The Role of Strategic Planning - Term Paper Example

Introduction Bateman (1990) asserts that ‘organizations must change because their environments change’. The changing technology and globalization hasgreatly transformed the business dynamics. In such scenario of highly competitive business environment, it has become essential for organizations to adapt the organizations within their business strategy. It not only helps them to survive but also equips them with necessary competencies to compete with their rival with confidence and effectively meet the challenges of the constantly evolving business environment. Indeed, the fast changing external environment, especially the factors like global financial crisis have significantly impacted the performance outcome of the business entities. Thus, the role of planning has become vital to the strategic management of the organization. Role of strategic planning The current market trends and changing equations of global business necessitate organizations to adopt proactive measure for competitive advantage. The strategic planning facilitates organizations in adapting measures to meet the needs of the markets. The organizations must demonstrate a proactive initiative planning to succeed in the cut-throat business environment. Bateman and Snell (2009:132) have described planning as ‘the conscious, systematic process of making decisions about goals and activities that an individual, group, work unit or organization will pursue in future’. It provides the managerial leadership with well defined but flexible course of future actions to meet the desired goals. The flexibility provides the organization with the alternative action plans to meet the contingencies that may have occurred due to adverse impact of external macro factors. The strategic planning is primarily focused on decision making processes regarding organization’s long term goals and objectives for its success and growth. These are greatly influenced by the external environment and are oriented towards strategies that can effectively face up to the various macro and micro environmental factors. Mintzberg (1994), the eminent scholar says that planning is a well defined methodology that is intended to produce the desired outcome through a cohesive system of decision making processes to achieve the predetermined goals. But at the same time, it is important that strategic planning involves more proactive and innovative measures to meet the exigencies of competitive business. The corporate strategy of the business model therefore, explicitly emphasizes the unique activities and approaches for delivering its strategic goals and objectives. Defining business model The business models can primarily be defined as value propositions for various stakeholders for which the management evolves strategies and methodologies to create goods and services in some particular arena and delivers the same to the desired target group or customers. A business model describes how the business would function, identifies the goods and services that would be produced for identified customers, ensures the viability of the objectives and goals of the business to deliver values based services. Thus, core strategy is focused on creating value for revenue generation. Key concepts for effective corporate strategy and planning to manage changes in the external environmental factors of 21st century. Resource based business strategy Some scholars have asserted that in the contemporary times, resources like machine, factories, human capital or intellectual property can be bought from the open market and therefore, they cannot be constituted as Resources that could provide competitive edge to a firm (Johnston, Scholes and Whittington, 2005). But at the same time, resource based strategy is knowledge based and inherently includes all tangible and intangible resources. These resources facilitate the organizations and firms to formulate and implement strategies to improve their efficacy and value, thereby giving them the necessary advantage (Lynch, 2003). Indeed, the widely distributed resources enable the organization to incorporate the changing equations and retain their advantageous position. Cost advantage and differentiation In the current era of competitive business and recessive trends in the global economy, firms need to maintain their market position by exploiting their strength. Porter (1980) has broadly categorized a firm’s strengths into cost advantage and differentiation. He further asserts that when these elements of strength are used by the firms, they are able to initiate three types of generic: cost leadership, focus and differentiation (Porter, 1980). Thus, businesses must adopt innovative approach and evolve strategies that would help them to face the challenges of the changing times. Research and development Research and development are important tools that empower the firms with specialized knowledge and informed choices so that they are able to make effective business decisions. Discovery and development of new products, especially in the area of science and technology through research programs, provides the firms with huge advantage. Through patents and ownership rights, the firms are not only able to gain financially but they are also able to expand their business in new areas. Biotechnology has become one of the most lucrative areas of research as its research outcome can be used widely in the diverse area of industrial growth like pharmaceuticals, agriculture, medicine, brewery etc. It can be emphatically stated that industries thrive on innovation through effective R&D only when they are able to keep pace with the changing demands of the people. Value creation and new product development De Wit & Mayer (2005) have convincingly argued that organizational culture and leadership initiatives are highly relevant elements of competitive advantage that provide the firms with vital organizational competencies which help to exploit human capital for improved performance. This becomes the facilitating factor to introduce the concept of ‘value creation’ and shifts the focus from the manufacturer and suppliers’ to the changing demands of the customers. Therefore, it becomes necessary for the contemporary marketers to develop strategies that would significantly impact the self concept and buying decisions of the customers. The brand creation and segmented marketing are exemplary examples of such market strategy that helps the firms to gain leverage against their rivals. Emergent theory The organization which ensure effective communication through shared learning and dissemination of information across the organisation about markets, products, technologies, and business processes, help to prosper in the competitive market. Mintzberg (1990) has also affirmed the need to exploit the informed choices, regarding the changing preferences of the people and fast transforming trends of the market conditions. Indeed, the data, information and knowledge about the changing trends become the critical elements of the informed choices which should be effectively linked to the goals and objectives of the organizations. Corporate social responsibility All businesses are inherently designed to serve the needs and requirements of the people at large. The close relationship between the two therefore, makes it imperative for the businesses to incorporate modules of community linked development activities that would project more people friendly image and establish credibility. UNIDO (2002) has defined CSR ‘in terms of the responsiveness of businesses to stakeholders’ legal, ethical, social and environmental expectations’. Indeed, the alarming rate of depletion of natural resources and adverse impact of technology on the environment has become a threat to the survival of all living beings. The climate change and the increasing frequency of natural disasters like tsunami, global warming etc. can be contributed to the low concern for environment. Hence, the external factors like environment and socially relevant issues like education and development need to become intrinsic part of CSR and must be brought within the broader umbrella of corporate strategy. Porter and Kramer (2006:4) also endorses that CSR encompasses ‘the relationship between business and society that does not treat corporate success and social welfare as a zero sum game’ and thereby, greatly enhances the credibility of the business model and improves outcome. Factors identified to gain competitive advantage Changing preferences of the people In the rapidly evolving societal norms, there is significant paradigm shift in the consumer behaviour. The rapid globalization and advancing technology has provided the people with a wide choice of goods and services. McGoldrick (2002) has affirmed that the customers and their needs should play a central role in all business activities. The firms, therefore, are increasingly adopting new ways to meet the challenges of the evolving business compulsions. It is important for the firms to incorporate the changing requirements of the people through the development of new products and services that meet the changing demands of the masses. Therefore, changing preferences become one of the major motivating factors for fostering alliances. This helps them to add value to their existing products and at the same time, helping them to diversify and maintain leverage against their rivals. Five forces analysis Grant (2005) asserts that identification and analysis of the changing trends in the lifestyle of the customers are important ingredients to gain leverage. He further explains these through the analysis of the five forces which become critical factors of competitive advantage: industry rivalry; bargaining power of suppliers; bargaining power of buyers; competition from substitute; and threat of entry. In the hugely competitive business environment, differentiating elements and value addition in the products help the firms to gain advantage against their rivals in the industry. The suppliers gain bargaining position through quality product, whereas, the bargaining power of the buyer is considerably reduced when there is short supply of quality goods which have great demand. The various media like television, ipod, internet, mobile are tools which facilitate the people to access huge plethora of informed choices. Thus, threat from the substitute is greatly increased and firms need to be innovative in their products and market strategy to gain advantage. Threat from new entrants has become easy in the current environment of globalization. Therefore, the firms must be creative and ensure speed and flexibility in their strategy so that they are able to meet the fast changing preferences of the people efficiently and timely. Strategic alliances and networking The strategic alliances with other businesses help the firms to gain entry in new areas. It is able to establish credibility in the global business and at the same time, it would have international presence under its own brand. The demands of the contemporary business format necessitate tactical business linkages across the globe so that they are able to survive in the cut-throat business environment. Kay (1995:50) says that ‘all types of contract business relationship are the linkages that facilitate higher level of efficiency and organizational growth which would offset a competitive advantage over their rivals… not by legal process, but by the need the parties have to go on doing business with each other’. These are important ingredients that help the organizations to gain leverage against their rivals. Learning environment Drucker (1999) argues that external environment is intrinsically linked to the business performance and managerial leadership must be able to identify and exploit their potential for the organization’s advantage. The labour friendly approach by the managerial leadership greatly helps in adapting to the strategic changes that are brought about transforming business dynamics. The leadership initiatives must encourage cross cultural understanding and develop join goals. Zeira asserts that a constant learning environment through regular training and development are essential ingredient to effectively manage the changing business equations (Zeira, 1974). The workforce therefore, must be provided with opportunities for acquiring new skills and competencies to improve and improvise performance outcome. Conclusion The current recessive trends in the global economy have adversely affected the interests of the global and domestic business environment. Planning and corporate strategy of different business models believe in strategic leadership that evolves with the fast transforming needs of the emerging new business imperatives. Therefore, it can be concluded that one needs to accept the challenge of creating a cohesive and encouraging atmosphere and leaders, within and outside the organization, must become the essential linkages that facilitate the acceptance of the changes in a smooth manner. Indeed, the effective organizational leadership promotes innovative approach and creativity so that the organizations are able to meet the challenges of the 21st century with vigour and confidence. Reference Bateman, Thomas S., and Carl P. Zeithaml. Management: Function and Strategy. Homewood, IL: Irwin, 1990. Bateman and Snell. (2009). Management: Leading and Collaborating in a Competitive World. 8th ed. McGraw hill. De Wit, B. and Meyer, R. (2005). Strategy Synthesis: resolving strategy paradoxes to create competitive advantage. Thomson Learning, London. Drucker,P. (1999). Management Challenges for the 21th Century. Harper, New York. Grant, Robert M. (2007). Contemporary Strategic Analysis. (6th edition). Blackwell. Johnson, G., Scholes, K. and Whittington, R. (2005). Exploring corporate strategy. Harlow, England: Pearson Education. Kay John.(1995). Foundation of corporate Success. Oxford University Press. Lynch, R. (2003). Corporate strategy. 3rd Ed. London: Prentice Hall International. McGoldrick, P. (2002). Retail Marketing. London. McGraw Hill. Mintzberg, H. (1990). The Design School: Reconsidering the Basic Premises of Strategic Management. Strategic Management Journal, 11(3), 171-195. Mintzberg, H. (1994). The fall and rise of strategic planning. Harvard Business Review, 72/1:107-114. Nutt,P. C. (1999). Surprising but true: half the deciisions in organizations fail. Academic of Management Executive, 13/4, 75-90. Porter, M. (1980). Competitive strategy: Techniques for analyzing industries and competitors. New York: The Free Press. Porter,M& Kraner,M. (2006). Strategy and society: the link between competitive advantage and corporate social responsibility. Harvard Business Review, 84(12):78-92. UNIDO Report. (June 2002). Corporate Social Responsibility: Implications for Small and Medium Enterprises in Developing Countries. Available from: < http://www.unido.org/doc/5162> [Accessed 4 May 2010]. Zeira, Y. (1974). Training the top management team for planned change. Training and Development Journal, 28 (6), 30-36. Read More