Slide 1
STRATEGIC MANAGEMENT
Lesson 3
Strategic planning process
Welcome to lesson 3 of your module, Strategic management. In this lesson, we shall be
considering the strategic planning process.
Slide 2
Lesson 3 Contents
SECTION 1 Top-down or bottom-up planning
SECTION 2 Objective-setting and strategic goals
SECTION 3 Critical success factors
SECTION 4 Resource planning
SECTION 5 Financial plans and budgets
In this lesson, we will be looking at top-down or bottom-up planning, objective setting and
strategic goals, critical success factors, resource planning, and financial plans and budgets.
Slide 3
Top-down or bottom-up planning
Regardless of the approach to strategy, organisations still need to think
ahead, usually 12 months ahead.
Top-down planning
The CEO generates the company’s vision, mission, strategic goals and
plans, and then communicates these to the ranks below. The frontline
translates goals into daily action to achieve the desired results.
Bottom-up planning
Relatively close targets at lower levels of the organizational hierarchy are
set. They are then gradually integrated into the framework of global goals
and global strategy at higher and higher levels.
So, regardless of an organisation’s approach to strategy, organisations still need to think
ahead usually for the following 12 months. Top-down planning is where the CEO generates
the company vision, mission, strategic goals and plans, and then communicates these to the
ranks below. The frontline translates these goals into daily actions to achieve the desired
results.
Bottom-up planning, on the other hand, is where people at the lower levels of the
organisation hierarchy are setting their own goals and targets. These are then gradually
integrated into the framework of global goals and global strategy at higher and higher levels.
Slide 4
Objective-setting and strategic goals
• Top-down – objectives are
set from the top
• Enables alignment of
objectives and strategy across
business units
• Bottom-up objectives are set
from below
• Closer to the customer
• If involved, believed to be
acceptance and ownership of
targets
• Agreement of objectives and
goals
• Ensure unity across the
organisation
Top-down planning ‒ the objectives are set from the top. This enables the alignment of
objectives and strategy across different business units. In bottom-up planning, objectives are
set from below. The benefits of this are that people who are closer to the customers are
setting the objectives and, if involved, it is believed that they will be more accepting and
take ownership of the targets set. Critical success factors are those factors which an
organisation believes, if achieved, will enable strategic success. Regardless of whether top-
down or bottom-up planning and objective setting is undertaken, there has to be agreement
about objectives and goals to ensure unity across the organisation.
Slide 5
Critical success factors
• Simple to understand
• Manageable list
• Enables focus
• Communication
• Basis for rewards
Frequently, organisations have critical success factors. These need to: be simple to
understand, be kept to a manageable list, enable focus for everybody within the
organisation, be communicated to everybody, and be the basis for rewards if any
performance-based bonus systems are in place. Here you can see some examples of
missions and critical success factors, and how they translate into goals. Pause the
presentation for a couple of minutes and take the opportunity to have a look at these
examples.
Slide 6
Resource planning
• Activities which need to be undertaken to achieve strategic goals.
• What resources are needed – human, physical and financial.
Resource planning needs to be undertaken. Organisations need to consider what activities
have to be done to achieve strategic goals and what resources are needed to complete these
activities ‒human resources, physical resources and financial resources. Especially within
this, organisations may consider what resources they can obtain if they don’t already have
them such as taking a loan out to increase financial resources or undertaking training and
development of staff if different skills and abilities are needed.
Slide 7
Financial plans and budgets
Expenditure and revenues – corporate level with input from business units /
departments.
Plan into the future – 12 months, 5 years? Will vary organisation to
organisation.
Strategic budget – expenditure required to support strategic plans.
Operating budget – to sustain existing operations.
From this, financial plans and budgets can be set. Organisations consider what expenditure
in different areas is likely to be needed, what revenues the organisations are expecting to
reap and, at corporate level, this will combine different business units and departments. It
sets the plan into the future ‒ frequently 12 months, sometimes up to 5 years. It will vary
from organisation to organisation and likely depends on how changeable the external
environment is. Several budgets will be determined: the strategic budget, which is
expenditure required to support strategic plans, and the operating budget, which will enable
an organisation to sustain existing operations.
Slide 8
Risk management
Risk identification
Risk quantification
Risk mitigation
Risk monitoring and control
When all of this has been undertaken, the organisation needs to undertake a risk
assessment of their plans. They need to identify risks: what could go wrong, what
information is the strategy reliant upon being true and accurate, quantification of that risk,
and then consider risk mitigation ‒ can the risk be avoided and, if not, contingency plans
may be needed. Continuous monitoring of risk and controlling of risk is then required.
Equally, if a project is put in place to enable an organisation to transform itself to be in a
position to undertake the new strategy, risk management will need to be undertaken on that
project and its implementation too.
Slide 9
THANK YOU
Thank you for listening and I look forward to seeing you in lesson 4. In the meantime, do
undertake the reading on the learning platform. This will also have links to further reading
which you will find useful and beneficial to help your understanding.