Application of strategic planning in an organization - Case Study Example

? Application of Strategic Planning In an Organization Strategic planning is an organizational process of laying out strategies and making fine-grained decisions on resource allocation towards achieving the goals of the organization. A strategically managed organization defines its prospects in the future by looking at its current position and implementing changes through perfectly structured procedures. It requires an understanding of the current position of the business and the possible ways through which it can meets the organizational goals. Most organizations use their missions and visions to determine the strategies required to achieve that its objectives and build alignment to the vision and strategic plan. The ability of organization to execute its strategic plans is therefore directly affected by its ability to understand and make a clear presentation of the strategy to the employees, shareholders and managers of the organization. For most organizations, it is important to build a successful tool for implementing and managing the overall business strategy. This calls for the development of a balanced scorecard and applying the concept of strategic mapping in the aligning the organization's units. A balanced scorecard is a business presentation model that allows the organization to relate its financial and non-financial aspects for strategic planning of the business goals and prospects. Present day organizations find it increasingly difficult to remain competitive because the strategies used and the business issues change constantly whereas the tools for measuring the effectiveness of these strategies record very minimal change. Many organizations use tools that measure success based on tangible assets whereas constant changes in technology dictate that all business units be linked together to meet the principals of strategic management. A balanced scorecard can be used to link the intangible and the tangible assets and help eliminate most of the challenges faced by modern day organizations. The scorecard concept is built upon good design guidelines for the business units to describe and implement their strategies by mapping strategic objectives into performance in different perspectives which include internal processes, customers, finance and learning and growth. These perspectives provide relevant feedback on the progress of the strategic plan of any given organization so that adjustments and efficient changes can be made where necessary. In addition to measuring the current performance of the organization towards meeting its goals, a Scorecard evaluates the firm's efforts for future improvement based on its progress in terms of profit creation and provision of satisfactory service to its customers. It signifies a quantitative and qualitative performance and multidimensional balance between the firm’s short-term and long-term objectives, financial and non-financial measures, lagging and leading indicators, and the internal and external performance. Strategy maps display the qualitative measures such as employee satisfaction, consumer loyalty and corporate mission that transform a balanced scorecard from performance measurement to a performance management tool that is strategically driven. By using strategy maps of cause and effect, intangible assets can be manipulated combined with other assets for value addition to produce goods and services that meet the consumers’ needs and demands. Strategy maps illustrate the transformation of intangible assets into tangible consumer products and provide a strategic framework to look into a value creation strategy in the internal business process. The strategy map view of a Scorecard presents the organization’s strategy with a series of linked objectives that explain the important priorities for the organization. It also holds specific measures that represent expected level of success and strategic initiatives for the organization. The concept of strategy mapping can be explained and implemented in an organization by taking into consideration the common principles that govern a balanced scorecard: Initially the organization must be able to set strategies, put those strategies at the center of the organization’s management process and translate them into operational terms. The strategy should then be described in details to the management of the organization who on understanding the suggestions of the plan may give consideration to the implementation or execution of the strategy presented. The financial perspective of the strategy would present the strategy for growth, profitability and risks viewed from a shareholders point of view. It also entails the customers or consumers perspectives for creating valuable products. Similarly, the internal business process is considered and the organization has to monitor the learning and growth perspective to create a support for change, innovation and growth in the organization. In clothing company for example, sourcing and distribution may affect customer’s perspective on product quality availability which may enhance customer retention, increase in revenue. The second element of strategic planning would be to align the organization to the strategies which have already been translated into operational terms. At this stage the business needs to focus on description and implementation of strategies developed from effective interactions between different units. A balanced scorecard can be used to clarify the values, beliefs and ideas that reflect the identity of the business. Successful companies in the development of balanced scorecard develop scorecards for small business units that trade products and services to external customers before they can develop shared service unit scorecards. These scorecards enable executives involved in these functional units to build a motivational management approach and improve on customer relation and competitiveness. The organization can also align all the employees to the strategy. The employees have to understand and involve themselves in the implementation of the strategy in order to create value. Employees are supposed to be tasked with the implementation of the organization’s strategies since they are often the ones involved directly in the type of services that the customers will receive and the products that the company will produce and present into the market. A balanced scorecard may be used in three different ways to align the employee. These include creating strategic awareness on the goals, prospects and visions, setting personal and team objectives and linking incentives to the balanced scoreboard. Employees must be educated by the executive on the strategies of the organization to ensure that employees understand the ideas and are taking interest in meeting the goals. The organization should also allow teamwork to enhance competitiveness in the implementation set objectives. Linking employee performance the scoreboard makes the employees feel that their organizations success rewards those who contribute in the achievement of those successes. Similarly, the organizational strategy should be made a continual process by using a double –loop process that integrates the managements of budgets and operations. Companies should avoid using one measurement to manage its target e.g. using a budget to meet the goals of the organization. This would only reflect on a single aspect of the organization which is financial factors whereas other non-financial factors such as customer relation are not considered. The scorecard is supposed to serve as a link between the operations control and process for managing the business strategy. This enables the firm to link strategy to the budget, close the strategic loops and test learn and adopt the new systems. Organizations that focus on strategy should view the budget for allocation of resources as both operational budgeting and strategic. The Balanced Scorecard enables the business determine the quantity spent in the strategic budget and the distinct prospects in the operational budget. Finally, there is need to mobilize change through the executive leadership of the organization through implementation of new strategies. It might be easy to build a business plan or come up with a scorecard that addresses growth strategies but identifying how the growth might be a achieved is not a walk in the park for many organizations. It is an important stage that puts into practice all the hustle and bustle of the organization to come with strategic proposals in the business. It is equally important to locate customers where profitable growth may occur and invest in the new system to enhance value proposition for growth. The senior management should show commitment to articulate the organization’s strategies by investing time and resources to make the strategy a success. In order for a strategic plan to achieve its objective, it must be translated into execution in the final session of the work with the senior team. The Balanced Scorecard The Balanced Scorecard maps an organization's strategic objectives into effective and efficient performance and implements the strategies in four perspectives: financial, internal processes, customers, and learning and growth. These perspectives provide the required feedback to the organization. A case study of a small retail shop that deals in a clothing line and has financial, sales and marketing, purchases and IT departments indicate that the business requires the development of a Balanced Scorecard. This might be the required solution to the dwindling state of returns in the business. Recently the organization’s revenue has declined and the expenses almost doubled. The business uses its budget as the major growth determinant but the processes do not help because the annual budget is often subject to deficit. I have noticed that some most the problems that face the organization are small issues that can be solved by introducing a Balanced Scorecard in the business. The following is a Balanced Scorecard that i have developed for the organization has four perspectives that are I have discussed after the diagram. It explains the Financial, Customer, Internal process and learning and growth each holding strategic objectives that serve to illustrate marketing strategy that can be used by the business to boost its profit margins. This Balanced Scorecard evaluates the firm's efforts for future The organization dwells on accounting from the accounting department to capture physical assets such as stock numbers, the sales volume and goods turnover value. The accounting department is however, does not provide useful reports in environments on the tastes and preferences of the customers since it focuses mainly on financial losses and gains of the business. The intangible assets such as customers and its employees constitute an important part of the business that determines the company's market value. There should be more to it than just a financial report; there is need to research on assets such as loyal customers and highly-skilled staff. Clearly, additional measures are needed for such intangibles. Any non-profitable organization that has a large number of customers would easily attract investors and appeal to the shareholders because the customers are a promising asset of that organization. A balanced Scorecard takes into account the current situation of the business and links them with strategic plans to produce a diversified and respectable organization. Shareholder may compromise profits depending on the business’s position in the life cycle. The customer perspective is an indication of how the organization is viewed by its customers and the ability of the organization to produce quality goods and services that meet the customers’ needs and demands. The organization should involve the customers on the type of clothes they want sold to them so that the company may boost customer relation and maintain consumer loyalty. Internal business process addresses the objectives that are critical in the organization for satisfying customers and shareholders. Accelerating new product ideas and developing the market intelligence ensures an effective customer relation that concentrate an organizational efforts to excel Learning and growth objectives are indicator that the firm must learn and innovate in order to meet its set objectives. I believe that Developing strategic marketing techniques and enhance technology for marketing initiates creative thinking and innovative solutions that is good for the positive growth of the business. References Bryson, M. &. (2004). Creating and Implementing Your Strategic Plan: A workbook for Public and Nonprofit Organisations. Alberta: Dale Stanway. Kaplan, R. &. (2001). The Strategy-Focused Organisation:How to balanced scorecard companies thrive in the new bussiness enviromment. Boston,MA: Harvard Business School Publishing Corporation. Read More