Advantages and Disadvantages of Strategic Planning

Strategic Planning Advantages and Disadvantages

This is my second post on explaining strategic planning in more details. I've already provided a list of 10 strategic planning definitions in my previous post, so please check it out!
Understanding strategic planning is crucial if an organization wants to achieve sustainable competitive advantage.Therefore, knowing its advantages and disadvantages is essential as its much easier to implement it when a manager knows what to expect. In overall, it has more benefits that limitations, but not all of them are equally important. Below, I've listed and explained 5 main benefits and 3 limitations. A few resources containing more or different benefits and limitations are revealed at the end.

Advantages

1. Facilitates communication between managers. One of the goals of strategic managers is to facilitate the collaboration of functional managers to achieve synergy between different parts of organization. Managers in finances, marketing, operations and human resources are essential for an organization but they often compete rather than collaborate. Even worse situation is with separate SBUs. Strategic planning is in place to facilitate the collaboration between these managers.

2. Identifies strategic goals and strategic intent. CEOs are usually the people who create goals and envisions the future of the company. Nonetheless, they are often engaged in many other activities and have less time to search for the best strategic fit.

3. Reduces resistance to change. It is strategic planner's job to inform the whole organization of strategic changes, company's plans, current situation implications and what changes are expected to be done. Thorough explanation of this information to managers in every level, reduces resistance to change as managers are less uncertain about the future.

4. Improves resource allocation. New products, services, strategies, goals or objectives require resource allocation (moving people from one team to another or moving the facilities into another country), which is done more efficiently when aligned with strategic objectives.

5. Leads to sustainable competitive advantage. Competitive advantage is often achieved without strategic planning but if the company wants to achieve sustainable competitive advantage it has to plan strategically.

Disadvantages

1. Costly to perform for small and medium businesses. Strategic planning, the same as marketing or proper human resource management, adds a lot of expenses to an organization. Managers or strategic planners have to be hired, additional efforts are required towards analysis of external and internal environments and some tools have to be designed to properly implement strategic planning process. Although all of this is done to some extent by all organizations (who doesn't monitor firm performance or analyze competitors?), mainly the large enterprises are the ones capable to hire competent personnel to implement strategic plans.

2. The process is very complex. Strategic planning process consists of many steps that are connected to each other and must be constantly adjusted. Some unexpected factors also appear that may change the whole strategy and as a result, strategic planning process.

3. Low rate of successful implementation. Due to its complexity and heavy commitment to strategic goals, strategic planning is rarely implemented successfully. Often, the poor implementation is the reason for failure, although it is more often the case of misaligned operational and strategic goals.

More resources on advantages and disadvantages of strategic planning:

Strategic Management Insight has listed more great advantages and disadvantages of strategic planning.








This slideshow also adds some benefits and limitations to the ones we explained in this article:

 

Strategic management and strategic planning from Ovidijus Jurevicius