The Modern Business Environment - Essay Example

This paper examines the modern business environment as supposed by the renowned business guru, Tom Peters. It investigates the assertion by Peters to the effect that the modern business environment is very dynamic and fast changing, the fastest in the last 200 or so years. It further examines the modern trend where managers perceive long-range planning as too academic and as a result not practical due to the uncertainties that currently face their industry sectors. It then explains why managers find themselves adopting such an attitude. The paper goes ahead to give suggestions on how to improve the conventional approach to long-range planning. It also explores the possibility of adopting more qualitative methods like scenario prediction in answering the managers' criticism, providing the rationale behind these ideas. The paper specifically analyses the nature of long-range planning and how it affects the operational policies of an organisation. It also appreciates the limitations of adopting the long-range approach to planning. Introduction Long-range planning is very important for the future of any organisation. Its principal tasks include understanding of the environment, defining the goals of the organisation, identifying the organisation's options, making and implementing decisions and evaluating actual performance (Collins and Porras, 1994). Long-range planning is therefore aimed at exploiting tomorrow's different and new opportunities. The traditional long-range planning has its basis on the concept of the four essential steps to planning. These steps include monitoring, forecasting, setting of goals and implementation of these goals. Long range planning is meant to help an organisation establish where it is currently, where it is going, where it wants to go, and what it has to do in order to change and head to its desired destination. The cycle of long-range planning starts by the monitoring of an organisation's selected trends. Then the process of forecasting of these trends' expected future follows. This is done by extrapolating past data by use of regression analysis or any such technique. The organisation's desired future is then defined by setting its goals in line with the expected future. The development and implementation of specific actions and policies with regard to long-range planning is aimed at reducing any disparity that may exist between the desired future and the expected future. The final phase is that of monitoring the effect of the policies and actions on the chosen trends. The nature of strategic planning and its impact on operational policies Strategic planning refers to the process of defining an organisation's direction or strategy and deciding on resource allocation in the pursuit of this strategy, including people and capital. A variety of business analysis techniques are utilised in the strategic planning process, such as SWOT analysis, PEST analysis, STEER and EPISTEL analyses (Bradford and Duncan, 2000). Strategic planning is therefore the process of formally considering the future course of an organisation (Kono, 1994). A typical strategic planning strategy is concerned with a number of issues such as what an organisation should do, for whom it should do it and how it should excel in its endeavours (Porter, 1996). Business strategic planning is mainly concerned with how to beat competition or how to avoid it altogether (Bradford and Duncan, 2000). In a number of organisations, this is seen as a process to determine where an organisation goes in the next three to five years, even though some organisations extend their plan to up to twenty years. For an organisation to determine where it goes, it must exactly know its current position. It is only when it knows its current position that it will be in a position to determine the position it wishes to get to and how to get to it. This then becomes the organisation's strategic plan (Lorenzen, 2006). It gives the general direction of the desired destination for any given organisation. Strategic planning is a powerful tool that can be used to plot the direction of an organisation effectively (Lorenzen, 2006). However, strategic planning in itself is not capable of foretelling the exact evolution of the market or the issues likely to surface in the future. Consequently, alteration of the strategic plan and strategic innovation are the key strategies for any organisation striving endure the unstable business climate. The will enable the organisation to take up any emerging opportunities that may not be in the strategic plan (Mintzberg et al, 1998). A strategic plan comprises a vision, a mission and a set of values to be used. The vision helps in defining the intended or desired future position of a given enterprise or organisation with regard to its fundamental objectives or strategic direction. A mission is used in defining the primary purpose of any given enterprise or organisation, mainly describing the reason for its very existence. Values are beliefs that the various stakeholders in an organisation share. The vision, mission and values all work together to help in driving the organisation's priorities and culture. Strategic planning takes on a number of approaches although three processes are commonly used, namely the situation, the target and the path. In the situation step, a proper evaluation of the existing situation will is done, mainly trying to establish how the situation came about. The 'target' step defines the objectives and goals of the organisation, and is sometimes referred to as the ideal state. On the other hand, the 'map' step maps a possible route to follow in achieving objectives and goals. One alternative approach to strategic planning is known as Draw-See-Think-Plan. Here, the 'draw' step gives the organisation's desired end state and the ideal image. The 'see' step establishes the current situation and any gaps that may exist from the idea and the reason why. Finally, the 'think' step helps in specifying the actions to be taken in order to close any gap that may exist between the current situation and the ideal one. The 'plan' step helps in the determination of the resources needed in the execution of the plan's activities. Another alternative approach to strategic planning is known as See-Think-Draw. The 'see' part is concerned with what the current situation is, while the 'think' part is charged with the responsibility of defining objectives and goals of the organisation in line with the strategic plan. Strategic planning therefore entails the definition of a vision and the setting of a mission, analysis of the goals and objectives; using tools such as SWOT analysis, formulation of processes and actions, implementing the agreed processes and controlling of the plan through monitoring, and getting feedback from the already implemented processes to enable full control of the operation. Situational analysis In the process of strategy development, it is very important to analyse the organisation together with its current environment. This also includes how it can be developed in the future (Kaplanand Norton, 2001). The analysis must be executed at both internal and external levels in order to identify all the opportunities as well as threats posed by the external environment (Fahey and Narayman, 1986). This will go a long way in identifying the strengths as well as the weaknesses of the organisation. In the analysis of the external situation, a number of factors must be assessed. They include the regulatory environment, the economy, labour markets, supplier markets, technology, competition and the customers or the market. It is not common for one to find critical importance in all these factors. In most cases, competition and the market is of critical importance (Porter, 1985). Analysing of the external environment usually puts its focus on the customer. The management should therefore be visionary in the formulation of customer-oriented strategies. They can do this by thinking about the shifts in the market environment; how they affect its sets of customers and whether or not these sets of customers are those that the organisation wishes to serve. Competitive environment analysis is also done basing on various frameworks. Targets, goals and objectives Strategic planning is vital in any business activity, as well as public sector areas like education. It is widely practiced, both formally and informally, in many organisations. Decision-making processes and strategic planning are meant to end with not only objectives, but also a roadmap of routes to follow in order to achieve the laid down goals and objectives (Kearns, 2000). It is not possible to mention strategic planning without also mentioning such terms as actions, tactics, strategies, objectives, goals, policies, plans and desired end states. Definitions can overlap or vary, and as a result fail in their endeavour of achieving clarity. However, the commonest of the concepts are time-bound and specific statements of the envisaged future results. There are also continuing and general statements of the envisaged future results, commonly referred to as objectives or goals, and sometimes used interchangeably. One of the models used to organise objectives makes use of hierarchies where the key items are organised in some sort of a hierarchy of ends and means. The items can be numbered as below. a) Top Rank Objective, TRO b) Second Rank Objective, SRO c) Third Rank Objective and so on From any of these ranks, any objective falling in the higher rank answers to the question 'why' while that in the lower rank answers to the question 'how.' The only exception is the TRO where the 'why' question does not have an answer. This is how the top rank objective is usually defined. Naturally, people have numerous objectives and goals at the same time, leading to goal congruency. This term refers to the capability of the given goals combining well with each other. Goal congruency examines whether or not goal A appears compatible with B. It also investigates whether or not goals A and B are capable of fitting together and forming a unified strategy. Another common characteristic of the goal hierarchy approach is the nesting of goals within other goals. Another approach to strategic planning is of the recommendation that goals should be divided into short-term, medium-term and long-term goals. In the model, attainment of short-term goals is quite easy compared to the long-term goals, which seem to be quite difficult or even impossible to attain. This is where goal sequencing, which refers to the use of one goal to get to the next, finds its application. In this approach, a group or an individual begins by accomplishing the short-term goals; which are deemed to be easy, then stepping up to medium-term goals and finally to the more difficult long-term ones. Goal sequencing can help in the creation of a goal stairway. In a setting such as that of organisations, goals are properly coordinated in order to avoid any conflicts with one another. Goals belonging to a particular part of an organisation should be capable of meshing compatibly with the goals of the rest of the organisation. Vision and mission statements It is common for organisations to summarise their objectives and goals into vision statements and mission statements. Whereas it is useful to have a shared mission, a number of strategy specialists have questioned the rationale behind the requirement to have a mission statement written down. However, there are a number of strategic planning models starting with mission statements. Mission statements are aimed at telling the organisation's stakeholders about the key purpose of that organisation. It puts its concentration on the present- the daily policies and actions. It helps in the definition of the customer, as well as the critical processes, informing them of the desired performance level. A vision statement helps in the outlining of what a given organisation wishes to be, concentrating on the future. A vision statement is meant to inspire and provide a clear criterion for clear decision-making. Vision statements are often mistaken for mission statements. This should not be the case since vision statements describe an organisation's future identity while mission statements are time-independent and on-going guides. The mission helps in explaining the importance of achieving the vision. A mission statement assists in defining the broader goal or purpose for an organisation's existence. This statement can remain unchanged for many years as long as it is well crafted. Vision statements are more specific as far as the period and the future state are concerned. They help in describing what the organisation must achieve in order to be successful. A number of companies have their mission statements resembling the vision statements. This can be a very serious mistake since it is likely to confuse people. A vision statement is capable of stimulating people to attain the organisation's objectives, as long as they are specific, measurable, relevant, achievable and time-bound. A mission statement, on the other hand, is meant to give a way of realizing this vision bearing in mind its values. Both the vision statement and the mission statement greatly determine the success of any organisation. For a vision statement to be effective, it should be clear without any ambiguity and present a clear and vivid picture. It should describe a bright future with engaging and memorable wording. Its aspirations should be realistic and in line with the organisation's culture and values. Limitations of long-term planning in achieving corporate objectives The present business environment is the most fast changing and dynamic in nearly 200 or so years. As a result, a number of managers perceive long-range planning as academic and some-what impractical because of the uncertainties that currently face their industry sectors. The managers' perception is understandable if the current business environment is anything to go by. There is a lot of uncertainty in the future, which may substantially differ from what was expected. This presents a big challenge since the organisations' long-range plans are based on these future expectations. Consequently, many managers see no need of long-term planning since the future may differ substantially from what is planned in the present. Moreover, today's managers have shown a lot of resistance to any formal form of planning because of numerous factors. Managers and other staff members fear that planning will place fresh demands on them in addition to what they already have. In addition, many organisations want to avoid the effects of their long-range plans not fitting into the future due to the uncertainties. Many managers in today's business environment want to avoid long-range planning because they do not want to face the risk of failure to attain the goals and objectives of the plan. Additionally, managers may not be very enthusiastic about the idea of long-range planning when they consider their current operating problems. Managers also fear that long-range planning will expose any conflicts within their organisation to the stakeholders. This is contrary to what they would wish to have: keeping any conflicts within their organisation private and internal. This is because exposing conflicts within an organisation to the external environment will also expose the weaknesses of the organisation as well as those of the managers. Managers find the idea of long-range planning academic and impractical since it perturbs power relationships, decision-making and the flow of information. The managers, especially the senior ones, feel threatened when their subordinates outshine them in their contributions towards long-range planning. As a result, they would prefer to maintain the status quo in order to reign on their subordinates and avoid any challenge to their power in the organisation. Many mangers find long-range planning, and indeed any form of planning very difficult, messy and very hard. They also find long-term planning very expensive, in terms of both money and time. In addition, the managers fear that once a long-range plan has been completed, it limits any future activities and choices for the organisation. Long-term planning is aimed at strengthening or attaining a strategic management and thinking. However, these desired outcomes are often not realised; the link between planning and an organisation's success is very weak. One of the greatest limitations of long-term planning is that it creates a very wide separation between the thinking process and the doing. For instance, non-profit organisations usually require about a year for them to complete a long-term planning process (Burkhart and Reuss, 1993). During this period, it is not easy for them to respond to any opportunities or threats that may emerge, since by this time no decision regarding the organisation's direction has been made. The organisation is therefore not comfortable with making any new commitments. This is because it fears that they may not be in line with the forthcoming official strategic direction. The operations of an organisation therefore come to a halt to await the completion of the official strategic plan. The conventional process of long-term planning needs substantial resources in terms of the board's time, staff and funds. This process needs to include everyone in the organisation regardless of the role he or she plays in the organisation. The long-term planning process compromises or brings many of the organisation's daily activities to a halt. This is especially the case for small and medium-sized organisations, which may not have adequate resources. The process of long-term planning typically needs an in-depth research of the environment. This is not only expensive, but also time-consuming and therefore not attainable for many organisations with limited resources. Moreover, long-term planning is often counterproductive, especially for non-profit organisations functioning in fast-changing environments (Burkhart and Reuss, 1993). This is because such organisations need to be more agile and quicker in their development of strategies for them to move ahead in such an environment. Furthermore, in spite of the wish to be all-inclusive long-term planning is undertaken by a small group of board members or senior management (Allison and Kaye, 2005). This is despite the fact that the plan is supposed to be implemented all through the organisation. This includes even those who had little or no involvement in the crafting of the plan and therefore have little or no investment in the plan's success. Many managers have found their performance assessment being tied to the achievement of particular goals expressed in the long-term plan. This often results in the managers striving to attain goals and objectives whose importance may have waned in view of the new up-and-coming opportunities. Worse still, there are chances of the goals of the strategic plan being rendered irrelevant due to the shifting external environment and its required responses (Light, 2002). As a result, the long-term planning process and its outcome can end up being more harmful than positive. According to Mintzberg (1994), planning and strategy never go together. This in effect means that the conventional process of long-term planning can lead to loss of valuable time. Moreover, it can cause organisations to spend so much of its resources. Consequently, it could lead to the diversion of attention from important activities. Long-term planning may also lead to the organisations overlooking or dismissing opportunities that are more promising, just because they are not in the long-term plan. Conclusion The modern business environment is very dynamic and fast changing, the fastest in the last 200 years. A trend has been developed whereby managers perceive long-range planning as too academic and as a result not practical due to the uncertainties that currently face their industry sectors. A number of measures can be undertaken to improve the conventional approach to long-range planning. For instance, more qualitative methods such as scenario prediction could be adopted. Long range planning has a great impact on any organisation since it affects the operational policies of an organisation. The effect is positive in some organisations and negative in others. The limitations of adopting the long-range approach to planning are ever increasing. 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