what is Strategic Planning in management ? Concept, process, importance and limitations

Hii! I am Deepjit Karmakar. Founder of the commercial info today here in this blog i am gonna tell you what is the concept of strategic planning , process of strategic planning and limitations of  strategic planning.

Concepts of Strategic Planning

The term 'strategy' has been borrowed from the military. In this context strategy means the grand plan for winning a war. But in Business organisation, strategy means the long-range over all approach for dealing with organisations competitive environment with a view to winning over competitors in business.

Definitions of strategic planning:

According to Alfred Chandler, a strategic plan is "the determination of the basic long term goals and objectives of an enterprise and the adoption of the course of action and the allocation of resources necessary for carrying out these goals."

In other words of Glueek strategic plan is "a unified, comprehensive and integrated plan designed to assure that the basic objectives of the enterprise are achieved."

Thus, strategy plan is an integrated and unified long-range plan for a set of plans regarding the development of organisation's resources to achieve the goals of the organisation in a competitive environment. 

Objectives and Importance of Strategic plan                         

Strategy is important for every organisation in order to survive in a competitive business environment. In fact, the purpose of strategic planning is to provide directional cues to the organisation that permits it to achieve is objectives while responding to the opportunities and threats in its environment. The objectives and importance of strategic plan are as under.
  1. It provides direction to the organisation.
  2. It prepares organisation to face or respond environment challenges properly.
  3. It helps utilise in sources optimally.
  4. It enables organisation to take advantages of the opportunities available in the environment.
  5. It facilitates coordination and control
It ensures long term survival and growth of the organisation.

Strategy formulation/steps in the process of strategic planning

The main steps in the process of strategy formulation are follows:
1. Determining mission or purpose:
         Mission or purpose is the reason for the existence of any organisation. Strategic planning starts with the determination of mission or purpose of the organisation. Mission should be clearly expressed. It should not be too narrow to reduce the effectiveness of the business. Mission should be in details in terms of resource development, social obligations., Profitability, market share, growth, technology and so on, an organisation must review the mission periodically so as to ensure its continued relevance and soundness.

2. Identification of current objectives and activities:
After determination of corporate mission, a manager should identify the current objectives and activities of the organisation. This involves specifying the nature and the type of business of the organisation. It includes -
  • Tar range of the products or services provided by the organisation
  • Geographical coverage of the organisation, local, national or international.
Organisation's differential advantages, e.g. competitive edge of the business such as fuel efficiency of Maruti car over other rivals.

3. Environmental analysis:
Next step in the process is to analyse external environment of the organisation. The purpose of element analysis is to identify the ways in which changes in an organisation's economic, social, cultural, technological,political ,legal environment can indirectly influence the organisation. It also aims at identifying the ways in which customers, competitors, suppliers, government agencies etc. directly influence the organisation.

      Through environmental analysis, management can prepare an "Environmental Threat and Opportunity Profile (ETOP). This profile clearly shows the influence of different environmental forces on the organisation. Managers can know the opportunities available to the organisation and the threats associated with them. Therefore, managers take necessary steps to the opportunities and to counter the threat.

4. Organisational analysis:
Next step in the process relates to organisational analysis. Manager analysis the position of is organisation by identifying its strengths and weakness. It involves the review of financial position, production capacity, marketing effectiveness, research and development, managerial talent, existing marketing strategies and competitive position etc. of the organisation.
5. Developing strategic alternatives:
Another step in the process is to develop strategic alternations. In this step, manager identify and develop alternative strategies through SWOT analysis. It means that the manager develops strategies by matching the strengths and weakness of organisation with the opportunities and threats in the environment. Through such a matching manager shall come to know the strategic gap between the existing and desired state of affairs. Then, he could evolve alternative strategies to bridge the gap and reach the objectives.

6. Evaluation of strategic alternatives:
After developing strategic alternatives, manager should evaluate each of them. Evaluation should be in the light of the strengths and weakness of the organisation as well as the opportunities and threats in the environment.

     In evaluating alternatives, it is also important to focus on particular product or service and on the competitors who are  posing direct competition.

7. Choosing appropriate strategy:
In this step, manager has to choose one appropriate strategy out of the different alternatives. Infusing from among the alternatives, manager should choose the alternative that is the best suitated to the organisation's need and capabilities. In choosing a strategy, manager should consider many factors such as the time and additional resources required, the amount of risk involved, management philosophy, existing resources and so on.

8. Strategy implementation:
Once the strategy has been formulated and selected, it must be put in the process of implementation. It should, therefore, incorporated in the daily operations of the organisation. Tactical plans, programmes, budgets etc should be repaired.

9. Follow up and feedback:
During the course of implementation, the manager shoot continuously follow up the results. We must check the progress at all stages of implementation. If required, we must make necessary correction in the strategy in the light of the changed situations.

Limitations of strategic planning

The following are the important limitations of strategic planning:

  1. Lack of knowledge: strategic planning requires lot of knowledge, training and experience. Managers should have high conceptual skills and abilities to make strategic plans and less which the desired goals will not be achieved.
  2. Interdependence of units: If business units at different levels(corporate levels, business level and functional level) are not coordinated, it can create problems for implementation of strategic plans.
  3. Managerial perception: in order to avoid risky objectives and strategies which they will not be able to achieve , managers may land up farming sub-optimal goals and plans. Sometimes, short term commitments also differ making long term strategies.
  4. Financial considerations: planning requires huge amount of time, money and energy, managers may be constrained by these considerations in making effective strategic plans.

These limitations are by and large, conceptual and can be overcome through the rational, systematic and scientific planning. Researchers have proved that companies which make strategic plans outperform those which do not do so.


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