Ever since long-range planning appeared in the business world, there have been many arguments and misconceptions about its nature.

University Degree Business and Administrative studies

INTRODUCTION

Ever since long-range planning appeared in the business world, there have been many arguments and misconceptions about its nature. Some managers have believed long-range planning, or strategic planning as it is referred to nowadays, is either long-range forecasting or an extended budgeting operation. Others have confused strategic planning with diversification or product improvement or long-term financial planning. Furthermore, some managers have regarded strategic planning as planning for contingencies or as undertaking major changes in the business.

The degree of misconception and confusion about the meaning and scope of long-range planning has led to the result that some managers think it is just an academic exercise. Therefore, it has no practical value for organisations.

The aim of this report is to give a broad idea about what strategic planning is; its nature; its impact on operational policies; its relation with environmental factors; and the way external and internal triggers could affect the success of strategic objectives.

Firstly, a brief presentation of the birth and subsequent development in the long-range planning history will be addressed. The different models used in each period will be tackled as well as the relevant literature published.

Secondly, a definition of strategic management and other definitions such as long-range planning, strategy, among others will be addressed. Furthermore, a classification of strategy in general and the different forms of strategic planning will be given.

Thirdly, the process of strategic management will be evaluated taking into account the various stages involved in such a process. Additionally, the role of operational policies in the process will be duly dealt with.

Fourthly, the influence of the environment on the strategic management process will be analysed. Moreover, the impact of external and internal triggers on the achievement of strategic objectives will be discussed. The role of culture in business environment will also be taken into account.

Fifthly, the argument sustained by today’s managers about the practical use of long-range planning will be elaborated. Different scholars’ views will also be evaluated in order to verify the veracity of such argument.

Finally, some conclusions will be drawn taking into consideration the aspects discussed in the report. Furthermore, a list of references used, bibliography consulted, as well as appendixes will be provided.

LONG-RANGE PLANNING HISTORY

“The concept of strategy applied to business was a legacy of World War II” (Kennedy, 1994, p. 116). Kennedy (1994) mentions that in the late 1940s this methodology was implemented in US industry. One of the pioneers was Robert McNamara, president of Ford Motor Company (Kennedy, 1994). In the 1950s, formalised strategic planning grew out of US budget exercises (Kathleen, 2004). SWOT analysis was the dominating model in this period (Brief History of Strategic Planning, 2004). A well-known book published within this period was The Theory of Game and Economic Behaviour (1953) by J. Von Neumann and O. Morgenstern (Kennedy, 1994).

There was a tremendous surge in the acceptance and adoption of long-range planning systems by the mid-1960s and throughout the 1970s (Higgins, 1981). Qualitative and quantitative models of strategy ruled in this period (Brief History of Strategic Planning, 2004). Books published within this time were: Strategy and Structure (1962) by Alfred. D. Chandler; My Years in General Motors (1963) by Alfred. P. Sloans; Corporate Strategy (1965) by H. Igor Ansoff; and The Concept of Corporate Strategy (1971) by Kenneth. R. Andrews (Kennedy, 1994).

During the 1980s, public and non-profit organisations recognized the utility of strategic planning (Kathleen, 2004). Shareholder value model, Porter’s Generic Strategic and his Five Forces model appeared during this time (Brief History of Strategic Planning, 2004). In this period some interesting books were published: Competitive Strategy: Techniques for Analysing Industries and Competitors (1980) by Michael Porter; The Mind of Strategy (1982) by Kenichi Ohmae; Competitive Advantage: Creating and Sustaining Support Performance (1985) also by Porter; Implanting Strategic Management (1985) and a new edition of Corporate Strategy (1987) both by H. Igor Ansoff (Kennedy, 1994).

In the 1990s according to Mintzberg (1994) strategic planning has fallen from the pedestal it occupied. However, an article published in 1996 in Business Week points out:

“…a new wave of gurus and consulting firms has emerged with a wide assortment of perspective and tools for companies to create strategies. A recent study by the Association of Management Consulting Firms found that executives, consultants, and B-school professors all agree that business strategy is now the single most important management issue and will remain so for the next five years” (Byrne, 2004).

According to Drummond and Ensor (1999) the age of strategic management appeared by the end of last century. Business transformation models emerged during the 1990s. Most of the newer models on strategy are based on “adaptability to change, flexibility, and importance of strategic thinking and organisational learning” (Brief History of Strategic Planning, 2004). Two important books written within this period: The Art of the Long View (1991) by Peter Schwartz; and The Rise and Fall of Strategic Planning (1994) by Henry Mintzberg.

DEFINITIONS RELATED TO STRATEGIC MANAGEMENT

Strategic Management includes understanding the strategic position of an organisation, strategic choices for the future and turning strategy into actions (Johnson & Scholes, 2002, p. 16).

Long-range Planning is a process directed toward making today’s decisions with tomorrow in mind and a means of preparing for future decisions so that they may be made rapidly, economically, and with, as little disruption to the business as possible (Kirby, 1966, p. 18).

Strategic Planning is a disciplined effort to produce fundamental decisions and actions that shape and guide what an organisation is, what it does, and why it does it, with a focus on the future (What is Strategic Planning?, 2004).

Strategy is the direction and scope of an organisation over the long-term, which achieves advantages for the organisation through its configuration of resources within a changing environment and to fulfill stakeholder expectations (Johnson & Scholes, 2002, p.10). It refers to how the organisation will achieve its objectives and may be observed as a pattern in a stream of decisions (Stahl & Grigsby, 1997, p.37).

Mintzberg (1987) has identified Five Ps for strategy: plan; ploy; pattern; position; and perspective (See Appendix A, p. 24).

Strategic Thinking means asking ‘Are we doing the right?’ Perhaps, more precisely, it means making that assessment using three key requirements about strategic thinking: a definite purpose be in mind; an understanding of the environment, particularly of the forces that affect or impede the fulfillment of that purpose; and creativity in developing effective responses to those factors (What is Strategic Planning? 2004) (See Appendix B, p. 26)

Scenario Planning is a disciplined method for imagining the richness and range of possible futures which attempts to stimulate decision makers to consider changes they would otherwise ignore (Schoemaker, 1995).

TYPES OF STRATEGY

Emergent Strategy is the strategic direction that emerges from actions taken by middle management, and organisational routines. It is the strategy actually in place in the organisation that was never intended (Stahl & Grigsby, 1997, p. 10 and 140).

Deliberate/Intended Strategy consists of a firm deciding on its goals and implement intended strategy to realise the goals (Stahl & Grigsby, 1997, p. 10).

Intended/Deliberate Strategy is an expression of desired strategy direction deliberately formulated or planned by managers (Johnson & Scholes, 2002, p. 75).

According to Mintzberg and Waters (1985) there are some other types of strategies which could be either deliberate or emergent; even, they could be both. These strategies are: planned; entrepreneurial; ideological; umbrella; process; unconnected; consensus; and imposed (See Appendix C, p. 28).

Realised Strategy is the strategy actually being followed by an organisation in practice (Johnson & Scholes, 2002, p. 75).

Dominant Strategy is one that out performs all other strategies whatever rivals choose (Johnson & Scholes, 2002, p. 342).

FORMS OF STRATEGIC PLANNING

Mintzberg (1994) suggests three forms of strategic planning: conventional; numbers game; and capital budget, which intend to clarify the confusion around the planning process model. They are based on Mintzberg’s Four Planning Hierarchies: hierarchy of objectives; hierarchy of budgets; hierarchy of strategies; and hierarchy of programs (See Appendix D, p. 30).

Conventional Strategic Planning shows the hierarchical relationship among the different hierarchies above in a conventional way: “objectives over strategies (together called formulation) and these over programs, all three of them driving budgets (the latter two conventionally labeled implementation)” (Mintzberg, 1994, p. 82) (See Appendix E, p. 32).

Strategic Planning as a Numbers Game develops

“a hierarchy of objectives and a hierarchy of budgets (each either top-down, bottom-up, or negotiated) with the objectives at each level feeding as one determinate of the budget. This kind of performance control is easy to understand and to do then the conventional strategic planning...what are called strategic planning exercises often reduce to the generation of numbers, not ideas –objectives and budgets but not strategies” (Mintzberg, 1994, p. 84-85) (See Appendix F, p. 34).

Capital Budgeting as Ad Hoc Control is “a system to handle the approval of major capital expenditure” (Mintzberg, 1994, p. 87). It is “a portfolio technique to control capital spending through decision making but not strategy making” (Mintzberg, 1994, p. 89) (See Appendix G, p. 36).

Mintzberg (1994) considers the conventional strategic planning being in between the numbers game and the capital budgeting. Moreover, he advocates that these three independent approaches –or portfolio of planning techniques- are what remains of strategic planning.

THE STRATEGIC MANAGEMENT PROCESS

Two models of the strategic management process have been selected in order to explain what scholars believe this process involves. The selected models are the ones proposed by: Stahl and Grigsby (1997); and Johnson and Scholes (2002).

Stahl and Grigsby (1997) suggest that the strategic management process comprises three major stages: formulation; implementation; and evaluation and control.

In the first stage, referred to as strategic formulation or planning; the mission of the organisation; its objectives; strategies; and policies are established. According to Wheelen and Hunge (2002, p.10) the “strategic formulation is the development of long-range plans for the effective management of environmental opportunities and threats, in light of corporate strengths and weakness”.

The second stage, implementation or operational management, “involves activities and decisions that are made to install new strategies or support exiting strategies” (Stahl & Grigsby, 1997, p. 11). Operation is the division of the organisation immediately accountable for achieving organisational objectives (Campbell, 1997)

In between these two stages there is a link, referred to as policy. According to Wheelen and Hunge (2002, p. 14):

“Policy is a broad guideline for decision making that links the formulation of strategy with its implementation. Companies use policies to make sure that employees throughout the firm make decisions and take actions that support the corporation’s mission, objectives, and strategies”.

In the last stage, evaluation and control, the strategic management process is kept on track by following up achievement of goals and getting feedback from the decision-making results. The purpose of this stage is “to ensure that behaviours, systems and operations conform to corporate objectives/policy” (Drummond & Ensor, 1996)

Johnson and Scholes (2002) talk about a model of the Elements of Strategic Management, a three-stage process as well which includes: position, choice and action (See Appendix H, p. 38).

Strategic position deals with the business environment and resource capabilities of the organisation in the context of the organisation culture and the expectations of stakeholders. Drummond and Ensor (1996) refer to this stage as strategic analysis. It is part of an auditing process of the external and internal environment.

Strategic choice is concerned with identification, evaluation and selection of the new strategy for the organisation. Here, the scope of the organisation strategy; the bases for competitive advantage; and the suitability, feasibility of the new strategy should be evaluated. This could be the strategic formulation mentioned by Drummond and Ensor (1996), which develops the necessary “plans to appropriate current and future circumstances” (Drummond & Ensor, 1996, p.2).

Strategy into action is related to the allocation of resources. Any change within the organisation should properly be managed and the organisation should be structured and designed to achieve success. ...