RELEVANCE OF STRATEGIC PLANNING IN FIRMS

Strategic planning enables a firm to take into consideration both the internal and external factors when taking decisions. Firms don’t function in a vacuum. On the contrary, a firm operates in an environment that comprises of factors that may adversely impact its performance. Strategic planning guides firms to assess the following and take strategic decision for its best benefit-

?a)?????? Internal environment: organizational culture, structure, financial performance etc.

b)????? external environment: state of economy, politics, technology, law and competition etc.

It is worthwhile to note that strategic planning methodology provides a firm with robust capabilities to analyze its internal and external business environments, which will enable its management to configure a sound business plan.

Relevance of Strategic Planning

Strategic planning is anchored on vision, mission, goals and objectives. Adoption of these allows a firm to sustain growth, acquire market space, establish leadership, enrich its image, create new value and retain competitive advantage. ?

a)?????? Vision: The vision intends to define the plan that a firm seeks to achieve in 7 to 10 years. As a result, a firm’s vision needs to be communicated to all for its successful fruition.?

b)????? Mission: A firm’s mission is another dimension of Strategic Planning. It is founded on vision. Its objective is to realise the aspirations of key stakeholders. The strategies are developed and implemented to attain a firm’s mission.?

c)?????? Goals: A firm’s goals act as a bridge between its mission and vision. The goals determine the path a firm should follow to realise its vision. The goals are time specific which may extend to five years.

d)????? Objectives: The objectives aid the process of attaining goals in quantifiable terms. Unlike the goals, the objectives help to operationalize the process of attaining goals in a defined timeframe.

e)????? Values: This element of strategic planning considers ‘values’ that are enshrined in the directive statements that are known to articulate the founding anchors of a firm.?

f)??????? Internal and External Analysis: This analysis is utilized to assess business environment comprising of internal and external factors that influence strategic planning-

i. Internal factors: These are correlated to internal functions of a firm, for example human resource and knowledge repository, culture, key abilities to manage technology and innovate, and organizational structure.

?ii. External factors: These are beyond the control of a firm. They include economic, legal, political and environmental factors. ?????????

Strategic Planning & the Role?

Strategic planning is known to play the central role in aiding firms to establish leadership in a market. It allows an entity including an Islamic Bank to take decisions regarding market access and the market in which it will deliver services and deliver benefits to its customers. Implementation of strategic plan enables the bank to ascertain the need for deployment of specific resources like competent talents, intellectual capital and skills, fund, infrastructure, systems and governance etc to establish dominance and competitive lead in a market such as Saudi Arabia.?

It is important to note that in competitive environment a bank in an Islamic Bank is required to govern and control equity and liquidity positions in conjunction with evaluating its exposure to diverse risks. To mitigate the impacts of these, an Islamic Bank needs to manage cost structures, constantly innovate services, attach priority customer services and customer experience enrichment. The focus on these initiatives yields results only when they are founded on strategic plans, enveloping Vision, Mission etc. The seamless alignment between strategic intent, strategic plan and action plan is the precondition of an Islamic Bank’s in attaining the goals set by the shareholders.

It can be inferred from the above that a strategic plan defines a clear path and direction, triggering prioritization on growth, cost management and process improvement. Further, the strategic plan allows an Islamic Bank to review its progress, acknowledge lofty attainments, and learn from mistakes. Strategic plan guides the management in the bank to determine whether it needs to attach priority to resource deployment and monitor utilization efficiency. It is worthwhile to note that strategic planning is not a one-time process. An Islamic Bank will be able to leverages emerging issues to stimulate smart decision-making.?

Strategic Planning Objectives

The central purpose of strategic planning is to help management of an Islamic Bank or a firm to define and establish effective approaches for realizing its strategic intent implying that strategic planning process helps to configure the strategic choices that complement mission realization by circumventing environmental barriers. ??

Strategic planning helps a bank to use of resources optimally. Firms including Islamic Banks utilize strategic planning as a tool to initiate strategic actions and manage transformation. It is used extensively as a strategic tool in transforming Islamic Banks. It influences such banks to think and act differently to innovate solutions and enrich their future, signaling the outcome of robust environmental analysis. In this way, managers are able to anticipate changes within the business environment, making it possible for the bank in a good and right position to manage changes, sustain differentiation, attain growth and build value. ?