In order to succeed, businesses need to have a well-defined strategy to leverage their internal strengths and exploit opportunities in the market. The two common methods of setting firm strategies are strategic management and strategic planning. These two methods are related but different; they can cause conflict but, if used properly, they can also work together.
Strategic management is the firm's top level management of its goals and objectives. Strategic management is typically undertaken by senior managers who develop a specific strategies for improving firm performance. According to leading business scholar and Harvard Business School professor, Michael E. Porter, there are three generic strategies that a firm can employ: cost leadership, differentiation and market segmentation. Managers develop strategies that, for the most part, fit into one of these broad strategies.
Strategic planning is another process for developing a firm's strategic objectives. Unlike strategic management, which generates strategies from the top down, strategic planning works from the bottom up. Rather than top managers, specialized strategic planners develop the firm's strategies within the strategic planning system. Unlike strategic management, which deals only with firm-wide strategies, strategic planning is used to develop a wide array of strategies, including marketing strategies, product development strategies and financing strategies. Depending on the type of strategy that planners are developing, they will work with different members of the organization. For example, if they are developing a marketing strategy they will consult people in the marketing department, but if they are forming a new product development strategy they will work closely with the research and development department.
Strategic management focuses on giving power to the top management team. Strategic planning, however, limits the power of top managers by making them follow a plan that they may influence but cannot control. Not surprisingly, this often causes conflict within a firm. Strategic planning often fails simply because the top management team does not provide it with adequate support. The reason for this, according to business scholar Henry Mintzberg, is that strategic planning often does not support the top management team and its strategic management goals.
Although a fundamental conflict may arise between strategic management and strategic planning, it is possible to resolve this problem. According to Mintzberg, strategic plans should support management. If they do this, managers will be inclined to support strategic plans. Strategic planners should, therefore, carefully consider what the top management team wants to achieve through strategic management. By incorporating these goals and involving the top management in the strategic planning process, strategic management and strategic planning can work together.
- "Long Range Planning"; Rethinking Strategic Planning, Part I: Pitfalls and Fallacies; Henry Mintzberg, June 1994
- "Long Range Planning"; Rethinking Strategic Planning, Part II: New Roles for Planners; Henry Mintzberg, June 1994