Posted at 11.26.2018
Formal strategic planning is influenced by the macro-environment which is the highest level coating in the platform, this includes an array of environmental factors that impact to some extent on virtually all organisations. The PESTEL framework may be used to identify how future developments in the Political, Economic, Community, Technological, Environment and Legal environments might have an effect on an company. Pestel analysis provides the broad date that key drivers to change can be diagnosed. Through the use of these key motorists organisations can envision situations for future years. Scenarios can be used to help organisations decide if change needs to happen with respect to the different ways in which the business environment may change.
It is very important to managers to analyse these factors in today's and exactly how they will probably change in the future. By analysing these, professionals can draw out implications for the organisation.
Pestel factors are occasionally linked together i. e. technological factors can impact on economic factors. It's important to identify the "key individuals of change" they are environmental factors that will probably have a high impact on the success or failure of the strategy. Key drivers change by industry i. e. Primark may be concerned by public changes that can transform customer likes and behaviours.
The critical issues will be the implications that are drawn from the understanding in guiding tactical decisions and options. The next stage is drawn from the environmental analysis specifically proper opportunities and risks for the company.
Having the ability to identify these opportunities and hazards is incredibly valuable when thinking about strategic choices for the future. Opportunities and dangers form half of the SWOT analysis that figures a company's formulation.
The use of SWOT examination can help summarise the main element issues from the business enterprise environment and the strategic capacity for an organisation that are likely to impact on strategy development. After the key issues have been identified an organisation may then assess if it is capable to package with the changes taking place within the business environment. In case the strategic capability is usually to be understood the business enterprise must remember that it isn't absolute but relative to its challengers. SWOT analysis is merely useful if it is comparative, that is it examines advantages, weaknesses, opportunities and risks. SWOT research should help focus discussion on the future choices also to what degree an company is with the capacity of encouraging these strategies. SWOT research shouldn't be used a substitute for much more in-depth research.
In responding strategically to the environment the target is to reduce identified dangers and take benefits of the best opportunities.
Peter Drucker (1954), talking about the importance of business plan and tactical planning in his book The Practice of Management says "we cannot be content with plans for a future that people can foresee. We must prepare for all possible and a good many impossible contingencies. We must have a workable solution for anything that will come up. "
By taking benefit of the "strategic space "(which can be an opportunity in the competitive environment that has not been completely exploited by rivals) organisations can deal with risks and opportunities.
Core competencies are a couple of linked business functions that deliver superior value to the client, when they are mixed they create tactical value and can result in competitive advantage. Through the use of Porter's five makes analysis which is a construction for organisations to analyse industry and business strategy, they can draw upon the five makes that determine the competitive intensity and therefore attractiveness of a market. Three of Porter's five pushes make reference to competition from external resources and the other two are inside threats.
This analysis is just one area of the complete Porter proper model others include the value chain (VC) and the generic strategies.
According to Porter (2008) the job of an strategist is too understand and cope with competition; however managers define competition too narrowly as though it has happened only among today immediate competitors. Competition runs beyond profits to add competitive pushes such as customers, suppliers, potential entrants and substitute products; the prolonged rivalry that results from all five makes defines an industry's composition and shapes the type of competition within an industry. For example - Apple are good at technology and technology therefore they can take the opportunities that provide them competitive benefit and makes them market leaders compared to Samsung or Nokia.
Porter's says there are 5 causes that shape the competition:
Threat of new entrants
Bargaining electric power of customers - powerful customers usually bargain for better services which entail cost and investment
Bargaining vitality of suppliers - may determine the price tag on raw materials and other inputs effecting profitability
Rivalry among rivals - competition influences the charges and other costs like advertising etc.
Threats from substitutes - where-ever substantive opportunities in R&D is occurring, the threat of substitutes is large. In addition, it affects success.
Competitive edge is the heart and soul of strategy and then for the strategy to succeed the company must have relevant competitive benefit.
We can see an example of this with Toshiba who operate in electro-mechanical goods, by using a flexible processing system it produces different products / types of some products on the same set up lines. At Ohme it assembles nine varieties of computers on the same range and on the adjacent brand it assembles 20 types of lap top pcs.
It is able to switch from one product / variety to some other instantly at low cost and makes income on low volume works too. This versatility of Toshiba to respond efficiently to the quickly changing market demand is certainly one of its competitive advantages. Whereas its competitors make gains only through long volume level runs of a particular model.
However, there are a great number of companies who are choosing not to spend because of the recession; however Lidl and Aldi are taking good thing about delivering cheaper products providing them with competitive advantages over say Waitrose.
Effective strategic planning can favorably increase the performance of an organisation and give them the ability to provide more clients, gain access to additional resources or enhance the quality of service/product. Additionally, it may offer answers to major organisational issues or challenges and gives stakeholders of the organisation an opportunity to develop harmonic solutions to long-term issues/obstacles which may have been impacting on the company. Furthermore it permits forward thinking, allowing an company the possibility to pause and revisit the quest and create long-term vision. It allows clear future way allowing stakeholders to turn to the future, plan and react to changes.
One of the major drawbacks of formal tactical planning is the uncertain vibrant environment, things change constantly and everything becomes shorter. The recession at the present time is making everything unpredictable and this is bad for proper planning.
According to Mintzberg (1994) "strategic planning should be utilized to devise and execute the competitiveness of every business unit".
Scientific management was pioneered by Fredrick Taylor (1856-1915) and involved separating thinking from doing and so creating a new function staffed by specialists. Planning systems were likely to produce the best strategies as well as detail by detail instructions how to achieve this, but this never worked well well. Corresponding to Mintzberg tactical planning is not proper thinking, the most successful strategies are visions, not ideas.
When an company can distinguish between planning and strategic thinking they can then get back to the actual strategy making process should be. Once a manger has the capacity to learn from all resources around him, including personal experience and market research and can assimilate this into a eye-sight of the way that the business can then pursue.
Mintzberg shows that strategic planning is a misconception and rests after three unsound arguments: - that prediction is possible, that's strategists can be detached from the subject matter of the strategies, and that the strategy-making process can be formalised.
Strategic thinkers can apply lessons learned from Mintzberg (1994) three inherent fallacies of traditional planning:
The Fallacy of Prediction is the assumption that we can in fact control events by using a formalised process that involves people employed in creative or even routine work and can have the ability to stay on the predicted course. You need more than hard facts you will need the non-public touch. Folks are not objective, they may be complex.
The Fallacy of Detachment is the assumption we can divide the look from the doing, if the machine does the thinking, then strategies must be detached from the methods. Formulation from implementation, thinkers from doers. One goal is to be sure senior managers acquire relevant information and never have to immense themselves in the facts. One fact is innovation has never been institutionalised and systems have never been able to replicate the synthesis created by the entrepreneur or the ordinary strategist and probably never will.
The Fallacy of Formulisation shows that "systems could certainly process more information, at least hard information". However they could never internalise it, comprehend it, and put everything collectively. Such control is more a aspiration that a simple fact. Reality explains to us that anomalies, the fickle behavior of humans and the limits of research play an enormous factor in the organisational benefits also to disregard them is dangerous and may lead to imperfect planning.
The restrictions of formal tactical planning can be seen if the future is uncertain and the goals divert from the program.
There may be internal amount of resistance to formal strategic planning scheduled to factors including:
Information flows, decision making and ability connections could be unsettled
Current operating problems may drive out long-term planning efforts
There are hazards and concerns of failure
New requirements will be put on managers and staff
Conflicts with the company are exposed
Planning is expensive - with time and money
Planning is difficult and hard work
The completed plan limits choices and activities for the organisation in the future
The question posed seems to be is proper planning worthwhile. The response to this lays within the company and would depend upon size. It appears that the ability to learn and put into action strategies contributes to the business enterprise performance of small or mid-sized companies in a powerful industry.
Leadership is important and organisations today suffer from strong and uncertain conditions. To have success organisations must be strategically aware. They need to understand how changes in their competitive environment are unfolding. They need to constantly be on the lookout for new opportunities to exploit their proper abilities, build on understanding and knowledge of current strategies and successes. Organisations must be able to answer quickly in response to opportunities and hazards.
Organisations must remain competitive effectively and out-perform their rivals in a vibrant environment; they must find suitable ways for creating and adding value because of their customers. Overall they must be versatile. Organisations could think about changing their strategy to an emergent strategy which allows them to adapt to new ideas and regarding to change. Emergent strategy means that an organisation is learning what works used. A good example of this is Groupon who provide daily discounts in large locations and in exchange Groupon get a percentage of the offer usually 50% from the company providing the deal. The company is on track to make $500M in earnings this season and has increased its last circular at a $1. 35B valuation. Groupon can be an example of an emergent strategy which has transformed several times.
Organisations could think about downsizing creation before closure as companies are wiped out due to the uncertain vibrant environment.
In articles labelled THE TRUE Value of Strategic Planning one administrator said "our planning process is similar to a primitive tribal ritual - there is a lot of dancing, waving of feathers and beating of drums. No one is exactly sure why we do it, but there is an almost mystical trust that something good will come from it. " Another said, "It's like the old Communist system: We pretend to make strategy plus they pretend to follow it. " Henry Mintzberg has gone as far as to label the phrase "strategic planning" an oxymoron. He records that real strategy is manufactured informally - in hallway conversations, in working organizations, and in peaceful moments of representation on long plane flights - and seldom in the panelled convention rooms where formal planning meetings are performed.