Everything you need to know about the strategic planning. Strategic planning means planning for strategies and implementing them to achieve organisational goals.
It starts by asking oneself simple questions like- What are we doing? Should we continue to do it or change our product line or the way of working? What is the impact of social, political, technological and other environmental factors on our operations? Are we prepared to accept these changes etc.?
Strategic planning helps in knowing what we are and where we want to go so that environmental threats and opportunities can be exploited, given the strengths and weaknesses of the organisation.
Strategic planning is “a thorough self-examination regarding the goals and means of their accomplishment so that the enterprise is given both direction and cohesion.”
Strategic planning is systematic, formally documented process for deciding what are the handfuls of key decisions that an organisation, viewed as a corporate whole must get right in order to thrive over the next few years.
In this article we will discuss about strategic planning. Learn about:- 1. Meaning of Strategic Planning 2. Definition of Strategic Planning 3. Features 4. Importance 5. Approaches 6. Process 7. Tools 8. Factors 9. Limitations.
Strategic Planning: Meaning, Definition, Importance, Approaches, Process, Tools and Limitations
- Meaning of Strategic Planning
- Definition of Strategic Planning
- Features of Strategic Planning
- Importance of Strategic Planning
- Approaches to Formal Strategic Planning
- Strategic Planning Process
- Tools of Strategic Planning
- Factors of Making Strategic Planning Effective
- Limitations of Strategic Planning
Strategic Planning – Meaning
Strategic planning means planning for strategies and implementing them to achieve organisational goals. It starts by asking oneself simple questions like- What are we doing? Should we continue to do it or change our product line or the way of working? What is the impact of social, political, technological and other environmental factors on our operations? Are we prepared to accept these changes etc.?
Strategic planning helps in knowing what we are and where we want to go so that environmental threats and opportunities can be exploited, given the strengths and weaknesses of the organisation. Strategic planning is “a thorough self-examination regarding the goals and means of their accomplishment so that the enterprise is given both direction and cohesion.”
It is “a process through which managers formulate and implement strategies geared to optimising strategic goal achievement, given available environmental and internal conditions.” Strategic planning is formalisation of planning where plans are made for long periods of time for effective and efficient attainment of organisational goals. Strategic planning is based on extensive environmental scanning. It is a projection into environmental threats and opportunities and an effort to match them with organisation’s strengths and weaknesses.
While long-run planning may not be fully equipped to absorb environmental shocks, strategic planning is done to comprehend, anticipate and absorb environmental vagaries. Strategic planning is a continuous process. Every time business organisations want to achieve a higher growth rate or change their operations, desire for better management information system, co-ordinate activities of different departments, remove complacency from organisations; they make strategic plans.
Planning is something we do in advance of taking action; that is, it is anticipatory decision making. It is a process of deciding what to do and how to do it before action is required.
Strategic planning can be defined as a managerial process of developing and maintaining a viable fit between organization’s objectives, skills and resources and its changing environment.
The company’s strategic plan is the starting point for planning. It serves as a guide to the development of sound sub-plans to accomplish the organizational objectives. The aim of strategic planning is to help a company select and organize its businesses in a way that would keep the company healthy in spite of unexpected changes in the environment. It purports to shape or reshape the company’s businesses and products so that they yield target profits and growth.
An interesting question that can come to the mind is that – how the conventional long range planning gave way to the strategic planning. Before the early 1970s, managers who made long-range plans generally assumed that plans for the future were merely extensions of what the organization had done in the past.
However, environmental shocks during the 1970s and 1980s, such as energy crises, deregulation of many industries, accelerating technological change, and increasing global competition undermined this approach to long-range planning.
These changes in the “rules of the game” forced managers’ develop a systematic approach to analyzing the environment, assessing their organization’s strengths and weaknesses, and identifying opportunities where the organization could have a competitive advantage. As a result the value of strategic planning began to be recognized.
Strategic Planning – Definition
Strategic planning is the process of determining a company’s long-term goals and then identifying the best approach for achieving those goals.
Strategic planning is an organization’s process of defining its strategy or direction and making decisions on allocating its resources to pursue this strategy, including its capital and people.
Strategic planning is a process to determine or re-assess the vision, mission and goals of an organization and then map out objective (measurable) ways to accomplish the identified goals.
Strategic planning is systematic, formally documented process for deciding what are the handfuls of key decisions that an organisation, viewed as a corporate whole must get right in order to thrive over the next few years.
Strategic planning is a continuous and systematic process where people make decisions about intended future outcomes, how outcomes are to be accomplished, and how success is measured and evaluated.
Strategic planning is the method by which a community continuously creates arti-factual systems to serve extraordinary purpose.
Strategic planning is systematic process of determining goals to be achieved in the foreseeable future. It consists of – (i) Management’s fundamental assumptions about the future economic, technological, and competitive environments. (ii) Setting of goals to be achieved within a specified timeframe. (iii) Performance of SWOT analysis. (iv) Selecting main and alternative strategies to achieve the goals. (v) Formulating, implementing, and monitoring the operational or tactical plans to achieve interim objectives.
Strategic planning is a coordinated and systematic process for developing a plan for the overall course or direction of the endeavour in order to optimizing the future potential.
Strategic planning is a business process that many companies employ to identify 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.
The mission statement is a short, concise statement that describes what the organization will strive to bring about — the reason why the company exists in terms of its impact on the rest of the world.
One of the functions of strategic planning is to inspire people in the organization to work towards the creation of a new state of affairs. The vision is a means of describing this desired future, but it works best to inspire and motivate if it’s vivid — in other words, a vision should be a “picture” of the future. The visioning process is usually the very first step in the strategic planning process.
The mission statement would focus on results and outcomes, while the role statement gets more into the “how’s”.
A good way to think about this is to first state your mission, add a byline to it, and then add a role.
For example, if the Mission of a startup organisation is to “go where no man has gone before” there might be a set of role statements (usually there will be more than one). For example – To go where no man has gone before by building new technologies and starships that can…
In terms of organizations and strategic planning, an environmental scan involves considering the factors that will influence the direction and goals of an organization. And, it includes consideration of both present and future factors that might affect the organization, since; we’re planning for the future, not just the present.
For example, an environmental scan might project that in the next ten years, the number of people (potential customers) between the ages of 18-24 will increase from 30% to 40%. That’s important information if we want to decide what kind of new products we might consider introducing into the marketplace.
Should we work on developing products targeted at a dwindling seniors population? Or should we develop products to take advantage of the shift to a youth dominated market. The environmental scan forces us to look at these factors.
A competitive analysis involves looking at those that compete in the market place, and using information about the competitors to identify where organisational strengths are relative to those competitors. One of the principles for becoming competitive is to leverage one’s strengths with respect to competitors, and minimise the weaknesses.
Once we established a vision, mission and role, and done internal and external scans, we should have enough information to set goals for the period that our strategic plan covers. Goals in strategic planning can be either result oriented, or process oriented, although, it’s probably better to have results oriented goals.
For example – increase share price by 5%, increase return on capital investments by 10%, reduce employee turnover by 10%, bring three new products to market, and register 3 new patents. Bad and non-strategic goals are, for example, become the most regarded company in our field (too vague, hard to measure, improve customer service (vague), hire and retain more talented staff (vague).
Strategic Planning – Features
The following are the salient features of strategic planning:
1. Process of Questioning:
It answers questions like where we are and where we want to go, what we are and what we should be.
2. Time Horizon:
It aims at long-term planning, keeping in view the present and future environmental opportunities. It helps organisations analyse their strengths and weaknesses and adapt to the environment. Managers should be farsighted to make strategic planning meaningful.
3. Pervasive Process:
It is done for all organisations, at all levels; nevertheless, it involves top executives more than middle or lower-level managers since top executives envision the future better than others.
4. Focus of Attention:
It focuses organisation’s strengths and resources on important and high-priority activities rather than routine and day-to-day activities. It reallocates resources from non-priority to priority sectors.
5. Continuous Process:
Strategic planning is a continuous process that enables organisations to adapt to the ever-changing, dynamic environment.
It coordinates organisations internal environment with the external environment, financial resources with non- financial resources and short-term plans with long- term plans.
Strategic Planning – Importance
Strategic planning offers the following benefits:
1. Financial Benefits:
Firms that make strategic plans have better sales, lower costs, higher EPS (earnings per share) and higher profits. Firms have financial benefits if they make strategic plans.
2. Guide to Organisational Activities:
Strategic planning guides members towards organisational goals. It unifies organisational activities and efforts towards the long-terms goals. It guides members to become what they want to become and do what they want to do.
3. Competitive Advantage:
In the world of globalisation, firms which have competitive advantage (capacity to deal with competitive forces) capture the market and excel in financial performance. This is possible if they foresee the future; future can be predicted through strategic planning. It enables managers to anticipate problems before they arise and solve them before they become worse.
4. Minimises Risk:
Strategic planning provides information to assess risk and frame strategies to minimise risk and invest in safe business opportunities. Chances of making mistakes and choosing wrong objectives and strategies, thus, get reduced.
5. Beneficial for Companies with Long Gestation Gap:
The time gap between investment decisions and income generation from those investments is called gestation period. During this period, changes in technological or political forces can disrupt implementation of decisions and plans may, therefore, fail. Strategic planning discounts future and enables managers to face threats and opportunities.
6. Promotes Motivation and Innovation:
Strategic planning involves managers at top levels. They are not only committed to objectives and strategies but also think of new ideas for implementation of strategies. This promotes motivation and innovation.
7. Optimum Utilisation of Resources:
Strategic planning makes best use of resources to achieve maximum output.
General Robert E. Wood remarks, “Business is like war in one respect. If its grand strategy is correct, any number of tactical errors can be made and yet the enterprise proves successful.” Effective allocation of resources, scientific thinking, effective organisation structure, co-ordination and integration of functional activities and effective system of control, all contribute to successful strategic planning.
Strategic Planning – Approaches
Arthur A. Thompson and A. J. Strickland have described four basic approaches to formal strategic planning:
1. Bottom-Up Approach:
Initiatives in formulating strategy are taken by the various units or divisions of an organization and then passed upward for aggregation at the corporate level. Corporate strategy will then be a composite of these plans. The weakness of this approach is that corporate strategy may end up as an incoherent muddle that merely reflects the objectives of the divisions before the planning attempt was made.
2. Top-Down Approach:
Initiative is taken by the upper-level executives of the organization, who formulate a unified, coordinated strategy, usually with the advice of lower-level managers. This overall strategy is then used to establish objectives and evaluate the performance of each business unit.
3. Interactive Approach:
This approach is a compromise between the bottom-up and top-down methods, corporate executives and lower-level managers develop strategy in consultation with each other, making a link between wider corporate objectives and the managers’ detailed knowledge of specific situations.
4. Dual-Level Approach:
Strategy is independently formulated at both the corporate and business levels. All units form plans which suit their particular situations, and these plans are regularly reviewed by corporate management. At the corporate level, strategic planning is continuous and focuses on the larger goals of the organization- when to acquire and when to divest businesses; how to react to competition and the external environment; what priorities to attach to the organization’s various units.
Strategic Planning – Process
Even though the phrases, ‘Long-term Planning’ and ‘Strategic Planning’ are interchangeably used, we may have a line of discrimination in between them. Philip Kotler puts “whereas the company’s annual and long-range plans deal with current businesses and how to keep them going, the strategic plan involves adapting the firm define Strategic Planning as the process of developing and maintaining a strategic fit between the organizational goals and capabilities and its changing marketing opportunities”.
Strategic planning is the foundation for other type of plans. It depends upon developing a clear company mission, supporting objectives of a sound business portfolio and coordinated functional strategies. The strategic planning process is one in which the management converts its mission, objectives and goals into a workable strategy. It involves the preparation of ways and means to the circumstances of the organization’s environment.
In today’s highly competitive business environment, budget-oriented planning or forest-based planning methods are insufficient for a large corporation to survive and prosper. The firm must engage in strategic planning that clearly defines objectives and assesses both the internal and external situation to formulate strategy, implement the strategy, evaluate the progress and make adjustments as necessary to stay on track.
The Strategic Management Process can be studied under five, different components.
1. Missions and Objectives:
A mission statement reveals the long-term vision of an organization in terms of what it wants to be and whom it wants to serve. It describes an organization’s purpose, customers, products or services, markets, philosophy, and basic technology. The mission statement describes the company’s business vision, including the unchanging values and purposes of the firm and forward looking visionary goals that guide the pursuit of future opportunities.
Objectives may be defined as “those ends which the organization seeks to achieve by its existence and operations”. It covers long-range company aims, more specific department goals, and even individual assignments.
Guided by the business vision, the firm’s leader can define measurable financial and strategic objectives. Financial objectives involve measures such as sales targets and earnings growth. Strategic objectives are related to the firm’s business position, and may include measures such as market share and reputation.
The mission justified the organization and legitimizes the corporate role in the society. It tells insiders and outsiders what the corporate stands for. The mission would carry the grand design of the firm and communicate what it wants to be. It will indicate broadly the businesses it will be in and the customer needs it seeks to satisfy. The mission is shaped by the capabilities and vision of the corporation’s leaders.
The main task in setting the corporate objectives is to decide the extent of growth the firm wants to achieve. Balancing the opportunities with organization’s capabilities and ambitions, the firm figures out its growth objectives. In addition to growth, there are certain other key determinants of corporate success, which apply to all firms – profitability, productivity, technology, competitive position, human resources, social responsibility and corporate image. The objectives are set in a measurable and time-bound manner.
2. Environmental Scanning or Surveying the Environment:
This is central to strategic planning. The second aspect of the strategic planning process is the environmental analysis. Since the basic objective of strategies is to integrate the organization with its environment, it must know the kind of environment in which it has to work. This can be known by environmental analysis.
The process of environmental analysis includes collection of relevant information from the environment, interpreting its impact on the future organizational working, and determining what opportunities and threats-positive and negative aspects are offered by the environment.
The environmental information can be collected from various sources like publications, verbal information from various people, spying, and forecasting. The process of environmental analysis works better if it is undertaken on continuous basis and is made an intrinsic part of the strategy formulation.
Basically, a firm gathers all relevant information relating to the environment and analyzes them in detail. It analyses both the Macro Environmental factors as well as Environmental factors that have specific to the business concerned.
i. Macro Environmental Factors or External Factors:
Under the macro environmental factors, it studies the demographic, socio-cultural, economic, political and legal environment. Business-specific environmental factors include emerging trends in the industry, structure of the industry, nature of the competition and the scope for invasion by substitute products.
ii. Internal Factors:
This is the process of assessing the company’s capabilities and resources, strengths and weaknesses, core competencies and competitive advantages. The firm also has to examine which of its perceived strengths actually constitutes the competitive advantage for the firm. The firm compares itself against the competition and develops its Competitive Advantage Profile (CAP). The process of internal appraisal also throws up the capability gaps of the firms, i.e., the gaps between its existing capabilities and the needed capabilities for tapping the opportunities spotted through the environmental survey.
3. Strategy Formulation:
Given the information from the environmental scan, the firm should match its strengths to the opportunities that it has identified, while addressing its weaknesses and external threats.
To attain superior profitability, the firm seeks to develop a competitive advantage over its rivals. A competitive advantage can be based on cost or differentiation. Michael Porter identified three industry-independent generic strategies from which firm can choose.
After strategy chosen, it is put to implementation, that is, it is put into action. Various factors which are necessary for implementation are designed for suitable organization structure, developing and motivating people to take up the work, designing effective control and information system, allocation of resources, etc.
The most crucial task is formulating the corporate strategy. The effectiveness of the entire strategic planning process of a firm is tested and proved by the effectiveness of the corporate strategy it walks out. While the objectives clarify where the firm wants to go, the strategy provides the design to getting there.
The main function of the corporate strategy is to provide strategic direction to the firm. It is corporate strategy that ensures the fit between the firm and its environment. It finally sets the pace of the corporation’s total growth, and thereby it’s future and overall prospects. It can be stated that primary corporate strategy denotes the firm-product market-posture. It is the route map chosen for navigating the firm through all the fluctuations and turbulence the firm may face.
4. Strategy Implementation:
The selected strategy is implemented by means of programs, budgets, and procedures. Implementation involves organization of the firm’s resources and motivation of the staff to achieve objectives.
The way in which the strategy is implemented can have a significant impact on whether it will be successful. In a large company, those who implement the strategy likely will be different people from those who formulated it. For this reason, care must be taken to communicate the strategy and the reasoning behind it. Otherwise, the implementation might not succeed if the strategy is misunderstood or if lower level managers resist its implementation because they do not understand why the particular strategy was selected.
5. Evaluation and Control:
The strategy has to be monitored and adjustments that become necessary have to be brought. Essentially, the thing had to be compatibility of the strategy with the environment as well as internal realities.
The implementation of the strategy must be monitored and adjustments made as needed.
Evaluation and control consists of the following steps:
i. Defining parameters to be measured
ii. Defining target values for those parameters
iii. Performing measurements
iv. Comparing measured results to the pre-defined standards
v. Making necessary changes.
The results of implementation can be compared in the light of objectives set, and control process comes into operation. If the results and objectives differ, a further analysis is required to find out the reasons for the gap and taking suitable actions to overcome the problems because of which the gap exists. This may also require a change in strategy if there is a problem because of the formulation n inadequacy. This puts back the managers at the starting point of the strategy formulation.
Strategic Planning – 6 Main Tools: SWOT Analysis, Scenario Planning, Pest Analysis, Risk Analysis, STP (Situation-Target-Path) and Goals Grid Method
SWOT analysis is a tool for assessing the business and its environment that helps focus on key issues. It can help us focus limited resources and capabilities to the competitive environment. SWOT stands for strengths, weaknesses, opportunities, and threats.
Strengths and weaknesses are internal factors. Opportunities and threats are external factors. The point of the SWOT analysis is to ensure that we have a marketing plan that is consistent with the resources and capabilities of our company.
i. A specialist marketing expertise.
ii. A new, innovative product or service.
iii. Location of business.
iv. Quality processes and procedures.
v. Any other aspect of business that adds value to product or service.
i. Lack of marketing expertise.
ii. Undifferentiated products or services (i.e., in relation to competitors).
iii. Location of business.
iv. Poor quality goods or services.
v. Damaged credibility.
i. A developing market or an emerging market.
ii. Mergers, joint ventures or strategic alliances.
iii. Moving into new market segments that offer improved profits.
iv. A new international market.
v. A takeover
i. A new competitor in home market.
ii. Price wars with competitors.
iii. A competitor has a new, innovative product or service.
iv. Competitors have superior access to channels of distribution.
v. Taxation/Octroi/Service tax is introduced on product or service.
Examples of SWOT analysis:
a. Strengths – Wal-Mart is a powerful retail brand. It has a reputation for value for money, convenience and a wide range of products all in one store.
b. Weaknesses – Wal-Mart is the World’s largest grocery retailer and control of its empire, despite its IT advantages, could leave it weak in some areas due to the huge span of control.
c. Opportunities – To take over, merge with, or form strategic alliances with other global retailers, focusing on specific markets such as – Europe or the Greater China Region.
d. Threats – Being number one means that you are the target of competition, locally and globally.
a. Strengths – Starbucks Corporation is a very profitable organisation, earning in excess of $600 million in 2004.
b. Weaknesses – Starbucks has a reputation for new product development and creativity.
c. Opportunities – New products and services that can be retailed in their cafes, such as – Fair Trade products.
d. Threats – Starbucks are exposed to rises in the cost of coffee and dairy products.
a. Strengths – Nike is a very competitive organisation. Phil Knight (Founder and CEO) is often quoted as saying that ‘Business is war without bullets.’
b. Weaknesses – The organisation does have a diversified range of sports products.
c. Opportunities – Product development offers Nike many opportunities.
d. Threats – Nike is exposed to the international nature of trade.
Where will you find the Mumbai Indians, the Royal Challengers, the Deccan Chargers, the Chennai Super Kings, the Delhi Daredevils, the Kings XI Punjab, the Kolkata Knight Riders and the Rajasthan Royals? In the Indian Premier League (IPL) – the most exciting sports franchise that the World has seen in recent years, with seemingly endless marketing opportunities. (Only strengths and opportunities)
In essence scenario planning is about being prepared.
Scenario planning is a fancy term for a very logical and sensible process — the “what if” process. It involves looking into the future, anticipating possible events, scenarios or changes, and analysing what will happen to the company as a result of those things happening, and, planning to minimise any damage, and maximise opportunities.
Scenario planning is often used in IT environments but applies to any business. For example, the IT department might anticipate what would happen if a major hurricane hit and destroyed their central computers. As a result they would minimize their risk by using offsite data storage geographically separate from the main installation, or move their central computers to a more resistant building.
Scenario planning can look at any set of possible circumstances. For example, an oil company might plan around the possibility that a new, non-petroleum based vehicle becomes available. As an outcome of this kind of scenario planning, they might look at the possibility of offering hydrogen fuel at their retail outlets (or charging stations).
It doesn’t mean they would implement those now, but they would be more prepared if such changes happened. In small business, one might consider, and plan for a scenario where one’s rent might double, or one might lose the prime retail space.
The PEST analysis or model is another tool, quite similar to the SWOT model, but is more specialized and focused on the external environment and important factors “out there” that can affect present and future business.
The PEST acronym stands for:
iii. Social, and
Once political, economic, social and technological factors are identified (which is the first step), the next step is to create a business strategies that will take advantage of these trends and changes, while minimizing risk to the company from those trends and changes.
Risk analysis involves identifying where a company might be vulnerable to various outside (usually) factors. Risk analysis may be conducted either within the structure of strategic planning, or, on its own. These days companies need to buffer the effects of a number of things “out there” so they ensure that they don’t become the victims of foreseeable events. We can never be sure that we have covered off all risks — we can only identify, and plan for risks we can foresee.
STP or Situation-Target-Path is a very simple overview of the strategic planning method, it divides the planning process into three parts, starting with defining the situation – evaluating and analyzing the current situation and how it came about.
The second component – Target – involves defining goals and objectives for the future. Sometimes this is referred to as defining the ideal or desired future state.
The third component – Path – involved defining a map or path to achieve the goals or future state.
The STP method is simple, but accurately describes, at least in a general way, what strategic planning involves?
A goals grid is a relatively simple technique to help us think more clearly about organizational and company goals, particularly when we are doing strategic planning.
Strategic Planning – Factors: An Open Systems Approach, Participation in Planning, Integration of Long-Term and Short-Term Plans and a Few Others
It is not sufficient to say that managers must take actions to make strategic planning effective, but they must be clear as to what actions can be taken in this direction.
Following factors are important for making planning effective:
1. An Open Systems Approach:
The problems of planning should be dealt through open systems approach. It suggests that managers must take into account interactions with their total environment in every respect of planning. Open systems approach makes it necessary on the part of the managers that they take into account the environmental variable such as, technological, social, cultural, legal, political, and economic.
Further, they must also take into account the internal interaction pattern that is, how their planning process is affecting others and is affected by others. When managers take all these factors into account is affected by others. When managers take all these factors into account, they are in better positions to plan and execute their actions.
2. Participation in Planning:
Planning progress should be a joint one. The best planning is likely to be done when managers are given an opportunity to contribute to plans affecting the area over which they have authority. Participation in planning affecting manager’s areas of authority at any level through their being informed contributing suggestions and being consulted, leads to good planning commitment, loyalty, and managerial effectiveness.
The various methods of participation in planning process may be followed in the organisations depending upon their requirements and understanding of the people.
Managers often focus their attention only on very short – term plans, even if they plan. A good planning process involves integration of long-term and short-term plans. A short-term plan contributes towards the achievement of the long-term plan. Thus, if a manager is planning for very short period, he must take into account his long-term plans also. He must constantly watch and review that his short-term plans contribute to his long-term plans. If this is not the situation, he must modify his course of action which may include modification in both long- term and short-term plans.
4. Communication of Planning:
Many planning efforts fail because managers do not adequately emphasise the role of communicating various planning elements, such as, goals, strategies, policies, and planning premises. If these are communicated clearly, adequately, and timely, the managers are motivated and initiated to take planning process. Which may be necessary for them. When a manager understands the various aspects of planning he is in a better position to foresee his future course of action and may develop a habit of planning every course of future action.
Planning to be effective must have the initiative and support of top level management. It is the top level which is responsible for success or failure of any organisational process, and planning is no exception. The basic objectives which are set at the top level must be two- way process which involves people at other levels also.
Further, when top management rigorously reviews subordinates programmes, it naturally stimulates planning interest throughout the organisation. The planning action by top management does not suggest in everything will come from the top and subordinates will do nothing, rather the planning process should be a joint one.
6. Establishing a Climate:
The managers should try to establish a climate where every person in the organisation takes planning action. Every superior managers should remove obstacles to planning and present facilities for planning of his can be done by setting clear goals, establishing and publishing applicable significant planning premises, involving all managers in planning process, reviewing subordinate plans and their performance, and assuring appropriate staff assistance and information at all levies of management.
Strategic Planning – Limitations
Strategic Planning in management is essential but there are practical limitations to its use. The reasons why people fall in strategic planning emphasise the practical difficulties encountered in planning.
A number of limits within which planning has to operate make this undertaking difficult.
Following are the limitations:
(1) Problems of Change:
The factor works more as limiting factor in the light of changes in future conditions. In a complex and rapidly changing environment, the succession of new problems is often magnified by implications that make planning most difficult. The problem of change is more complex in long-range planning.
Present conditions tend to weigh heavily in planning, and by overshadowing future needs, may sometimes results in error of judgment. Such factors as changing technology, consumer tastes and desires, business conditions, and many others change rapidly and often unpredictably. In such conditions, planning activities taken in one period may not be relevant for another period because the conditions in two periods are quite different.
(2) Failure of People:
There are many reasons why people fail in planning, both at the formulation level as well as implementation level. Some of the major failures are lack of commitment to planning, failure to develop, sound strategies, lack of clear and meaningful objectives, tendency to overlook planning premises, failure to see the scope of the plan, failure to see planning as a rational approach, excessive reliance on the past experience, failure to use the principles of limiting factors, lack of top management support lack of delegation of authority, lack of adequate control techniques, and resistance to change.
These factors are responsible for either inadequate planning or wrong planning in the organisations concerned.
(3) Lack of Accurate Information:
The first basic limitation of strategic planning is the lack of accurate information and facts relating to future. Planning concerns future activity and its quality will be determined by the quality of forecast of future events. As no manager can predict completely and accurately the events of future, the planning may pose problems in operation.
This problem is further, increased by lack of formulating accurate premises. Many times, managers may not be aware about the various conditions within which they have to formulate their planning activities.
Manager while going through the strategic planning process have to work in a set of given variables. These variables may be more in terms of organisational or external. These often provide considerably less flexibility in planning action.
Major internal inflexibilities that may limit planning are related to the psychology. Organisational policies and procedures, and long-term capital investment. The first internal inflexibility is in the form of human psychology in that most of the people have regard for the present rather than for future. The present is not only more certain than future, it is also more desirable, and more real.
Thus, resistance to change is a basic factor which works against planning because planning often depends on the changes. People may have feelings that if planning is soft-pedalled, the changes and the possible danger of future will be minimised. For them, planning tends to accelerate change and unrest.
Second type of internal inflexibility emerges because of organisational policies and procedures once these are established, they are difficult to change. Though these policies, procedures, and, rules are meant to facilitate managerial functions by, providing guidelines, they often are too numerous and exacting that they leave very little scope for managerial initiative and flexibility.
Since managers have to plan for future which is not static but changing, they often find themselves in great constraints. Such problems are more common in bureaucratic organisations where rules and procedures are the matters of prime concerns.
Third type of internal inflexibility comes because of long- term capital investment. Long-term planning is not a process of making future decisions, but a means of reflecting the future in today’s decisions. If the organisation has taken a long-term investment, it is committed by that and future actions have to be taking in the light of the investment. Thus managerial planning is limited to that extent.
Beside the internal inflexibilities, managers are confronted with many external inflexibilities and they do not have control over these. These factors may be social, technological, legal, labour union, geographically and economic. The managers have to formulate their plans keeping in view the demand of these factors. Thus their scope of action is limited making planning in effective in many cases.
(5) Time and Cost:
While going through the strategic planning process managers should also take into account both time and cost factors. The various steps of planning may go as far as possible because there is no limit of precision in planning tools. But planning suffers because of time and cost factors.
Time is a limiting factor for every manager in the organisation on, and if they are busy in preparing elaborate reports and instructions beyond certain level, they are risking their effectiveness. Excessive time spent on securing information and trying to fit all of it into a compact plans is dysfunctional in the organisation.
Often people feel that planning provides rigidity in managerial action. Many types of internal inflexibilities, may be results of planning itself. The planning stifles employee initiative and forces managers into rigid or straitjacket mode of executing their work. In fact, rigidity may make managerial work more difficult than it need be. This may result in it delay in work performance, lack of initiative, and lack of adjustment with changing environment.
Many people feel that planning is limited in value because best results can be obtained by a muddling through types of operation in which each situation is tackled when and if it appears pertinent to the immediate problem. Though this factor of rigidity of planning is limiting factor but without planning, it is really difficult to operate particularly in large organisations.
The planning also involves cost on the part of the organisation. The various factors analysed above contribute to the limitations of strategic planning, either making planning ineffective or making lesser degree of planned work.