Strategic Planning of Organization - Term Paper Example

 STRATEGIC PLANNING Strategy Strategic planning is the decision making process that aligns the internal capability of an organization with the chances and threats it faces in its immediate market place, geared towards achievement of good results. Strategic planning for a firm or organization may require it to reminiscence its position and take interrogative questions to find its business world and achieve measurable success. Questions like, why do we exist, what is to be achieved in this organization, what type of resources to achieve the success we need, who is at the receiving end compared to our competitors, who are the customers and their profile? Strategic planning helps the management team to properly understand the current situation. Thus the present times requires a continuous strategic planning because the escalating rate of change of business world. Firm are hiring people who can foresee the implication of a certain newly employed process or concept. This has led to the development of predictive models which simulate what might happen in future. Managers of various companies and organizations are forced to think of the future. To achieve this they need to think out of the box and remain focused. Studies previously done, show organizations that have had long-term strategic plans have survived and thrived in times of crisis compared to the ones which had short-term strategic plans. Growth in terms of customer base and general organizations’ catchment is seen if long-term strategic planning is employed. Strategic planning acts as a form of communication that the firm is planned for the future and basically the good intent of the organizations’ management team. Though all these occur, the flip side of such kind of planning cannot be assumed. Strategic planning does not form the organization’s futures blue print, while it might focus on solving a specific problem, a different predicament can come by and catastrophically affect the organization. Strategic planning is not an effective method of formulating future decisions of an organization, otherwise the future is unknown. It will not identify all the critical factors which need to be solved in an organization, it require a thorough investigation of with different viewpoints which is laborious and time consuming. (Vander, 2004) Below is a structure of how a strategic decision is arrived at This calls for planned and emergent approaches to strategy where in planned approach; the organization objectives and purpose are clearly stated and directly translated into actions. In the emergent scene decisions are made on the basis of bargain, chance of occurrence and a positive feedback. Corporation are always accountable to employees, customers, suppliers and state laws, in contrast to mere objective focusing of the company emergent approach handles forces external to an organization but which are of value to it. Emergent approaches go beyond short run profitability, mere meeting minimum legal and market directives. Planned approach may be meant for short-term profitability but might lead to failure of processes meeting customer needs and customer satisfaction. The emergent approach bridges the gap between strategic decisions made in the boardroom and day to day practice of the business. The tradeoff between planned and emergent approach looks at Strengths, Weaknesses, Opportunities and Threats (SWOT) an organization might face. This is to maintain good fit with all the elements for effectiveness and efficiency. ( Chandler, 1962) The two way approach will achieve best use of resources, because at times past performance can be the best indicator of capabilities for the firm. Solving a problem at hand will help the management team deal better with the predicament much more appropriate if it reemerges. A two way approach is much more realistic and achievable, if one approach is employed it might not properly phase off competition with other organizations. In the planned approach to strategic planning, a competitor company will adjust based on your approach, but if managers will see it from a different and much more risky perspective of what comes by is solved, it will put the competing organization in limbo. In nowadays volatile business climate there should be a fit of organizational strengths and current customer demands. Because planned approach rules out the possibility of a nonexistent thing like change in tastes, by assuming that the future is a continuation of the past which is extremely unlikely. (Schwartz, 1991) This is why an organization need to combine planned and emergent approaches to strategic planning to effectively and efficiently serve the customers current needs while remaining creative about the future. Principles of strategic planning warn of focus of only one side of equation which is already successful and forget other impending business climate changes. For successful transformation in organization can only be achieved through combining what is defined in the strategic plan and also responsiveness to what emerges in the process of executing what is the strategic plan, failure to which might have a sudden change of events. This reminds the business world that strategy is not only about planning but also reacting to what comes your way as a impeding factor. Then cliché of plan-act at times does not work effectively in business, in real world of experiences we act then use the results to plan of our next course of action which favors the emerging strategy. Managers are presently embracing both approaches to realize the goal of effectively serving its customers. By extending lines of production, introducing new feature or new commodities, copying competitor’s services, process matching. MayTag corporation shifted it planned strategic planning to adapt a new emergent products. This firm succumbed to the pressure of dealers and customers demand and made it change it product line. It previously used to manufacture general washers and driers but later adopted dishwashers, refrigerators and cooking products. This flexibility made MayTag pull itself from the eminent plunges to non existence. This even made it acquire four other brands. This saw MayTag grow from $684 million in1985 to $3.4 billion in the wake of 1994. Neutrogena also adapted the same criteria; it started distributing mass merchandise to Wal-mart stores. Later it expanded to distributing eye make-up remover and shampoos thus increased its revenues effectiveness of “Competing on the Edge” as described by Brown and Eisenhardt Competition, market's instability, unpredictability and sudden changes has seen come up with a guide on business strategic. As such Brown and Eisenhardt in their book believe that for one to prosper in such adverse conditions standard survival strategies must be put aside and take a new direction –competing on the edge. To compete on the edge the authors mean: other than taking the ordinary and obvious solutions to problem one should reinvent solutions. By competing on the edge, a firm needs to change constantly by reshaping its competitive advantage, even as the market place is shifting unpredictably. Competing-on-the-edge strategy change on a daily basis means not giving in easily to market challenges and having rhythmical adaptation to changes in the market trends. This book is written for manager and those would be managers to understand that these strategies formed at any given time will have to answer the question of ‘how’ and ‘where’ a manager can create temporal but having a great competitive advantage over other competitors. The initial challenge is to survive the onslaught of change in market conditions by not evading it but embrace it. By seizing the change, setting the completion pace, they will ultimately dominate the business world. John Browne (CEO-British Petroleum) once stated ‘No advantages and success is ever permanent. The winners are those who keep moving’ (Prokesh, 1997). The book shows both the managers and readers how to cope with unbelievably demanding and apace and highly uncertain and unpredictable business world. This book covers effective strategic planning while advising on the best way and practice to go over managerial traps. By trying to manage change a manager is also anticipating it, thus gaining insight into what is to occur and repositioning for that future (Eisenhardt, 1997 pg4 ) Anticipation creates more new opportunities thus better way to change. Pg 5 The following structure illustrated in Eisenhardyt and Shona book shows how a company can manage the strategic challenge of change. Managing the strategic challenge of change (Shona L.B.& Eisenhardt K.M. 1998. Competing on the edge:strategy as structured chaos. :Havard business school press.) Intel which was well known for its manufacture of semiconductors embraced the criteria above in the procedure of leading, anticipating then reacting to sudden changes like introduction of network an inexpensive alternative to personal computers. The managers had respond to these changes by coming up with an internet divisions and plan are underway to develop NetPC with Microsoft targeting the network computer. Such updated responsiveness is what is advocated by Shona and Kathleen. This will avoid catastrophic closure of business and other psychological torture which precede. How scenario thinking / planning is assisting marketers to find an appropriate balance between these two approaches to strategy. A scenario are perspectives on possible events and their results, providing a setting in which managers can make decisions. Having a range of possibilities at hand for a manager, decisions made are better informed and more inclined to success. Scenario planning help top managers to effectively tackle risk, uncertainty and complexity, in this way a firm can prepare for the future. These scenarios on most occasions review and provide a test of strategic plans and policy options. In addition, they are meant to stimulate development of new policies. Scenarios identifies those early warning signs an organization should avoid if it has to walk comfortably to the future. Mont Fleur used scenarios to find its path to success. Four scenarios were considered by a diverse group of prominent politicians, businessmen, academicians and activists. Only one scenario – Flight of the Flamingoes- successfully illustrated how an apartheid South Africa can flourish. These scenarios played a big role in winning the approval of National Party to fully negotiate a settlement and convince African National congress (ANC) party for a good policy of economy. Japan and also Finland uses scenarios in its technological and innovation advancements. Innosight is a company which deals with consumer packaged goods, on one occasion the firm’s management team thought and came up with fifteen assumptions and risks it deemed important to successful create a winning market strategy for its new product. A thorough and close look much later, the team realized they had done just a little to become successful. The team then had to extend its list of assumptions and risks depending on the emerging issues to more than hundred. The different categories considered ranged, from consumer perceptions, technology, streams of revenue, costs required, market trends and reasonable partnerships. This led to a major breakthrough in its profitability. Scenario planning tries to better understand of how different components possibly unrelated work from answers to assumptions. If in any case the management of a given firm starts to work from its revenues and cost backwards to the production assumptions can be drawn that lie behind the financial risk. In that capacity a scenario has been used to review strategic planning, a scenario provides a reality check on strategic plan and options. Scenarios can help identify risks and mitigation measures, they provide meaningful option for recognition and representing risks which can be generated by a combination of factors. Thus they help a lot in development of contingency plans valuable than strategic plans. Scenario planning might not only solve financial problems but lead to a mind open up, where one is prompted to think comprehensively and completely about an idea in a business model. This can help managers a lot more that what is thought of at first If one is given scenarios, other factor like products’ market stability need to be overlooked, this will help design experiments that will allow the management team to analyze the cost and time require for its operation to work effectively. Wolaner after leaving her job at Mother Jones magazine she established her own Parenting magazine. But before she could kick start any operation about the markets and marketing she hard to experiment and text it. This testing helped her come with much more improvements on the product. Scenario analysis brings about business modeling and simulation options. When a model is run using known scenarios the results are deterministic and much more predictable than when no scenario is in place. A scenario is too pivotal in developing a good working model, when assumptions are made and simulated in the model; it brings about more informed results and reliability on how the business should be run from the present time to the future. This technique helps in predicting missing data in a model, thinking through a new price strategy for a new product, is use of skimming or penetrative price strategy requires a scenario development; what if this product was delivered to the customers without addition of transportation to the product’s prices?, what are the implications?, what about if the price is adjusted upwards, to cater for the cost of transportation?. In these two scenarios the management is weighing on the options of either gaining market share or short-term profitability. For a lasting solution to the problem at hand the management must test the two scenarios and simulate the results to see which one is lasting and more profitable in the long run. A scenario will come handy too, in the case where there are no comparable products or customers provide inaccurate data, which do not necessarily reflect the objectives of the company. A company having a feedback forms for its customers might have a wrong opinion if it’s bent on only what the customers write back. While this cannot be overlooked, but some of feedbacks are personal attitudes and feelings which if implemented might not realize any major change in the organizations profitability or complete satisfaction for customers Reference list Shona L.B.& Eisenhardt K.M. 1998. Competing on the edge: strategy as structured chaos. :Havard business school press. Igor H.A.,1980. corporate strategy: an analytical approach to business or policy for growth and expansion.New York: McGraw hill. Jelinek M. 1979.Institutionalising innovation: A study of organizational Learning Systems. New York: Praeger publishers. Milgrom P.,and Roberts J.1995. Complementarities and Fit: Strategy, Structure, and Organizational Changes in Manufacturing’, Journal of Accounting and Economics, 5 (13), p.179–208. Prokesh,S. G.,1997. "Unleashing the Power of Learning: An Interview with British Petroleum's John Browne," Harvard Business Review, pp 75, 166. Schwartz, P. 1991. The Art of the Long View. New York: Doubleday. Selznick P. 1957. Leadership in administration: A sociological Interpretation. New York: Harper & Row. Steiner G, 1979. Strategic planning: What every manager must Know. New York: Free Press. Vander H. K., 2004. Scenarios: The Art of Strategic Conversation. 2nd Edition. Chichester: Wiley. Tichy, N.1983. Managing Strategic Change: Technical, political, and cultural dynamics. New York: , John Wiley. Chandler A. 1962.Strategy and Structure: Chapters in the history of industrial enterprise. New York: Doubleday publishers. Read More