporation: https://medium.com/@KeithKrach/5-key-components-of-a-powerful-strategic-plan-4fbb6f15eae3
Latham, A. (2017, October 29). What The Heck Is A Strategy Anyway? Retrieved from Forbes: https://www.forbes.com/sites/annlatham/2017/10/29/what-the-heck-is-a-strategy-anyway/#732e21d27ed8
Martin, R. L. (2014, February). The Big Lie of Strategic Planning. Retrieved from Harvard Business Review: https://hbr.org/2014/01/the-big-lie-of-strategic-planning
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