What is the Role of strategic planning in an organization?

Strategic planning is needed in any company which has a single product or even multiple products with many strategic business units. The reason for strategic planning department to exist in a company is that the business environment and the companies positioning in such an environment needs to be tracked at all times. Accordingly we can decide the right strategy for the company.Thus, the role of strategic planning in an organization is as follows.

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1) Looking at strategic business units as investments

SBU’s are nothing but investments from companies for different businesses or products. Thus HUL Will have SBU’s for shampoos, detergents, food products and others. It needs to look at these SBU’s from an investment perspective because the firm Will have limited resources. Thus the proper strategic decision needs to be taken looking at the potential and growth of the SBU which is the role of strategic planning. Finally, if you are looking at SBU’s as investments than you also need to judge its current worth.

2) The strategic department keeps monitoring the business environment

The market growth rate and therefore the company’s position in that business environment. A simple unit such as market size against companies current market share can say a lot about the company’s potential and is actual market penetration.

Looking at such statistics the strategic planning department drafts the current position of the various SBU’s in the company with respect to the market.If the company has 16 SBU’s, 5 of them might be market leaders, 7 might be average positioned and 4 might have very low market share as compared to their potential.

3) Establishing a strategy based on the decisions made

If you look at the bcg matrix or the mckinsey matrix than these are tools used by the strategic planning department to come to a conclusion about which strategy to follow. The strategy may be made by the top management but the strategy Will be unique for each independent SBU or product. These SBU strategies Will be aligned as per corporate objective.

Also Read 7 simple reasons that justify the importance of planning

Thus, taking the above example, the company can use the 5 market leaders as cash cows, it can invest more money in the 7 SBU’s which are performing average, and finally it can divest the 4 SBU’s which are performing very poorly.

Thus the role of strategic planning is summarised as keeping complete track of the company’s progress against the progress of the business environment. And at the same time keep a watch on different SBU’s and products in an organization. And finally form independent sbu strategies with a uniform vision for the organization.