What Is Strategic Planning?
As noted, the company’s hierarchy or chain of goals flows from top management’s overall strategic plan for the company. A strategic plan is the company’s overall plan or how it will match its internal strengths and weaknesses with its external opportunities and threats in order to maintain a competitive position. The strategic planner
asks, “Where are we now as a business, and where do we want to be?” He or she then
formulates a strategic plan to help guide the company to the desired destination.4
When Yahoo! tries to figure out whether to sell its search business to concentrate
on offering more content, or when Apple branches out into selling watches, they are
engaged in strategic planning.
Strategic plans are similar to but not the same as business models. Those investing in a business will ask top management, “What’s your business model?” A business model “is a company’s method for making money in the current business environment.” It pinpoints whom the company serves, what products or services
it provides, what differentiates it, its competitive advantage, how it provides its product or service, and, most importantly, how it makes money.5 For example, Google doesn’t make money by requiring people to pay for searches; it makes money by offering targeted paid advertisements based on what you’re searching for.
A strategy is a course of action. Both PepsiCo and Coca-Cola face the same basic problem—people are drinking fewer sugared drinks. However, they each chose different strategies to deal with this. PepsiCo diversified by selling more food items like chips. Coca-Cola concentrated on sweet beverages, and on boosting advertising
to (hopefully) boost Coke sales.
Finally, strategic management is the process of identifying and executing the organization’s strategic plan by matching the company’s capabilities (strengths and weaknesses) with the demands