Strategic Planning - Tesco - Literature review Example

Strategic Planning Literature Review Introduction This paper will conduct a thorough literature review through analysis of a number of key academic journal articles in order to prepare a critical evaluation on the topic of strategic planning, after which the key insights and learning from the content of the sources covered will be applied to Tesco Plc. Understanding “Strategy” Strategy, according to Mintzberg (1987), has been applied in many varied contexts in the past thereby rendering any single definition of the concept insufficient; accordingly, Mintzberg considers multiple definitions of the term, “as a plan, ploy, pattern, position, and perspective” (p.11). Strategy as a plan can also be a ploy or a sort of manoeuvre to defeat an opponent or to win competition while as a pattern, strategy refers to consistency in behaviour, be it purposeful or inadvertent. The definition of strategy as a plan implies that it is intended and plans may go unrealized while considering strategy as a pattern suggests that it is realized without premeditation; these two dimensions of intended and realized strategy yield two strands of strategies namely deliberate strategies and emergent strategies. Strategy as a position implies that it is a tool for locating an organization in its environment thereby mediating between the two, that is, between the internal and the external context; this definition incorporates all the others since a strategic position in an organization’s environment can be arrived at through a plan or pattern of behaviour. Strategy as a perspective implies that its content consists of an ingrained way of perceiving the world, and different organizations perceive the world differently; for instance, whereas some perceive the world as bare thereby aggressively setting trends by continuously exploring new technologies and exploiting markets, others view the world as established and stable thus remain complacent. “Strategy” in business Despite its centrality in the corporate world, strategy is such an elusive concept to most business executives; Collis and Rukstad (2008) reveal that only a few executives can articulate the strategies of their businesses. They underscore the importance of having a simple and clear strategy statement that people can easily master and use to guide the intricate decision-making process, particularly in the face of complex situations. A clearly understood statement of strategy is necessary for every business, particularly because it aligns behaviour of every individual employee within the organization; an effective statement of quality must have three main components including objective, scope, and advantage. The single most fundamental aspect of every statement of strategy is the ends that strategy is designed to achieve, that is, the objective, which must also be bound within a given timeframe; the scope defines the boundaries of operation while the advantage defines the uniqueness of strategy. Most companies have a difficult time trying to distinguish between their statements of values or mission statements with their strategic objectives; whereas the mission statement highlights what motivates a business’s existence, the statement of strategy spells out the single most important objective that will push it over the subsequent years. Interestingly, firms operating in the same industry may quite easily have similar values, mission and vision such as providing financial security for clients; and being a global leader in insurance respectively, (in the case of insurance companies); however, a business strategy cannot be shared even by companies in the same industry. Strategic Planning defined Hassan, (2010) defines strategic planning as a management tool that provides direction to, and aligns the firm in relation to its surrounding environment to win competition, that is, strategic planning prepares and makes it possible for the firm to respond to environmental eventualities. The terms strategic planning and strategic management are used interchangeably in many resources, particularly because both of them highlight the identification of mission as well as goals, and the implementation process that follows in pursuit of the identified goals and objectives; apart from that, strategic planning/management entails establishment of corrective actions in strategy evaluation and control process. The strategic planning process deals with long-term goals and calls for the involvement of top management in policy formulation, evaluation of goals and objectives, allocation of resources, as well as designing alternative actions. The role of the top management in the strategic planning process cannot be undermined since it enhances organizational outcomes; for instance, involvement of top management affects the outcomes of effective planning in terms of strategic capability, managerial training, coordination, communications, and adaptability. Clark C.S. (2011) argues that the senior leaders must play a central leadership role in the planning process rather than relegating it to junior staff; that senior management should give insight on the assessment alongside its major discoveries and on the most desirable directions and strategies of reaching the end outcomes. Powell (2007) adds voice to this perspective by claiming that leaders of the organization have central roles in the creation and execution of plans to achieve organizational success; powell documents research findings that leaders have two primary responsibilities including the setting and implementation of vision, as well as the preparation of people for advanced heights of responsibility. Besides having a vision for the organization, leaders must communicate that particular vision to every member of the organization to ensure congruency among the workforce; findings suggest that leaders will only be able to influence their followers towards optimum performance if they can communicate effectively. Contrariwise, Elbanna, (2008) highlights that the strategic planning practice rather than the participation of management has much more significant influences on the effectiveness of strategic planning, but the joint effect of both is further associated with the effectiveness of the former. As the business evolves, the type of strategic planning employed progresses becoming more formal and sophisticated; strategic planning develops from simple financial plans to futuristic planning, that is, the firm becomes externally oriented, focusing on shaping the future rather than merely reacting to it. The complex and dynamic nature of the global business environment demands that the top business management increasingly cooperates with the people at lower management levels in developing the business strategy of their firms. Origins of strategic planning According to Young (2001) the concept of strategic planning has its origins in the military, as an ancient science of warfare; however, strategic planning in the management and administrative context is a recent concept, particularly in corporate and public circles. The origins of the concept as understood in the public sector can be traced back to the 1950’s as well as early 60’s when defence machineries, particularly in the U.S. begun an earnest search for efficient and affordable ways of achieving long term goals. The concept of strategic planning gradually became popularized as a process of establishing futuristic plans to provide guidance to organizations in achieving their clearly stated missions, goals, and objectives. In that respect, strategic planning in the organizational context entails assessing the position of an enterprise in its environment; the myriad challenges, and opportunities it encounters; in addition to its desirable future state, and the way to get there. Mission, vision, values, goals, objectives As noted by Khalifa (2011), many strategic planning processes begin by articulating the organization’s mission statement and many decision makers in the business context including consultants and academicians are increasingly emphasizing the importance of developing effective mission statements. Many definitions of mission statements abound but most importantly, they seem to agree that a mission statement attempts to define the nature or kind of business an organization is engaged in, that is, the dimension of the purpose of an enterprise, or the reasons of its existence. Similarly, the understanding of the function of mission statements is subject to multiple interpretations but they seem to converge on the points that mission statements should define the role and contribution of a business in its social context; every business is expected to satisfy employees’ needs, to focus attention and resources to key issues, and to develop objectives and strategies. A quality mission statement should possess at least three features namely function-related characteristics, content- or focus-related characteristics and form-related characteristics; nonetheless, studies that are more recent have established that there is no significant relationship between mission statements and financial performance. Bellenfant & Nelson (2002) conceptualizes mission, value, vision, and goals as the fundamental guiding principles of an organization and objectives as that which identifies the actual steps of implementation of strategy; strategy to Bellefant refers to the approach a firm will use to complete the ordered steps alongside other tasks in their respective order. Goals spell out the overall direction of the firm within a specific timeframe, spanning across at least 3-5 years. Nonetheless, organizational goals should be flexible and dynamic, that is, they should be able to shift strategically in the course of time as dictated by the changes in the internal and external environment of the organization. Bellefant conceptualizes objectives as the short term targets that an organization identifies for each of its goals, and the central component of objectives is the quantification of the key strategies being established. Strategic Planning in focus Managers in both the private and public sectors employ the concept of strategic planning in the management process, to establish the manner in which resources should be allocated to enhance financial as well as strategic performance of the firm. According to Jennings and Disney (2006), the strategic planning process has three major components including formulation; evaluation and selection of strategic alternatives; as well as implementation and control. Strategic planning serves numerous organizational roles including building capacity to respond to environmental change, helping to recognize and address uncertainties, as well as enabling divisional and whole business control; establishing a business strategy is a continuous and spread process that is core to every corporate’s administrative context. A rich environmental change that effectively captures the essence of strategic planning is inevitably the 2008 global economic crisis as Wilson & Eilertsen (2010) reports that a majority of organizations were thoroughly unprepared for the events that unfolded in this period, which further frustrated their recovery from the impacts of the crisis. A scan across boarders indicates that organizations that were most likely to be prepared and to respond to the global economic crisis with growth actions are those that had established a deeply inculcated planning culture and had mastered the use of planning in resolving crisis. Harrison (1995) contents that effective strategic plans must have enduring effects that are difficult to reverse, that is, strategic planning should be concerned with long-range planning, or the making of decisions whose effects last into the most feasible distance future. Strategic planning focuses on decision situations that are both within and without the business context, recognizes the influence of stakeholders while accepting the unavoidability of rapid shifts in the surrounding business environment. Strategic objectives precedes planning, outlining what the management’s expected outcomes and planning provides direction by defining the how, when, where, and by whom the clearly stated objectives will be obtained. According to Cathy & Krentz (2006), good planning must have a solid factual foundation, particularly because projections of the future have more chance of being true if they are informed by a collective assessment of the recent past and the present firm situations. Additionally, a good strategic plan must address core uncertainties in addition to having strategic metrics that will turn goals into concrete outcomes since a plan that cannot be implemented is of no use to the organization at all. The measurement of the strategic centrality of specific jobs in achieving the strategic objectives of organizations has often been mired with difficulty, which explains why the concept has conventionally been ignored in organizational compensation. However, according to Craig Davidson (1995), the strategic centrality of certain jobs or the degree to which certain jobs are essential to the achievement of the strategic objectives of a firm can be determined, thereby allowing the application of strategic planning concepts to compensation. Case Study: Tesco Plc According to the “Tesco Annual Report” (2013), Tesco Plc follows a clearly focused and consistent strategy for growth that targets to exploit the large expanding home markets, particularly in the areas of financial services, non-food, and telecoms, alongside the emerging foreign markets such as Central Europe, Asia, and the United States. Tesco’s strategy is summarized into five basic components, that is, to be a successful international retailer, to expand the core UK business, to strengthen both the food and non-food market share, to develop retailing services, and to make the community the centre of focus. In that respect, Tesco’s strategic plan is designed to cover these five basic components, which act as the pillars of its operations in all its markets around the world; in other words, the company focuses its resources and attention in these five key areas as its strategy for growth. Tesco’s strategy has enabled it to emerge as one of the world’s largest retailers that serves customers anywhere, anyhow, and anytime due to its multi-channel business; the firm has a clear mission to create values for its outstanding customers to earn their lifetime loyalty. The firm is guided by three key values in all its operations and these are expressed in concise statements of value; the first one, “no-one tries harder for our customers,” entails understanding people and what they hold dear and trying to make their experiences better. The second value at Tesco expressed as “treat people as we like to be treated,” enshrines the aspects of looking after other people’s interests in a culture of mutual trust and respect where colleagues work as a team, in trust and respect, listening and supporting each other while sharing knowledge and experiences. The third value of Tesco asserts “every little helps,” which implies that the firm is capable of offering affordable and high quality products and services for all its markets around the world while continually enhancing value for its customers and the society as a whole. Tesco’s vision is to be the most highly valued business not only by the customers, but also by the communities served, by its colleagues, as well as by its shareholders; Tesco’s vision incorporates five components, that is, it seeks to be an innovative, dynamic, and most needed company that wins locally while applying skills globally (“Tesco Annual Report” 2013). Conclusion Overall, the research explored above has provided invaluable insights into the concept of strategic planning, as a central management tool in the corporate world, which provides the overall direction that the management seeks to steer the organization, while spelling out the step-by-step initiatives of getting there. Tesco Plc has a clearly spelled out strategy that can be distinguished into five key components, which reflects the content of its strategic plan; in that respect, strategic planning is at the core of Tesco’s growth and success over the years. Tesco’s strategy has enabled it to emerge as one of the world’s largest retailers with tentacles stretching across foreign markets; the firm has a clear mission to create value for its customers to earn their lifetime loyalty, and its vision is to be the most highly valued business by its customers, communities, colleagues, and its shareholders. References Collis, D.J., and Rukstad, M.G. (2008). Can You Say What Your Strategy Is? Havard Business Review. Print. Retrieved from: www.hbr.org Khalifa, A.S. (2011). Three Fs for the mission statement: What’s next? Journal of Strategy and Management 4(1): pp. 25-43. Young, R.D. (2001). Perspectives on Strategic Planning in the Public Sector. Print. Tesco Annual Report. (2013). Working to make what matters better together. Print. Mintzberg, H. (1987). The strategy concept I: Five Ps for strategy. California Management Review; ABI/INFORM Global pg. 11. Print. Jennings, D., & Disney, J. J. (2006). 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Strategic planning: Looking beyond the next move. Healthcare Financial Management, 56(10), 62-8. Powell, W. R.,,Jr. (2007). The impact of managerial leadership in strategic direction on organizational effectiveness. Futurics, 31(1), 1-32. Read More