Chap 7 Flashcards
is an organizational management activity that is used to set priorities, focus energy and resources, strengthen operations, ensure that employees and other stakeholders are working toward common goals, establish agreement around intended outcomes/results, and assess and adjust the organization’s direction in response to a changing environment.
Strategic planning
is also described as the art of creating specific business strategies, implementing them, and evaluating the results of executing the plan, in regard to a company’s overall long-term goals or desires.
Strategic planning
is a document used to communicate with the organization the organization goals, the actions needed to achieved those goals and all of the other critical elements developed during the planning exercise.
A strategic plan
is about setting short or mid-term goals and defining the steps necessary to achieve them.
A business plan
is typically focused on mid to long-term goals and explains the basic strategies for achieving them.
A strategic plan
The_ is to set overall goals for the business and to develop a plan to achieve them. It involves stepping back from the day-to-day operations and asking where the business is headed and what its priorities should be.
purpose of strategic planning
The process of strategic planning is about determining the direction in which the business will take. By contrast, the purpose of the business plan is to provide the detailed route map that will take the business in the desired direction.
Effective strategy development requires a shift in focus from day-to-day concerns to the broader and longer-term business options.
The Difference Between Strategic Planning and Writing a Business Plan
THE THREE KEY ELEMENTS OF STRATEGIC PLANNING
* Where is your business now? This involves understanding as much about your business as possible, including how it operates internally, what drives its profitability, and how it compares with competitors. Be realistic, detached and critical.
* Where do you want to take it? Here you need to set out your top-level objectives. Work out your vision, mission, objectives, values, techniques and goals. Where do you see your business in five or ten years?
What do you want to be the focus of your business and your source competitive advantage over your rivals in the market place?
What do you need to get there? What changes will you need to make t deliver on your strategic objectives? What is the best way of implementing those changes? What changes to the structure and financing of you business will be required and what goals and deadlines will you need to set for yourself and others in the business?
While the second question is at the heart of the strategic planning process, it only be considered usefully in the context of the other two.
You should balance your vision for the business against the practical realities of your current position. You need to take into account the implications of any changes, such as increased investment in capital and other resources. A strategic plan needs to be realistically achievable.
BENEFITS OF STRATEGIC PLANNING
The volatility of the business environment causes many firms to adopt reactive strategies rather than proactive ones. However, reactive strategies are typically only viable for the short-term, even though they may require spending a significan amount of resources and time to execute. Strategic planning helps firms prepare proactively and address issues with a more long-term view. They enable a company to initiate influence instead of just responding to situations.
Among the primary benefits derived from strategic planning are the following 1. Helps formulate better strategies using a logical, systematic approach
This is often the most important benefit. Some studies show that the strategic planning process itself makes a significant contribution to improving a company’s overall performance, regardless of the success of a specific strategy.
2. Enhances communication between employers and employees
Communication is crucial to the success of the strategic planning process It is initiated through the participation and dialogue among the managers and employees, which shows their commitment to achieving organizational golas.
Strategic planning also helps managers and employees show commitment to the organization’s goals. This is because they know what the company is doing and the reasons behind it. Strategic planning makes organizational goals and objectives real, and employees can more readily understand the relationship between their performance, the company’s success, and compensation. As a result, both employees and managers tend to become more innovative and creative, which fosters further growth of the company.
3. Empowers individuals working in the organization
The increased dialogue and communication across all stages of the process strengthens employees’ sense of effectiveness and importance in the company’s overall success. For this reason, it is important for companies to decentralize the strategic planning process by involving lower-level managers and employees throughout the organization. A good example is that of the Walt Disney Co., which dissolved its separate strategic planning department, in favor of assigning the planning roles to individual Disney business divisions.
GETTING STARTED WITH STRATEGIC PLANNING
As with any business activity, the strategic planning process itself needs to be carefully managed. Responsibilities and resources need to be assigned to the right people and you need to keep on top of the process.
Who to Involve
Try to find people who show the kind of analytical skills that successful strategic planning depends upon. Try to find a mix of creative thinkers and those with a solid grasp of operational detail.
Do not try to do it all yourself. Take on board the opinions of other staff-key employees, accountants, department heads, board members and those of external stakeholders, including customers, clients, advisers and consultants.
How to structure the process
There is no right or wrong way to plan the process of strategic planning, but be clear in advance about how you intend to proceed. Everyone involved should know what is expected of them and when.
delegating the drafting of a strategy document to one of its members. Or you migh Consider holding a series of weekly meetings with a strategy team before decide to hold strategy brainstorming sessions which might involve seeking
contributions from a broader range of employees and even key customers.
Getting the Planning Document Right
It is important to get the process right. But don’t neglect the outcome-it is also important to make sure you capture the results in a strategic planning document that communicates clearly to everyone in your business what your top-level objectives are. Such a document should:
reflect the consensus of those involved in drafting it.
⚫ be supported by key decision-makers, notably owners and investors. ⚫ be acceptable to other stakeholders, such as your employees.
STRATEGIC PLANNING PROCESS
The strategic planning process requires considerable thought and planning on the part of a company’s upper-level management. Before settling on a plan of action and then determining how to strategically implement it, executives may consider many possible options. In the end, a company’s management will, hopefully, settle on a strategy that is most likely to produce positive results (usually defined as improving the company’s bottom line) and that can be executed in a cost-efficient manner with a high likelihood of success, while avoiding undue financial risk.
The development and execution of strategic planning, are typically viewed as consisting of being performed in four critical steps:
a: Analysis
b. Formulation and Planning
c.
Implementation
d. Evaluation
1. Analysis
When analyzing a business’s strategy there are no constantly right answers, but there are some constantly right questions. As the business and the business to question rigorously, decide the best approach and then check the course of
action through further questioning.
- Strategy Formulation and Planning
In the process of formulating a strategy, a company will first assess its current situation by performing an internal and external audit. The purpose of this is to help identify the organization’s strengths and weaknesses, as well as opportunities and threats (SWOT Analysis). As a result of the analysis. managers decide on which plans or markets they should focus on or abandon, how to best allocate the company’s resources, and whether to take actions such as expanding operations through a joint venture or merger.
Business strategies have long-term effects on organizational success. Only upper management executives are usually authorized to assign the resources necessary for their implementation.
* Define your purpose. Summarize where you are now, where you want to be and how you will change. People will want to know what the business will do and what they will be expected to do. Present a clear statement of goals as briefly as possible.
. Explain your advantage. People will want to understand how the business will succeed and what success will look like. Explain briefly why customers will buy from you rather than anyone else. These competitive advantages must be clear and convincing.
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Set the strategy’s boundaries. Be clear about which products and markets you will deal in, and which you will not. Too many boundaries will make the strategy inflexible and cause frustration; too few boundaries will lead to a lack of focus.
Prioritize. Emphasize the most profitable or significant products, customers and markets. Give employees specific responsibilities, objectives and resources so that the potential of these priorities can be realized. Encourage debate about priorities to foster focus and commitment, and regularly review the priorities as circumstances change.
* Budget. Recognizing the financial requirements of a strategy is fundamental to its success. Estimate costs, revenues and the cash implications and prepare a budget to meet the strategic objectives. Measure results against the budget and make changes that will either maximize opportunities or take corrective action.
Remember to:
⚫ budget early and recognise that it is dangerous to prepare budgets without consulting widely;
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seek advice and communicate;
⚫ include a cash flow forecast;
be realistic;
consider different scenarios;
make sure that budgets are consistent with the business’s plans as well as the present realities;
act on the information provided by analysis of the budget;
explain the process to gain commitment and focus attention.
- Strategy Implementation
After a strategy is formulated, the company needs to establish specific targets or goals related to putting the strategy into action, and allocate resources for the strategy’s execution. The success of the implementation stage is often determined by how good a job upper management does in regard to clearly communicating the chosen strategy throughout the company and getting all of its employees to “buy into” the desire to put the strategy into action.
Effective strategy implementation involves developing a solid structure, or framework, for implementing the strategy, maximizing the utilization of relevant resources, and redirecting marketing efforts in line with the strategy’s goals and objectives.
Integrating the Strategy
The strategy needs to take account of the realities of the business. To succeed, it must be consistent with the work of other departments, the capabilities of employees and suppliers and the expectations of customers. The challenge is to avoid confusion or conflict.
Communicating
Clear communication is crucial in developing and implementing a strategy, but communication skills are often overlooked and leaders frequently forget they can always be improved to benefit the organization and everyone within it. Several techniques can help to develop skills as a trusted communicator: * Ask questions not only to improve your understanding but also to test assumptions and show that you are listening. When asking questions, signal for attention to let the other person know that you want to comment. Respond to their point and allow them to pause and switch their attention to you before you speak.
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Be professional and control emotions. Do not interrupt, embarrass people or be rude. Even if you feel it is the only way to make your point, consider whether it would undermine your position. Controlling emotions helps you stay in control.
* Maintain trust and avoid rumors, misunderstandings and unnecessary complications by respecting confidences. Being critically aware when communicating requires:
(a) reacting to ideas, not people;
(b) focusing on the significance of the facts and evidence; (c) avoiding jumping to conclusions;
(d) listening for how things are said and what is not said.
Be aware of people’s concerns and reactions by fostering an honest and open environment. Even then, some people will still not say how they feel or what they think, or they may not be able to express themselves adequately. The leader needs to ask open, probing questions to indicate what the person is thinking.
* Agreeing clear objectives. They should be specific, measurable, ac achievable, relevant and time-constrained. People also need to be held personally accountable for achieving their objectives. This means setting milestones, agreeing limits of authority and discussing how best to proceed.
Successful implementation will also depend on:
⚫testing aspects of the strategy;
⚫ coaching people so that they have the required skills and confidence; making sure that people are motivated, engaged and committed to the strategy for example, reward systems may need adjustments to encourage specific actions and behaviors;
⚫ assessing and monitoring the risks with new initiatives;
⚫ monitoring performance and reviewing operational targets.
4. Strategy Evaluation
Any savvy business person knows that success today does not guarantee success tomorrow. As such, it is important for managers to evaluate the performance of a chosen strategy after the implementation phase. Strategy evaluation involves three crucial activities: reviewing the internal and external factors affecting the implementation of the strategy, measuring performance, and taking corrective steps to make the strategy more effective. For example, after implementing a strategy to improve customer service, a company may discover that it needs to adopt a new customer relationship management (CRM) software program in order to attain the desired improvements in
customer relations.
All three steps in strategic planning occur within three hierarchical levels: upper management, middle management, and operational levels. Thus, it is imperative to foster communication and interaction among employees and managers at all levels, so as to help the firm to operate as a more functional and effective team.
WHAT IS A STRATEGY MAP?
A Strategy map is a simple graphic that shows a logical, cause-and-effect connection between strategic objectives. It is one of the most powerful elements associated with the balanced scorecard methodology, as it is used to quickly communicate how value is created by the organization. Strategy mapping can vastly improve any strategy communication effort. Most people are visual learners and so a picture of your strategy will be understood by many more employees than a written narrative. Plus, the process of developing a strategy map forces the team to agree on what they are trying to accomplish in simple, easy-to-understand terms. With a well-designed strategy map, every employee can see how they contribute to the achievement of the organization’s objectives.
WHAT A WRITTEN STRATEGIC PLAN SHOULD INCLUDE
There is no set blueprint for how to structure a strategic plan, but it is good practice to include the following elements:
Analysis of internal drivers corresponding to the strengths and weaknesses of a SWOT (strengths, weaknesses; opportunities and threats) analysis.
* Analysis of external drivers this should cover factors such as market structure, demand levels and cost pressures, all of which correspond to the opportunities and threats element of a SWOT analysis.
⚫ Vision statement - a concise summary of where you see your business in five to ten years’ time.
⚫ Top-level objectives - these are the major goals that need to be achieved in order for your vision for the business to be realized. These might include attracting a new type of customer, developing new products and services, or securing new sources of finance.
* Implementation - this involves setting out the key actions (with desired outcomes and deadlines) that will need to be completed to attain your top level objectives.
Resourcing - a summary of the implications your proposed strategy will have on your business’ resources. This will reflect financing requirements, as well as factors such as staffing levels, premises and equipment.
You may also want to consider adding an executive summary. This can be useful for prospective investors and other key external stakeholders.
