Strategic Planning

Strategic planning is a defined, recognizable set of activities designed to achieve organizational objectives and goals. The techniques for strategic planning may vary but the substantive issues are essentially the same.

These include:

 Establishing and periodically confirming the organization’s mission and its corporate strategy.

 Setting strategic or enterprise-level financial and non-financial goals and objectives.

 Developing broad plan of action necessary to attain these goals and objectives, allocating resources on a basis consistent with strategic directions, and managing the various lines of business as an investment “portfolio”.

 Communicating the strategy at all levels , as well as developing action plans at lower levels that are supportive of those at the enterprise level.

 Monitoring results, measuring progress, and making such adjustments as are required to achieve the strategic intent specified in the strategic goals and objectives.

 Reassessing mission, strategy, strategic goals and objectives, and plans at all levels and, if required, revising any or all of them.

A great deal of strategic thinking must go into developing a strategic plan and, once developed, a great deal of strategic management is required to put the plan into action. Strategic planning is a useful tool, of help in managing the enterprise, especially if the strategy and strategic plans can be successfully deployed throughout the organization. Thinking and managing strategically are important aspects of senior managers’ responsibilities, too. To paraphrase an old saw, “The strategy wheel gets the executive grease.” This is as it should be. Senior management should focus on the strategic issues, on the important issues facing the business as a whole, including where it is headed and what it will or should become. Others can “mind the store.” became unstable, long range planning was used and then replaced by strategic planning and later by strategic management.

In mid 1930’s, according to the nature of business the planning was done through Adhoc policy making. As many businesses had just started operations and were mostly in a single product line, there arose a need for policy making. As companies grew they expanded their products and they catered to more customers and which in turn increased their geographical coverage. The expansion brought in complexity and lot of changes in the external environment. Hence there was a need to integrate functional areas. This integration was brought about by framing policies to guide managerial action.

Especially after II World War there was more complexity and significant changes in the environment. Competition increased with many companies entering into the market. Policy making and functional area integration was not sufficient for the complex needs of a business. As the organization became large and the layers of management increased alongwith were environment al uncertainties, basic financial planning and foreast based planning became insufficient. As the only focused on operational control.

Strategic planning develops increasing responsiveness to markets and competition by trying to think strategically, later Strategic management evolved which seeks a competitive advantage and a successful future by managing all resources. Thus the evolution of the strategic management includes a consideration of strategy implementation and evaluation and control, in addition to the emphasis on the strategic planning. General Electric, one of the pioneers of the strategic planning, led the transition from the strategic planning to strategic management during the 1980s. By the 1990s, most corporations around the world had also begun the conversion to strategic management.

A part of strategic management has now evolved to the point that its primary value is to help the organization operate successfully in dynamic, complex environment. To be competitive in dynamic environment, corporations have to become less bureaucratic and more flexible. In stable environments such as those that have existed in the past, a competitive strategy simply involved defining a competitive position and then defending it.

Organizations must develop strategic flexibility: the ability to shift from one dominant strategy to another. Strategic flexibility demands a long term commitment to the development and nurturing of critical resources. It also demands that the company become a learning organization It means an organization skilled at creating, acquiring, and transferring knowledge and at modifying its behaviour to reflect new knowledge and insights. Learning organizations avoid stability through continuous self-examinations and experimentations. People at all levels, not just top the management, need to be involved in strategic management: scanning the environment for critical information, suggesting changes to strategies and programs to take advantage of environmental

shifts, and working with others to continuously improve work methods, procedures and evaluation techniques. At Xerox, for example, all employees have been trained in small-group activities and problem solving techniques. They are expected to use the techniques at all meetings and at all levels. The evolution of Business policy to strategic management summaried below:

Strategic Planning Process

The strategic management process means defining the organization’s strategy. It is also defined as the process by which managers make a choice of a set of strategies for the organization that will enable it to achieve better performance. Strategic management is a continuous process that appraises the business and industries in which the organization is involved; appraises its competitors; and fixes goals to meet all the present and future competitors and then reassesses each strategy. A good strategic management process will help any organization to improve and to gain more profits. Every organization should know that performance of the management process is very important. There is a big difference between planning and performing. The organization will be successful only if it follows all the stages of the strategic management process. Strategic management process has following four steps

a) Environmental scanning refers to a process of collecting, scrutinizing and providing information for strategic purposes. It helps in analyzing the internal and external factors influencing an organization. After executing the environmental analysis process,  management should evaluate it on a continuous basis and strive to improve it.

b) Strategy formulation is the process of deciding best course of action for  accomplishing organizational objectives and hence achieving organizational purpose. After conducting environment scanning, managers formulate corporate, business and functional strategies.

c) Strategy implementation implies making the strategy work as intended or putting the organization’s chosen strategy into action. Strategy implementation includes designing the organization’s structure, distributing resources, developing decision making process, and managing human resources.

d) Strategy evaluation is the final step of strategy management process. The key strategy evaluation activities are: appraising internal and external factors that are the root of present strategies, measuring performance, and taking remedial / corrective actions. Evaluation makes sure that the organizational strategy as well as its implementation meets the organizational objectives.

corporate culture, it can lead to group think. It can also cause an organization to define itself too narrowly.

Some of the other reasons of strategic management failure which act as its limitations are as follows:

• Inability to predict environmental reaction

• Failure to coordinate

• Failure to obtain senior management commitment

• Failure to obtain employee commitment

• Failure to follow the plan

• Poor communications

• Failure to understand the customer

• Over-estimation of resource competence

• Under-estimation of time requirements

• Failure to manage change

Introduction to Strategic Management - Definition and Stages of Strategic Management

What Is Strategic Management?

Once there were two company presidents who competed in the same industry. These two presidents decided to go on a camping trip to discuss a possible merger. They hiked deep into the woods. Suddenly, they came upon a grizzly bear that rose up on its hind legs and snarled. Instantly, the first president took off his knapsack and got out a pair of jogging shoes. The second president said, “Hey, you can’t outrun that bear.” The first president responded, “Maybe I can’t outrun that bear, but I surely can outrun you!” This story captures the notion of strategic management, which is to achieve and maintain competitive advantage.

Defining Strategic Management

Strategic management can be defined as the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives. As this definition implies, strategic management focuses on integrating management, marketing, finance/accounting, production/operations, research and development, and information systems to achieve organizational success. The term strategic management in this text is used synonymously with the term strategic planning. The latter term is more often used in the business world, whereas the former is often used in academia. Sometimes the term strategic management is used to refer to strategy formulation, implementation, and evaluation, with strategic planning referring only to strategy formulation. The purpose of strategic management is to exploit and create new and different opportunities for tomorrow; long-range planning, in contrast, tries to optimize for tomorrow the trends of today.

The term strategic planning originated in the 1950s and was very popular between the mid-1960s and the mid-1970s. During these years, strategic planning was widely believed to be the answer for all problems. At the time, much of corporate America was “obsessed” with strategic planning. Following that “boom,” however, strategic planning was cast aside during the 1980s as various planning models did not yield higher returns. The 1990s, however, brought the revival of strategic planning, and the process is widely practiced today in the business world. A strategic plan is, in essence, a company’s game plan. Just as a football team needs a good game plan to have a chance for success, a company must have a good strategic plan to compete successfully. Profit margins among firms in most industries have been so reduced by the global economic recession that there is little room for error in the overall strategic plan. A strategic plan results from tough managerial choices among numerous
good alternatives, and it signals commitment to specific markets, policies, procedures, and
operations in lieu of other, “less desirable” courses of action. The term strategic management is used at many colleges and universities as the subtitle for the capstone course in business administration.  

Stages of Strategic Management

The strategic-management process consists of three stages: strategy formulation, strategy implementation, and strategy evaluation. Strategy formulation includes developing a vision and mission, identifying an organization’s external opportunities and threats, determining internal strengths and weaknesses, establishing long-term objectives, generating alternative strategies, and choosing particular strategies to pursue. Strategy-formulation issues include deciding what new businesses to enter, what businesses to abandon, how to allocate resources, whether to expand operations or diversify, whether to enter international markets, whether to merge or form a joint venture, and how to avoid a hostile takeover. 

Because no organization has unlimited resources, strategists must decide which alternative strategies will benefit the firm most. Strategy-formulation decisions commit an organization to specific products, markets, resources, and technologies over an extended period of time. Strategies determine long-term competitive advantages. For better or worse, strategic decisions have major multifunctional consequences and enduring effects on an organization. Top managers have the best perspective to understand fully the ramifications of strategy-formulation decisions; they have the authority to commit the resources necessary for implementation. 

Strategy implementation requires a firm to establish annual objectives, devise policies, motivate employees, and allocate resources so that formulated strategies can be executed. Strategy implementation includes developing a strategy-supportive culture, creating an effective organizational structure, redirecting marketing efforts, preparing budgets, developing and utilizing information systems, and linking employee compensation to organizational performance.

Strategy implementation often is called the “action stage” of strategic management. Implementing strategy means mobilizing employees and managers to put formulated strategies into action. Often considered to be the most difficult stage in strategic management, strategy implementation requires personal discipline, commitment, and sacrifice. Successful strategy implementation hinges upon managers’ ability to motivate employees, which is more an art than a science. Strategies formulated but not implemented serve no useful purpose.

Interpersonal skills are especially critical for successful strategy implementation. Strategy-implementation activities affect all employees and managers in an organization. Every division and department must decide on answers to questions, such as “What must we do to implement our part of the organization’s strategy?” and “How best can we get the job done?” The challenge of implementation is to stimulate managers and employees throughout an organization to work with pride and enthusiasm toward achieving stated objectives.

Strategy evaluation is the final stage in strategic management. Managers desperately need to know when particular strategies are not working well; strategy evaluation is the primary means for obtaining this information. All strategies are subject to future modification because external and internal factors are constantly changing. Three fundamental strategy-evaluation activities are (1) reviewing external and internal factors that are the bases for current strategies, (2) measuring performance, and (3) taking corrective actions. Strategy evaluation is needed because success today is no guarantee of success tomorrow! Success always creates new and different problems; complacent organizations experience demise.

Strategy formulation, implementation, and evaluation activities occur at three hierarchical levels in a large organization: corporate, divisional or strategic business unit, and functional. By fostering communication and interaction among managers and employees across hierarchical levels, strategic management helps a firm function as a competitive team. Most small businesses and some large businesses do not have divisions or strategic business units; they have only the corporate and functional levels. Nevertheless, managers and employees at these two levels should be actively involved in strategic-management activities. 

Peter Drucker says the prime task of strategic management is thinking through the overall mission of a business:..

. . . that is, of asking the question, “What is our business?” This leads to the setting of objectives, the development of strategies, and the making of today’s decisions for tomorrow’s results. This clearly must be done by a part of the organization that can see the entire business; that can balance objectives and the needs of today against the needs of tomorrow; and that can allocate resources of men and money to key results.