i. Basic Strategic Planning/Model
According to O'Regan and Ghobadian, (2002) basic strategic planning process is commonly adopted by the organizations which are very small, engaged, and those who have not executed basic planning earlier. The process is suitable to equip the company in initial years to get a reason of how planning is organized, and then geared up in subsequent period with increased planning stages and activities to secure selective direction. Top-level management usually carries out planning. The basic strategic planning process includes:
-
Ascertain the identity of purpose (mission statement) – First of all the purpose of existence of organisation is to be found out i.e. the basic purpose of an organisation. It should be specified what types of customers are needed to be contacted and with what type of services are to be rendered. The higher management should grow and accede to the identification of purpose. Over the years, however, the statements can be changed. (O'Regan and Ghobadian, 2002).
-
Selecting the targets an organization should compete if they have to achieve the mission - Targets are those goals that an organisation needs to achieve to complete the purpose, or mission, and point out major issues, which an organisation faces.
-
Identifying particular approaches and schemes that should be implemented to complete the targets - The strategies are described as the schemes which change the most in the organization to be conducted the more robust strategic planning, specially by way of closely analyzing the internal and external surroundings of the organization.
-
Make out action plans to execute each strategy - These are the necessary activities to be performed by each major function (section, department) so as to execute each strategy successfully. The objective should be clearly defined to enable the people whether they have achieved it or not. The Top Management should form specific committees having a separate work plan and objectives. (O'Regan and Ghobadian, 2002).
-
Regular Monitoring and updating – Planners should regularly and continuously monitor and see to what extent the goals are being met and whether action plans are being implemented. The feedback from the organization’s customers is the most reliable source for this. (O'Regan and Ghobadian, 2002).
It may be noted that organizations following this planning method may like to conduct step three above again to identify the additional goals for further developing and strengthening financial management of the organization.
For example, if a company wants to expand its business in other country, the first aim will be to decide on the entry mode and after successfully entering the market this objective will be of no use. Then the company has to set another objective and work for the same. Another example of this approach could be understood by taking an look of the vision statement of Ford i.e. “To become the world’s leading Consumer Company for automotive products and services”. To achieve this Ford has acquired Aston Martin, Jaguar, Volvo Cars and Land Rover, as well as a controlling share of Mazda, with which it operates an American joint venture plant called Auto Alliance. It has spun off its parts division under the name Visteon. Its prestige brands, with the exception of Lincoln, are managed through its Premier Automotive Group (www.answers.com, 2005).
ii. Issue-Based (or Goal-Based) Planning/Model
As per Dobson et. al. (2004), those organizations that start with this “basic” planning approach generally adapt to more thorough and more effective type of planning. The planning process is as under:
- “SWOT” analysis (Strengths and Weaknesses and Opportunities and Threats) so as to measures the performance.
- Strategic analysis to spot main objectives and goals
- Devise major strategies (or plans) to achieve goals.
- Design/update vision, missions and image of the organization.
- Formulate action plans to achieve objectives. What resources are needed and roles and responsibilities for implementation)
- Account for issues, targets, strategies and programs, updated task and vision, and plans of actions in a Strategic Plan document attaching SWOT, etc.
- Make the yearly Operating Plan document (from year one of the multi-year strategic plan)
- Make and plan the Budget for year one (allocation of funds needed to fund year one)
- Manage the organization’s year-one operations
- Regular monitoring, evaluation, reviewing and updating of the Strategic Plan document
For example, Nirula’s, a fast food chain of India, has high levels of international focus in their current activities. Nirula’s wants to expand to other countries, for this purpose the company has to conduct a more detailed study that will contain detailed analysis of the target countries. This means that Nirula’s has to collect information related to the target country’s economic conditions, the governments, the political conditions, state of foreign trade, benefits given to the foreign investments and many more relevant issues. The Nirula’s has to consider political stability, access to raw materials, and low production costs as other major reasons for investing in the country (www.nirula.com/hotels/index.html). This means if the stake is lager, the company has to plan in a more organised manner. This model emphasizes on the external aspects.
iii. Alignment Model
The aim of the model is to have maximum coordination between the organization’s mission and for successful functioning of the organization. According to Mintzberg and Lampel (1999), Alignment Model is helpful for the organizations that require to modify their strategies or to know the reasons for not performing well. Sometimes an organization that is having a large number of problems concerning its internal issues may also choose this model. The steps needed include:
- The committee constituted for planning sketches the objectives & goals of the organization and its various resources.
- Finds those areas performing well and those that need some fine-tuning.
- Finds ways to fine-tune those areas.
For example, in case some conflict appears in an organisation it has to be resolved so that the organisation could achieve its aim. The example of Cocoa Research Institute of Savana (CRIS) helps in understanding this. In this case there was trouble between the biochemistry and plant pathology departments, or rather between two senior scientists of these departments. There had been several instances of conflicts between the scientists and their divisions, but the conflicts had never reached boiling point. They were usually resolved amicably, even before the executive director took note of them. Mostly the conflicts arose over allocation of plots for experiments, budgetary allocations and participation in international conferences. The case of Dr Agadir provides an opportunity to understand causes of conflict situations in research organizations, and ways and means of managing such situations. The conflict discussed in the case is not uncommon in a research organization. Often such conflicts remain unresolved, creating adverse organizational effects. They influence team-work and affect research outputs. While management would like to resolve such conflicts, they are often difficult to resolve (http://www.fao.org/docrep/W7504E/w7504e08.htm).
iv. Scenario Planning
This methodology might be used in combination with other models to ensure that the planners rightly start strategic thinking. The strategic issues and goals are specially identified with the help of this model.
- Choose various external forces and think of the similar changes that might influence the organization, e.g., change in rules & regulations, demographic changes, etc. It is possible to find certain changes by minutely searching the headlines of the newspaper changes that might effect the organization.
- From the possible changes stress upon each change that may affect the organization considering all the three situations (the best, the worst and not bad). Considering the worst situation brings motivation for the change.
- Choose that the organization should do, or potential strategies, in each of the three scenarios to respond to each change.
- Planners then find that there are common solutions or strategies that should be followed for external changes.
- Choose those external changes that are expected to effect the organization in the next five years and also look for the most realistic strategies the organization can have for such changes.
For example, a top U.S. petroleum company is changing to a new SAP computerized information system, which requires a completely new computer interface and new standard operating procedures for every employee. This change demands that the company simultaneously address the logistics of effective systems implementation and the issues of staff demoralization and impaired productivity during the transition. The company hired an external consultant to sort-out this. The solution suggested by them are, involved a wide variety of representative stakeholders to develop a map of issues related to the SAP implementation that would affect performance; Conducted a broad-based internal web survey of stakeholders' importance ratings of all issues; Analyzed the survey to identify consensus and disconnects in importance among subgroups of stakeholders; and, Linked the importance ratings to specific phases of the implementation to identify where change interventions might be introduced for best impact. This resulted into the rapid surfacing of concerns and issues at all employee levels, the buy-in created throughout the process within the organization, the comprehensive roadmap created for planning interventions to support change and the ability to monitor change on an ongoing basis (http://www.conceptsystems.com/Consult/CaseStudies/ChangeManagement.cfm)
Practical Limitations of the Models
The strategic management approach emphasizes interaction by managers at all levels of the organizational hierarchy in planning and implementation. As a result, strategic management has certain behavioral consequences that are also characteristic of participative decision making. Therefore, an accurate assessment of the impact of strategy formulation on organizational performance also requires a set of non-financial evaluation criteria measures of behavioral based effects. However, regardless of the eventual profitability of particular strategic management models, several behavioral effects can be expected to improve the welfare of the organisation.
Kotler (2003) stated that each strategic management model has its limitations and it is very necessary to know how the model can be properly used. This knowledge will help in effective strategic management. Thus, the main stress should be on three points: the model is holistic, analytical, and non-political. Out of these the author focused on analytical issue and it is more related to this assignment.
According to Johnson and Scholes (2005) a major issue of concern in using the strategic management models is that it is analytical rather than prescriptive or procedural. The models generally describe the logical or analytical steps many businesses actually use in their strategic activities. However, it does not describe the procedures or routines necessary to carry out each step. As a result, no model should be seen as providing a prescription for the way strategic planning should be done. Therefore, when the strategic management model is used it should be remembered that the model builders are recommending the general approach they believe will provide a sound basis for strategic planning, not a model they are certain will lead to the best results (Johnson and Scholes, 2005). The strategic management process undergoes continual assessment and subtle updating. While elements in the basic model rarely change, the relative emphasis each element receives varies with decision-makers and the environments of their companies.
- Conclusion
The complexity and sophistication of business decision making requires strategic management. Managing various internal activities according to the external environment is only part of the modern executive’s responsibilities. Strategic management only helps to achieve the goals of the business entity. Different strategic models discussed above are only the tools in the hands of the business executives to determine mission, vision, goals, objectives and the ways to achieve these. No single model is completely suitable for a particular business entity. To deal effectively with all decision making problems and to affect the ability of a company to increase profitability, the executives design strategic management processes that will facilitate the optimal positioning of the firm in its competitive environment. Such positioning is possible because these strategic processes allow more accurate anticipation of environmental changes. Different strategic approaches are to be mixed to gain maximum.
REFERENCES
- Ansoff, H. I. et al., (1971), “Acquisition Behaviour of u.s. Manufacturing Firms 1946-65”, Vanderbilt University Press, Nashville, Tenn.
- Dobson, P., Starkey, K., Richards, J., (2004), “Strategic Management: issues and cases”, Blackwell Publishing.
- Johnson and Scholes, (2005) Exploring Corporate Strategy 7th Edition London Prentice hall
- Kotler, P. (2002) Marketing Management the Millennium Edition Prentice-Hall New Jersey, 2000.
- Mintzberg, H., Lampel, J. (1999), "Reflecting on the strategy process", Sloan Management Review, Vol. 40 No.3, pp.21-30.
- O'Regan, N., Ghobadian, A. (2002), "Formal strategic planning: the key to effective business process management?", Business Process Management Journal, Vol. 8 No.5, pp.416-29.
-
Pearce, J. A. II & Robinson, R. B. (1988). Strategic Management – Strategy Formulation and Implementation. Richard D. Irwin: Homewood, IL