developing strategies on corporate level. SWOT analysis is a tool for assessing the business and its environment that helps focus on key issues. This promotes motivation and innovation. Strategic planning is a coordinated and systematic process for developing a plan for the overall course or direction of the endeavour in order to optimizing the future potential. It also takes into account how you’ll measure those goals, and the major projects you’ll take on to meet them. When planning takes place, the views of all departments and businesses are considered. In small business, one might consider, and plan for a scenario where one’s rent might double, or one might lose the prime retail space. This is possible if they foresee the future; future can be predicted through strategic planning. Chances of making mistakes and choosing wrong objectives and strategies, thus, get reduced. The mission statement would focus on results and outcomes, while the role statement gets more into the “how’s”. What is strategic planning? It also means that one of the functions is to course correct the business performance in case it is not following the right growth rate. The strategic planning process itself performs the function of understanding the current activities of the company and planning based on the available information of future forecasts. It is done for all organisations, at all levels; nevertheless, it involves top … Developing the plan is a process that may involve discussion with a number of different stakeholder groups and should take place over a period of time. Strategic planning is the method by which a community continuously creates arti-factual systems to serve extraordinary purpose. Strengths – Starbucks Corporation is a very profitable organisation, earning in excess of $600 million in 2004. b. It consists of – (i) Management’s fundamental assumptions about the future economic, technological, and competitive environments. The visioning process is usually the very first step in the strategic planning process. Undifferentiated products or services (i.e., in relation to competitors). They are directed to long term goal setting and decision making. Moving into new market segments that offer improved profits. Meaning of Strategic Planning 2. Strategic management is both visionary and practical and, at its best, finds an effective balance between these two poles.The functions of strategic … Major internal inflexibilities that may limit planning are related to the psychology. Should we work on developing products targeted at a dwindling seniors population? Strategic planning discounts future and enables managers to face threats and opportunities. The point of the SWOT analysis is to ensure that we have a marketing plan that is consistent with the resources and capabilities of our company. And when you have plans you tend to succeed more. Strategic planning is the process of determining a company’s long-term goals and then identifying the best approach for achieving those goals. Since managers have to plan for future which is not static but changing, they often find themselves in great constraints. It unifies organisational activities and efforts towards the long-terms goals. The mission statement is a short, concise statement that describes what the organization will strive to bring about — the reason why the company exists in terms of its impact on the rest of the world. iv. Reengineering? Employee advocate. Strategic planning is an organization’s process of defining its strategy or direction and making decisions on allocating its resources to pursue this strategy, including its capital and people. These changes in the “rules of the game” forced managers’ develop a systematic approach to analyzing the environment, assessing their organization’s strengths and weaknesses, and identifying opportunities where the organization could have a competitive advantage. Cost of Quality? This is central to strategic planning. Definition of Strategic Planning 3. Goals in strategic planning can be either result oriented, or process oriented, although, it’s probably better to have results oriented goals. The planning action by top management does not suggest in everything will come from the top and subordinates will do nothing, rather the planning process should be a joint one. Weaknesses – Wal-Mart is the World’s largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control. A competitive advantage can be based on cost or differentiation. A strategic plan isn’t just a document to keep everyone on track. Strategic planning is a fundamental component of organizational management and decision making in public, private, and nonprofit organizations. The mission justified the organization and legitimizes the corporate role in the society. What is the impact of social, political, technological and other environmental factors on our operations? Risk analysis involves identifying where a company might be vulnerable to various outside (usually) factors. What is the impact of social, political, technological and other environmental factors on our operations? Third type of internal inflexibility comes because of long- term capital investment. Are we prepared to accept these changes etc.? One way or the other all of us have desires of what to do in the future like the three mentioned above. These factors are responsible for either inadequate planning or wrong planning in the organisations concerned. Strategic planning is a continuous process. To understand the functions of management, you must first examine what management is about. There are many reasons why people fail in planning, both at the formulation level as well as implementation level. Open systems approach makes it necessary on the part of the managers that they take into account the environmental variable such as, technological, social, cultural, legal, political, and economic. While the objectives clarify where the firm wants to go, the strategy provides the design to getting there. Strategic planning is a process to determine or re-assess the vision, mission and goals of an organization and then map out objective (measurable) ways to accomplish the identified goals. If this is not the situation, he must modify his course of action which may include modification in both long- term and short-term plans. Functional leaders must be equally responsive. A competitor has a new, innovative product or service. iii. Objective of the planning process is to serve as a roadmap that provides direction and aids in aligning resources to the business activities, Planning involves sequence of steps that are based on the current and future state of the organization. The company’s strategic plan is the starting point for planning. Quality Function Deployment? This approach is a compromise between the bottom-up and top-down methods, corporate executives and lower-level managers develop strategy in consultation with each other, making a link between wider corporate objectives and the managers’ detailed knowledge of specific situations. Before publishing your Articles on this site, please read the following pages: 1. The process also includes establishing the sequence in which those goals should fall so that the organization is enabled to reach its stated vision. Strategic Planning Stages. Strategy is independently formulated at both the corporate and business levels. Which may be necessary for them. b. The most crucial task is formulating the corporate strategy. TOS4. Strategic planning as a function of strategic management provides the basis for making major decisions in the management of a firm. The various factors analysed above contribute to the limitations of strategic planning, either making planning ineffective or making lesser degree of planned work. In such conditions, planning activities taken in one period may not be relevant for another period because the conditions in two periods are quite different. Strategic planning, disciplined effort to produce decisions and actions that shape and guide an organization’s purpose and activities, particularly with regard to the future. A packaged-goods company offers an even more tailored example. The managers have to formulate their plans keeping in view the demand of these factors. This is the process of assessing the company’s capabilities and resources, strengths and weaknesses, core competencies and competitive advantages. The planning also involves cost on the part of the organisation. Strategic planning means planning for strategies and implementing them to achieve organisational goals. Create your strategic plan. One of the principles for becoming competitive is to leverage one’s strengths with respect to competitors, and minimise the weaknesses. The managers should try to establish a climate where every person in the organisation takes planning action. A key function of the Management Committee is to determine the direction and scope of the organisation over the longer term. For example – increase share price by 5%, increase return on capital investments by 10%, reduce employee turnover by 10%, bring three new products to market, and register 3 new patents. Strategic objectives are related to the firm’s business position, and may include measures such as market share and reputation. The final decisions are shared and discussed to ensure that there is an alignment of organizational purpose and goals. It can help us focus limited resources and capabilities to the competitive environment. They are developed at corporate level, for each SBU, and also at the level of businesses or departments. This year, enterprise strategy setting is adaptive and must flex with scenario planning. A business plan focuses on a shorter term, usually no more than a year, and serves a specific goal - eg starting a business, getting funding, or directing operations. The effectiveness of the entire strategic planning process of a firm is tested and proved by the effectiveness of the corporate strategy it walks out. It is corporate strategy that ensures the fit between the firm and its environment. It describes an organization’s purpose, customers, products or services, markets, philosophy, and basic technology. Put your strategic plan into practice. Many types of internal inflexibilities, may be results of planning itself. How do you define management?Management is a process with a social element. Strategic Planning is a critical function of the board and one of the most crucial documents for an organization. Strategic planning helps in knowing what we are and where we want to go so that environmental threats and opportunities can be exploited, given the strengths and weaknesses of the organisation. Business-specific environmental factors include emerging trends in the industry, structure of the industry, nature of the competition and the scope for invasion by substitute products. Manager while going through the strategic planning process have to work in a set of given variables. He must constantly watch and review that his short-term plans contribute to his long-term plans. For example, has the organization used or continuing to use Kaizen? This is the role of strategic management. Scenario planning can look at any set of possible circumstances. The objectives are set in a measurable and time-bound manner. Process Inputs. Managers should be farsighted to make strategic planning meaningful. The ability to understand and implement policies, procedures, and processes that relate to the HR strategic plan. Means to develop talent that is projected to be needed in the future. Phil Knight (Founder and CEO) is often quoted as saying that ‘Business is war without bullets.’. The following lists the importance of planning for any business enterprise: Creation of Goals. The skill to anticipate and respond to change within the HR function, but as a company as a whole. See how to prepare a business plan for growth. Content Guidelines 2. The selected strategy is implemented by means of programs, budgets, and procedures. One of […] A competitive analysis involves looking at those that compete in the market place, and using information about the competitors to identify where organisational strengths are relative to those competitors. In essence scenario planning is about being prepared. Further, they must also take into account the internal interaction pattern that is, how their planning process is affecting others and is affected by others. If these are communicated clearly, adequately, and timely, the managers are motivated and initiated to take planning process. A strategic plan outlines your mission, vision, and high-level goals for the next three to five years. At the corporate level, strategic planning is continuous and focuses on the larger goals of the organization- when to acquire and when to divest businesses; how to react to competition and the external environment; what priorities to attach to the organization’s various units. Who carries it out? Your strategic planning should be carried out in a team environment that involves key players in your business. Strategic planning is a fundamental component of organizational management and decision making in public, private, and nonprofit organizations. v. Any other aspect of business that adds value to product or service. Essentially, the thing had to be compatibility of the strategy with the environment as well as internal realities. It helps organisations analyse their strengths and weaknesses and adapt to the environment. Management roles and responsibilities for strategic planning include several activities (management functions): Managers should pay attention to the relationship and differences between planning and forecasting. Many times, managers may not be aware about the various conditions within which they have to formulate their planning activities. Pervasive Process: Process 7. An interesting question that can come to the mind is that – how the conventional long range planning gave way to the strategic planning. Visualize a famous bridge, such as the Golden Gate Bridge, Brooklyn Bridge, or Tower Bridge. Though these policies, procedures, and, rules are meant to facilitate managerial functions by, providing guidelines, they often are too numerous and exacting that they leave very little scope for managerial initiative and flexibility. This puts back the managers at the starting point of the strategy formulation. A good way to think about this is to first state your mission, add a byline to it, and then add a role. While long-run planning may not be fully equipped to absorb environmental shocks, strategic planning is done to comprehend, anticipate and absorb environmental vagaries. Therefore, reaching a strategic goal typically involves accomplishing a set of objectives along the way -- in that sense, an objective is still a goal, but on a smaller scale. In this article we will discuss about strategic planning. As a result the value of strategic planning began to be recognized. For example, the IT department might anticipate what would happen if a major hurricane hit and destroyed their central computers. A strategic plan is for a 3-5 year period and sets out the tasks, the milestones and the steps needed to drive your business forward. But, even the best strategic plan won’t be very effective if the human resources function isn’t in alignment with it. Tools 8. During this period, changes in technological or political forces can disrupt implementation of decisions and plans may, therefore, fail. The STP method is simple, but accurately describes, at least in a general way, what strategic planning involves? 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. Strategic planning is often based on the organization’s mission, which is its fundamental reason for existence. If the results and objectives differ, a further analysis is required to find out the reasons for the gap and taking suitable actions to overcome the problems because of which the gap exists. Some of the major failures are lack of commitment to planning, failure to develop, sound strategies, lack of clear and meaningful objectives, tendency to overlook planning premises, failure to see the scope of the plan, failure to see planning as a rational approach, excessive reliance on the past experience, failure to use the principles of limiting factors, lack of top management support lack of delegation of authority, lack of adequate control techniques, and resistance to change. Guided by the business vision, the firm’s leader can define measurable financial and strategic objectives. a. Strategic planning... Outputs. Furthermore, each five functions – planning, organizing, staffing, directing and controlling – are linked to each other. Strategic Planning is done by top level management, whereas the Operational Planning is a function of middle-level management. The environmental information can be collected from various sources like publications, verbal information from various people, spying, and forecasting. In a complex and rapidly changing environment, the succession of new problems is often magnified by implications that make planning most difficult. Strategic planning, disciplined effort to produce decisions and actions that shape and guide an organization’s purpose and activities, particularly with regard to the future. The strategic planning framework and committee. In a large company, those who implement the strategy likely will be different people from those who formulated it. Strategic planning involves managers at top levels. Below, we’ll walk through the three critical phases: Prepare for strategic planning. These factors may be social, technological, legal, labour union, geographically and economic. This is usually reviewed on a 3 or 5 year basis through a process called strategic planning. It suggests that managers must take into account interactions with their total environment in every respect of planning. Given the information from the environmental scan, the firm should match its strengths to the opportunities that it has identified, while addressing its weaknesses and external threats. A good planning process involves integration of long-term and short-term plans. All units form plans which suit their particular situations, and these plans are regularly reviewed by corporate management. A goals grid is a relatively simple technique to help us think more clearly about organizational and company goals, particularly when we are doing strategic planning. When a manager understands the various aspects of planning he is in a better position to foresee his future course of action and may develop a habit of planning every course of future action. Strategic planning is a continuous process that enables organisations to adapt to the ever-changing, dynamic environment. Everything you need to know about the strategic planning. The process of planning is the primary function of management and cannot be dispensed with. The aim of strategic planning is to help a company select and organize its businesses in a way that would keep the company healthy in spite of unexpected changes in the environment. ADVERTISEMENTS: 3. ii. Visualize a famous bridge, such as the Golden Gate Bridge, Brooklyn Bridge, or Tower Bridge. It’s for that very reason we created this ultimate guide to strategic planning. It starts by asking oneself simple questions like- What are we doing? The second aspect of the strategic planning process is the environmental analysis. Scenario planning is often used in IT environments but applies to any business. Mergers, joint ventures or strategic alliances. Action planning often includes specifying objectives , or specific results, with each strategic goal. Where will you find the Mumbai Indians, the Royal Challengers, the Deccan Chargers, the Chennai Super Kings, the Delhi Daredevils, the Kings XI Punjab, the Kolkata Knight Riders and the Rajasthan Royals? It has a reputation for value for money, convenience and a wide range of products all in one store. In today’s highly competitive business environment, budget-oriented planning or forest-based planning methods are insufficient for a large corporation to survive and prosper. 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’ll use to reach them. This may result in it delay in work performance, lack of initiative, and lack of adjustment with changing environment. Firms have financial benefits if they make strategic plans. The Strategic Planning Toolkit is a hub for guidelines and resources to support local councils and planning professionals in plan making. The volatility of the business environment causes most firms to adopt reactive strategies and not proactive ones. A strategic plan helps to define the direction in which an organization must travel, and aids in establishing realistic objectives and goals that are in line with the vision and mission charted out for it. Organisational policies and procedures, and long-term capital investment. ii. It reallocates resources from non-priority to priority sectors. Strengths – Wal-Mart is a powerful retail brand. What Is An Operational Plan? Strategic planning helps in knowing what we are and where we want to go so that environmental threats and opportunities can be exploited, given the strengths and weaknesses of the organisation. Strategic Planning covers the whole organization, but Operational Planning is done in a particular unit or department of the organization. This problem is further, increased by lack of formulating accurate premises. The corporate-strategy function summarizes the results, adds appropriate corporate targets, and shares them with the organization in the form of a strategy memo, which serves as the basis for more detailed strategic planning at the division and business-unit levels.
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