Strategic planning for business growth
Understand the importance of strategic planning and find out how to create a clear and effective strategic plan to drive the growth of your business
Creating a strategic plan is a key part of planning for growth. A strategic plan helps prepare a realistic vision for the future of your business and maximise your potential for successful business growth.
You should not confuse strategic planning with business planning. A business plan is about setting short or mid-term goals and defining the steps to achieve them. A strategic plan is focused on mid to long-term goals and explains the basic strategies for achieving them.
The purpose of strategic planning
Understand what is meant by strategic planning, what the process entails, and the purpose it serves in your business
Strategic planning is a systematic process that helps you set an ambition for your business' future and determine how best to achieve it. Its primary purpose is to connect three key areas:
- your mission - defining your business' purpose
- your vision - describing what you want to achieve
- your plan - outlining how you want to achieve your ultimate goals
Strategic planning is different to business planning. It requires stepping back from your day-to-day operations and articulating where your business is heading, by setting long-term goals, objectives and priorities for the future.
Importance of strategic planning
Strategic planning is necessary to determine the direction for your organisation. It focuses your efforts and ensures that everyone in the business is working towards a common goal. It also helps you:
- agree actions that will contribute to business growth
- align resources for optimal results
- prioritise financial needs
- build competitive advantage
- engage with your staff and communicate what needs to be done
Another significant purpose of strategic planning is to help you manage and reduce business risks. Growing a business is inherently risky. Detailed planning may help you to:
- remove uncertainty
- analyse potential risks
- implement risk control measures
- consider how to minimise the impact of risks, should they occur
Read more about risk management.
What is a strategic plan?
Effective planning usually results in a written strategic plan. This is a formalised document that describes your business' goals, and the actions needed to achieve them.
Other common elements are:
- vision and mission statements
- core values
- clearly defined goals and objectives
- action plans
You may also want to include an implementation schedule, key performance indicators (KPIs) and other accountability measures.
Learn more about the key elements of strategic planning.
Difference between strategic plan and business plan
Both strategic and business plan documents are essential planning tools for your business. However, depending on business stage and goals, one may be more useful than the other.
A strategic plan is for a 3-5 year period and sets out the tasks, the milestones and the steps needed to drive your business forward. Find out how to develop a strategic plan.
A business plan focuses on a shorter term, usually no more than a year, and serves a specific goal - eg starting a business, getting funding, or directing operations. See how to prepare a business plan for growth.
Key elements of strategic planning
Understand the key questions that strategic planning aims to address, and the essential elements around which you can build your strategic planning process
A strategic plan is a key document that sets out your business direction and outlines steps you will take to get there. Critical to this document is the strategic planning process itself.
The planning process allows you to ask and answer four fundamental questions about your business:
- Where are you now? - This is your starting point. Learn as much as you can about your business. Find out how it operates internally, what drives its profitability, and how it compares with competitors. Be realistic, detached and critical.
- Where do you want to take your business? - What is your target destination? Outline where you see your business in three, five or ten years, what you want to focus on, and what will your competitive advantage be.
- How will you get there? - Map out the journey, the milestones and the changes you will need to make to meet your strategic objectives.
- How will you know if you're succeeding? - Determine the checkpoints and decide how you will measure success.
Read more about the purpose of strategic planning.
Essentials of strategic planning
Effective planning will take into account the following elements:
|Where are you now?||Where do you want to be?||How will you get there?||How will you measure success?|
|Strategic review||Strategic focus||Strategic priorities||Balanced scorecard|
|Values||Goals/objectives||Tactics||Key performance indicators (KPIs)|
|Core competencies||Vision statement||Action items|
|Market position||Mission||Resource allocation|
Keep in mind that not all strategic plans end up the same. Some cover only one year; others take a longer-term view, generally three to five (and occasionally up to ten) years into the future.
In some businesses, planning may produce only top-level information without action plans. Others will want to provide extensive details.
Whichever approach you take, make sure that your vision for the business is:
- clear and easy to convey
- holistic and takes a whole-business view
- purpose-driven and based on the real mission
- realistically achievable considering your resources and current position
How you will carry out strategic planning most likely depends on the nature of your business, its complexity, size, culture and expertise. You can use many different approaches and strategic tools to guide you. Read about the steps in the strategic planning process in more detail, and see which types of strategic planning models you can use.
Finally, be aware of the implications of any changes. You will have to carefully manage any strategic change to ensure that you successfully reach your goals and objectives, and fulfil your mission. Read more about change management.
Steps in the strategic planning process
Learn the basic steps of the strategic planning and management process, and who you should involve in the development of your strategic plan
Strategic planning and management process can be overwhelming. However, by breaking it down into smaller segments, it is easy to see how the different pieces fit together.
The process gives you an approach rather than a set of rules to follow, so there will be differences in how organisations carry out their planning activities. However, most will follow a similar pattern.
Five stages of the strategic planning and management process
The five steps of the process are:
- strategy formation
- strategy implementation
- monitoring and evaluation
The management part of the process ensures that the actions and resources support the vision in your strategic plan. This takes in implementation, monitoring and evaluation, and is sometimes referred to as strategy execution. See how to implement a strategic plan.
The planning part of the strategy process takes in goal-setting, analysis and strategy formation. See key elements of strategic planning.
There is no right or wrong way to plan the process of strategic planning, but be clear in advance about how you intend to proceed. Everyone involved should know what is expected of them and when.
For example, you may decide to hold:
- a series of meetings with a strategy team before delegating the drafting of a strategy document to one of its members
- strategy brainstorming sessions to seek contributions from a broader range of employees and even key customers
Who is responsible for strategic planning?
In a large business, the responsibility lies with top-level executives. Planning is often a participative process, so they will want to involve some or all of the following:
- CEO, COO or other similar senior position
- managers once removed from the CEO
- other executive staff
- advisors, assistants, consultants
- interest groups and beneficiaries
Small businesses owners may be tempted to strategise on their own, but it will often help to involve others. You can involve different people in different ways and at different times during the planning process. Greater involvement is key to securing commitment to the delivery of your strategic plan.
Try to find people who show strong analytical skills. Choose a mix of creative thinkers and those with a solid grasp of operational detail.
Seek opinions of other staff, such as key employees, accountants, department heads, and board members. Listen to external stakeholders, including customers, clients, advisers and consultants.
Ultimately, everyone will be responsible for using a strategic plan. Managers may be responsible for the implementation and communication, but the leadership is most likely to be held accountable for the strategic planning and implementation results.
Remember, there are many tools and approaches you can take when deciding on your strategy - such as these common types of strategic planning models.
Types of strategic planning models
Using strategic models, such as Five Forces, SWOT or PESTLE analysis, can help you consider and evaluate the challenges and opportunities facing your business
Strategic planning is about effectively positioning your business in the marketplace. You need to make sure that you conduct a thorough analysis of both your business and your market.
Many strategic analysis models can help with this task, including:
- The balanced scorecard - which takes into account objectives, measures and initiatives. See more on the balanced scorecard.
- Strategy mapping - which visually communicates the strategic plan and high-level business goals. Read about strategy maps.
- Strategic gap analysis - which looks at where your business is now, where it wants to be, and how to bridge the gap between. See more on gap planning.
However, the three most popular planning models include SWOT analysis, PESTLE analysis and Porter's Five Forces framework.
A SWOT analysis is a high-level model often used at the beginning of the strategic planning process. It identifies the internal and external factors that are favourable and unfavourable to achieving a business goal:
- Strengths - aspects of the business that can help achieve the objective
- Weaknesses - aspects of the business that could hinder achieving the objective
- Opportunities - external factors that could help achieve the objective
- Threats - external factors that could hinder achieving the objective
Using a SWOT analysis can help you understand what you're doing well and in what areas you can improve. See our SWOT analysis example.
PESTLE breaks the business environment down into the following areas:
- Political - eg changes to taxation, trading relationships or grant support for businesses
- Economic - eg interest rates, inflation and changes in consumer demand
- Social - eg demographic trends or changing lifestyle patterns
- Technological - eg emerging technologies or productivity-improving equipment
- Legal - eg changes to employment law or to the way your sector is regulated
- Environmental - eg changing expectations of customers, regulators and employees on sustainable development
PESTLE analysis is often used alongside SWOT analysis to help identify opportunities and threats. See our PESTLE analysis example.
Porter's Five Forces analysis
The Five Forces model aims to help businesses assess how competitive a market is. The model looks at:
- your customers' bargaining power - the higher it is the more downward pressure on prices and revenue they will be able to exert
- your suppliers' bargaining power - the ability of suppliers to push prices up can impact significantly on costs and profitability
- the threat of new competitors entering your market or industry - more businesses competing makes it harder to retain market share and maintain price levels
- the threat of customers switching to newer products and services - eg the threat to DVD manufacturers posed by online video streaming
- the level of competition between businesses in the market - this depends on a wide range of factors, including the number and relative strength of the businesses and the cost to customers of switching between them
Find out more about Porter's Five Forces.
PESTLE analysis example
An example of a PESTLE analysis and the type of information you should examine to assess external factors affecting your business
PESTLE analysis is a fundamental tool for business strategy and planning. It is a method of assessing your business' environment and its possible impact on the performance of your company.
PESTLE is an acronym which stands for six external factors affecting your business: political, economic, sociological, technological, legal and environmental. Each of these can have a profound effect on your business and varying implications, for example, in terms of:
- duration of impact - short term or long term
- type of change - positive, negative or unknown
- rate of impact - increasing, decreasing, unchanged or unknown
- importance - critical, important, unimportant or unknown
Example of PESTLE analysis
The following PESTLE analysis example clarifies how the six external factors work and what type of information you should include in your analysis. This example scenario involves overseas sale of a product.
|Possible factors||eg international trading tariffs, restrictions, visa requirements, price control, etc||eg current UK economic situation, currency inflation, interest rates, taxation level, etc||eg cultural norms, attitudes to product, consumer preferences, age and gender distribution, etc||eg emergence of innovative technologies affecting the production, marketing or sale of product, automation of processes, etc||eg legislative issues, such as consumer protection laws, health and safety laws, licensing regulations, etc;||eg sustainability, waste management rules and regulations, green practices etc|
|Business impact||eg - possible trade barriers to protect domestic suppliers||eg - strength of overseas economies versus UK may affect price/profitability||eg - will product be accepted overseas?||eg - can intellectual property rights be protected overseas?||eg - will the product comply or be allowed into the market?||eg - pollution implications of transportation|
|Time frame||unknown||6-12 months (possibly longer)||6-12 months||0-6 months||0-6 months||n/a|
|Type of impact||negative||unknown||unknown||negative||negative||possibly negative|
|Rate of impact||increasing||unknown - dependent on the economy, and other countries' economies||unknown||unchanged||unchanged||unknown|
Advantages of PESTLE analysis
By helping you to understand how external factors affect your businesses, PESTLE can help you:
- determine their long-term effect on the performance and activities of your business
- review any strategies you have in place
- work out a new direction, product or plan for your business
- identify solutions to problems
- gain strategic advantage on competitors
- evaluate the risks associated with markets you're interested in
PESTLE is an extended version of PEST analysis. It is often used in collaboration with other analytical business tools like the SWOT analysis and Porter's Five Forces to give a clear understanding of a situation and related internal and external factors.
Read about other types of strategic planning models.
SWOT analysis example
An example of a SWOT analysis, with details of information you may want to include under your business' strengths, weaknesses, opportunities and threats
A SWOT (strengths, weaknesses, opportunities, threats) analysis can help you understand how your business is positioned in relation to the market and your competitors.
You can use SWOT analysis for any of the following:
- business planning
- strategic planning
- competitor evaluation
- product development
- business reports
Example of a SWOT analysis
Below is an example SWOT analysis template with information and examples of what to include in each section.
|Factors to assess||Strengths||Weaknesses|
|Internal factors|| |
Include any information on any strengths, such as:
Include information on any weaknesses, such as:
|Factors to assess||Opportunities||Threats|
|External factors|| |
You should include growth opportunities, such as:
You should include any potential threats to your business, eg:
Advantages of a SWOT analysis
A SWOT analysis offers many benefits, including helping you to:
- understand the key issues affecting your business
- spot and deal with weaknesses
- minimise risks and deter threats
- capitalise on opportunities
- take advantage of your strengths
- develop business goals
- identify strategies for achieving your goals
A SWOT analysis is typically also low- or no cost, and relatively quick and simple to carry out.
How do you develop a strategic plan?
List of key elements to include in your strategic plan - from your vision statement to your key goals for implementation
A strategic plan document is typically the result of the strategic planning process. It is a stepping-stone towards strategy implementation and offers a roadmap for accomplishing your business' strategic goals.
There is no set way to structure a strategic plan document, but it is good practice to include the following:
- Introduction statement - briefly describing why you developed the strategic plan, its scope and duration.
- Business statement - briefly describing your business and its history. This can serve as an 'elevator pitch' when explaining your business to others.
- Vision statement - describing what you want to achieve or where you want your business to be.
- Core values - outlining the principles that underpin your business culture.
- Mission statement - describing the long-term purpose of your business.
- Problem statement - explaining key issues that you wish to address.
- SWOT analysis - examining your business' internal strengths and weaknesses, as well as external opportunities and threats. See a SWOT analysis example.
- Objectives and goals - outlining your top-level objectives as measurable and actionable steps. These might include attracting a new type of customer, developing new products and services, or securing new sources of finance.
- Implementation plan - setting out key actions (with desired outcomes and deadlines) needed to fulfil your top-level objectives.
- Monitoring and evaluation - determining which key performance indicators (KPIs) you will track, and how you monitor the progress against actions on an ongoing basis.
- Resourcing - summarising the impact of the proposed strategy on resources, including budget, staffing, premises and equipment.
You may also want to consider adding an executive summary. This can be useful for prospective investors and other key external stakeholders.
Rather than being fixed in stone, your strategic plan should be a dynamic document. You may need to revisit and adjust periodically to fit the changing needs of your business.
Once you finalise this document, you will need to take steps to implement your strategic plan.
Implementing a strategic plan
How to implement and execute your strategic plan, and monitor performance against your business' strategic objectives
Implementation is vital to the success of your strategic plan. It allows you to activate the plan you have created, turn strategy into actions, and ensure that the time and energy you've put in the planning process don't go to waste.
To ensure that you're set up for a successful implementation, you will need to secure five key elements: people, resources, structure, systems and organisational culture.
You will also have to follow these vital steps to carry out the implementation:
- install a new business and management structure, if necessary
- assign clear roles and responsibilities to those implementing the plan
- clearly communicate the strategy, processes and goals to staff, stakeholders, etc
- secure funding and resources for any initiatives or changes that need to happen
- manage change efficiently and effectively
- enable staff to dedicate time and effort to the agreed actions
Once you align these things, you will be able to execute your strategic plan.
The key to implementing strategic objectives is to assign goals and responsibilities with budgets and deadlines to responsible owners. This could include key employees or department heads.
Monitor strategic implementation
After you begin the implementation, you will have to control and evaluate actions to ensure they remain on target towards achieving the strategic goals.
You can do this through:
- performance measurement
- review of internal and external issues
- making corrective actions, if necessary
Monitoring will be an ongoing process. You will have to:
- define which parameters you wish to measure
- use KPIs to assess business performance
- set targets and deadlines as a way of managing the process
- determine your progress by measuring the actual results versus the plan
As implementation progresses, you may find you need to tweak your business strategy.
Using a business plan alongside your strategy
Your business plan is another important tool in the implementation process. The business plan is typically a short-term and more concrete document than the strategic plan. It tends to focus more closely on operational considerations such as sales and cashflow trends. Your business plan can help you set out actions that drive growth and the implementation of your strategy. See how to prepare a business plan for growth.