After evaluating strategies in terms of risks and returns (ability to achieve the goals), they are ranked in order of priority and the strategy best suited to achieve the goals is chosen. create environmental threat and opportunity profile (ETOP) which analyses the environmental factors and assesses their impact on the organisation. In order to avoid developing risky objectives and strategies which they will not be able to achieve, managers may land up framing sub-optimal goals and plans. If it fails to maintain its contribution to society, especially through value creation, it can disintegrate. External factors which indirectly affect strategic planning are technological, social, political, and legal and those which directly influence are competitors, suppliers, government and customers. A successful strategy aligns with the environment. Environmental analysis is the “systematic assessment of information about the... 3. It is pervasiveness, and The efficiency of resulting plans. Required fields are marked *. Four criteria for evaluating strategies are identified by Richard R Rumelt: (a) Is the strategy consistent with broad objectives of the company? Resources being limited, organisational strengths and weaknesses should be analysed to use the resources in areas where they can be optimally utilised. Strategic planning is done to comprehend, anticipate and absorb environmental vagaries. (d) Is the strategy realistic? If a church fails to serve its members, it will lose its congregation. Future can be predicted through strategic planning. Second, analytical research is essential to enhance managers’ ability to make good strategic decisions. (d) Strategy to enter into joint ventures: Firms enjoy the benefits of synergy by collectively exploiting the resources and enlarging their area of operation. It focuses organisation’s strengths and resources on important and high-priority activities rather than routine and day-to-day activities. General Robert E. Wood remarks, “Business is like war in one respect. When an American automobile manufacturer stops providing customers with quality cars, customers buy cars elsewhere, perhaps from a Japanese automobile company. However, reactive strategies are short-term, causing firms to spend a significant amount of resources and time. Employers, … It reallocates resources from non-priority to priority sectors. Researchers have proved that companies which make strategic plans outperform those which do not do so. The chosen strategy should be directed to maximise long-term goals of the organisation. (b) Does the strategy focus organisational resources on critical success factors in the product/market area for which it is intended to be formulated? Learn how your comment data is processed. The goals can be economic or social and may relate to size of the organisation, goods or services or simply the technology or the way an organisation operates its business. are used to evaluate strategies. It saves huge costs on reducing absenteeism, labour turnover, role conflicts etc. Strategic planning is a coordinated and systematic process for developing a plan for the overall course or direction of the endeavour in order to optimizing the future potential. If they do not have the knowledge and skill to prepare strategic plans, the desired results will not be achieved. Surplus resources are shed off in this strategy. It means dropping some of the resources (human and non-human) to make best use of the remaining ones. If the results are similar to objectives, the strategies become the basis for future action. Strategic planning requires lot of knowledge, training and experience. Matching of strengths and weaknesses (internal environment) with threats and opportunities (external environment) is known as SWOT analysis. Earning profits is less meaningful than earning a growth rate of 10% per year. It makes the objectives operational and provides right direction to organisational activities. If its grand strategy is correct, any number of tactical errors can be made and yet the enterprise proves successful.” Effective allocation of resources, scientific thinking, effective organisation structure, co­ordination and integration of functional activities and effective system of control, all contribute to successful strategic planning. It coordinates organisation’s internal environment with the external environment, financial resources with non-financial resources and short-term plans with long- term plans. If existing strategies can help in reaching the desired objectives, new strategies need not be formulated but if there is a gap, managers develop strategies to attain the objectives. Strategy is concerned with the grand picture of how organizations serve society, and strategic planning is concerned with how organizations intentionally and systematically make decisions about products, services, customers, and human resources vital both to itself and to society. i.e., it is a workable strategy or not? An organization is a collective enterprise, a group of individuals that provides society with more than individual enrichment. It aims at long-term planning, keeping in view the environmental opportunities. Analyse … It unifies organisational activities and efforts towards the long-term goals. Strategic planning, disciplined effort to produce decisions and actions that shape and guide an organization’s purpose and activities, particularly with regard to the future. The time gap between investment decisions and income generation from those investments is called gestation period. Resources are scarce and strategic planning helps in their use in the areas where they are required most. It is executed by strategic planners or strategists, who involve many parties and research sources in their … 3. This information may be related to production (plant location, layout, inventory management repairs and maintenance etc. Post was not sent - check your email addresses! (b) Determine the key success requirement of the product/market segments in which the organisation competes or might compete. First, intuition alone does not suffice for planning in a complex society. Strategic planning is “a thorough self-examination regarding the goals and means of their accomplishment so that the enterprise is given both direction and cohesion.”. Several messages emerge from this and similar studies. Strategic planning involves managers at top levels. If business units at different levels (corporate level, business level and functional level) are not coordinated, it can create problems for effective implementation of strategic plans. Implementation requires designing the suitable organisation structure, developing a sound system of communication, motivation and control, allocating authority responsibility, resources etc. Firms have financial benefits if they make strategic plans. Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy. Managers should be farsighted to make strategic planning meaningful. It promotes discipline in the organisation and enhances human resource effectiveness and also organisational effectiveness. Different strategic options are evaluated on the basis of their competitive advantages in terms of: Will the strategy be able to achieve the objectives? Third, strategic planning is a blend of meticulous research and managerial verve to make better decisions. It enables managers to anticipate problems before they arise and solve them before they become worse. If it fails to maintain its contribution … Missions formulate objectives and objectives help to formulate strategies. After analysing the external environment, firms evaluate their internal resource position to identify their strengths and weaknesses in relation to environmental threats and opportunities. Have the knowledge and skill to prepare strategic plans outperform those which do not have the knowledge skill..., “ business is like war in one respect no longer offers sound academic,. Than providing free education to school children of a specific community in safe opportunities! Organisational activities need to pay more attention to maximise long-term goals competes or might compete also provides motivation to at. 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