Principles of Management: Strategic Planning Study Guide

Updated on December 21, 2017
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Katleigh is a Business major and a makeup and skincare enthusiast, as well as an Avon Representative.

Planning is a difficult process, but it can be broken down to simple steps.
Planning is a difficult process, but it can be broken down to simple steps. | Source

The Basic Planning Process

Step 1: Situational Analysis

A situational analysis, is a process planners use, within time and resource constraints, to gather, interpret, and summarize all information relevant to the planning issue under consideration. This includes past events, internal and external forces, and identifies the problem.

Step 2: Alternative Goals and Plans

Goals are a target that or end that management desires to reach. These goals should not be broad and undefined ideas. Instead, they should be SMART: Specific, Measurable, Attainable, Realistic, and Timely. An example of a SMART goal for a local fast food restaurant could be to decrease meal preparation time by 15% by the end of December of this year. This goal is specific because it relates to a particular activity within the organization. It is measurable because you are measuring time and this data can be recorded and compared.

Plans, on the other hand, are the actions or means that managers intend to use to achieve organizational goals. This includes a contingency plan, or "what if" plans, to respond to disasters and sudden changes.

Step 3: Goal and Plan Evaluation

The point of step three is to evaluate the expected cost and returns of the goals and plans. Goals must be prioritized according to the needs of the company, and some less pressing goals might need to be eliminated.

Step 4: Goal and Plan Selection

There are many things to consider when deciding which goal and plan you have to undertake in a business. These situations are scenarios or a narrative that describes a particular set of future conditions.

Step 5: Implementation

The most obvious step of the basic planning process is implementation. You need to ensure that your team understands the plan, has access to the proper resources, and is on board to do so. This can be done through constant communication and an internalized reward system.

Step 6: Monitor and Control

Any plan will go under without proper control. It is important to remember that planning is a cycle, and that this is a cyclical process.

The planning process is important for all levels of business.
The planning process is important for all levels of business. | Source

Levels of Planning

Strategic Planning

Strategic planning is a set of procedures for making decisions about the organization's long-term goals and strategies. Strategic planning is important in order to achieve strategic goals, which are defined as major targets or end results.

Strategies are patterns of actions and resource allocations designed to achieve the organization's goals. Effective strategies answer five main questions:

  1. Where will we be active?
  2. How will we get there?
  3. How will we win in the marketplace?
  4. How fast will we move and in what sequence will we change?
  5. How will we obtain returns?

Tactical and Operational Planning

Tactical planning is a set of procedures for translating broad strategic goals and plans into specific goals and plans that are relevant to a distinct portion of the organization, such as a functional area like marketing.

In contrast, operational planning is the process of identifying the specific procedures and processes required at lower levels of the organization.

Aligning Tactical, Operational, and Situational Planning

A strategy map illustrates whether or not a business has a balanced scorecard. A balanced scorecard includes the skills of their people and ability to learn, the effectiveness of internal processes, ability to deliver value and grow financial assests.

Creating and implementing a budget is an important part of strategic control.
Creating and implementing a budget is an important part of strategic control. | Source

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Strategic Planning

Strategic management is a process that involves managers from all parts of the organization in the formulation and implementation of strategic goals and strategies.

Step 1: Establishment of Mission, Vision, and Goals

Establishing a company's core values is an important part of the planning process. A mission is an organization's basic purpose and scope of operations. On the other hand, strategic vision is the long-term and strategic intent of the company.

Step 2: Analysis of External Opportunities and Threats

Stakeholders are groups and individuals who affect and are affected by the achievement of the organization's mission, goals, and strategies. Stakeholders can include competitors, regulatory demands, consumer preference, and social issues.

Step 3: Analysis of Internal Strengths and Weaknesses

Resources are inputs to a system that enhances performance. This can include both tangible and intangible resources. Tangible resources are things like real estate, while intangible resources are concepts like culture and technical knowledge. These resources make up the core capability of a business, are a unique skill and or knowledge an organization possesses that gives it an edge over competitors. To be a core capability, the skill or knowledge must be rare, organized, valuable, and inimitable resources.

Another important aspect of the analysis process is benchmarking, which compares one business against another to learn their "best practices." It should be of limited use, however, because companies want to exceed, not meet others' standards.

Step 4: SWOT Analysis and Strategy Formulation

A SWOT Analysis is a comparison of strengths, weaknesses, opportunities, and threats that help executives formulate a strategy.

Corporate strategy is the set of business, markets, or industries in which an organization competes and the distribution of resources amongst these entities. A concentration is a strategy employed by an organization that operates a single business and competes in a single industry. Vertical integration is the acquisition or development of new businesses that produce parts or components of the organization's product. Concentric diversification is a strategy that is used to add a new business that products or are involved in related markets and activities, while conglomerate diversification uses unrelated market and activities. Concentric diversification is commonly used to build on the strengths of different businesses, while conglomerate diversification can minimize market risks.

Corporate strategy has been changing rapidly in recent years. Mergers and acquisitions are common and are most beneficial in concentric markets. Globalization has also affected corporate strategy and has provided quick growth and inexpensive resources.

Business strategy is the major actions by which a business competes in a particular industry or market. The most common business strategies are low-cost strategy and differentiation strategy. Low-cost strategy is a strategy an organization uses to build competitive advantage by being efficient and offering a standard, no-frills product. On the other hand, differentiation strategy is used by organizations used to build competitive advantage by being unique in its industry or market segment along one or more dimensions. The most effective strategy is one that competitors are unwilling or unable to imitate.

Functional strategy is implemented by each functional area of the organization to support the organization's business strategy. These strategies are usually implemented in areas like production, human resources, marketing, research, finance, and distribution.

Step 5: Strategy Implementation

Strategy implementation is made in four steps.

  1. Define strategic tasks.
  2. Assess organizational capabilities.
  3. Develop an implementation agenda.
  4. Create an implementation plan.

Step 6: Strategic Control

A strategic control system is designed to support managers in evaluating the organization's progress regarding its strategy and when discrepancies exist, taking corrective action. These procedures often include a budget to monitor and control financial resources.

Sources

Bateman, T., & Snell, S. (2014). Management: Leading & collaborating in the competitive world (11th ed.). New York: McGraw-Hill Publishing. ISBN: 9780077862541

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    © 2017 Katleigh Merrier

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