Advantages and Disadvantages of Strategic Planning - Essay Example

Top of Form Abstract This paper entails the components of a strategic planning of an organization or a business. It contains an orientation of what strategic plan is and what it entails. It also entails a detailed process of writing or formulating strategic plan, the importance of the strategic plan, its application, the reasons as to why smalls business require the strategic plan, and the components of a very good strategic plan. Other factors include how strategic planning lead to improved performance in small companies, the common pitfalls of strategic planning and finally a conclusion, which contains a summary of the main points, contained in the whole essay. Introduction Strategic planning is a very important component of the success of an organization either profit earning or non-profit earning organization. It is the means by which the organization uses as its framework for making decisions as well as securing its approval and support, it provides the means by which an organization gets a detailed plan to run its activities, it acts as a way of advertising the business to the world for the purposes of informing, involving and motivating. It is a way of assisting in performance monitoring and benchmarking and is also the means by which the organization stimulates change as well as it is the building block used for initiating the next needed plan for the organization (Peter, 2007). Definition of strategic planning Strategic planning refers to the process of planning strategically and systematically or rather prospecting where the business will be in a specified period. It involves a number of steps, which are important in identifying the current as well as the future situation of the business. It clearly defines the business or the organizations objectives as well as the external and the internal situation so that the management of the business can formulate a strategy, implement it, evaluate all the process, as well as make the needed adjustment as far as the success of the business is involved. It is also the strategy that the business management uses to allocate resources both the finances as well as the human resources (Thompson & Martin, 2005). It is the strategy through, which most of the business analysis techniques are used like the PEST analysis, STEER analysis, SWOT analysis, and EPISTEL analysis. It is the strategy that answers the following three main questions: what is to be done, whom the work is being done to and how to excel. The tool gives the business or the organization an effective direction to follow in order to realize its goals and objectives. The strategy works hand in hand with the strategic innovation, which enables the business to thrive in the harsh business climatic condition in existence in the world. Strategic planning A there is a very great difference between a strategic plan and a business plan. A strategic plan is basically very short in terms of the contents it contains as compared to the business plan which is a huge document containing a lot of details like the strategies of pricing, market segmentation, description of the location of the business alongside the disadvantages and advantages of marketing in that place (Hill & Jones, 2007). It also contains the budget of the advertisement and the promotion strategy. Finally, it contains the detailed description of the service and the product including the entire features that are special about it. The strategic plan contains the framework as well as the foundation of the business the organization is to be involved in. it is important to note that the strategic plan is also not the same as the operation plan. The strategic plan is more visionary, directional and conceptual (Peter, 2007). A good strategic plan should be SMART meaning it should be specific, measurable, attainable and very realistic. This is for enabling the managers or the entrepreneurs to get to think strategically as well as act operationally. In the very competitive environment in terms of business, a business must have a strategic plan so that it can be able to stand in the platform of competition. The following are the five processes that is involved in the process of formulating a business strategy; objectives and mission formulation, environmental scanning, formulation of the strategy, implementation of the strategy and finally the control and the evaluation of the strategy (Salder & Craig, 2003). It is the mission that describes the vision of the company, values, goals and the objectives in order for the business to pursue its future opportunities in terms of the market share. The environmental scanning entails external analysis and internal analysis helpful in understanding the weaknesses, strength, threats and opportunities of the business. The formulation of the strategy entails the process of matching all the information gotten from the environmental scanning in terms of weakness and strengths as well as the threats and opportunities. The importance for this is to give the business a platform for competition as well as superiority in the area of profitability. The implementation of the strategy refers to the process of putting into actions all the programs, procedures and budgets (Finlay, 2000). It is the process that fully involves the organizations resources like the human resource as well as the finances. Also at this stage, there is the aspect of motivating the staff to ensure they are aggressive in trying to achieve the company’s objectives and goals. Finally, the control and evaluation stage involves the process of monitoring and adjusting the implemented strategies through defining the parameters that needs to be measured. Moreover, defining the values targeted as far as these parameters are concerned, setting the measurement of the performance, comparing the results measured with al predefined standards and finally making any changes that are necessary in the strategy. Do small businesses formulate strategic planning? A strategic plan is important for both the small and the big business. This is because all the business is in need of it. The small business like the big ones, need to have a time limit of the business objectives. In addition, all of the business needs to have the vision, mission and the objectives all of which are the means by which the business uses for its way forward. The businesses even though small at that level have competitor that they have to beat so as to thrive meaning that they need to have the business strategy. The small business also needs a sense of direction, which can only be effectively and efficiently provided by the strategic plan. It is also very important for the small businesses to have the strategy because it will create the value of the business to the people who get to read it whereby some of them are potential customers, employees and managers (Paauwe, 2009). The vision of the small business will give it the importance and reasons for achieving the mission. The strategic plan is therefore formulated by the small business as an essential part of running, improving and growth of the business into better and more profitable businesses. Does strategic planning lead to improved performance in small companies? Strategic planning is very important as far as the process of improving the performance of small business is concerned. This is because the components of the strategic Plan are all geared towards the improvement of the business performance in terms making the activities of the business more purpose oriented, objective oriented and finally in terms of human resource management. There are a number of ways through, which the strategic plan helps in the improvement of the performance. Human resource management as a way of strategic planning in any organization is very important. It refers to the process of linking all the human resources to strategic objectives of that particular organization with the aim of improving the organization’s performance (Boselie, 2005). This entails analysis of the resources in terms of the skills, the background, training of all of the employees as well as the managers and also the management of the organization structure. Managers in an organization should be encouraged to think strategically in all that they do through embracing the process of training. In addition, the organization can incorporate all the employees in the process of strategic planning in the sense that it encourages the process of strategic thinking hence a good relationship with the stakeholders. The practices and policies that are governing the management of the human resources are supposed to fit well with the strategy, the organization conditions faced by the organization as well as the competitiveness of the organization’s organization environment. One of the ways of human resource management is through motivation. Through motivation, there can be a great deal of improvement in performance. Motivation has been defined as the combination of one’s desires as well as energy, which are all directed in achieving a certain goal. In other words, it is what causes a certain action to be taken. In order to influence people’s motivation then it means to get them to do what you actually want them to do. It should be noted that not all people are motivated by the same things to perform (Boxall & Purcell, 2003). There is a very strong relationship between the improvement in the human resource management and the management of the human resources in a given organization. Actually, it is very evident that the management of the human resource is a facilitator or rather an enabler and a very effective strategic option to achieving improvement in organizational management. Human resource management has also been termed as the perfect approach of personnel (Finlay, 2000). Some of the outcomes that have proved that it is a good form of human resource management include low absenteeism; cost effectiveness is high, dull to utilization of the human resource in full, increase performance in their jobs and good relationship with others. Performance in any organization is however not completely based on the human resource management, there are other things other are also involved like the performance relationship. In addition, the plan enables the business to be focused to the objectives, goals and purposes that it was intended for (Burns, 1961). The common pitfalls of strategic planning Strategic planning has some disadvantages in that in case there are opportunities for the business to venture into other form of businesses it cannot because of the fact that a strategy has been laid down. In addition, it is very impossible for the business to venture into other form businesses because a plan has been put up with a vision and mission directing the business towards a particular direction. Also the fact that a budget has been drawn, means that all the business resources have been utilized or planned for meaning there is no way of acquiring other resources for the business (Chandler, 1962). Also the process of making changes in the business and running of the business may be very hard because so many people are involved in the strategic planning like the shareholders, stakeholders, the customers, the employees and the managers. This means that it may take a long time to convince them all to make the changes in the business. Conclusion Strategic planning is a very important component of the success of any business. It is the process that provides the business or the organization with a direction to which it should go in terms of the vision, mission, objectives, goals, budget, management of the resources ( finances and human resource management). It also the process that enables the business to understand its strengths, weaknesses, threats and opportunities as far as its market share and the issue of competition is concerned. It important for business owners to know that there are pitfalls of strategic planning like the fact that a business will not easily change from the kind of business it deals with easily (Finlay, 2000). References Boselie, P., Dietz, G., and Boon, C. (2005). Commonalities and contradictions in HRM and performance research. Human Resource Management Journal, 15(3): 67-94. Boxall, P. and Purcell, J. (2003). Strategy and Human Resource Management. New York: Palgrave Macmillan. Burns, T. (1961). The Management of Innovation. London: Tavistock. Chandler, A. (1962). Management theory and practice. London: Thomson. Finlay, P. (2000). Strategic management: an introduction to business and corporate strategy. New York: Pearson Education. Hill, C. & Jones, G. (2007). Strategic Management: An Integrated Approach, 8th Ed. California: Cengage Learning. Paauwe, J. (2009). HRM and Performance: Achievements, Methodological Issues and Prospects. Journal of Management Studies, 46(1): 129-142. Peter, F. (2007). The practice of management. New York: John Wiley & sons. Salder, P., & Craig, J. (2003). Strategic management, 2nd Ed. London: Kogan Page Publishers. Thompson, J. & Martin, F., 2005. Strategic management: awareness and change, 5th Ed. California: Cengage Learning EMEA. Read More