Development of Strategic Planning throughout the Years - Essay Example

Business Strategy Introduction Strategy refers to the process of planning to achieve a desired future, or different aims and objectives. In terms for businesses, strategic management plays an immense role in efficiently achieving future aims of a business organization. An effective strategic plan is developed from top to down also known as the Rational Approach; it keeps in mind the external and internal environment of the business, this plan is then communicated to all the stakeholders of the business organization. The main aim of this paper is to overview the history and development of strategic planning throughout the years, and the development in the field of strategy. There is no one fixed formula for creating a business strategy however there are principles and steps on which the businesses strategy should be based. The principles or steps are as followed: 1) Current Situation Analysis 2) Segmentation Analysis 3) Strength, weakness, opportunities and threat analysis 4) Core competencies analysis 5) Key success factors 6) Business Unit Strategy / Business Plan 7) Balanced Score Card 8) Evaluation Current Situation Analysis The managers can use a variety of methods of analysis to understand the firm’s capabilities, consumers and business environment. The American Marketing Association describes the situation analysis as a systematic collection of past and present data to categorize current trends and conditions that influence the businesses performance and helps in creating the suitable business strategy. It gives the managers a clear and concise look at the businesses present state within its market. The situation analysis comprises of two different methods: The 5Cs and Porter’s five force analyses. The 5Cs The 5Cs considered as the most functional, wide-ranging, and common way of analysing the market situation. It allows the businesses to increase their knowledge about the internal macro and micro-environmental factors within the markets environment. The 5Cs are: Company: analysing the company allows it to evaluate the company’s prime objectives, strategies and capabilities which tell the managers regarding the strength of the business, it tells them which areas require improvement and attention and how the business organization can fit in the market environment. It sets our company’s goals and objectives and inline to that it also provides an analysis of the firms position, performance and products. Competition: this analysis helps the managers to determine which organizations are competing with their organization, if those organizations are a potential threat, and what are their strengths and weaknesses. Customers: customer analysis can be vast and complex. It determines what requirements of the clients your organization is trying to satisfy. A few areas to analyse would be the market segments, benefits the consumers want, regularity of purchases, amount of purchases etc. Collaborators: this analysis will conclude if there are any outside sources that can aid the organization for example distributors and suppliers. Climate: this analysis tells the managers if there are any constraints due to political issues or economic concerns such as costs of production etc. (Boundless, 2012) Porters Five Forces Analysis: Under this analysis the organization figures out five forces that determine the competition and attractiveness of the market. The primary goal of this analysis is to help the organization predict its future profitability and position in the market. The five factors are: Threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitute product of services and rivals among existing competitors. Segmentation Analysis This analysis helps the organization in dividing the market in segments to identify ongoing trends in the market. It is useful when creating a target audience. The following are examples that are taken into account when segmenting a market: income, age, gender etc. Through this analysis there is efficient use of marketing resources which leads to a reduction in wastages. When ongoing trends are observed a competitive advantage is gained and those products can be produced which the consumers demand. The SWOT analysis: This analysis helps the managers realise the strengths and weaknesses of the organization. This helps in creating awareness of your organizations status which helps in strategic planning and decision making. This analysis can be done to search for new possibilities and solutions for existing problems. There are two analysis done under SWOT analysis: 1) Internal: it collects data about the firm’s strengths and weaknesses. For example staff, location, equipment, funding agencies etc. 2) External: it collects data about the firms opportunities and threats. For example future trends, economy, environment etc. (Renault, 2013) When Starbucks initially decided to enlarge decisions were made based of intuition, then the company started to face problems, it conducted a SWOT analysis. Its following accomplishments were due to this analysis. (Boundless, 2012) Core competencies analysis The term “Core Competency” originated from a 1990 Harvard Business Review article. This term refers to your organizations area in which it is expert. An organization will first spot and then concentrate in its core competencies. Its core competencies are those areas which will help the organization in achieving its goals and objectives. It is difficult for the organizations competitors to replicate another organizations core competencies thus it gives the organization a competitive advantage. Company’s area of expertise is determined through assessments, interviews and research. This also tells where the organizations weaknesses lie. (TPMG, 2006) Key success factors At times organizations fail to recognize their goals and objectives thus fail to deliver expected outcome. It is difficult to point out each and every mistake in plan therefore companies keep repeating the process of strategic planning,. There are 5 factors that can certify the successful implementation of plans: 1) Engagement: this refers to the effective communication of all the organizations staff. This will give additional input to the planning. This input will give information regarding the challenges and issues the organization is facing at different levels. This will also ensure their participation in executing these strategies. 2) Communication: strategic planning is successful when a top down approach i.e. a rational approach or a bottom up approach is used. This informs all the employees at different levels that a strategic planning is under process. In a bottom up approach the employee will provide with the input to the planning through surveys, feedbacks and meetings. In the rational approach the organizations senior management will provide the employees with the strategic plan. 3) Innovation: some strategic plans include the strategies of the development of a new product or service. This is done by setting up teams of employees and giving them monetary investments, they work on the development of the product or service. However this process lacks the strategy of development. The employees will lack information about the goal of the strategy created. Organizations like Apple, BMW and Google have a successful strategy of innovation. 4) Project Management: after the strategic plan is developed there are two elements that are linked to project management. One is to require which products will help the organization gain success, the second is to prioritize these products accordingly; the products that will gain more success should have high priority and the required amount of resources. This requires a proper commitment by the employees to spend required time on these projects. This will ensure that the employees have an understanding of the strategic plans. It will also increase their level of commitment to the development of these strategies. 5) Culture: the culture of an organization refers to the attitudes, values and behaviour of its employees. Each organization has a diverse and unique culture which distinct it from other organizations. If the employees of an organization feel negative about change, then the process of change implementation will not be appreciated by the employees. However if the employees believe that the changing process will be beneficial they will assist throughout the process. Those organizations which employees accept and support change are successful and continue to excel in their market. (Stanleigh, 2013) Business Unit Strategy / Business Plan: Developing a business plan helps in determining the goals and objectives of your organization. It is a well developed plan which helps a business to flourish. The development of a business plan has the following advantages: 1) Directs the business: it helps in representing the goals of your organization, it helps the organization in being clear about what exactly they want to achieve. 2) Estimates the cost: it helps in determining the investment that will be required to start the business. This will allow the firm to carry out research regarding its equipment and materials required. 3) Arrange for funds: a business plan will be required when talking to potential investors and bankers. A convincing business plan can attract potential investors and can also help in asking the bank for loans to start up the business. 4) Set Goals: a well developed business plan defines the production goals of the organization. It also helps in estimating the profits that the company can make. (Zacharakis, Spinelli & Timmons, 2011) Balanced Score Card The balanced scorecard helps the organizations through the process of creating strategies and implementing them. It can be a great help if used as a strategic tool. It enables organizations to clarify their visions and strategies and bring them to action. The balanced scorecard has four different ways in which it evaluates an organizations progress: 1) Financial perspective: this measures the return on investment and the shareholders value 2) Customer Perspective: this measures how satisfied the organizations customers and what is the organizations corporate image. 3) Process Perspective: this determines what strategies the company should use to excel 4) Innovation Perspective: how will the organization learn from its mistakes and develop new strategies so they are not repeated. (Kaplan and Norton, 1996) Evaluation The evaluation process needs to be in progress at all times. It needs to keep a check on the progress of business in accordance with the business plan and the strategic plan. It provides a timeframe which determines whether the perspectives stated in the scorecard are being met. The evaluation process is successfully carried out with both formal and informal modules. The formal module may be a quarterly evaluation of conditions. The informal process is the way managers are dealing with visiting customers and suppliers. The final decision of the evaluation process is to determine whether the goals set out in the strategic plan are being met efficiently or not. Strategy in early times: In ancient China Sun Tzu a philosopher presented his thoughts on strategy that are still studies by businesses and military leaders. One of his ideas states that winning a battle without fighting is the best way to win the battle. Many computer producers like Toshiba and Acer compete with each other mostly on the basis of price which leads to price war. Apple on the other hand shows a good example of this idea. One of the most famous examples of strategy revolves around the Trojan horse. Legend states that Greek soldiers developed a strategy to enter the gates of Troy and attack it. Now the term Trojan horse refers to those actions which look beneficial but have a hidden mission in them. King Arthur and his knights set a mission to find the Holy Grail, this serves as an example in developing strategies that setting a mission is immensely important. (Ketchen & Short, 2013) Development of strategy as a field of study: Strategic management has been important throughout history however it has emerged as a field of study in the past century. Frederick W. Taylor in 1911 published the Principles of Scientific Management considering Sun Tzu’s ideology of strategy as part art and part science. He believed that businesses would be more successful if management principles were implemented. Automobile firm owner Henry Ford emerged as one of the founder of strategic management within industrial owners. Harvard University was the first educational institute that offered a course which focused on development of business strategy. The process of developing strategies has helped many business organizations in flourishing. This process helps the firms to set its main goals and objectives and assists the businesses in achieving those goals and objectives. Creating a business plan helps the businesses to keep in mind and its cost and produce accordingly. Processes like Balanced scorecard help the businesses in putting all these goals and objectives into action. The evaluation process keeps a check on all the business strategies. Development of strategy is now a course in many known business institutes. (Ketchen & Short, 2013) References: Boundless. (2012). “Conduct a Situational Analysis”. Boundless. Retrieved April 9, 2014, from https://www.boundless.com/marketing/marketing-strategies-planning/steps-to-creating-a-marketing-plan/conduct-a-situational-analysis/ Kaplan, R. S., & Norton, D. P. (1996). “Using the balanced scorecard as a strategic management system”. Harvard business review, 74(1), 75-85. Ketchen, D., & Short, J. (2013). “Mastering Strategic Management, v. 1.0.” Flat World Knowledge. Retrieved April 9, 2014, from http://catalog.flatworldknowledge.com/bookhub/3085?e=ketchen_1.0-ch01_s03 Renault, V. (2013). Section 14. SWOT Analysis: Strengths, Weaknesses, Opportunities, and Threats. Main Section. Retrieved April 8, 2014, from http://ctb.ku.edu/en/table-of-contents/assessment/assessing-community-needs-and-resources/swot-analysis/main Stanleigh, M. (2013). 5 Key Factors to Successful Strategic Planning. 5 Key Factors to Successful Strategic Planning. Retrieved April 9, 2014, from http://www.bia.ca/articles/5-Key-Factors-Successful-Strategic-Planning.htm TPMG. (2006). The Performance Management Group LLC. Consulting Services: Strategy, Operations and Performance Analytics. Retrieved April 9, 2014, from http://www.helpingmakeithappen.com/strategy/corecompetencyanalysis.html Zacharakis, A., Spinelli, S., & Timmons, J. A. (2011). Business plans that work. NY: McGraw-Hill. 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