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STRATEGIC PLANNING

Strategy?

Formal Statement of specific plans. Strategic Planning? The process of preparing and revising this statement is called Strategic Planning. It is a process of deciding on the programs that the Organization will undertake and on the approximate amount of resources that will be allocated to each program over the next several years

Relation to Strategy Formulation


Strategy Formulation is the process of

deciding on new strategies, whereas Strategic planning is the process of deciding how to implement the strategies.
Eg: Organization thinking on diversifying through acquisition or through organic growth.

Strategy formulation should be an activity in which creative, innovative thinking is strongly encouraged Strategic Planning is systematic, it has prescribed procedures and timetables.
Formulation is unsystematic. It may be

formulated to perceived threats and opportunities. Thus a possible strategy may be surfaced at anytime from anyone in the organization.

Evolution
In 1950s, Strategic planning process was

considered as unsystematic and it was not done in a coordinated way. It was difficult to understand certain requirements such as: Staff, Budget, Time, Effort etc. At present many organization are gaining the advantage of Strategic Planning for next 3-5 years. Eg: Cost leadership strategy.

Benefits
A framework for developing annual budget. A management development tool. A mechanism to force managers to think long

term. A means of aligning managers with long term strategies of the company.

Limitations
Planning can end up becoming a form filling,

bureaucratic exercise, devoid of strategic thinking. Organization may create a large strategic planning department and delegate the preparation of the strategic plan to the staff department. It is time consuming and expensive.

Characteristics
Top management should be convinced that it

is important. Small organizations need not need but large organizations it is relatively necessary. Uncertainty always exists, planning should be flexible.

Program structure
Programs are products or product families,

plus R&D, general and administrative activities, planned acquisitions etc. In service organizations, programs are referred to types of services. Most of them prepare rough plans upto 5 years or above, some have only for next 3 years. Because of the relatively long time horizon only rough estimates are possible.

Organizational relationships
Primary purpose is to improve the communication between corporate and business

unit executives by providing sequence of schedules. For some Controller prepares the planning while others have separate planning staff. Strategic planning requires analytical skills and a broad outlook. Even if there is a planning staff, controller usually does the work of disseminating guidelines and assembling the proposed numbers.

Chief executives are always kept in the loop.

Analyzing proposed New Programs


Ideas can originate anywhere in the

organization. As ideas come from the wide variety of sources, the atmosphere needs to be such that ideas come to light and receive appropriate management attention. A highly structured, formal system may create the wrong atmosphere for this purpose. A system should be flexible and receptive enough.

Organization for analysis


A team may evaluate extremely large and

important proposals, and the process may require a year or more. A huge hierarchical structure is involved. The CEO may also return for further analysis several times. Thus consuming lot of time. Recent work in the rapidly developing field of expert systems uses computer software in the analysis of proposed programs.

The computer tabulates the results and

uncovers inconsistencies or misunderstandings and raises questions about them.

Analyzing ongoing Program


Value chain Analysis:

The value chain for any firm is the linked set of value creating activities of which it is part, from acquiring the basic raw materials foe component suppliers to making the ultimate end use product and delivering it to the final consumers.

From the strategic planning perspective, the value chain highlights three potentially useful areas:
1) Linkages with suppliers 2) Linkages with customers 3) Process linkages within the value chain of

the firm.
1) Linkages with the suppliers: Taking advantage of opportunities can lower costs, increase value or both.

2) Linkages with Customers:


3) Process linkages with the value chain of the firm: the overall objective of this analysis is to move materials from vendors through production and to the customer at the lowest cost in the shortest time and of acceptable quality. Efficiency Inward portion: Factors that precedes production Efficiency Outward portion: From factory door to the customer

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