Strategic planning applies a system approach by looking at a company as a system composed of subsystems. It
permits managers to look at the organization a whole and the interrelationships of parts, rather than deal with each
separate part alone without reference to others. Therefore, it provides a framework for improved coordination and
control of an organization’s activities. Strategic planning provides a basis for other management functions. Steiner
(1979) observes that strategic planning is inextricably interwoven into the entire fabric of management. It
provides a framework for decision-making throughout the company and forces the setting of objectives, which
provides a basis for measuring performance. Managers are able to spend time, efforts and resources in activities
that pay off. Setting of goals and targets on the other hand facilitate evaluation of organization performance.
Individuals in an organization will strive to achieve clear objectives that are set.
It is argued that strategic planning results in a viable match between the firm and its external environment.
Strategy concerns an analysis of the firm’s environment, leading to what the firm, given its environment, should
achieve. Environmental scanning and analysis allows the firm to be connected to its environment and guarantees
the alignment between the firm and its environment. Environmental analysis reveals the market dynamics,
business opportunities and challenges, customer expectations, technological advancements and the firm’s internal
capacities and this provides the basis for strategy selection.
Kotter (1996) argues that the strategic planning process can be used as a means of repositioning and transforming
the organization. Thompson, Strickland and Gamble (2007) postulate that the essence of good strategy making is
to build a market position strong enough and an organization capable enough to produce successful performance
despite unforeseeable events, potent competition, and internal difficulties. Quinn (1980) explains that wellformulated
strategies helps marshal and allocate an organization’s resources into a unique and viable posture
based upon its relative internal competencies and shortcomings, anticipated changes in the environment, and
contingent moves by intelligent opponents. Indeed Ohmae (1983) contends that strategic planning enables a
company to gain, as effectively as possible, a sustainable edge over its competitors. Bryson (1989), Stoner (1994)
and Viljoen (1995) share Ohmae’s contention, pointing out that strategic planning assists organizations to develop
a comparative advantage or an edge over competitors and creates sustainable competitive advantage. Greenley
(1986) points out that a range of potential benefits to intrinsic values accrues to both the company and external
stakeholders from the use of strategic planning.
Various empirical studies have been done to establish the relationship between strategic planning and firm
performance with varied conclusions. The initial studies include that done by Thune and House (1970). Thune
and House studied 36 companies employing the approach of examining the performance of each company both
before and after formal strategic planning was initiated. This covered both informal and informal planners. The
comparison showed that formal planners outperformed the informal planners on all the performance measures that
were used. Herold (1972) in an attempt to cross-validate Thune and House (1970) study, surveyed 10 companies,
comparing performance of formal and informal planners over a 7-year period. Based on the survey results, He
concluded that formal planners outperform informal planners and hence, supporting the results of Thune and
House (1970). Gershefski (1970) in his survey compared the growth of sales in companies over a 5-year period
before strategic planning was introduced, and over a period of 5 years after planning was introduced. The results
of the comparison led Gershefski to conclude that companies with formal strategic planning outperformed
companies with little planning. Ansoff (1970) studied 93 firms using various variables of financial performance.
The findings revealed that companies, which do extensive strategic planning, outperformed the other companies.
Karger and Malik (1975), taking a similar approach to that taken by Ansoff, compared the values of a range of
variables of planners to those of the non-planners and based on the results concluded that the planners
outperformed the non-planners. Greenley (1986) examining empirical data from nine surveys (8 in USA and 1
UK within the manufacturing business) on the relationship between strategic planning and company overall
performance noted mixed conclusions with five studies concluding the existence of the relationship while the rest
conclude that higher levels of performance did not necessarily relate to the utilization of strategic planning.