Q2- Approaches To Strategic Planning (20 marks)

Question 1

Definition of organisational strategy:

Answer 1

-> long term direction
-> scope of an organisation
-> gain competitive advantage over competitors
-> address factors in the business environment
-> consider values and expectation of shareholders

Question 2

Levels of strategy

Answer 2

-> corporate/strategic = determines overall purpose and scope of activities. High level decisions
-> business/tactical = how to create and maintain a competitive advantage in each area of the business.
-> functional/operational = how each function within the business can support the organisation as a whole. Day to day decisions

Question 3

Examples of corporate, business, and functional decisions:

Answer 3

Corporate…
-> updating the organisation’s mission statement
-> with drawing from an overseas market

Business…
-> adjusting price for a product/service
-> departmental budgeting

Functional…
-> setting the daily work schedule
-> buying materials in bulk for discount

Question 4

Why is strategic planning important:

Answer 4

-> forces organisations to look ahead
-> improved fit with environment
-> better use of resources
-> helps monitor progress
-> provides an overall vision for everyone to work towards

Question 5

Limitations of strategic planning:

Answer 5

-> not a guarantee of success
-> can be a complex process
-> time consuming
-> difficult to implement
-> some plans are just bad

Question 6

Approaches to strategy formulation:

Answer 6

-> rational/traditional
-> emergent
-> logical incrementalism
-> freewheeling opportunism

Question 7

Factors that influence which approach companies choose:

Answer 7

-> company size (resources available)
-> people skills (innovation, creativity, communication, attitudes to risk)
-> type of market (stability vs uncertainty, rigid approach & flexibility)
-> organisational culture + structure
-> rapidly changing market, customer, product

Question 8

Rational planning process…

Answer 8

…top down (centralised) and formal approach/process with a clear step by step routine (2-10 years)

Question 9

Rational planning process advantages

Answer 9

-> forces long term view
-> identifies key strategic issues (internal + external)
-> promotes goal congruence
-> security for shareholders (investors)
-> works well in stables environments (large companies with the required resources)
-> helps coordinate complex organisations

Question 10

Rational planning process disadvantages

Answer 10

-> inflexible (difficult to change course)
-> inappropriate for dynamic environments
-> stifles creativity and innovation
-> bureaucratic - hierarchal authority
-> difficult to get participation
-> complex for smaller business

Question 11

Emergent strategy

Answer 11

-> evolving, continuous and allows response to factors unknown initially
-> informal and bottom-up (decentralised approach)

Question 12

Emergent strategy advantages

Answer 12

-> quicker change for the organisation
-> more innovative ideas
-> greater motivation
-> supports culture of flexibility and learning

Question 13

Emergent strategy disadvantages

Answer 13

-> chaotic organisation that lacks planning control
-> lack of long term direction
-> organisations too reactive
-> required skills from staff which many not exist

Question 14

Stages of emergent strategy

Answer 14

1. Intended strategy = the strategy that an organisation hopes to execute
2. Unrealised strategy = the abandoned parts of the intended strategy
3. Deliberate strategy = the parts of the intended strategy that the firm continues to pursue over time
4. Emergent strategy = an unplanned strategy that arises in response to unexpected opportunities and challenges
5. Realised strategy = the strategy that an organisation actually follows

Question 15

Logical incrementalism approach

Answer 15

-> top down (centralised) and less formalised
-> smaller and gradual adjustments to strategic plans (every 6 months to 2 years)

Question 16

Logical incrementalism advantages

Answer 16

-> less complex and long winded
-> better use for uncertainty or rapidly changing environments
-> easier to control + manage
-> quicker respond to problems/issues
-> informal frequent consultation/planning

Question 17

Logical incrementalism disadvantage

Answer 17

-> too reactive
-> not suitable for transformational or radical change
-> lack of long term direction (strategic drift may occur)

Question 18

Freewheeling opportunism

Answer 18

-> top down (centralised), informal and short term approach
-> opportunistic strategy, dominates by the search for new opportunities, with bold and often high risk decisions that need to be made by the entrepreneur themselves
-> fast moving industries

Question 19

Freewheeling opportunism advantages

Answer 19

-> can grasp short term opportunities
-> is flexible to allow quick reaction to changes in environment
-> encourages creativity
-> not time consuming or complicated
-> greater frequency of planning

Question 20

Freewheeling opportunism disadvantage

Answer 20

-> long term opportunities can be missed
-> lack of long term direction
-> can be difficult to control
-> lose interest - always looking for next thing
-> difficulties in identifying risk

Question 21

Stages of rational approach

Answer 21

1. Mission & objectives- establish long term goals (overall purpose and scope of org)
2. Corporate appraisal- critical appraisal of internal and external factors affecting business
3. Generate strategic options- gain competitive advantages (consistent with swot findings)
4. Strategy evaluation & choice- feasibility, risk and return, consistent with values
5. Strategy implementation- operational plans (change management)
6. Review & control- monitor process and provide feedback