Strategic planning is a subset of the strategic management process. Strategic management is a four-phase process. These phases are situation analysis, strategy formulation, strategy implementation, and strategy evaluation. The process is cyclical, and once the evaluation phase is complete, it is time to reanalyze the situation. Strategic planning specifically relates to the situation analysis and strategy formulation phases of the strategic management process (Coulter, 2010). It is important to remember that strategic planning is about developing a long-term plan.
Situation analysis is a method to understand the various aspects of an organization. In order to fully grasp all aspects of the organization’s situation, one must understand the current organizational context, external environment, and internal environment. The organizational context is the unique situation in which the organization currently finds itself. This includes organizational elements such as the organization’s mission statement or perceived competitive advantage. Additionally, business drivers such as globalization or the effect of technology help define the organizational context. Finally, a key aspect of organizational context is the organization’s values and commitment to a code of ethics (Coulter, 2010).
An analysis of the external environment seeks to expose opportunities and threats. For those familiar with SWOT analysis, the external environment is the O and the T. Opportunities are external factors in the organization’s favor. Opportunities can be exploited to improve the organization’s situation. Threats are the opposite of opportunities. They represent negative external factors that could impede the organization. Together, opportunities and threats create a roadmap of the external environment that a strategic plan must navigate in order to enhance the organization’s chance for success.
An analysis of the internal environment looks inward on the organization. It highlights the strengths and weaknesses of the organization. Strengths are the resources and capabilities an organization possesses that can be exploited to gain a competitive advantage. Resources include a wide range of commodities ranging from financial to physical to human. Capabilities, on the other hand, are the processes an organization uses to turn resources into products. Weaknesses are the areas in which an organization is lacking. Like strengths, these are also resources and capabilities. Weaknesses are resources and capabilities that are deficient or need improvement (Coulter, 2010).
Strategy formulation is the second phase of the strategic management process and the real meat of the strategic planning process. Strategy formulation defines the strategy’s purpose, determines what advantages the strategy creates or improves, sets boundaries of what the organization will and will not do, and prioritizes areas the organization will emphasize. This all begins with a statement of purpose. The statement of purpose should be strongly worded and leave no doubt about what the new strategy will accomplish. If the purpose is too ambiguous, the rest of the strategic planning process may suffer without the tight focus created by a strong statement of purpose (Bruce & Langdon, 2007).
The situation analysis already determined what factors give the organization a competitive advantage. The strategic plan must utilize those competitive advantages to achieve success. It is important to understand that all competitive advantages may not relate to a particular strategic plan. For example, a company with a highly efficient pencil making process may not rely on that competitive advantage if they are interested in moving out of the office supply industry. Therefore, when examining competitive advantages it is important to keep previously defined purpose in mind (Bruce & Langdon, 2007).
The purpose of boundaries in the strategic planning process is to help maintain focus. During the planning process, it is easy to follow a tangent too far and waste valuable planning time. By setting clear boundaries, the planning team is fully aware of what ideas pertain to the strategic plan and which are off-task. Additionally, boundaries defined within the strategic plan protect the organization from making potentially disastrous decisions. Boundaries defined within a strategic plan limit the scope of the organization’s operations. This can be used, for example, to define what services an organization will provide and which it will outsource (Bruce & Langdon, 2007).
Finally, the strategic plan must define what the organization’s priorities are. Based on the results of the situation analysis, a strategic plan may decide to focus on a specific market segment or ignore another. Prioritization ensures that the organization’s resources are focused on the areas that will result in the highest return (Bruce & Langdon, 2007). Like the other aspects of strategy formulation, prioritization relies heavily on the results of the situation analysis. Therefore, it is important to ensure that the methodology utilized in the situation analysis is accurate.
Kwangju Bank of South Korea developed a strategic plan to implement applications necessary to support the information needs of management. The plan outlines the situation analysis that was performed. It clearly defines the bank’s organizational context and both the external and internal environment. The plan uses the bank’s overall strategic plan to guide the information systems strategic plan. It includes descriptions of how information systems can be used to further the bank’s strategic plan and what advantages information systems provide. In the end it identifies projects that adhere to the strategic plan and prioritizes them based on their return (Kwangju Bank, 2006).
Kwangju Bank’s strategic plan for information systems is quite aggressive. They plan to create a data warehouse to store data that can be manipulated to answer the questions of senior management. The plan has a good understanding of the key performance indicators for the organization and knows what must be done to provide that information. Assuming the bank did not already have ready access to this information, this could become a competitive advantage that allows the bank to make the right decision more quickly. Although the plan is optimistic, it should be accomplishable given the proper investment.
Since the document is now three years old, the Kwangju Bank information systems strategic plan should be reviewed. Although database technology is constantly evolving, the premises set forth in the document are not necessarily out of date. In fact, improvement in computing and storage may allow the plan to be expanded and include more data and more reporting. Over time, competitors will have developed similar plans and Kwangju Bank will have lost its competitive advantage. Therefore, it is imperative that the bank remains vigilant in its strategic planning and stays ahead in information systems innovation.
Bruce, A. & Langdon, K. (2007). Think strategically: Plan the future and make it happen. London: Dorling Kindersley.
Coulter, M. (2010). Strategic management in action (5th ed.). Upper Saddle River, NJ: Pearson.
Kwangju Bank. (2006). Strategic Information Systems Plan. Retrieved October 13, 2009.