Question

Explain why it is important to link operational budgets to strategic plans. Make sure that your answer addresses the issues below in the space provided.

What is strategic planning?

Answer 1

Strategic planning is the process of documenting and establishing a direction of your small business by assessing both where you are and where you’re going. The strategic plan gives you a place to record your mission, vision, and values as well as your long-term goals and the action plans you will use to reach them. A well written strategic plan can play a pivotal role in your small business’s growth and success because it tells you and your employees how best to respond to opportunities and challenges. The volatility of the business environment causes most firms to adopt reactive strategies and not proactive ones. However, reactive strategies are short-term, causing firms to spend a significant amount of resources and time. Strategic planning helps firms prepare beforehand; it lets the company initiate influence instead of just responding to situations.

The process of business planning is made up of several steps. A strategic plan is used to outline company objectives and to identify the methods in which those objectives can be reached. An operational plan is the comprehensive way in which each department or division will use its resources to achieve company goals. Strong links between the strategic plan and the operational plan are needed to allow the company to operate efficiently.

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