Overview of the Strategic Planning Process - Essay Example

? Strategic Management Table of Content Strategic Planning 4 A.The purpose and values of Strategic Plans 4 B.Overview of the strategic planning process 5 C.How to define different strategy options 6 2.Influence of shareholder and stakeholder in strategic planning 8 A.How to identify the shareholders & stakeholders 8 B.Role of shareholder and stakeholder in the strategic planning process 10 C.Samples of how may be the influence and un-applied examples 12 3.Selecting strategic directions with respect to risk 13 A.Kinds of strategic choices or strategic options 13 B.Risks of the potential strategic choices 16 C.Possible ways to evaluate and justify the strategic choices 17 4.Development, implementation and review of strategic plan 18 A.Developing the strategic plan and its content 18 B.Designing and implementing strategic plan 18 C.Evaluation of effect and performance of strategic plan 19 Reference 20 1. Strategic Planning A. The purpose and values of Strategic Plans Strategic planning is an analytical process for organizing the present on the basis of desired future projection. So, it is a transparent road map which is used to lead an organization from its current position to the near future i.e. in next five or ten years where it would like to be. It is very necessary for all division in an organization to have their own strategic plan. There are some important characteristics in a strategic pan. It should be simple to be understandable for the persons or employees who will implement this. It needs to be clearly written based on the current actual situation of an organization. A strategic plan should have enough time allowed for settling down the objectives and adopting new strategies. It should not be rushed to implement a strategic plan. The main purpose of strategic planning is to structure the long term goal of an organization to assist the associates involved with the organization in developing priorities and effective serve for sustainable outcomes. The plan must be practical as well as flexible so that it can be used as effective guide for implementing programs. Evaluating the outcomes and making necessary adjustments in the process. Another of purpose of strategic planning is to improve probable chances of desirable and possible outcomes. There are important values of planning which integrate the performance of an organization. It helps to prepare the contingencies which can prevent an organization from unable of attaining goals. Planning enables an organization to develop a framework for estimated growth and progress. An effective strategic plan influence the organization to adopt an efficient strategy for proper allocation of resources in particular manner will allow enable it to achieve its goal (Thorton, 1986, p.5). B. Overview of the strategic planning process An organization is benefited by strategic planning to have an effective focus on attention and resources in the away to goal. The strategies help the organization for progress and growth by successful implementation in the macroeconomic level i.e. in the volatile global and national business environment. An organization can develop effective budget, gain efficient collaboration and cooperation inside and outside the industry of the organization. It helps the organization to focus on the important work for a particular timeline. Another function of planning process is that the processes develop a framework of estimation of work need to be done with respect to deadline i.e. what need to be done and when. By this process the leader of a division can track the process so that he can monitor the growth of the process and take essential actions related to the strategies as well as activities in the programs. The macroeconomic business environment fluctuates all the time, even a smallest changes in the micro level i.e. in the industry where the company belongs, can ruin a best strategic plan. If a continuous monitoring is done in the strategic planning process, it will help the leader as well as the organization to evaluate the progress rate in smaller interval of time. The process can be changed with the substantial change in the micro or macro level business environment so that to circumstances will become beneficial or suitable for the activities. Efficient workout of this process can ensure that long term goal or vision of the organization is not negatively affected (Steiner, 1979, p.7). Figure 1: strategic planning process (Source: Armstrong, 1982, p.2) Effective strategic planning process involves some important or highlighted characteristics of the business process of an organization. These are mission and vision, identification of internal and external factors or issues through SWOT analysis, objectives, roles of stakeholders and shareholders and lastly action plan and the outcomes of implementation of processes. Apart from these the role of leadership and 3cs in the planning process is very beneficial for the progress and outcomes of the processes. C. How to define different strategy options There two main options which need to be considered are strategy for nonprofit organization or profit making organization. Because organization plan are not same for businesses and government agencies. The associations have to be receptive to the benefit for the membership at large not to increase the size of the organization. Apart from the broad options like profit making or non profit, there are various strategic options an organization have but making a choice from these options provides the best strategic fit for the organization. An organizational strategic option is a set of many related options which develop a potential strategy. Figure 2 : Defining strategy options (Source: ORC, Oxford University Press, 2012) Any organization can have different strategic options by answering the basic three questions like “where we are now?”, “where we are going?” and “how we can go. The main key options in an organization where it can plan strategies are markets and products/services; building resources, capabilities, and competence; methods of implementation. Markets and products/services: The essential strategies need to plan in terms of diversification of the organization are diversity of product or brand and the diversity of market. Diversity of products also has many options like forward diversification and backward diversification. Forward diversification is developing internal distribution channel of a producer or a supplier like establishment of won outlets in the retail market for direct selling. Backward diversification is like establishment of production houses of a retail company. In market diversification there are many types like Horizontal integration, vertical integration, and conglomerate diversification. Other types of market penetration are penetrating into another market and penetrating into the same market by increasing market share (Egan, 1995, p.43). Methods of implementation: There are three type of strategic planning are needed. First is to envisioning corporate intent through communicating with the stakeholders, SBU and implementing strategies according to the findings. Second is effective intervention for improvement in performance. Lastly, provisions need to be made in services, expertise and resources. Building resources, competence and capabilities: It has four important areas where strategic planning is needed. These are building market share by investing more, holding current market position, harvesting for short term profit and lastly divesting by release of non-potential resources (Steiner, 1979, p.27). 2. Influence of shareholder and stakeholder in strategic planning A. How to identify the shareholders & stakeholders A stakeholder is someone who involve in the company’s business operation and is affected by the company action. An organization wants to engage individuals, groups and institutions who can continue help the company for improvement and growth. Some key stakeholders including internal and external are shareholders, consumers, suppliers, employees, communities, governments and environment. Figure 3: Stakeholders (Source: Herman, 2012, p.2). So, stakeholders are individuals or all relevant groups of people who involve with an organization and are important and beneficial for the organizational value creation. They have different types of inputs to a business like capital, labor or work, resources, consumption power or buying power, word of mouth for promotion etc. These valuable inputs are vital and very essential for the organization. Some stakeholders have direct and short term influence in the business while others have long term influence which is more impotent for a company. Without these stakeholders any organization can’t operate its business process. B. Role of shareholder and stakeholder in the strategic planning process An effective corporate governance of the organizations helps to ensure that any organization need to take into account the individual interests of a wide of institutions or constituencies and as well as of the communities and the market wherein the organization operates its business. The boards are accountable to the shareholders as well as the company. This helps to assure that corporation operates for the benefit of society as a whole. Shareholders and stakeholder have major contribution in the sustainable growth of a company and they always ensure the short term as well as long term health and prosperity of the company. Figure 4: Role of stakeholders (Source: Herman, 2012, p.3). Employees are the prime stakeholders than shareholders and some say shareholders are the first stakeholder. Mangers have an additional duty that of maintaining the growth of the company where they work by fulfilling stakeholders demands in form of service or their work. This is why mangers are also the prime stakeholders because other stakeholders’ interests are fulfilled by their duties. Creditors are determine the financial condition of a company i.e. the credit rating of a company is determined by the creditors which is the key financial indicator of any organization and shows the financial health of that. Their rights are often protected by the contract with the company and the creditors and their interest are backed by the collateral and this is why they are often treated as owner as like shareholders. Trade unions also have indirectly influence into the productivity of a business by because this political group is redundant with the employee union or group (Thorton, 1986). One of the most important of external stakeholders is society as well as local community and they also have influence in strategic management of any organization. They are the broader definition of stakeholders. They are affected by the company production processes and use raw of materials and labor can cheaply provided by the local community and for this the company also have substantial responsibilities which they do in the form of corporate social responsibilities. A organization need to well practice stakeholder management maintain and develop the relationship with the all individual, groups and institutions who act as stakeholder to the company or their financial or may be non-financial interests are attached to the company. An organization should the serve the interest of the stakeholders efficiently and effectively to maintain the profitability of the organization in terms of sustainable growth and improvement of the stakeholders’ contribution i.e. the resources they provide for the company’s value creation (Scharioth & Huber, 2003). A strong influence of stakeholders can show all the characteristics for sustainable competitive advantages especially social complexity and casual ambiguity. Who wouldn’t agree that highly qualified and motivated loyal employees can’t enhance the progress of a company? The way of doing jobs by the employees is not only reflected via customer as well as shareholder orientation and retention but also it affects the process quality of cooperation between the departments so called internal service qualities. The internal service quality has an effective influence on the strategic management as the output of it reflects through the internal service. It is very important to realize that the interaction between an organization and its different stakeholder groups in order to fully grasp the positive influence of a single stakeholder group as each of them has an important role in the strategic management which results through company growth (Scharioth & Huber, 200, p.10). C. Samples of how may be the influence and un-applied examples Stakeholders’ influence in the strategic management is crucial for the long term success and sustainability of an organization. For an example: All business are aware of this fact that it is near about five to six time more expensive to acquire or get new customers rather than retaining existing customers of a company. So effective manage of stakeholders customers by efficient customer relationship can help to retain the ones a firm already have. So customers are one of key influencer in the strategic management for sales division because they are the success keys by which a long term profitable business can run. By this the company will be secure in terms of the resources i.e. the buyer power or money. The empirical evidence shows that customers have the direct influence in the strategic management in terms of projection of future profitability of a firm as its contribution in the profit is surprisingly high at 10% to 20% (Huber, Scharioth & Pallas, 2004). Companies are more concentrating on customer orientation as other resources of effective stakeholders like the highly talented and experienced employees might become rare in future as demographic changes in some regions like US and Europe. The competitiveness of a firm is being secure by the quality employees as they are the only service provider to other stakeholder of the company (Scharioth & Huber, 2003, p.17). 3. Selecting strategic directions with respect to risk A. Kinds of strategic choices or strategic options For choosing a strategic planning process, there two main options which need to be considered are strategy for nonprofit organization or profit making organization. Because organization plan are not same for businesses and government agencies. The associations have to be receptive to the benefit for the membership at large not to increase the size of the organization. Apart from the broad options like profit making or non profit, there are various strategic options an organization have but making a choice from these options provides the best strategic fit for the organization. An organizational strategic option is a set of many related options which develop a potential strategy. Figure 5: Strategic options (Source: ORC, 2012, p.135) An organization can different strategic options by answering the 5Ws like what, why, how, who and when. The main key options in an organization where it can plan strategies are diversification, corporate parent, corporate portfolio and generic strategies. The essential strategies need to plan in terms of diversification of the organization are diversity of product or brand and the diversity of market. Diversity of products also has many options like forward diversification and backward diversification. Forward diversification is developing internal distribution channel of a producer or a supplier like establishment of won outlets in the retail market for direct selling. Backward diversification is like establishment of production houses of a retail company. In market diversification there are many types like Horizontal integration, vertical integration, and conglomerate diversification. Other types of market penetration are penetrating into another market and penetrating into the same market by increasing market share. In corporate parent there are three type of strategic planning are needed. First is to envisioning corporate intent through communicating with the stakeholders, SBU and implementing strategies according to the findings. Second is effective intervention for improvement in performance. Lastly, provisions need to be made in services, expertise and resources (Lorange & Roos, 1992, p.35). Corporate portfolio has four important areas where strategic planning is needed. These are building market share by investing more, holding current market position, harvesting for short term profit and lastly divesting by release of non-potential resources. Figure 3: Generic Strategies (Source: ORC, 2012, p.143) Generic strategies include effective leadership and differentiation for increasing brand value and value addition into the business. These are most important are of an organization B. Risks of the potential strategic choices Strategic choices are the third logical element of the strategy formulation and it is at the centre of any strategy formulation. There should be always limit on the range of possible choices. Generally small companies have limited resources while large companies find it difficult and they concentrate on the past choices made by them and the output they had. When managers make strategic choices among the substantial options, the result from chosen strategy has some risk involved into it. Because the output depends on the past analysis and the future projection by those managers have faced the negative outcome many strategic choices. The process of strategic choice can be optimistic or pessimistic or the combinations of both always have the risk of outcomes. In business practice, it may be difficult to choose all possible options at the same time with equal confidence and clarity. Any unexpected events can come to an effect in the strategic process and can affect any small steps. These events can create new opportunity or may destroy any pre-assumed opportunity. Evaluating and identifying appropriate options through strategic choices is an important approach but it has some limitation and some amount of involved into it. It is essential to keep in mind that future outcome may be different from any of the options’ projected outcomes. A standard strategic choice has to be challenging enough stay ahead of competitors but need to be achieved. Sometimes, it is better to delay in the process of choice where as at that time a wrong decision can be better than no decision. If options are open in strategic choices then there may be an uncertain future which defines the strategy and it is depends for the success on the uncertain events happenings. So to choose a riskless strategy, the judgment requires skill and experience (ORC, 2012, p.143). C. Possible ways to evaluate and justify the strategic choices Strategic options are evaluated by few questions. Any option needs to pass two tests. First test (Aligned in Figure 2) is answering a question like “does this option takes the organization towards the goal?” It means to choose any there has a substantial reason and objective that need to be achieved by the choice. So it is a projection of outcomes from a particular option that can touch the objective or not. If it seems that the option is valuable then that is selected. Second test (Feasible in Figure 2) is the resources and capabilities can be made available which are necessary for the success. In this test the question is “will it work?” It is to highlight the analysis of strategic assessment and the test of feasibility needs effective consideration of the requirements for the necessary changes (Egan, 1995, p.24). 4. Development, implementation and review of strategic plan A. Developing the strategic plan and its content Developing a strategic plan includes some steps. The sight of ultimate objective should not be lost in time of developing a plan. Strategic plan may not be the ultimate recipe of success but without it business is much more like to fail. An effective strategic plan should Provide a base for mere detail planning Serve as the framework for decision making for any objectives Assist performance monitoring and benchmarking Stimulate any changes and appear as building block for next plan Effective strategic planning involves some important or highlighted characteristics of the business process of an organization. These are mission and vision, identification of internal and external factors or issues through SWOT analysis, objectives, roles of stakeholders and shareholders and lastly action plan and the outcomes of implementation of processes (Steiner, 1979, p.37). B. Designing and implementing strategic plan Most formidable part of strategic planning is the designing and implementation of the plan. This is a phase where planned objectives need to put into action and the plan proceeds through necessary modification and changes. The revision is to be timely introduced into the plan. One of the important areas of plan implementation is organization’s capabilities and support system. The role of 3cs (cooperation, collaboration, coordination) is require in effective and successful implementation of any plan. Other important aspects are efficient people in charge, effective mechanism involve with the process for better progress, etc. These aspects need to work together for achievement of the plan’s strategic success (Kaplan & Beinhocker, 2003, p.1). C. Evaluation of effect and performance of strategic plan Evaluating the plan’s performance and as well as planning activities and status of the process is the last important area of a strategic plan. One important process of evaluation is to match the current outcomes of each steps of an activity with the previously estimated outcomes and if it is near about same then next activity need to be implemented. The advantage of evaluation is to ensure that the overall process is following the correct direction established during the development of the plan. Another major advantage is that management can learn a great idea of the micro or macroeconomic environment of the organization and its position in the industry where it operates its business process (Steiner, 1979, p.41). Reference Armstrong, J. S. (1982). The Value of Formal Planning for Strategic Decisions: Review of Empirical Research. John Wiley & Sons, Ltd. Egan, C. (1995). Creating Organizational Advantage. Oxford: Butterworth Heinemann. Herman, S. P. (2012). Stakeholder Management. [Pdf]. Available at: http://www.tns-infratest.com/presse/pdf/autorenbeitraege/hermann_stakeholder_management.pdf. [Accessed on March 29, 2012]. Huber, M., Scharioth, j. & Pallas, M. (2004). Putting Stakeholder management into practice. Berlin/Hidelberg: Springer. Kaplan, S. & Beinhocker, E. D. (2003). The Real Value of Strategic Planning. [Online]. Available at: http://sloanreview.mit.edu/the-magazine/2003-winter/4429/the-real-value-of-strategic-planning/. [Accessed on March 30, 2012]. Lorange, P. & Roos, J. (1992). Strategic Alliances: Formation, Implementation and Evolution. Oxford: Blackwell. ORC, Oxford University Press. (2012). Strategic Choice. [Pdf]. Available at: http://www.oup.com/uk/orc/bin/9780198782292/ch11.pdf. [Accessed on March 29, 2012]. Scharioth, J. & Huber, M. (2003). Achieving Stakeholder management into practice. Berlin/Hidelberg: Springer. Steiner, G. (1979). Strategic Planning. The Free Press. Thorton, J. S. (1986). Futuring: Strategic Planning for Making Your Visions Come True. American Society of Association Executives. Read More