Strategic planning process is a way through which strategic fit is developed and maintained between the goals of the organization or capabilities and altering opportunities of the market. In fact planning is related to the actions of the organization and the ways of doing those actions. Those organizations that do not perform the function of strategic planning, actually plans for failure. In order to deal with the changing environments of the organizations. These must be visionary and farsighted and long term strategies should be prepared. The long term growth and survival of the organization is ensured through the strategic planning process by facing competition. So the marketing function of the organization is essential to the strategic planning process. Since the useful information along with other inputs is provided through it. The planning is done for:
- Specification of the changing environment and the customers
- Development of shared goals in the organization
- Specification of the competitive threat
- Anticipation of the future
- The determination of the actions that are required to accomplish the objectives
Different Forms of Strategic Planning
The main activities of the strategic planning process are the establishment of the goals and plans of the organization. The long term issues are focused on the strategic planning emphasis on the survival and growth. Moreover the overall effectiveness of the organization is made in the strategic planning process.
Tactical planning is the transformation of the established goals and wider plans into more specified and actionable objectives. The tactical planning is done by middle level managers in the organization by taking the decisions based on coordination of resources and shorter time horizon.
The operations of the organization are supervised through operational planning. The non-management employees are directly involved in the operational planning process in which the plans developed by the tactical managers are implemented. Thus the lower level managers are responsible for doing such planning which is quite important in the organization because it can connect the management of the organization with the non-management workforce.
Features of a Strategic Plan
Strategic planning is involved in the development of the mission statement, goals and objectives, business portfolio and functional plans in the organization. The growth aspect of the organization is also focused on strategic planning. Four avenues of growth are explained in the product/market expansion grid, which are as follow
- Market penetration
- Product development
- Market development
There are some organizations that do not follow formal planning. But there are many useful benefits associated with formal planning. These benefits are as follows.
- The management of the organization is supported to consider the long term future aspect of the business.
- Moreover the objectives and policies of the organization are clearly represented with the help of formal planning.
- The efforts of the organization are coordinated effectively.
- The performance standards for control are clearly established through formal planning.
- Therefore the changing requirements of the environment are better dealt and fulfilled by the organization through proper formal planning.
Strategic Planning Process
The process, in which a match between the goals and capabilities of the organizations and the changing requirements is made, is called the strategic planning process. All the further planning in the organization is based on strategic planning. The strategic planning process consists of the following four steps.
- Defining of clear mission statement of the organization
- Development of the supportive objectives of the organization
- Designing of a sound business portfolio
- Planning and coordination of other functional strategies along with the marketing strategies
Defining of Clear Mission Statement of the Organization
The main purpose of an organization is to achieve something. The purpose of the organization is made clear in advance by considering the following questions by the management.
- What is our business and what should it be?
- Who are our customers and what are their values?
So the defining of the mission statement of the organization is the first step of the strategic planning process. The purpose of the organization is the mission statement of the organization which explains what should be achieved in the larger environment by the organization. When the mission statement of the organization is clear to all the employees, then this mission statement acts as an “invisible hand” for the accomplishment of the goals and objectives. The mission statement of the organization should not be too broad and also it should not be too narrower. Moreover, following are the main features of an effective mission statement.
- It should be market oriented, realistic, specific and motivating
- It should indicate distinctive competencies and fit with the market environment
Development of the Supportive Objectives
When the mission statement of the organization is clearly defined then this statement is converted into wider supportive objectives for every Level of the Management. The management (middle level) of the organization is bound to prepare short term goals and objectives so they can be implemented for achieving. There is a hierarchy of objectives led by the mission statement that contains both business objectives as well as marketing objectives. But these objectives should be specific.
Designing of Business Portfolio
Designing a business portfolio is the third step in the strategic planning process. The combination of businesses and products of an organization is collectively called a business portfolio. The most effective business portfolio of an organization has the potential to match the strengths and weaknesses of the organization with the opportunities and threats to the environment. For designing a business portfolio, the organization should examine its current portfolio to ascertain how much investment is required for different setups of the portfolio. Certain growth strategies are developed for addition of any new product or business to the existing portfolio of the organization.
For analyzing current business portfolio, portfolio analysis is conducted by the organization to identify and evaluate each setup of the portfolio. For this purpose first of all the Strategic Business Units (SBUs) are identified. Each SBU has its own separate mission statement together with a separate set of objectives. The SBU can take the form of a division, a product line or only a single product or brand. After identification of each SBU of the business portfolio, the next step is to ascertain the attractiveness of each of these units to further ascertain the amount of support that each SBU deserves.
A famous and effective portfolio planning tool is Boston Consulting Group (BCG) Matrix. All the SBUs of the organization are classified according to the growth-share matrix in Boston Consulting Group approach. The measure of attractiveness of the market is represented by the market growth, which is shown on the vertical axis of the matrix. The measure of the strength of the organization in the market is represented by relative market share, which is shown on the horizontal axis of the BCG matrix.
The BCG matrix can identify only four kinds of SBU, which are as follows.
The market growth rate and relative market share are high which shows that this business or product (SBU) needs a heavy portion of the investment.
The relative market share is high, but the market growth rate is low which shows that this business or product requires little investment.
The relative market share is low, but the growth rate is high which shows the high portion of the investment.
The market growth rate as well as relative market share is low and this SBU should be immediately sold because of its poor performance.
There are four types of strategies that an organization can employ after identification and evaluation of each of its SBU.
- High proportion of the investment is made by the organization to develop its share.
- The lower portion of the investment is made by the organization maintaining the current level of the SBU.
- The SBU can be harvested and divested by the organization.
Therefore the life cycle of each SBU is different, so it changes its position in the growth share matrix with the passage of time. Although the BCG matrix is quite helpful in the strategic planning process, there are still certain problems associated with this method.
Finally, growth strategies are developed on the basis of the analysis of the business portfolio of the organization. The growth opportunities of an organization are identified through a useful tool named product/market expansion grid. There are four kinds of growth strategies that are developed by the organization. These strategies are as follows.
In Market Penetration Strategies the sales of the organization are enhanced in the same market by increasing the intensity of its marketing mix but keeping the product the same. This means that similar products are marketed in similar markets, but with certain useful techniques.
In this strategy, the products of the organization remain the same, but new markets are targeted for enhancing the sales of the organization. This means that existing products in new markets.
In this strategy, the organization offers new or modified products in the current market so that the sales can be enhanced. This means that new products, but marketed in the current market.
In Diversification Strategy, the organization tries to increase its sales by adding new products which are offered in new markets. This means that the new products go to new markets.
Planning of Cross Functional Strategies
The planning of cross functional strategies is the last step of the strategic planning process. Each business unit (SBU) is planned in a detailed manner after the strategic planning has been made. Different functional strategies are developed that would be applied in the functional areas of the organization. These functional strategies help the non-management employees of the organization to play their role in the accomplishment of the top Strategic Management objectives and goals of the organization.
All the departments of the organization assist the strategic planning by providing any useful information which is required. The marketing department of the organization plays a vital role in the strategic planning process of the organization in the following ways.
- By providing guiding philosophy.
- Certain inputs are provided to the strategic planners that assist in pointing out the market opportunities so that the planners can analyze the strengths of the organization for taking advantage.
- Certain strategies are developed by the marketing department so that the objectives of the individual SBUs can be effectively accomplished.
- The marketing department plays by motivating all the departments of the organization to consider their actions in customer perspective through a number of useful ways.
Implementation and Control of the Strategic Plans
All the planning performed in the process of strategic planning, must be properly implemented and controlled so that the desired results can be acquired. If the results are not satisfactory, then certain adjustments are made in any of the previous steps of the strategic planning process.
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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