Hii! I am Harsh jain. writer of the commercial info today here in this blog, the idea behind strategic planning, the steps involved, and its drawbacks will all be explained.
Concepts of Strategic Planning
The word "strategy" was taken from the military. In this context, strategy means the grand plan for winning a war. But in Business organizations, strategy means the overall long-range approach for dealing with organizations' competitive environment to win over competitors.
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Definitions of strategic planning:
According to Alfred Chandler, a strategic plan is "the process of identifying an organization's fundamental long-term goals and objectives, choosing a plan of action, and allocating the resources needed to achieve those goals."
In other words, Glueek's strategic plan is "a coordinated, thorough, and integrated strategy created to ensure the achievement of the enterprise's core goals."
Thus, a strategic plan is an integrated and unified long-range plan for a set of procedures for developing the organization's resources to fulfill the organization's objectives in a competitive environment.
Objectives and Importance of Strategic Plan
Strategy
is essential for every organization to survive in a competitive business environment.
Strategic planning aims to give the organization directional cues to accomplish
its goals while responding to opportunities and dangers in its environment. The
goals and importance of the strategic plan are as under.
It
provides direction to the organization.
It
prepares the organization to face or respond to environmental challenges
appropriately.
It
helps utilize sources optimally.
It
enables the organization to take advantage of the opportunities available.
It
facilitates coordination and control
It guarantees the organization's long-term survival and expansion.
Strategy formulation/steps in the process of strategic planning
The
main steps in the process of strategy formulation are as follows:
1.
Determining mission or purpose:
Mission or purpose is the reason for the existence of any organization. Identifying the organization's mission or purpose is the first step in strategic planning. The mission should be clearly expressed. It should be narrow enough to reduce the effectiveness of the business.
The mission should be in detail in terms of resource development, social obligations., Profitability, market share, growth, technology, and so on, an organization must review the mission periodically to ensure its continued relevance and soundness.
2. Identification of current objectives and activities:
After
determining of corporate mission, a manager should identify the current goals
and activities of the organization. This involves specifying the nature and the
type of business of the organization. It includes -
Tar
range of the products or services provided by the organization
Geographical
coverage of the organization, local, national, or international.
Organization's differential advantages, e.g. the business's competitive edge, such as the fuel efficiency of Maruti car over other rivals.
3. Environmental analysis:
Analyzing the organization's external environment is the process' next phase. The purpose of element analysis is to identify how changes in an organization's economic, social, cultural, technological, political, and legal environment can indirectly influence the organization. It also determines how customers, competitors, suppliers, and government agencies directly affect the organization.
Management can prepare an "Environmental Threat and Opportunity Profile (ETOP) through environmental analysis. This profile clearly shows the influence of different ecological forces on the organization. Managers can know the opportunities available to the organization and their associated threats. Therefore, managers take necessary steps to the options and to counter the threat.
4. Organizational analysis:
Organizational analysis is the subject of the process in the following step. Managers analyze the position of the organization by identifying its strengths and weakness. It involves the review of the financial situation, production capacity, marketing effectiveness, research and development, managerial talent, existing marketing strategies, competitive work, etc.
5. Developing strategic alternatives:
Another step in the process is to develop strategic alternations. In this step, the manager identifies and develops alternative strategies through SWOT analysis. It means that the manager creates a plan by matching the organization's strengths and weaknesses with the opportunities and threats in the environment.
Through such a matching manager shall 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, the manager should evaluate each of them. Evaluations should consider the organization's assets and liabilities and external opportunities and dangers. In evaluating alternatives, focusing on a particular product or service and the competitors posing direct competition is essential.
7. Choosing the appropriate strategy:
In this step, the manager must choose one appropriate strategy from the alternatives. Infusing from the other options, the manager should select the choice best suited to the organization's needs and capabilities. In choosing a strategy, the manager should consider many factors, such as the time and additional resources required, the amount of risk involved, management philosophy, existing resources, etc.
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8. Strategy implementation:
Once the strategy has been formulated and selected, it must be put into the implementation process. It should be incorporated into the daily operations of the organization. Tactical plans, programs, budgets, etc., should be repaired.
9.
Follow-up and feedback:
During
implementation, the manager shoots continuously follows up on the results. We
must check the progress at all stages of implementation. If required, we must
correct the strategy in light of the changed situations.
Limitations of strategic planning
The
following are the essential limitations of strategic planning:
Lack
of knowledge: Strategic planning needs a great deal of expertise, education,
and experience. To create strategic plans and lessen the likelihood that the
targeted goals won't be met, managers need to have strong conceptual skills and
talents.
Interdependence
between entities: If business units at different levels (corporate levels,
business level, and functional level) need to be coordinated, it can create
problems in implementing strategic plans.
Managerial
perception: Managers may settle for farming less-than-ideal goals and plans to
avoid dangerous targets and methods they won't be able to accomplish.
Sometimes, short-term commitments also differ in making long-term strategies.
Money-related factors: Planning takes a lot of time, money, and effort, and managers may be prevented from developing strong strategic plans as a result of these issues.
Conclusion
Most
of these restrictions are conceptual and can be removed by logical, systematic,
and scientific planning. Companies that create strategic plans perform better
than those that don't, according to research.