How do you define strategic planning? What are some differences between strategic and financial planning? What financial problems might an organization encounter when implementing a strategic plan? Strategic Planning is and organization plan and the direction they will take to be profitable in the future. Strategic planning consists of a company vision, values, vision and strategy to be use. In the strategic planning process organizations define their purpose and where they want to go. During the strategic planning is important for organizations to establish guidelines on how they will compete against other similar organization.
Keown, Martin and Titman define Strategic planning “general description of the firm, its products and services, and how it plans to compete with other firms in order to sell those products and services. ” A very important aspect of strategic planning is leadership. Financial planning is the forecasting of company future financial needs. It consist of a short term (months) and a long term (5+ years). Understanding future needs a company can better prepare to meet the requirements. The main difference between financial planning and Strategic planning is that financial planning it allows the company to meet the plans set in the strategic plans.
For example the part of a company plans is to ensure services provided stay competitive and advance. As markets change the company will have to invest in infrastructure and development that will require cash. Without and effective financial plan accomplishing the strategic plan can result in a loss. Some of the financial problems organizations face during implementation of strategic plans is that ideas are not transfer into action. During the financial planning is important to forecast future needs. If a company establishes a plan to be reach within a time frame it needs to make sure all resources are available in that time frame.
This is one of the problem organizations encounters during their strategic planning as some of the future needs and growth is hard to estimate. Another issue is the lack of forecasting of Discretionary financing needs. Organization’s growth depends on ensuring supplies and items needed are in place. Companies not accurately forecasting these needs can be a major problem (CH17, p. 577). An example of financial and strategic planning failure is GAMESTOP that has failed to move to the digital word (download) in the video game market, resulting in loss of market share from other competitors.