Strategic planning is a process that helps organisations set goals and determine the actions necessary to achieve those goals. It involves the identification of an organisation’s strengths, weaknesses, opportunities, and threats (SWOT analysis) and the development of a plan to address these factors in order to achieve its long-term objectives. Read on to find out about the strategic planning process, the advantages, disadvantages and how to avoid strategic drift.

Advantages of Strategic Planning

One advantage of strategic planning is that it helps organizations set clear and specific goals and objectives, and provides a roadmap for achieving them. This can help to increase focus and direction, and ensure that all members of the organization are working towards the same goals. It can also help to identify and prioritize key areas for improvement, and allocate resources in a way that maximizes the organization’s chances of success.

Another advantage of strategic planning is that it can help organisations to be more proactive, rather than reactive, in their decision-making. By identifying potential opportunities and threats and developing strategies to address them, organisations can be better prepared to respond to change and minimise potential risks.

Disadvantages of Strategic Planning

However, there are also some disadvantages to strategic planning. One potential disadvantage is that the process can be time-consuming and resource-intensive. Developing a comprehensive and effective strategic plan can require significant research and analysis, as well as input and buy-in from various stakeholders within the organisation. This can be a significant undertaking, and may require the allocation of significant time and resources.

Strategic Drift

Another potential disadvantage is that strategic plans can become outdated or ineffective if the external environment changes significantly. This is known as “strategic drift,” which is a term used to describe the process by which an organization’s strategy becomes misaligned with its external environment. There are generally four phases of strategic drift within the strategic planning process:

  1. Incremental Change (Unrecognised drift): This is the initial phase, in which the organisation is not aware that its strategy is becoming misaligned with its external environment.
  2. Strategic Drift (Recognised drift): In this phase, the organisation becomes aware that its strategy is no longer effective, but does not take any action to address it.
  3. Flux (Managed drift): In this phase, the organisation takes steps to address the misalignment, but does not fully realign its strategy.
  4. Transformational change or Demise/Terminal drift: In this final phase, the organisation’s misalignment becomes so severe that it is unable to recover and ultimately fails. On the other hand, it can potentially save itself from entering terminal drift/ demise by fundamentally and aggressively changing.

One way to mitigate the risk of strategic drift is to regularly review and update the organization’s strategic plan to ensure that it remains relevant and aligned with the external environment.

Three-stage planning process model

The three-stage planning model, developed by Johnson, Scholes, and Whittington, is a framework that can be used to guide the strategic planning process. The three stages are:

  1. Situation analysis: This involves identifying and analyzing the organization’s internal and external environment, including its strengths, weaknesses, opportunities, and threats (SWOT analysis).
  2. Strategy formulation: In this stage, the organization develops specific goals and objectives and identifies the actions necessary to achieve them.
  3. Strategy implementation: This involves putting the plan into action and allocating resources in a way that helps the organization achieve its goals.

One potential disadvantage of this model is that it is a linear process, which means that it does not allow for much flexibility or the ability to adapt to changes in the external environment. This can make it more difficult for organizations to respond to unexpected events or shifts in the market.

Summary

Overall, strategic planning can be a useful tool for helping organisations set goals and achieve success, but it is important to carefully consider the potential advantages and disadvantages, and to be prepared to adapt and respond to changes in the external environment.

Find out how what it means to be a successful strategic business leader and how to conduct a strategic analysis for your organisation.


This content can be used as part of the Strategic Business Leader (SBL) module for the Association of Chartered & Certified Accountants (ACCA) examination.
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