Strategic Planning in Business
Strategic planning is critical for any sort of business. Initial stages of business are considered the most critical as this requires the involvement of every aspect of the business.
What Exactly is Strategic Planning
Planning cannot guarantee any success but a business done without planning is sure flop. Strategic planning is a way of stream lining your thoughts into very essential details and to decide upon what has to be done and precisely when. A good strategic planning success in most cases and this involves planning with respect to the ratio of risk involved and resources to be accumulated. It brings a great amount of clarity to your business. Strategies of how to sell your product, how to do the marketing, how to add value to the product and most of all how to establish the brand equity in the market.
Benefits of Strategic Planning
Strategic planning enables to view your business in a macro aspect by still considering the essence of micro aspects. Strategic Planning is something which we foresee of the future about a certain business venture. Most often business are made to last. Strategic planning to an extend ensures a long term success by taking up the investment opportunities at a regular basis and mobilize the funds to grow it further.
Though strategic planning offer most of the ill effects in the business. One must make sure you should not chalk out over ambitious plans for your business. The planning should be precise but should contain detail so the business. Strategic planning has to be a routinely updated to ensure success. Board meetings at regular intervals for this cause shall do more good to the business.
Strategic Planning – Strategic and Tactical Planning
Strategic planning is a business process that many companies employ to identify their critical success factors that set the course for future growth and profits. Lewis Carroll in “Alice in Wonderland” makes a good case for it: “Would you tell me, please, which way I ought to go from here?” said Alice. “That depends a good deal on where you want to get to,” said the Cat. “I don’t much care where…,” said Alice. “Then it doesn’t matter which way you go,” said the Cat.
Like most business processes, the key to success is in the effective implementation of the plan. Companies that do a good job of developing and executing their strategies can create a competitive edge that provides increased market share and higher gross profit margins. Organizations that turn their plan into a “dust collector” upon an executive bookshelf will never achieve their full growth and profit potential.
Most criticism of strategic planning is aimed at the planning process. They question the validity of a plan that has been based on market “guestimates”, the questionable valuation of the depth and breadth of competitors and an optimistic assessment of the company’s internal strength and weakness. The fact that strategic plans can be overly optimistic is not the core problem. Although the criticism may be appropriate, it puts the focus for improvement on the wrong end of the process – it’s the implementation task that is critical to producing positive results and it’s here where most companies fail at strategic planning.
Rational strategic plans poorly implemented will produce limited positive results. On the other hand, overly optimistic strategic plans, effectively implemented can produce results beyond everyone’s expectations. This being the case, what is the key to effective implementation? In one word – commitment!
Companies that are good at strategic planning build commitment to the planning process and to each of the strategies within the plan. They build commitment throughout the organization, working with people from all business functions to build commitment before, during, and after development of their strategic plan.
Winners begin early in building commitment to the strategic plan. Suggestions are encouraged from managers at all levels, from key executives who will participate in the planning sessions, and others who will share responsibility for implementing the resultant strategies. Together, they surface issues that will require changes in business process and/or culture and identify those constraints that will need to be overcome if implementation is to be successful..
During planning sessions, key executives from each functional area are all encouraged to participate and contribute to the plan. These executives develop strategies that build on organizational strengths and consider resources required to accomplish those strategies. They assure that a key executive “owns” each strategy and commits to a time schedule for its accomplishment. The key executives give thought to resource planning – realizing that human resources are the key to making positive things happen in difficult, complex business environments – and they commit accordingly.
Following the development of their plan, those responsible for implementations develop their own “tactical plans.” These action plans, when coupled with self-directed work teams, are major contributors to a successful Strategic Planning implementation. Teams use their plan to manage, to make decisions and to grow their business. Periodically, they review their “tactical plans” to monitor and report on the progress of implementation – keeping the plan “alive” by revising strategies and tactics when necessary.
Finally, to assure successful implementation of their strategic plan, they work on the planning process itself. The planning group continuously “fine tunes” the planning process to assure that inputs from all business functions are given their due consideration and to assure that buy-in and commitment to the final plan is at all levels of the organization.
So, why are most operations management teams outside of the strategic planning process? Why do many line managers view strategic planning as a make work project that produces little or zero value to customers? Maybe, it’s because they did not participate in its development nor did they buy-into its validity – let alone commit to the execution of its strategic objectives. In short, they’re not connected to the process! To achieve a company’s full growth and profit potential, CEOs and business owners need to assure the active participation of operation management in their strategic planning process. Professional assistance is available from Business Basics, LLC, why not give us a call.
STRATEGIC PLANNING IN INDIA
STRATEGIC PLANNING IN INDIA
*Shanmukha Rao. Padala **Dr. N. V.S. Suryanarayana
An Introduction:
Corporate planning had its genesis in India sometimes in the sixties when a number of subsidiaries of multinational companies introduced the process in compliance with their parent companies’ directives. Since then quite a few companies have introduced formal planning for a variety of reasons. Some introduced it because their top managements felt that it would help them long term objectives; some introduced it because of a fad, not wanting to be behind by others, and some others because were directed to do so. Many public sector enterprises adopted corporate planning because they were to do so by the Bureau of public Enterprises, the governmental body that regulates all public enterprises. Despite the facts that are now quite a few firms which have introduced corporate planning, such firms still constitute a small minority.
On the academic side, research in India on strategic planning has not taken off. There are very few studies on corporate planning practices in India firms. Of late some leading Indian management education institutions have begun to offer short duration executives development programmes on corporate planning. A quick examination of the teaching materials used in these programmes clearly shows a predominance of materials originally developed in the United States. This is not surprising because strategic planning at the enterprise level had its genesis there. Strategic planning or corporate planning is a management process which enable a firm’s management to explore the future impact of change and make current decisions to move towards the envisioned future. The Western economies, characterized by a rapid rate of change and fierce competition became an ideal home for the development of the concept of corporate planning. The Indian economy till recently provided protection to firms from change through a plethora of regulations which did not provide an impetus for the development of a planning orientation. However, this scenario is changing rapidly as a result of increasing liberalization effected by the Government in its policies towards industry. A number of industries are now characterized by a high degree of competition, e.g., textile, television, passenger car, two-wheeler, commercial vehicles, cable, paint etc. It is therefore very likely that strategic planning will be adopted by many firms in the near future.
The Indian Scenario:
Management education received a big boost in early 60s after the setting up of Indian Institute of Management (IIMs) and the Administrative Staff College of India. IIMs structured their curriculum along the followed in reputed American business schools. The case method of study (as followed in Harvard Business School) was an important pedagogical tool, employed in IIM, Ahmedabad all these years. But in India the Mater of Business Administration program is first introduced by the Andhra University. Successively several university departments, meanwhile, have started the Masters in Business Administration (MBA) programmes at various locations throughout the country. After the opening up of the Indian economy in early 90s, the All India Councial for Technical Education (AICTE) was set up to provide proper direction to the growth of management education. The Business Policy and strategic Management Course has gained wider acceptance as an integrative as an discipline in over 1500 management institutes that have come up in the recent past (1990-2003). A number of doctoral and post doctoral studies have also been undertaken with a view to enrich the knowledge in the area, especially with a clear focus on Indian companies. A professional association called Strategic Management Forum of India has also been formed in 1996- which is exclusively devoted to the development of issues relating to strategic management. A number of publications covering the concepts, techniques and case studies relating to business policy and strategic management have also gone up impressively, especially after 90s, such as Strategic Marketing, Business Standards strategist etc.
STRATEGIC PLANNING AT BHEL:
Bharat Heavy Electricals Limited (BHEL) is a highly diversified public sector. Undertaking operating in a number of business sectors: energy, industry, and transportation. Corporate planning at BHEL follows the general pattern in other public sectors enterprises in India. Public enterprises in the country have emerged as a part of the national planning exercises At the time of the inception of many of the Public Sector Enterprises (PSE ‘s),detailed feasibility reports with a long term orientation were prepared .However, there were no built –in contingency plans for tackling uncertainties and discontinuities. When these Public Sectors Enterprises reached a stage when the original concepts forecasts were no longer applicable as a consequence of environmental changes, they faced enormous problems .Enterprises operating in high technology areas and which had a high investment found it extremely difficult to cope with changing environment .BHEL was no exception .However, it was able to overcome the problem by adopting comprehensive corporate planning .Planning had commenced at BHEL from the very beginning .Till 1969, planning was done with a short-term orientation .The real efforts in the direction of long-term planning were started during 1970-71. It was during this period that an Action Committee consisting of various PSE s including BHEL. The committee suggested a reorganization, including the merger of Heavy Electricals India Limited (HEIL) with BHEL An analysis of the corporation’s strengths and weaknesses, and the opportunities and threats that were present in the external environment was undertaken and a detailed action plan was developed for achieving rated capacity .Beginning in 1973-74 efforts were made to built systems for comprehensive planning, programming and budgeting. A Corporate plan was developed and circulated among executives. Initially, revenue budgets for each division were prepared for two-years so as to achieve linkage between short-term and long-term plans. Frequent discussions were held, functional and cross-functional committees were appointed for achieving integration between head office and the divisions. The organization’s structure was changed to transform the company from manufacturing orientation to an engineering orientation with an increased emphasis on marketing. A Corporate Planning and Development division was created at the corporate level with each division having its own planning and development cell.
The Corporate Planning and Development Division was placed under the charge of an Executive Director. The division was organized around the following groups: investment and facilities planning long range planning, operations planning, and optimization and modeling. The investment and facilities planning group was responsible for company-wide investment programmes.
Various activities included project formulation and appraisal, coordination of review committees, project monitoring and preparation of annual capital projects. The long-range planning group was responsible for environmental analysis, review and appraisal of long term plans, review of integrating devices, transfer of technology, collaboration, subject licensing and training. Operations planning included analysis of performance budgets, coordination of operations, monitoring, project management studies for industrial projects, production coordination and materials management. The optimization and modeling group was responsible for undertaking the development of various models using quantitative techniques and studies relating to optimal utilization and scheduling of machines and facilities, investment analysis and energy modeling.
The role of the Corporate Planning and Development Dision could be summarized thus:
i) Planning for modernization and expansion of manufacturing;
ii) Development of technology management capability in the context of rapid rate of technological obsolescence,
iii) Assisting in the development, review and evaluation of product plans,
iv) Synthesizing divisional plans and product plans into the sectoral plans and weaving them together as a corporate plan,
v) Introduction of contingency planning in all areas,
vi) Improving planning capability at the divisional level,
vii) Providing assistance in the preparation of functional plans, viz., engineering plans, technology plans, etc.
viii) Undertaking organizational studies,
ix) Strategic management development,
x) Monitoring of divisional performance,
xi) Enhancing information processing capability and analysis of environmental conditions.
The Corporate Planning and Development Division was responsible for directing and coordinating the total planning activity in the organization. But the basic inputs into the plan were generated by the activity in the organization. But the basic inputs into the plan were generated by the various units. Each division prepared its long term plans keeping in view its relevant environment. Each division also developed product plans, which included an analysis of technological gaps and action required for bridging the gaps. Based on these technology plans of the units, a corporate technology plan was prepared which provided direction for technology acquisition and/or development. Product plans and divisional plans were reviewed, evaluated coordinated and integrated into sectoral plans.
PLANNING APPROACHES AND CHARACTERISTICS:
The short description of the corporate planning process at BHEL provided some glimpses into its complexities. The experience of BHEL is not typical because organizations of the nature and experience of BHEL is not typical because organizations of the nature and complexity of BHEL are not too many in the country. Corporate planning systems vary from organization to organization depending on a variety of factors: environmental conditions, organizational size and complexity, age, top management values and styles, initial trigger for the commencement of planning, etc. Variations in the corporate planning systems across organizations may be found first the top doing corporate planning. These approaches may be any of the four types: top-down approach, bottom-up approach, hybrid between top-down and bottom-up approaches, team approach.
Top-down Approach: Firms adopting this approach plan at the top and the various departments are supposed to do what they are told to do by the top management.
Bottom-up Approach: In firms adopting this approach the top management asks the departments or divisions to submit their plains are then reviewed by the top management and accepted or sent back to the organizing departments or divisions for modification. The consolidated divisional plans in the case of a decentralized company may not add up to the management’s targets. Additional plans are then required to be prepared which might necessitate planning for acquisitions or diversification into highly unrelated business areas.
Hybrid Approach: A combination of top-down and bottom-up approaches is the approach which is generally used in decentralized companies. In firms using this approach the top management provides certain guidelines to the divisions or strategic business units (SBU). The SBUs are distinct business with their own set of resources that can be managed in a manner reasonably independently of other business within a firm. The top management guidelines are sufficiently broad to permit flexibility to the SBUs in developing their plans. There is a vertical communication between the top management and the divisions or SBUs at different phases of the planning process. Broad objectives, policies and strategies may be arrived at through a dialogue and negotiation between the top management and the divisional or SBUs managers.
Team approach: In small centralized firms where lateral communication between the top managers is easier than in large decentralized firms, the chief executive may himself, in collaboration with the senior managers, prepare corporate plans. In some very large firms also this practice has been found to exist.
Differences, in the planning systems in organizations may be in term of the approaches adopted, as noted earlier, and also the dimensions given below:
Completeness of planning Cycle Depth of Analysis Degree of Formality Use of staff and Corporate Planning Specialists Linkage among Plans Methods of introducing planning Degree of documentation Participation of people Role of the CEO
SUMMARY:
Strategic planning involves an extended time-frame, the development of a large percentage of the resources of an organization, a wide spectrum of activities and a major eventual impact. By merging the two models of planning, long-range planning and environmental scanning to form an interrelated model- the Strategic Planning Model was formed. The Strategic Planning Model is a tool that helps an organization in setting up goals or objectives; the analysis of the environment and the resources of the organization; the generation of strategic options and their evaluation; and the planning, design and implementation of control systems or monitoring mechanisms. Three dimensional structure of organization requires strategic planning, operational planning and tactical planning at respective levels. Many organizations develop strategies at three different levels; corporate- level strategic planning, business- level strategic planning and functional- level strategic planning.
Several enterprises in India, both in the private and public sectors, have introduced strategic planning in their organizations. With increasing liberalization of government policies and consequently the enhancement role of competition, corporate planning in India is likely to pick up greater momentum in the future. BHEL is one of the earliest enterprises to adopt strategic planning. Engaged in diversified business sectors like energy, industry and transportation, the company, with the help of strategic planning, has been able to come to grips with problems of uncertainties created by changing technological and socio-economic environment. In the initial phases, strategic planning in BHEL had short-term orientation. However, in recent times this had changed into quite a long-term one. Besides, strategic plans are comprehensively prepared. The company views itself note merely a manufacturing company but an engineering company with emphasis on marketing. The corporate planning and development division, which is organized around various functions, is responsible for total corporate planning activity in the organization.
Strategic Planning – The Reality of Making It Work
There’s often a gap between the theory and principles behind strategic planning, and the reality of business life, and planning. Here are a few things to keep in mind before, during and after the planning process.
It’s Non-Linear!
Models of strategic planning sometimes suggest that the process is logical, rational, and linear…where each step follows the previous one. In reality, this isn’t the case…or at least not the whole story. Sometimes you will find that something you generate in a later step must be fed back to a step that you already finished. That’s normal. Sometimes strategic planning can work in a straight line, and sometimes it works in loops.
It’s a Human Endeavor!
Strategic planning is a process carried out by people with different opinions, and different perceptions of which “facts” are valid and relevant. Again, it is a process that isn’t quite so logical as it appears on the surface. That means differences of opinion and sometimes arguements. It happens! One important human aspect of the process is the need to build consensus.
It Takes Time!
Strategic planning always takes more time than you think. See “It’s A Human Endeavor”.
Timing!
It makes sense to finish your strategic planning prior to budget or estimates submissions. Then you link your budget justifications to your plan. Then again, some would suggest that it is pointless (at least these days) to do any planning until you know what money and people you will have left after budgets and estimates. You have to decide what will work for you.
The Desk Drawer Syndrome!
The desk drawer syndrome refers to the tendency for strategic plans to be put in the back of one’s desk drawer, never to be removed (except to houseclean three years later). This tends to occur when strategic planning is undertaken without any commitment to actually make use of it (as in “the CEO wants to see our plan, so maybe we should make one up”.) This is plain silly! If the CEO wants to see a plan, and you are going to spend all that time making one up, then the least you can do is use the darn thing to guide your decision making.
The Executive Privacy Act!
When executive and management work to develop strategic plans, and then refuse or forget to share them with staff, a good amount of the benefit derived from doing a plan is lost. One important purpose of planning is to create a common vision within the entire organization.
Cascading!
Strategic planning, when properly implemented, involves a cascading process. Departmental planning is done first. Then, divisions within the department take that plan and incorporate it in their divisional planning. Then region/branch planning occurs. At the end, the plan of the region/branch fits into the division plan which fits into the departmental plan…like those little Russian dolls.
(c) 2005, Robert Bacal, Bacal & Associates. You are welcome to “reprint” this article online as long as it remains complete and unaltered (including the “about the author” info at the end) all links are made live, and this copyright notice and indication of authorship are included.
The 5 Strategic Planning Models – Which is Right For Your Company?
Strategic planning can be very important to the success or failure of a company. However, there is no one model that can be used for every for every company. When choosing a strategic planning model, companies need to take into account which model fits best with what they are trying to accomplish, then modify if need be to better suite their specific needs. Here are the five strategic planning models, as well as what they are best used for.
Basic Strategic Planning
This basic process is often utilized by small companies who are simply too busy to engage in other kinds of strategic planning. It is also common with companies who have not engaged in this kind of planning previously. Basic strategic planning involves identifying a purpose, often referred to as a “mission statement,” then identifying the goals that must be met in order to achieve this mission. Strategies are then put in place to achieve the goals, along with action plans that can be followed. The overall plan is monitored and updated as needed, until success is achieved.
Goal-Based Planning
Goal-based planning is often the second step a company takes after initially working with basic strategic planning. This kind of planning explores specific goals in a more in-depth fashion, and is often used to identify and prioritize some of the major goals within an organization. Strategies and action plans are then devised, and the necessary roles and responsibilities required for implementation are established. While similar in many ways to basic strategic planning, goal-based planning is generally more formalized and structured in its approach.
Alignment Model Planning
The alignment model is often by companies in order to fine-tune and adjust strategies that are already in place. It can be very useful for determining why certain strategies are not working for a company, and what should be done to remedy the situation. This method can be very effective when dealing with internal efficiency problems. The process involves outlining the overall mission, evaluating the programs that are already in place, the resources that are currently available, and the need for any additional support. The existing problems are identified, then adjustments are devised and incorporated into the strategic plan as needed.
Scenario Planning
Scenario planning can be very useful to determine “what-if” situations. This kind of planning is often utilized to evaluate the effect that external forces may have on an organization. For each possible scenario, strategies are developed which can be used to help a company respond to the potential changes.
Organic Planning
This style of planning is more ongoing in nature, as it focuses less on specific methods and more on “lessons learned.” Using this planning method, an overall vision is determined, then there is an ongoing dialog about what processes may be necessary in order to achieve the vision. By its very nature, this style of planning often returns slower results, but it can also be quite effective when used properly.