Strategic Planning Process | Strategic Formulation Process
The term ‘Strategy’ has been adapted from war and is being increasingly used in business to reflect broad overall objectives and policies of an enterprise. Literally speaking, the term ‘Strategy’ stands for the war-art of the military general, compelling the enemy to fight as
per out chosen terms and conditions.
According to Koontz and O’ Donnell, “Strategies must often denote a general programme of action and deployment of emphasis and resources to attain comprehensive objectives”. Strategies are plans made in the light of the plans of the competitors because a modern business institution operates in a competitive environment. They are a useful framework for guiding enterprise thinking and action. A perfect strategy can be built only on perfect knowledge of the plans of others in the industry. This may be done by the management of a firm putting itself in the place of a rival firm and trying to estimate their plans.
Characteristics of Strategy
• It is the right combination of different factors.
• It relates the business organization to the environment.
• It is an action to meet a particular challenge, to solve particular problems or to attain desired objectives.
• Strategy is a means to an end and not an end in itself.
• It is formulated at the top management level.
• It involves assumption of certain calculated risks.
Strategic Planning Process / Strategic Formulation Process
1. Input to the Organization:
Various Inputs (People, Capital, Management and Technical skills, others) including goals input of claimants (Employees, Consumers, Suppliers, Stockholders, Government, Community and others)need to be elaborated.
2. Industry Analysis:
Formulation of strategy requires the evaluation of the attractiveness of an industry by analyzing the external environment. The focus should be on the kind of compaction within an industry, the possibility of new firms entering the market, the availability of substitute products or services, the bargaining positions of the suppliers, and buyers or customers.
3. Enterprise Profile:
Enterprise profile is usually the starting point for determining where the company is and where it should go. Top managers determine the basic purpose of the enterprise and clarify the firm’s geographic orientation.
4. Orientation, Values, and Vision of Executives:
The enterprise profile is shaped by people, especially executives, and their orientation and values are important for formulation the strategy. They set the organizational climate, and they determine the direction of the firm though their vision. Consequently, their values, their preferences, and their attitudes toward risk have to be carefully examined because they have an impact on the strategy.
5. Mission (Purpose), Major Objectives, and Strategic Intent:
Mission or Purpose is the answer to the question: What is our business? The major Objectives are the end points towards which the activates of the enterprise are directed. Strategic intent is the commitment (obsession) to win in the competitive environment, not only at the top-level but also throughout the organization.
6. Present and Future External Environment:
The present and future external environment must be assessed in terms of threats and opportunities.
7. Internal Environment:
Internal Environment should be audited and evaluated with respect to its resources and its weaknesses, and strengths in research and development, production, operation, procurement, marketing and products and services. Other internal factors include, human resources and financial resources as well as the company image, the organization structure and climate, the planning and control system,
and relations with customers.
8. Development of Alternative Strategies:
Strategic alternatives are developed on the basis of an analysis of the external and internal environment. Strategies may be specialize or concentrate. Alternatively, a firm may diversify, extending the operation into new and profitable markets. Other examples of possible strategies are joint ventures, and strategic alliances which may be an appropriate strategy for some firms.
9. Evaluation and Choice of Strategies:
Strategic choices must be considered in the light of the risk involved in a particular decision. Some profitable opportunities may not be
pursued because a failure in a risky venture could result in bankruptcy of the firm. Another critical element in choosing a strategy is timing. Even the best product may fail if it is introduced to the market at an inappropriate time.
10. Medium/Short Range Planning, Implementation through Reengineering the Organization Structure, Leadership and Control:
Implementation of the Strategy often requires reengineering the organization, staffing the organization structure and providing leadership. Controls must also be installed monitoring performance against plans.
11. Consistency Testing and Contingency Planning:
The last key aspect of the strategic planning process is the testing for consistency and preparing for contingency plans.
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