Strategic Planning, Business Strategy, Long-Term Planning, Corporate Planning

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Concepts on Strategic Planning, Business Strategy

What is Strategy?

• a pattern of activities that seeks to achieve the objectives of the organisation and adapt its scope, resources and operations to environmental changes in the long term.'

What is Strategic Planning, Long-Term Planning, Corporate Planning?

• considers the longer term (think of a time-horizon of about five years or beyond)
• considers the whole organisation.
• it gives direction to the whole organisation, and integrates its activities
• it considers all stakeholders
• it looks at how to gain a sustainable competitive advantage
• it relates the organisation, its resources and competences to its environment.

Why should we conduct Strategic Planning?

Strategic planning is particularly important

• there are long lead times
• the business needs to be turned around
• there is high capital expenditure
• many stakeholders are affected.

What are the different levels of Strategic Planning?

• Corporate Strategy
  • What business is the firm in? What businesses should it be in?
  • These activities need to be matched to the firm's environment, its resource capabilities and the values and expectations of stakeholders.
  • How integrated should these businesses be?
• Business Strategy
  • Looks at how each strategic business unit (SBU) attempts to achieve its mission within its chosen area of activity.
  • Which products should be developed?
  • What approach should be taken to gain a competitive advantage?
  • Which markets to enter?
• Functional or Operational Strategy
  • Looks at how the different functions of the business support the corporate and business strategies.

What are the Approaches of Strategic Planning?

Top-Down Approaches

• Traditional Approach
  • Linear Model
  • see diagram
• JSW (johnson, Scholes & Whittington) Model of Strategic Planning
  • Modern Adaptation and development of rational Planning Model
  • Same as traditional approach, but instead of linear, it is interdependent shown as a triangle
  • strategic position/analysis
    • the environment (competitors, markets, regulations, discoveries etc). Key factors are often summarised as opportunities and threats.
    • the strategic capability of the organisation (resources, competences). Key factors are often summarised as strengths and weaknesses)
    • the culture, beliefs and assumptions of the organisation
    • the expectation and power of stakeholders (what do the shareholders want? Will employees co-operate?).
  • strategic choices
    • 3 Elements of scope and direction
      • Generation of strategic options, e.g. growth, acquisition, diversification or concentration.
      • Evaluation of the options to assess their relative merits and feasibility.
      • Selection of the strategy or option that the organisation will pursue.
        • There could be more than one strategy chosen but there is a chance of an inherent danger or disadvantage to any choice made.
      • Although there are techniques for evaluating specific options, the selection is often subjective and likely to be influenced by the values of managers and other groups with an interest in the organisation.
    • 2 ways that strategy can be pursue
      • internal development (organic growth)
      • external development - merger/acquisition, JV, franchising/licensing.
  • strategy into action (implementation)
    • Organising/structuring. For example, should the organisation be split into European, US and Asian divisions? How autonomous should divisions be? What parenting style would be appropriate?
    • Enabling an organisation's resources should support the chosen strategy. For example, appropriate human resources and assets need to be acquired.
    • Managing change. Most strategic planning and implementation will involve change, so managing change, in particular employees' fears and resistance, is crucial.

Emergent Approaches

Organic and Emergent Approach

• Mintzberg (1987) suggests that few of the strategies followed by organisations in the real world are as consciously planned as the approaches above suggest. He believes this to be an unrealistic view of strategic planning, believing instead that strategies evolve over time (emerge) rather than result from an in-depth analysis of every aspect of the environment and an impartial evaluation of every possible alternative.
• Emergent strategies do not arise out of conscious strategic planning, but result from a number of ad hoc choices, perhaps made lower down the hierarchy. In this view, the final objective of the strategy is unclear and elements still develop as the strategy proceeds, continuously adapting to human needs - the emergent strategy is evolving, incremental and continuous.
• Emergent strategies develop from patterns of behaviour; one idea leads to another, until a new pattern is formed and a new strategy has emerged. For example, a salesman visits a customer out in the field. The product isn't right, and together they work out some modifications. The salesman returns to the company and puts the changes through; after two or three more rounds, they finally get it right. A new product emerges, which eventually opens up a new market. The company has changed strategic course.

Alternative Approaches

Incrementalism

• Strategic Managers do not evaluate all the possible options open to them but choose between relatively few alternatives.
• It does not normally involve an autonomous strategic planning team that impartially shifts alternative options before choosing the best solution.
• Strategy making tends to involve small-scale extensions of past policy - 'incrementals' - rather than radical shifts following a comprehensive search.
• Lindblom believed that strategy making involving small scale extensions of past practices would be more successful as it was likely to be more acceptable as consultation, compromise and accommodation were built into the process. He believed that comprehensive rational planning was impossible and likely to result in disaster if actively pursued.

Freewheeling Opportunism

• Freewheeling opportunists do not like planning. They prefer to see and grab opportunities as they arise.
• Intellectually, this is justified by saying that planning takes too much time and is too constraining. Probably, the approach is adopted more for psychological reasons: some people simply do not like planning.
• Often such people are entrepreneurs who enjoy taking risks and the excitement of setting up new ventures. However, once the ventures are up and running, the owners lose interest in the day-to-day repetitive administration needed to run a business.

Strategic Lenses by Johnson and Scholes

Strategy as design.

View that strategy formulation is a rational, logical process where information is carefully considered and predictions made. Strategic choices are made and implementation takes place. Essentially this is the same as the rational planning model discussed earlier.

Strategy as experience.

View that future strategies are based on experiences gained from past strategies. There is strong influence from the received wisdom and culture within an organisation about how things should be done. This reflects the emergent approach described above.

Strategy as ideas.

View that innovation and new ideas are frequently not thought up by senior managers at the corporate planning level. Rather, new ideas will often be created throughout a diverse organisation as people try to carry out their everyday jobs and to cope with changing circumstances.

Stakeholder Analysis

Strategic Analysis

Strategic Choice

Strategy into Action

References

• http://kfknowledgebank.kaplan.co.uk/KFKB/Wiki%20Pages/Business%20Strategy.aspx