Strategic Planning - MIS

7/29/2019 Strategic Planning - MIS

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Concept of Corporate PlanningAPlan is a predetermined course of action to be taken in the future. It is a

document containing the details of how the action will be executed. The goals

and objectives that a plan is supposed to achieve, and the pre-requisite of plan.The setting of the goals and objectives is the primary task of the Managementwithout which planning cannot begin.

Planning means taking a deep look into the future and assessing the likelyevents in the total business environment and taking a suitable action to meetobjectives of the organization.

Planning involves a chain of decisions, are dependent on the other, since it dealswith a long term period. A successful implementation of a plan means theexecution of these decisions in a right manner one after another.

Planning, in terms of future, can be long-range or short-range. Long-rangeplanning is for a period of five years or more, while short-range planning is for

one year at the most.Long-range planning is more concerned about the business as a whole, and

deals with the subjects like the growth and the rate of growth, the direction ofthe business, establishing some position in the business world by way of acorporate image, a business share and so on.


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Long-range planning deals with resource selection, its acquisition and allocation.It deals with the technology and not with the methods or the procedures. Ittalks about the strategy of achieving the goals. The right strategy improves thechances of success tremendously. At the same time, a wrong strategy means a

failure in achieving the goals.The short-range planning, on the other hand, is more concerned with

attainment of business results of the year. It could also be in terms of action bycertain business tasks, such as launching of a new product, starting amanufacturing facility, completing the project, achieving intermediatemilestones on the way to attainment of goals.

Dimensions of PlanningThe corporate business plan has five dimensions. These are time, entity,

organization, elements and characteristics.

1. Time the plan may either be long-range or short-range, but the execution ofplan is year after year. The plan is made on a rolling basis where every year it isextended by one year. The rolling plan provides an opportunity to correct or

revise the plan.2. Entity the plan entity is the thing on which the plan is forced. The entity

could be the production in terms of quantity or it could be a new product. Itcould be about the finance, the marketing, the capacity, the manpower or theresearch and development. The goals and objectives should be stated in termsof these entities.


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3. Organization the corporate plan would deal with the company as a whole,but it has to be taken down for its subsidiaries, if any, such as functionalgroups, the divisions, the product groups and the projects.

4. Elements the plan is made out of several elements. The plan begins with themission and goal which the organization would like to achieve. It may provide avision statement for all to understand as also the purpose, focus, and directionthe organization would like to move towards.

5. Characteristics there are no definite characteristics of a corporate plan. The

choice of characteristics is a matter of convenience helping to communicate toeverybody concerned in the organization and for an easy understanding inexecution.

The plan is a confidential written document subject to change, and known to alimited few in the organization.

It is described in the quantitative and qualitative terms.

The long-term plan is normally flexible while the short-term one is generallynot.

The plan is based on rational assumptions about the future and gives weightageto the past achievements and corporate strengths and weaknesses.


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Why Strategic Planning is Essential?There are some compelling reasons which force all the organizations to resort to strategic

business planning. The following reasons make planning an essential managementprocess to keep the business in a good shape and condition:-

1. Market forces2. Technological changes

3. Complex diversity of business

4. Competition

5. Environment (Threats, Challenges and Opportunities)

Market Forces it is very difficult to predict the market forces such as the demand andsupply, the trend of the market growth, the consumer behavior and the choices, theemergence of new products and the new product concepts. These market forces affectthe sales, the growth and the non-profitability. With the problems arising out of marketforces, it is difficult to reorient the organization unless the business is managed througha proper business plan.

Technological Changes there are a no. of illustrative cases throughout the world on the

technological breakthroughs and changes which have threatened the current businessby creating new business opportunities. The emergence of the microchip, lasertechnology, fibre optics technology, wireless communications, are the examples whichhave made some products obsolete. The technological changes have affected not onlythe business prospects but the managerial and operational styles of the organizations.

In the absence of any corporate plan, such a technological change can bring the organizationinto some difficult problems and can pose a threat to its survival.


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Complex Diversity of Business - the variety of products, the different marketsegments, the various methods of manufacturing, the multiple locations, thedependence on the external factors, such as transport, the communications and themanufacturing resources brings complexity in the management of business. Manyfactors are uncontrollable and unless there is a plan, prepared with dueconsideration to the diverse and the complex nature of business, handling thesefactors is not possible.

As the business grows, it reaches a stage where the strategies such as the expansion vertical or horizontal, integration forward or backward, diversification in thesame line or in the diverse line of the business, are the issues which themanagement is required to handle.

Competition Facing competition in the business means fighting on a number offronts. Competition can be direct or indirect. It may share the market or create anew product which will shift the market affecting your business. The companiescompete on the merits such as the know how, quality, prompt delivery, after salesservice, etc.

The competition is a natural phenomenon in business, and it has to be dealt within aproper manner to protect business interests. This means that the management hasto continuously evolve new strategies to deal with the competition.

Environment the environment is beyond the control of the management. It could beone of social, business, economic, industrial, technological environments affectingthe business. The environmental changes are difficult to predict and are generally

slow.


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3. After determining the mission and goals, the next step in the planning process is toset various objectives for the organization. The objectives are described in termsof business results to be achieved in a short duration of a year or two. Theobjectives are measurable and can be monitored with the help of business toolsand technologies. The objectives may be profitability, the sales, the qualitystandard, the capacity utilization, etc.

4. The next step in the planning process is to set targets for more detailed workingand reference. The targets may be monthly for the sales, production, inventory andso on.

The success in achieving the goals and objectives is directly dependent on themanagements business strategies. The strategy means the manner in which theresources, such as the men, the material, the money and the know-how will be putto use over a period to achieve the goals.

The development of business strategy also considers the environmental factorssuch as the technology, the markets, the life cycle, the work culture, the attitudes,the policies of the Government and so on.

The development of the strategy considers the strength of the organization indeploying the resources and the same time it compensates for the

weaknesses. The strategy formulation, therefore, is an unstructured exercise of acomplex nature riddled with the uncertainties.


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Types of Strategies

A strategy means a specific decision(s) usually, but not always, regarding thedevelopment of resources to achieve the mission or goals of the organization.The right strategy beats the competition and ensures the attainment of goals,while a wrong strategy fails to achieve the goals.

If a strategy considers a single point of attack by a specific method, it is a purestrategy. If a strategy acts on many fronts by different means, then it is mixedstrategy. The business strategy could be a series of pure strategies handlingseveral external forces simultaneously.

Hence, the strategy, may fall in any area of a business and may deal with anyaspects of the business. It could be aspects like price, market, product,technology, process, quality, service, finance, management strength and so on.When the management decides to fight the external forces of a single area bychoice, it becomes a pure strategy. If it uses or operates on more than onearea, then it becomes a mixed strategy.

Strategies can be pure or mixed. It can be classified into four broad classes:

1. Overall company strategy 2. Growth strategy 3. Product Strategy 4. MarketStrategy.


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2. Growth Strategy

An organization may grow in two different ways. Growth may either mean thegrowth of the existing business turnover, year after year, or it may mean the

expansion and diversification of the business.

Growth strategy means the selection of a product with a very fast growthpotential. It means choice of industries such as electronics, communication,transport, textile, garment, and so on where the growth potential exists for

expansion, diversification and integration. The growth strategy meansacquisition of business of the other firms and opening new market segments.

Growth strategies are adopted to establish, consolidate, and maintain a leadershipand acquire a competitive edge in the business and industry.


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3. Product Strategy

A growth strategy, where the company chooses a certain product with particular

characteristics, becomes a product strategy. Aproduct strategy means choiceof a product which can expand as a family of products and provide the basis foradding associated products. It can be positioned into the expanding markets byway of model, type and price.

The growth strategy can be innovated continuously for new markets. Someexamples are as follows:

1. A company producing pressure cookers enters the business of making ovens,boilers, washing machines and mixers the products of the home market.

2. A company producing a low prices detergent powder enters the business ofwashing soap and bath soaps.

When a consumer need exists, has a potential of expanding in several dimensionsand a product can be conceived satisfying that need, it becomes the productstrategy.


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4. Market Strategy

The product and the marketing strategies are closely related. The marketingstrategies deal with the distribution, services, market research, pricing,

advertising, packaging and choice of the market itself. A few examples ofmarketing strategy are as follows:-

1. A company can offer its products in different packages keeping in mind theconsumer budget.

2. A company can arrange for loan facilities to buy its products and keeps the

price low.3. Many companies adopt the strategy of providing after sales service of the

highest order. They may offer a free after sales service or establish serviceorganizations to solve the customer complaints and problems.

The marketing strategies act as an expediting and activating force for the productand the growth strategy and as a force which accelerates businessdevelopment. Marketing strategies are generally centered around one of thefactors such as quality, price, service and availability.

Strategic Planning - MIS

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