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Difference between Strategy and Strategic Plan
Although strategy and strategic plan are considered as the same, it is wrong to assume so. There are some distinct differences between strategy and strategic plans. Strategy and strategic plan are the parts of financial planning wherein companies try to chart their future course of action depending on the resources that the company has under its control. Let’s look at strategy and strategic planning individually to understand what they mean and what their basic differences are.
What is Strategy?
Strategy is the base of planning but it is not the planning itself. The strategy provides the platform for the company to build its financial planning in order to run a project smoothly and without any hindrance. Strategy is the central thread that ties a company’s competencies, resources, and opportunities. It also looks at the threat that is created by the risks that may arise due to the application of the strategy or changes in the business environment.
Strategy is a link that connects the multiple goals and objectives of a company that are taken to satisfy the needs of the stakeholders and the plans and policies used by the company to achieve these goals.
Resource deployment is also a major part of a strategy. In fact, it is important to note that advantages are not only created by product and market positioning but can stem from organized resource deployment as well. Therefore, the final success of a company may not be inherent only in the scope but may be greatly influenced by resource deployment and competitive advantages.
Components of a Strategy
The four key components of a Strategy – scope, distinctive competencies, competitive advantages, and synergies created between product/market segments and distinctive competencies can determine the success of a company to a large extent.
What is Strategic Planning?
It is notable that to succeed in the market, companies need a balanced portfolio of businesses or products. Strategic planning ensures that a company’s portfolio is balanced in terms of profit, overall risk, and cash flows. Strategic planning is, therefore, the tool by which the progress of a company can be ensured.
It must be noted that since decision-making is performed at the top level of a company, strategic planning should be applicable at the ground level as well. Popular business models such as the Boston Consulting Group (BCG) Model and the nine-cell matrix model developed by the General Electric (GE) company are based on this aspect of business operations.
Strategic planning decides the strategy. Planning is done at the top level of a company while the strategy is applied at the ground level where managers apply the strategies as directed by the top-level managers.
The main characteristic features of Strategic Planning can be summarized as follows −
The environment in which a company operates is competitive in nature.
Strategy is the link that connects the company’s competencies and the opportunities that may arise due to changes in the environment.
The companies are always multi-directed. In other words, the multiple goals of a company and its plans and policies are connected by a strategy.
The main components of the strategy are product-market scope, distinctive competencies, competitive advantages, and synergies created by these factors.
Market dominance in the growth phase of a company is the best strategy.
A balanced portfolio is necessary for a company to grow and have profitability that is generated by its operations.
Strategy and strategic planning may be interrelated but in essence, they are two different aspects of a business’s operation. A strategy looks at the qualitative aspect of operations more than strategic planning, whereas the latter is more engaged in quantitative aspects.
Strategic planning needs a good idea of the market as well as the strengths and weaknesses of the company. Although it is tough, creating a good strategic plan to build a strategy that works well can be a milestone of success for the companies.
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