When discussing planning in a company, it is necessary to pay attention to the connections and differences between planning and forecasting. A plan is a mode of action, a program, and a forecast is a prediction of processes that are not dependent on us. Therefore, the plan is applied to those processes and elements from which we can make a choice - to make a decision, and the forecast only determines the future state of economic processes or phenomena without any intervention in this state through decisions and planned actions.
The plan is evaluated in terms of effectiveness and the consequences resulting from these activities. The forecast is evaluated only from the point of view of its validity. Forecasting and planning are interconnected in the management process, but they should not be identified with each other.
Concept
Strategic planning as a function of strategic management provides the basis for making major decisions in company management. The dynamic process itself is built on management functions and creates the basis for company management.
As a management function, strategy planning focuses on choosing enterprise goals and ways to achieve them. In such a situation, the concept consists in anticipating changes in the external and internal environment and adapting the company to them.
The functions of strategic and operational planning differ from each other. In planning the strategy, a significant role is assigned to the analysis of promising areas of the company’s development, current trends, dangers, risks are identified, and opportunities are formulated. It is not the time indicator that is taken into account, but the direction of the firm's development. The strategy itself can be implemented through a system of operational plans that relate to the current tactics of the organization.
Definition of a concept
Strategic planning is a formalized process of creating long-term tactics aimed at identifying and achieving the ultimate goals of the organization. They are usually developed for a period of more than 5 years. The strategic planning function at the enterprise is characterized by the following features:
- strategic planning provides answers to questions such as: “what are we doing and what should we do”, “who are they and who should our customers be?”;
- creates the basis for tactical and operational planning and for everyday decisions. Taking into account the need for such a decision, the manager may ask: “Which of the possible directions and actions is best suited to our strategy?”;
- It is associated with a longer period than other types of planning;
- facilitates the concentration of energy and resources of the organization on the most important activities;
- It represents the highest level of activity in the sense that executive management should be actively involved in it, since only it has sufficient knowledge and experience resources to take into account all aspects of the functioning of the organization. His participation is also necessary in order to initiate and maintain interaction at lower levels.
Role and significance
Strategic planning should be an integral part of business management and, therefore, must take into account such restrictions as the conflict of interests of groups that affect the functioning of the enterprise, financial barriers, resource constraints, lack of information, strategic potential, lack of competence, expected changes in the environment, competitive activity .
Process essence
The strategic planning process consists of three main stages:
- Strategic analysis is based on diagnostic activities, the purpose of which is the opportunity to show current and future strengths, and areas of development of the organization, its potential and threats. It also defines the environment in which the organization is located. This step must be carried out reliably, because a good analysis, giving an accurate picture of the situation, is the basis for creating the right plan.
- Strategic planning considers the various options that the organization can take, and how to implement them. The planning stage should end with the development of a strategic plan, usually containing several future scenarios with varying degrees of optimism and deciding on a specific strategy for implementation.
- Strategic implementation: this stage follows the selection of a specific plan and includes a number of activities related to its implementation. These activities are combined with operational planning, which addresses more specific issues than strategic forecasting, and is characterized by a shorter period. At this stage, the organization often faces many implementation challenges, such as reduced employee engagement and a lack of identification with company goals, a lack of financial resources and a changing environment that forces the plan to be dynamic.
Process features
This kind of strategic planning is expressed in the following special features:
- represents a comprehensive approach, consisting of a combination of the decision-making process associated with key tasks and critical problems of the company, with the analytical and projective aspect of the functions;
- a wide range of processes consists of elements: programming (basic strategies at the corporate level, management strategies, functional strategies), development of business plans;
- concretizes and completes the goals of the company, mainly due to the specification of products (services), pricing, marketing functions, costs, quality, production process standards, technological parameters, etc .;
- takes into account creativity, innovation and adaptability to environmental changes;
- represents an “external” orientation, determined both by meeting the needs and expectations of customers (society), and by the position of the company in a competitive environment;
- is a factor of integration (coordination) of functional programs and plans.
Functions
Among the main functions, the list is presented below.
- Strategic Planning Function: Resource Allocation. All resources existing in the company: material, financial, labor should be effectively used by the company’s management on the basis of their rational distribution in the process of functioning. It is necessary to build such combinations of resources in which the return on production will be maximum.
- Adaptation to the external environment is the main function of strategic planning. By it we understand the ability of the company to adapt to the external environment and its dynamics, which will create competitive advantages for the company.
- The function of strategic planning: coordination and regulation. Under it is understood the creation of coordinated actions of company divisions to achieve the goals.
- Organizational changes. As part of this function, the organizational structure of the company is formed to ensure stable work of the staff. Within its framework, organizational transformations are also taking place to achieve the maximum efficiency of the company in the future.
- Mobilization function. It means that all the resources of the company in the process of planning the strategy must be mobilized within it in order to achieve the intended plans.
Vision of the enterprise as the initial element of the essence of strategic planning
The vision of an enterprise is often identified with the stated mission of its business. Mission is an excellent concept regarding the philosophy or strategy of a company. It determines the direction of the main activity of the organization and the integration around it of solutions to emerging problems. A correctly formulated mission meets the following requirements:
- should be easy to identify;
- should be created for the benefit that the customer satisfies with the help of products and services provided in the market;
- written in an accurate and error-free manner in response to questions.
Making decisions
The essence and functions of strategic planning are closely related to decision-making in the management process. These relations already exist at the stage of formulating the goals of the company (and in the case of strategic management: its mission and vision), as well as at the stage of adopting options for various strategies (programs) and plans and, finally, in monitoring their implementation.
The interaction between these functions is very strong, however, in planning, understood in the sense of accounting, pre-processing and identification of decision-making problems predominate. For example, the distribution of financial resources between specific areas of management, determining the assortment structure and scale of production, determining the scale of diversification, the formation of a pricing strategy, etc.
The analytical documentation consists of initial and comparative data, as well as expert opinions that are used in the preparation of the plan. Planning documentation includes long-term programs and plans, as well as budgets (short-term projects). At the strategic management level, this documentation is a list of typical tasks of key importance along with their characteristics, as well as a description of the strategic potential that determines the implementation of proposed projects.
The function of strategic planning as a system
Strategic planning is an extensive system, the structure of which is created by various types of strategies (programs) and plans. They are developed at the level of corporations, as well as institutions or departments. The level of detail and the accuracy of their training increase as you move to lower levels of management, and the programs are mostly long-term.
Functional strategies and plans that address specific issues, such as, for example, improving the organizational structure of a company, research and development of production technologies, volume and type of investments, personnel development, increasing productivity, and comprehensive quality management, are important. In this type of research, the diagnostic part is combined with forecasts that determine the future of the company. If they are optimistic, in economic practice they are called strategies or development plans.
Problems of the functions of strategy planning
Among the main problems that are associated with the planning function of the strategic planning process, we can distinguish:
- the procedures for linking quality strategies with grassroots projects are very complex;
- in the planning models of the strategy there is no flexibility and adaptability;
- The main focus of the strategy on business capitalization. Especially characteristic for the conditions of Russia.
Conclusion
Thus, strategic planning should be understood as a management function, which is the process of choosing the organization’s goals and the possibilities to achieve them. It ensures the implementation of most management decisions regarding the future of the company. The process itself is relevant in modern Russian conditions of fierce competition in the market. It is a set of management functions that distributes company resources, adapts it to the external environment, and forms internal coordination. The strategic planning process itself performs the function of understanding the current activities of the company and planning based on the available information about future forecasts.
The main functions of strategic planning include resource allocation, adaptation to the external environment, internal coordination and regulation, organizational changes.