Strategic planning process

Strategic planning is a business roadmap to achieving its objectives and goals. It is the process that brings an organization’s mission and vision to life. The purpose of strategic planning is to help a business in identifying its priorities. Strategic planning is “strategic” in the sense that it is comprehensive involving and affecting essential elements of a business or organization. Strategic planning is purposeful in attempting to progress from the current situation to another (improved one). 

Strategic management also recognizes change will always occur thus it is visionary.

The formal strategic planning process are interactive and continuous. They also involve continuous monitoring and modification so that every organizational unit or department is working toward the same desired goals within a changing environment. The basic processes or elements of strategic planning include:
Selecting the corporate mission and major corporate goals

The first component of strategic planning is crafting the mission statement of the organization. The mission statement offers the framework within which the organization formulates strategies. It describes the vision for the business including the values and the purpose of the business and the visionary goals that guide the pursuit of the future opportunities. The mission statement enables the manager to define the financial and strategic objective of the firms. The strategic objectives include measures such as the target sales and earnings growth while strategic objectives include the business position such as market share and the reputation of the business.

Analyzing the organization’s internal and external environment to identify possible threats and opportunities.

Internal analysis focuses on reviewing and analyzing organization’s resources, capabilities, and competencies. The aim of internal analysis is to recognize organization’s strengths and weaknesses. Select strategies that capitalize on the organization’s strengths and correct its weaknesses in order to take advantage of external opportunities and counter external threat threats. These strategies are constant with the mission and the major goals of the organization.

The environmental scan (internal and external analysis) enables the business to develop a series of strategic alternatives or future strategies to adopt considering the business internal weaknesses and strengths and its external opportunities and threats. There are different types of methods that organizations can use to conduct their external analysis. Some of the most common one include Political, economical, social, technological, environmental and legal environment (PESTEL analysis). PESTEL analysis enables an organization to identify the external macro-environment that affects the business performance. A company can generate a profile of internal strengths and weaknesses through SWOT analysis while Porter’s fives forces is applicable in conducting industry analysis.

After identifying its strengths and weaknesses, the organization design strategies that match its strengths to its opportunities while addressing its external threats and weaknesses. In order to achieve superior profit, the organization achieves a competitive advantage. According to porter, there are three fundamental strategies that a company can use to achieve competitive advantage. These strategies include cost leadership, differentiation, and focus. The selection of the most appropriate strategic requires critical decision making. According to CIMA (2013), decision-making is increasingly becoming the foundation of competitive advantage and value creation in an organization. The most common decision –making process draws from the contribution of Mintzberg eat al (1976) and Noorderhaven (1995). According to the model, the decision-making process begins with the recognition of the existence of a problem. The problem is from weaknesses in the business environment. The recognition of the problem greatly relies on the way information the organization gathers and processes information. The identification and recognition of the problem enable the manager to formulate the problem comprehensively. The formulation of the problem determines what and who will participate in the decision-making process. The third stage involves searching viable solution to the problem and identifying the available solution. The search for alternatives relies on the nature and scope of the problem. Some problems may require simple and outright solutions while others may require well-thought strategies. The manager needs to evaluate each of the alternatives to identify which best suit the problem and the current situation of the business. The evaluation process involves critically evaluating which among the three generic competitive strategies is best applicable to the company. The evaluation processes enable the manager to make a choice of the best strategy. The decision-maker need to set the criteria that the ideal decision should meet and eliminate the infeasible solutions. The manager has to consider the negatives (cost, consequences, problem created, and time needed) and positives (money, time-saved, added creativity or customer satisfaction) characteristics of every viable alternative. There are different routines for choosing the most viable alternative. The key modes for making choices include bargaining, judgment, and analysis. The manager needs to implement the choice. The actual implementation of the choice has the greatest impact on an organization in terms of resources, time, and energy. There are numerous ways of implementing the strategy, and the stakeholders have to decide the best strategy to use. Once a manager chooses an alternative and decides how to implement it, the manager allocates the necessary resources to achieve the goal of the strategy. However, getting to the point of deciding the best strategy is often long, complex, and challenging. Often, decisions are long term, highly unstructured and involve inherent risks. Numerous manager’s attributes affect the decision-making process. Several books and researchers identify perceptions of risks and emotions as key factors that influence the decision-making process’. A risk is a multidimensional construct that is often associated with dimensions such as dreadful, unfamiliar and uncontrollable. According to Slovic (1996), managers who have less trust in government, institutions, and authorities perceive risks and hazards as greater than managers who trust these institutions. A number of personal traits of a manager affect the decision-making process. Personal traits affect the strategic choice made by the manager. According to the “top management theory” personal traits include demographic traits such as age, education level and specialization and personality traits such as openness, extraversion, and agreeableness. Several studies have shown the relationship between the age of the manager and decisions they make and their general attitudes. Child (2005) notes that young people are open to ideas and novelties while old people tend to protect the status quo (are conservative). The education level and experience of the manager affects their strategic choices. Managers who have adequate training make effective decisions. Experience improves the quality of decisions. Experience relate to the seniority and maturity of a manager. Extrovert managers are good at creating social relations, and they are warm and compassionate. On the other hand, introvert managers are cautious and demure. Extroverts like utilizing opportunities and are excited about people and opportunities. Neuroticism indicates the stamina of person to withstand stress. It includes traits such as calmness, self-certainty and the feeling of being secure. Managers with low neuroticism are less endurance to stress while managers high on the trait are calm and less reactive to stress.

Businesses operate within dynamic and ever-changing environment. They have to adjust and adapt to the changing environment through a number of strategies. Firms that can match their strategy with the environment can improve their profitability. The business basic mission or scope should align with its environment and aim at achieving a competitive edge. Environmental uncertainty plays a vital role in the formulation of strategy, and it affects the availability of resources and the value of its competencies and capabilities. It also affects consumer needs and industry competition.

Conclusion

In a competitive global business environment, organizations and businesses need to achieve competitive advantage to maintain their profitability. The development of a competitive advantage involves making strategic decisions that are a result of strategic planning. Strategic planning involves the definition of measurable and specific goals and objectives, evaluation of the current business environment, formulation of a strategy depending on the environment scan and implementing the strategy. The strategy needs to be evaluated and monitored consistently to ensure they adapt to the current business environment. The entire strategic planning process relies on the decision-making process. The ability of a manager to make effective decisions relates personal traits such as demographic characteristics, risk perceptions, and emotional status.

References

Ahmad H (2012). The main factors beyond decision-making. Journal of management research. Vol.4 (18).

Vroom V & Arthur J (1974). Leadership and decision-making. Decision sciences institution

Hill C & Gareth J (2010). Strategic management theory: an integrated approach. Cengage learning.

Carolyn Morgan is the author of this paper. A senior editor at MeldaResearch.Com in custom research paper services. If you need a similar paper you can place your order from urgent essay writing service.