How a Strategic Plan being implemented will improve a company’s capacity

Blogpost No. 8: By Tilak Karunaratne (E201471)

Introduction

A Strategic Plan is a long-term plan developed after assessing the strengths and weaknesses and the current environment (both internal and external) of an organization, business or an operation.  The Strategic Plan shows the future goals and targets and describes its strategies to be implemented to realize them.  Strategic planning process is what results a Strategic Plan.

As the Strategic Plan is of multi-year (3 to 5 years) and mentioning the outputs or outcome, it is broken down into years and the yearly / annual plans are then produced.  Called ‘Work Plans’ or ‘Annual Plans’, they specify the activities to be carried out and when, within a specified period, with the inputs needed and the person/s responsible for the activity / activities.

 “The process of strategy formulation can be thought of as taking place at the three organizational levels namely: headquarters (corporate strategy), division (business strategy), and department (functional strategy). The planning processes leading to the formulation of these strategies can be labeled in parallel fashion as corporate planning, business planning, and functional planning. (Vancil R. F and Lorange P (1975)”

A Strategic Plan can be formulated at three (3) different levels, namely; at corporate level, at business level and at operational level.  A corporate level Strategic Plan focusses on the overall purpose and the scope of the company, business level plan is concerned with the product's competition in the market while the operational level Strategic Plan focusses on the operation i.e. managing the resources, processes and people.  

Picture Courtesy: Internet

Strategic Plan - Why?

Strategic Plan shows an organization or a business the direction to head for and how.  As its name implies, it is strategic for it exploits the organization’s strengths and the opportunities available while minimizing the impact of its weaknesses and the threats.  Based on the direction for future shown by the strategic plan, actions are planned for periods such as one week, one month or a year and – implemented.

Methods to formulate Strategic Plans

Strategic Plans can be formulated using different methods / approaches. Three of most commonly used approaches are as below.

  • SWOT analysis: The strengths (S) and weaknesses (W) of an organization and the opportunities (O) and threats (T) available to the same organization are clearly identified.  Then the plan is prepared in a way; optimally using the strengths, minimizing the effects of weaknesses, exploiting the opportunities present outside and minimizing the impact of threats.  The analysis will focus on the present. 
  • PESTLE analysis: The organization will analyze its macro environment which is consisted of seven components; Political (P), Economic (E), Socio-cultural (S), Technological (T), Environmental (E) and Legal (L).  The analysis is conducted focusing on future / impact of emerging trends.
  • Porter's Five forces analysis:  The five forces, namely: Industry rivalry, Supplier power, Threat of substitute, Threat of new entry and the Buyer power are analyzed.        

Effects of a Strategic Plan

In general, it is logical to believe that a strategic plan increases a company’s performance, as it provides competitive edge through staff training and equipping the company.  However, in spite of the large number of studies examining this relationship, findings have been inconclusive and present a mixed picture. Even though the majority of studies have reported a positive relationship between strategic planning and firm’s performance (Sapp and Seiler, 1981; Wood and LaForge, 1979), several studies found no relationship (Robinson and Pearce, 1983; Kudla, 1980), and a few reported a negative relationship (Fulmer and Rue, 1974). A recent study by Gibson and Cassar (Gibson & Cassar, 2005) cast doubt on the causal relationship between planning and performance, even in small firms.

Dubihlela, J and Sandada (2014) argues that their research’s findings indicate that strategic planning, in the form of employee participation, implementation incentives, and its evaluation and control, influences business performance in a significant way.

A research by Gica and Negrusa concludes that their research results hadn’t supported a positive relationship between the overall strategic planning indicator and the overall performance indicator.  “But several hypothesis regarding partial influences of the components of the two aggregate indicators were confirmed”.

 


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The long term direction provided by a strategic plan enables a stable platform for the formation of such periodic plans and the allocation of resources for its implementation.  Recruitment of staff, procurement of equipment and the training for staff that normally are in such plans – when implemented – results the increase of staff’s performance and the production, both in quantity and in quality.  When turned into local currency this shows an increase in turn over and in profit.  That shows how a company’s capacity has increased as a result of the implementation of its Strategic Plan.

 

References

Dubihlela, J and Sandada, M. (2014) Impact of Strategic Planning on Small and Medium-Sized Enterprises’ (SMEs)Performance: The Role of Employee Participation, Implementation Incentives and Evaluation and Control. Journal of Economics

Karabulut, A.T; (2010) Impact of Strategic Planning on Financial Performance of Companies in Turkey.  International Journal of Business and Management Vol. 5, No. 4.

Vancil R. F and Lorange P (1975) Strategic Planning in Diversified Companies.  Harward Business Review; https://hbr.org/1975/01/strategic-planning-in-diversified-companies

Gica O.A and Negrusa A.L (2011) The Impact of Strategic Planning Activities on Transylvanian SMEs - An Empirical Research. Procedia – Social and Behavioral Sciences (2011) 643-648

 

Comments

  1. Sachini FernandoAugust 26, 2023 at 8:17 AM

    Good article to read. A strategic plan is a roadmap for the future of a company. It outlines the company's goals, objectives, and strategies for achieving those goals. When a strategic plan is implemented effectively, it can help to develop a company's capacity in a number of ways. According to Meredith(2022) strategic business management is the ongoing process by which an organization creates and sustains a successful roadmap that moves the company in the direction it needs to move, year after year, for long-term success. It spans from research and formulation to execution, evaluation, and adjustment. Given the pace of change, strategic management is more relevant and important than ever for assigning measurable goals and action steps.

    ReplyDelete
  2. Priya RajAugust 26, 2023 at 10:16 AM

    Agreed. implementation of a strategic plan is instrumental in developing a company's capacity to grow, adapt, and excel in its industry. It aligns resources, streamlines processes, promotes innovation, and ensures the organization is well-prepared to overcome challenges. The strategic plan serves as a dynamic tool that guides the company's development, enabling it to navigate the complexities of business effectively.

    ReplyDelete
  3. Samith JanakaAugust 27, 2023 at 12:29 AM

    Your article captures the essence of strategic planning implementation. Implementing a strategic plan can have a transformative impact on a company's capacity to grow, innovate, and succeed. I believe the implementation of a strategic plan fundamentally enhances a company's capacity by providing direction, focus, agility, and alignment of resources. It empowers employees, improves decision-making, and fosters innovation, ultimately enabling the company to not only grow but also sustain that growth over the long term. Well done…!

    ReplyDelete
  4. Nipuni WeerasuriyaAugust 27, 2023 at 2:15 AM

    You've eloquently highlighted the integral relationship between a strategic plan and the organization's overall performance. Your perspective on the long-term direction provided by a strategic plan acting as a stable platform for subsequent plans is insightful. It underscores how strategic planning serves as the guiding force that shapes various facets of an organization's operations.Your emphasis on resource allocation, recruitment, equipment procurement, and staff training as integral parts of these plans resonates well. These components are indeed pivotal in enhancing staff performance and production quality and quantity. Your observation about the subsequent increase in turnover and profit reflects the tangible impact of these initiatives.

    ReplyDelete
  5. Patrick JayakumarAugust 27, 2023 at 11:29 PM

    I agree that the impact of strategic planning on a company's performance can be mixed. There are many factors that can affect the success of a strategic plan, such as the quality of the plan, the commitment of the organization's leaders, and the external environment.
    However, I believe that strategic planning can be a valuable tool for improving a company's performance. A well-crafted strategic plan can help a company to:
    Set clear goals and objectives
    Identify its strengths and weaknesses
    Assess the opportunities and threats in its environment
    Develop strategies to achieve its goals
    Allocate resources effectively
    Monitor its progress and make necessary adjustments
    By following these steps, a company can increase its chances of success.
    In your blog post, you could discuss the following points:
    The different types of strategic planning
    The benefits of strategic planning
    The challenges of strategic planning
    How to create a successful strategic plan
    How to implement a strategic plan
    How to measure the impact of strategic planning

    ReplyDelete
  6. Ashinka AanjalaAugust 29, 2023 at 8:38 PM

    This blog offers a comprehensive look into the strategic planning process within organizations. I appreciate the step-by-step breakdown, which makes the complex topic more digestible. The inclusion of real-world examples adds a layer of practicality. However, I wonder how organizations adapt their strategic plans in response to unforeseen challenges? Could you elaborate?

    ReplyDelete
  7. Saminda KarunathilakeSeptember 1, 2023 at 5:26 AM

    Agree that implementing a strategic plan develops a company's capacity by providing a structured roadmap for growth and improvement. It aligns the organization's efforts toward common goals, optimizes resource allocation, enhances operational efficiency, encourages innovation, and empowers employees. This systematic approach fosters adaptability, positions the company for long-term success, and enables it to take advantage of opportunities for expansion and development. Effectively, and consistently.

    ReplyDelete
  8. Tharminy KuvindranSeptember 1, 2023 at 9:00 AM

    Hi Tilak Karunaratne,

    This blog post by Tilak Karunaratne provides a clear overview of the importance of implementing a Strategic Plan in an organization. It emphasizes how a well-thought-out Strategic Plan, developed after thorough analysis, can enhance a company's capacity. The breakdown of the plan into corporate, business, and operational levels illustrates the comprehensiveness required in strategic planning. It's evident that strategic planning is a crucial process for setting future goals and strategies for an organization's success.

    ReplyDelete

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