The Effect of Strategy Planning and Strategic Management in a Business Organization
Rue, W. Lislie and Plylis, G. Holland (1989), writes that when strategy is used in the context of the organization as a whole, describes the way that the organization will purse its goals, given the threats and opportunities in the environment and the resources and capabilities of the organization. As suggested by this definition; they named three factors as having a significant influence on strategy. These factors are the external environment, the internal resources, and the goals that are being pursed. In assistance, they claim, that an organisation’s strategy provides a basic understanding of how the organization will compete.
Thomas, L. Wheelen and J. David Hunger (1992), write that a strategy of a corporation form a comprehensive master plan stating how the corporation will achieve its mission and objectives. It maximizes competitive advantage and minimizes competitive disadvantages.
Strategy is defined by Webster’s New World Dictionary (x), as the science of planning and directing military operations. The planning theme remains an important component of most management definitions of strategy.
Alfred Chandler (1962), defines strategy as the determination of the basic long-term goals and objectives of an enterprises, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals. Implicit in this definition is the idea that strategy involves national planning process. The organization is depicted as choosing its goals, and allocating resources accordingly.
James, B. Quinn (1980), defines it as being “the patter or plan that integrates an organisation’s major goals, policies and action sequences into a cohesive whole”.
Willan, F. Glueek (1980), defines strategy as “a unified, comprehensive, and integrated plan designed to ensure that the basic objected of the enterprise are achieved”.
STRATEGIC MANAGEMENT DEFINED
Wheelen and Hunger (1992), define strategic management as that set of managerial decisions and actions that determines the long term performance of a corporation. They write that it includes environmental scanning, strategy formulation, strategy implementation and evaluating and control, strategic management therefore emphases the monitoring and evaluating of environmental opportunities and constraints in the light of a corporation’s strengths and weaknesses.
Collin Cilligan et al (1986), states that strategic management involves the development of corporate objectives and strategies for the total enterprise. A major input to this, they say, is the strategic audit which is concerned with analysis of the environment and the company resource base. They write that the long-term success of any business is determined to a very large extent by the degree to which management maintains a balance between resources and opportunities. They claim that without this, problems, stemming from an outdated product range, inappropriate manufacturing capabilities, inadequate distribution method, and so on will become increasingly apparent. And that at the same time, because both the environment and the resources base are constantly changing, the profitable growth balance of a business will also be changing. The implications, they continued of this are that even when a successful strategy has been identified and is being pursued, it is likely to be of limited duration since the penalties for standing still in any market can be severe.
THE TERM STRATEGIC PLANNING
Planning is one of the most fundamental activities of management. All managers plan and there are a myriad of types of planning and plans. Planning, as a concept, has been with us for a long time. Consequently, there are a variety of definitions for planning some of which the researcher has enumerated above. However, for the purpose of this study, the researcher is specifically interested in only one type of planning, strategic planning.
James, B. Whittaker (1978) states that strategic planning is concerned with both the definition of goals and objectives for an organization and that design of the functional policies, plans, and organizational structure and systems to achieve those objectives. He goes further to state that strategic management which encompasses those management actions that deal with the direction of the firm’s resource allocation process relies heavily on strategic planning. Continuing, he writes that this strategic planning involves the following:
- Analysing the environment of the firm to determine specific threats and opportunities.
- Evaluating the firm to determine the key skills and resources that could be used to develop a competitive strategy in a given product – market situation.
- Integrating the unique skills and resources with all specific opportunities in the firm’s environment.
- Establishing corporate objectives for where the company wants to be at a given time.
- Creating a number of corporate policies, plans, programmes and tasks to successfully accomplish the objectives that were established.
Peter Drucker (1974), call strategic planning “a continuous process of making present entrepreneurial (risk taking) decisions systematically and with the greatest knowledge of their futurity, organizing systematically the efforts needed to carryout these decisions, and measuring the results of these decisions against the expectations through organized systematic feed back”.
He goes further to make the interesting point that managers should know that strategic planning is not. He sates categorically that it is not a box of trick, a bundle of techniques, and not forecasting. That it deals not with future decisions but with the futurity of present decision, neither is it an attempt to eliminate risk. Drucker’s comments are helpful in understanding strategic planning because too much effort has been expended in following initiatives in some of these areas to the long-term detriment of effective strategic planning.
Drucker writes further that although there are certainly times where various analytical techniques must be used in strategic planning, but that they should be used as tools to accomplish the planning, not viewed as ends in themselves. He points out that rigorous analysis must be used in the process of strategic planning, but that simply qualifying everything one can lay one’s hands on is not strategic planning.
David R. Hampton (1988) defines strategic planning as the process of developing strategy. According to him, it is the most fundamental and far reaching planning that managers do for their organizations.
In the views of Barnett and Wilsted (1988) strategic planning is a process that represents part of strategic management, and that this process is for analyzing the opportunities and threats in the market place, while building the strengths and correcting the weaknesses within the firm. Strategic planning, they state, also involves setting goals for specific product markets and for the firm.
While distinguishing between and organization’s strategic posture and its strategic plans, Cray and Smeltzer (1989) state that strategic posture relates to an organization’s strategy at any given time, past or present. A strategic plan, on the other hand, is future oriented. They claim that strategic plan describe the intended future strategic posture and a general action plan devised to achieve this posture. And that all firm’s have strategic postures, but not all firms have strategic plans.
Leslie and phylis (1989) see strategic planning as the process that sets forth organization objectives to be achieved, the strategies and policies needed to reach the objectives, as well as the short-range plans to make sure that the strategies are properly implemented, for all practical purpose, analogues to top-level long-range planning.
Taylor B. and Hawkins K. (1972), produce an impressive dossier of definition. They define strategic planning as the determination and implementation of corporate business strategy, a business strategy they state as the course of action designed to optimize future profits over a series of year by developing limited resources in a closing environment and in the face of increasing competition in the pursuit of certain management goals.
THE KEY ELEMENT IN THE STRATEGIC PLANNING PROCESS
Organizations of all sizes should embark on strategic planning despite the difficulties associated with it because of time scale and uncertainties. It is an activity that needs constant attention. However, relativity little is known about the way in which this process works. This is largely because few organizations are willing to talk in public about the procedures they use. It is, however possible to identify the key elements in the process and to show how they interact. They are so enumerated below: culled from Megginson et al (1986), they pastulate about eights key elements.
- Establishing organization objectives: This they say is the first step in strategic planning for the organization as a whole and them for each subordinate unit. This step involves deciding that the organization want to do as far as its activities are concerned and the position at which it would like to be at some fixed points in the future. These objectives set the direction in which the efforts and resources will be applied, such as quality of products, market share, sales, volume, number of employees and rate of return on investment (ROI) for private organizations.
- Developing planning premises: According to them, these is the planning assumptions about the future settings, in which planning is to take place and the total environment in which the plans are to operate. To do this, planners need to do realistic forecasting. They must also analyse both the internal and the external environments to see what factors are already present or be found in the future. This planning possibly take into account all the events in the future, but these premises do provide management with orderly path to follow, and they can be changed as changing conditions might warrant. Strategic planner must, therefore, monitor these changes and modify the planning premises as conditions dictate.
- Generating alternatives: This steps includes noting the various ways in which management can reach its goals, taking into consideration planning premises and other factors. It also involves creative and innovative ways of solving the problems or achieving the objectives.
- evaluating alternative: this means using statistical or quantitative analyses of factors involved in each alternative, if possible, and then, after considering the behavrioal implications, reaching a decision about what course of action to take. In strategic planning, this feature is especially important, because it permits analysis of the effects of manipulating the different variable affecting the activity being planned.
- Selecting the most appropriate alternative: They claim that the focal point of all the other steps is the step of selecting the appropriate alternative. This involves choosing the plan with the most promise of leading management to the achievement of its objectives. This selection decision results from evaluating the alternatives and the planning premises, including assumptions about the organisations internal and external environments and possible future situations.
- Developing plans for units and subunits: After major plan for the total organisation is accepted, other plans for units and subunits must be established to back it up. These plans attempt to coordinate the different phases of the organisation so that they will work along with the major plan to reach the same objectives.
- Implementation and monitoring the plan: The plan only becomes a reality when it is put into operation. This involves a transition from planning to action. It also requires the use of other management functions, such as organization, staffing, leadership, and controlling. It is quite important that the plan be monitored carefully in order to determine whether it is effectively accomplishing the desired results.
LEVELS OF STRATEGY
This issue of levels of strategy is drawn largely from James Stoner and Edward Freeman (1989), they put forward three levels which are as follows:
- Corporate level strategy: This level of strategy is formulated by top management to oversee the interests and operations of organization that contain more than one line of business. The two major questions usually asked at this level are: What kind of business should the company be engaged in? And how should resources be allocated among these businesses? To answer these basic questions, corporate strategic planners, usually top management, must address a further series of questions, such as; what business should the organization serve? What new technologies should it use? How do we manage the range of our activities, and how do we acquire and allocate resources for the activities we choose to purse? Corporate level strategy addressed the actions that total organization is taking and should take, and attempts to determine the roles each business activity is playing and should play in the organization.
- Business level strategy: This level of strategy is concerned with managing the interest and operations of a particular business. It deals with such questions as how will the business compete within its market? What products services should it offer? Which customers does it seek to serve? How will the various functions manufacturing, marketing, finance, and so on be managed in order to meet market goals? How will resources be distributed within the business? Business unit strategy attempts to determine what approach the business should take to its market and how the business should conduct itself, given its resources and the conditions of the market. According to them, many corporations have extensive interest in different business. Top managers of their corporations complex and varied activities. One approach to dealing with this problem is the creation of strategic business units. A strategic business unit (SBU) groups together all business activities within a multi-business corporation that produce a particular type of product or service and treats them as a single business unit. The corporate level provides a set of guidelines for the SBUs, which they develop their own strategies on the business unit level. The corporate level then reviews the SBU plans and negotiates changes if necessary. Single business corporation use business unit level strategy making unless they are contemplating expanding into other types of business. At that point, strategic planning on the corporate level becomes necessary.
- Functional level strategic: This level creates the frame work for the management of functions – such as finance, research and development, and marketing. So that they confirm to the business unit – level strategy for instance, if the business unit.
Strategy calls for the development of a new product, the R&P department will create plans on how it will develop that product.
CRITERIA OF EVALUATING A PLAN’S EFFECTIVENESS
Writing further, Megginson et al put forward some criteria that can be used to evaluating the effectiveness of any plan. And these criteria are:
- Usefulness: They state that for any plan to be useful to management in performing its other functions, such a plan should be flexible yet stable – continuous and simple.
- Flexibility: This is essential to successful strategic planning results from careful analysis and forecasting, developing contingency plans, and making planning a continuous process. The plan should therefore be capable of quick and smooth adjustment to changing environmental conditions without serious loss of effectiveness.
- Stability: A stable plan, is one that will not have to be abandoned or modified extensively merely because in the long run trend of the organisation environment. If plans change too often, managers do not becomes familiar with them as an operating tool and do not use them effectively.
- Continuity: Planning should have continuity. However, when a plan has outlived its usefulness it is replaced by another so that the guiding concepts provided by planning may be continuous.
- Simplicity: The larger and more complex an organisation and its environment are the more complex the plans must be. However, the plans may be more complicated than they need to be. The more complex plans are, the more difficult they are to implement and monitor. Thus, a simple plan provides for the accomplishment of its objectives with the fewest possible variables, so that the chance of complications is minimized.
- Accuracy and Objectivity: They contribute further by writing that plans should be evaluated to see whether they are definite, clear, concise, and accurate. This is because decisions and other management actions are only as effective as the information on which they are based. Thus planning must be based on factual and realistic thinking about the requirements needed to reach objectives rather than on the personal objectives of those doing the planning. To achieve this goal, planning should be based on the objective thinking, and emotional and personal objectives should not be permitted to interfere with the factual, logical, and realistic requirements of the plan.
- Scope: While commenting on the issue about plans being evaluated in terms of their scope. They insist that the following elements should be considered.
- Comprehensiveness: they claim that a plan should adequately cover all the action that will be required of individuals and organisations to reach objectives. Although, it should not specify the nature and conditions of the action in such minute detail that it will be unduly restrictive. In order words, it should not put limitations on the nature and conditions of actions to such an extent that instead, it should enable managers at every level to coordinate the action on the lower levels for which they are responsible.
- Unity: This implies, if possible only one plan should be put into operation at a time in order to prevent confusion and inconsistency. Plans for these may be several part of a plan. It does mean that each plan should be designed to achieve one central objective and to be consistent and complete in itself.
- Consistency: Writing further, they say that each administrative unit of an organisation is related to and depends on the other units. These units each have managers who plan their operations and actions in terms of the special objectives of their units. The effectiveness of these managers may be cost if the various unit plans lack consistency, cooperation, and coordination. Therefore, there must be unity and consistency, at least in the overall objectives of the planning units and organizational itself.
- Cost effectiveness: They assert that planning is costly in terms of time, effort, and emotional drain on those doing it. Therefore, the guideline in planning is unless the results increase revenues or reduce cost by more than the cost of the planning and its implementation, do not do it.
- Accountability: They put it that there are two aspects of accountability.
- Responsibility for doing the planning and
- Responsibility for implementing the plans.
They state that planning is generally not the jot of any person designates as “the planner” but rather part of the job of all the managers in an organization because it must reflect the ideas and commitments of those responsible for implementing the plans if they are to be successful. Yet those managers also need overall guidelines, coordination, and direction in their own efforts from someone higher in the organization who has specific authority and experience in planning. And this guidance can take the form of guidelines, specific measures of performance and timetables provided by top management.
- Timeless: They stated that forecasting the future with any reasonable degree of accuracy presents a problem because of the vast number and variety of events that may take place over which management has little, if any control. And that organizations are affected by many things such as major catastrophes, technological changes, or even changes in the weather. Such events are difficult to predict with any degree of accuracy, but the planners must attempt to such important predictions.
IMPEDIMENTS TO STRATEGY EXECUTION
Most strategies outline in detail the steps that an organization must take to achieve strategic goals. But what about all the things that might get in the way of your well laid out plans? Thereby acting as restraining forces to strategy implementation and development.
William P, Nilsson (1987) postulates three (3) major reasons for strategy failure and they are:
- The effectiveness of the strategy itself: He writes that it is a very difficult assessment based on the fact that good strategies can fail due to poor implementation or insurmountable economic or other environmental problems. And moreso, one can never really know whether the strategy is good until it has either succeeded or failed. Strategic management must be a dynamic actions as the overall strategy is being carried out. When a firm doubts its strategic management ability, this becomes a major strategic issue for the organization.
- Implementation effectiveness and factors to the firm: This reason for the failure of strategy has to do with the fact that the people in the organization may not have the knowledge and skill to implement the strategy or, for some reason, the motivation and determination that are necessary. There may also be too many internal obstacles in the way. Common problems in the firm’s internal environment are effects in the organizational structure and ineffective communication.
- He continues by saying that productivity, quality customers satisfaction, leadership, and team work all influence the ability of a firm to execute its strategy. And that problems in any of these areas can be a reason for ineffective implementation. He considered it in the following themes:
- Productivity: Under this, he says that competitive advantage is directly related to a firm’s productivity compared to competing companies. And that manufacturing productivity is but one small part of the problem. The major cost components of many products lie in overhead, administration, research and developments, and marketing. Poor productivity in any of these areas, he writes results in ineffective strategy execution. Productivity can be a signification strategic issue for most organizations.
- Product and service quality: He asserts that quality is no longer a trill or a hurry; but that it is expected. Excellent quality comes from people doing their jobs right the first time, including the job of management. And that major gaps in employee and management skills and knowledge are important strategic issue.
- Customer satisfaction: he states that product features do not dictate most purchasing decisions. Customers expect a solution to their specific problem, not some lowest common denominator solution that results from much of today’s product development effort. Customers expect to have their needs satisfied. He then asks: how many strategies take specific action to guarantee customers satisfactions.
- Leadership and frame work: According to him, strategies are implemented by people in “turned on” work teams at every level in the organisation. And that leaders of these teams must be able to not only articulate the vision for where the teams are heading but also engender the commitment and enthusiasm necessary for achieving team and company goals. He concludes on these factors internal to the firm which hinder the effective implementation of strategy by saying that lack of vision commitment, or enthusiasm are significant strategic issues for any organisation.
- The external environment to the firm: William Nilsson, continues by stating that the firms may be affected by actions outside its control. Competitors can upset the market strategy by product outside innovations and price cutting. There may also be a shift in market needs. The economy may turn sour, or government actions might go against the firm’s strategy. He states categorically that the following two trends might well create strategic issue for the firm.
- Global competition: According to him, the inners in hotly concerted world markets will be these aggressive. Competitors who can move easily across national boundaries. That product designed and manufactured to meet the common needs of all markets of interest can be produced at lower cost than products customized for each individual market. Failure to think “globally” can easily put a firm at a great disadvantage.
- Impact of new technologies: He writes that advances in technology are making a profound impact on methods for engineering, manufacturing, marketing and administration. And that, expert executives takes steps to acquire these new technologies and methods and apply them to their firm, they will fall behind competitions. To him, significant changes in job methods have created, for some firms, serious mismatches between available skills of the workforce. Therefore, re-shaping the skills of the workforce is a strategies issue for these firms.
He states that although the firm does not directly influence most of these external factors, executive do have the responsibility to develop strategies that will optimize the firm’s performance in the environment that exists. But that the first step is to recognize changes that will affect the company.
He concludes by stating that for a firm to develop a list of strategic issues, that the firm should start by systematically thinking about those things that need to be done to implement its strategy. Such as the knowledge and skills that the management and employee teams will need. What skills must you develop? What resources will you require? And that all the things that might impede the implementation efforts should as well be listed. Where are you vulnerable? What competitive and environment forces pose a potential threat?