U4.10 — Purpose and Intent of the Strategic Planning Process
Overview
Dotpoint 10: purpose and intent of the strategic planning process.
Strategic planning is the process a business uses to set its long-term direction, analyse its environment, choose strategies, implement actions and evaluate progress.
This is a short but important dotpoint because it introduces why businesses plan before making major decisions such as global expansion, product development, market entry, restructuring or growth.
The focus is on the purpose and intent of strategic planning, which provides a foundation for the next dotpoint, where the features of the strategic planning process are covered in greater detail.
🎯 Purpose of the strategic planning process
What is the purpose of strategic planning?
The purpose of the strategic planning process is to help a business decide where it wants to go, how it will get there and how it will know whether it has been successful.
It provides long-term direction so that managers, employees and resources are working toward the same goals. This is especially important when a business is growing, entering a global market or facing major change.
Strategic planning affects business operations because it guides decisions about marketing, finance, staffing, production, technology, legal compliance and international expansion. Without strategic planning, a business may make rushed decisions, waste resources, misunderstand market risks or expand without a clear direction.
Main purposes of strategic planning
Set direction
Strategic planning gives the business a clear long-term direction rather than reacting to problems as they occur.
Clarify goals
It helps the business set objectives so managers and employees understand what the organisation is trying to achieve.
Allocate resources
It helps the business decide how to use money, staff, technology, equipment and time effectively.
Reduce risk
It allows the business to research internal and external factors before making major decisions.
Coordinate operations
It aligns departments such as marketing, finance, operations and human resources behind the same strategy.
Measure success
It gives the business a way to compare actual results with planned objectives and make improvements.
Example of how to write this in an exam
The purpose of the strategic planning process is to give a business a clear long-term direction and guide how it will achieve its objectives. For example, if Rio Tinto wanted to expand mining operations into a new overseas market, strategic planning could help the business assess political risk, environmental regulations, infrastructure, labour availability, costs and long-term demand before committing major capital. This is important because it reduces the risk of poor decisions and helps the business allocate resources more effectively.
🧭 Intent of the strategic planning process
What is the intent of strategic planning?
The intent of the strategic planning process is the business’ desired outcome. It is what the business is trying to achieve through the plan.
In simple terms, the purpose is why planning is done, while the intent is what the business wants the plan to achieve.
For a growing business, the intent may be to expand into a new market, achieve economies of scale or strengthen competitiveness. Different intentions lead to different strategies, budgets, timelines and performance measures.
Common strategic planning intentions
Growth intentions
- Expand overseas: enter a new international market.
- Increase market share: attract more customers than competitors.
- Increase sales: grow revenue through new products, locations or online channels.
- Build brand awareness: make the business more recognised in the target market.
- Achieve economies of scale: reduce average costs by increasing the scale of production or operations.
- Become a global brand: build strong recognition and a presence across international markets.
- Access new resources: gain access to overseas suppliers, skilled workers, technology or raw materials.
- Diversify: enter new products or markets to reduce reliance on existing ones.
Performance intentions
- Improve profitability: increase revenue or reduce costs.
- Improve efficiency: use resources more effectively.
- Increase productivity: produce more output from the same resources.
- Strengthen competitiveness: improve the business’ position against rivals.
Example of how to write this in an exam
The purpose and intention of strategic planning is to help a business set a clear direction and decide how it will achieve its long-term goals. For example, a tourism business expanding into Singapore may use strategic planning to analyse customer demand, competitors, technology use, costs and marketing opportunities. The intention may be to become more competitive and increase sales by attracting Singaporean tourists. This would help the business choose appropriate strategies, allocate resources and measure whether its expansion has been successful.
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Biz Fact: IKEA says one of its biggest lessons from overseas expansion is that the more thoroughly it prepares before entering a country, the better the launch tends to go.
Past Exam Questions
Use these past exam questions to see how this dotpoint has been assessed. Pay close attention to the command term, the number of marks and whether the question is Section 1 or Section 2.
Section 1 Questions
2023 — Section 1 — Question 4(a) — 2 marks
Context
Strategic management is a key element to consider when operating in global markets.
4(a): Outline the purpose of the strategic planning process. (2 marks)
Command term focus: Outline
Outline: state the main point and briefly clarify the key idea.
See the full command term guide here: Command Terms.
4(a) Sample answer
The purpose of the strategic planning process is to provide a business with long-term direction and a clear plan for achieving its objectives. It helps the business analyse its environment, choose strategies, allocate resources and measure whether the plan is successful.
Section 2 Questions
2017 — Section 2 — Question 9(a) — 6 marks
Case study / context
Amy Wong plans to grow her business by importing quality silk products from China. Silk is used to manufacture a wide range of products. Amy has undertaken market research and identified the silk-bedding market, including silk quilts and pillows, as having significant growth potential. While popular for centuries in China, her research shows that silk-bedding products are now becoming better known in Western markets.
The increasing popularity of silk and its associated reputation has developed due to a combination of factors, including its excellent thermal properties, light weight, resistance to insects and natural hypoallergenic properties. Also, silk does not require any processing chemicals during its manufacturing process. Consequently, it is considered an environmentally-friendly product.
Amy thinks that growth in Western markets, customer demand for natural products, introduction of free trade agreements (FTAs) and the increase in production of quality silk products from China provides the basis for a successful global business. Given the scope of potential changes to her current business, Amy may need to review her strategic plan.
9(a): Explain the purpose of the strategic planning process and why it is important for a growing business such as hers. Include in your answer the key features of a strategic plan. (6 marks)
Command term focus: Explain
Explain: show cause and effect by explaining why or how something happens and the result. Section 2 requires application.
See the full command term guide here: Command Terms.
9(a) Sample answer
The purpose of the strategic planning process is to give Amy’s business a clear long-term direction and decide how it will achieve its growth objectives. This is important because Amy is considering importing silk products from China and targeting Western markets, which would involve new customers, suppliers, competitors, costs and risks.
Strategic planning would help Amy use market research to assess customer demand for natural silk bedding, analyse opportunities created by FTAs and consider threats such as competitors or changing import costs. This would reduce uncertainty and help Amy decide whether the expansion is worth pursuing.
Key features of a strategic plan include a mission and objectives, an environmental scan such as PEST, Porter’s Five Forces or SWOT, strategic formulation, strategic implementation, and evaluation and control. These features would help Amy set goals, choose a strategy, put the plan into action and measure whether her silk-bedding expansion is successful.
2018 — Section 2 — Question 7(a) — 3 marks
Case study / context
Daisy has been operating a surf and yoga camp in the small beach town of Yallingup in Western Australia. She is very happy with the success of the business, which attracts both local and international tourists. She is thinking of expanding to Bali, Indonesia. This appears to be an ideal location, due to its popularity as a holiday destination, the availability of affordable flights, diverse culture, good surf and the fact that there are already established surf and yoga camps successfully operating in Bali. Daisy has also learned the Indonesian language during her past visits to Bali. She decides she needs to assess the strategic direction of her business and will need to consider whether it is worth expanding overseas.
Through market research, Daisy has discovered Bali has a multi-religious population, with a rich dance and music culture. She has also found that it is important to build relationships before starting business negotiations. Australia and Indonesia are strategic partners and cooperate in a range of areas, including politics, economics, tourism and education.
7(a): Explain to Daisy the purpose of the strategic planning process. (3 marks)
Command term focus: Explain
Explain: show cause and effect by explaining why or how something happens and the result. Section 2 requires application.
See the full command term guide here: Command Terms.
7(a) Sample answer
The purpose of the strategic planning process is to help Daisy set a clear direction and decide how her business will achieve its long-term objectives. This is important because expanding from Yallingup to Bali would involve new competitors, cultural differences, overseas suppliers, staffing decisions and financial risk. Strategic planning would help Daisy assess whether the Bali expansion is worthwhile and choose the best strategies to enter the Indonesian market successfully.
2020 — Section 2 — Question 6(a) — 3 marks
Case study / context
Ted and Roshan have recently completed their commerce degrees, majoring in tourism management. While at university, they have been operating a small tour company that organises weekend trips away for international students. Their tours have become popular and, since finishing university, they are keen to grow their business.
On their trips away, Ted and Roshan had many conversations with Singaporean students, who explained Perth’s appeal. Besides having top ranked universities, Perth has great weather and is only a five-hour flight from Singapore. The Singapore dollar and the Australian dollar are almost equal in value and Western Australia offers a huge choice of international cuisines. Ted and Roshan also learnt most Singaporeans speak English and that Singapore is one of the most tech savvy countries in the world.
The article also stated Singaporeans were big social media users, with most tourists flocking to tourist destinations they had seen on Instagram with people posing for selfies at places such as Cottesloe Beach, Wave Rock, the Pinnacles and, for the ultimate selfie, with a quokka at Rottnest Island.
During their research, Ted and Roshan discovered that Australia and Singapore enjoy a strong two-way investment relationship and that Singapore is Australia’s largest trade and investment partner in South-East Asia, having the Singapore-Australia Free Trade Agreement (SAFTA). They also read on the Department of Foreign Affairs and Trade (DFAT) website that Singapore is Australia’s sixth largest inbound tourism market and, in the year ending December 2019, Singaporean visitors spent $1.528 billion. Australia and Singapore also hold regular tourism talks and have established a framework for collaboration on research, data-sharing, and market insights to strengthen tourism collaboration.
6(a): Describe the purpose and intention of the strategic planning process. (3 marks)
Command term focus: Describe
Describe: give the main characteristics or features with enough detail to show what it is like. Section 2 requires application.
See the full command term guide here: Command Terms.
6(a) Sample answer
The purpose of the strategic planning process is to give Ted and Roshan’s business a clear direction and help them decide how to achieve their long-term goals. The intention may be to grow their tour company by attracting more Singaporean tourists to Perth, build stronger brand awareness and improve competitiveness in the tourism market. Strategic planning would help them use their research on Singaporean visitors, social media use, tourism links and SAFTA to choose suitable marketing and operational strategies for future growth.