The Concept of Strategic Planning and Its Relevance

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Table of Contents

Abstract
Introduction
Definition of Strategic Planning
Strategic Planning for Small businesses and Improved Performance
Pitfalls of Strategic Planning
Conclusion
References

Abstract

The purpose of this essay is to analyse the concept of strategic planning and its relevance to the activities of an organization. Strategic planning has been viewed as an important cornerstone in the decision making activities of an organization. It enables an organization to achieve its goals and objectives through the development of plans. These plans can either be long term, medium or short term depending on the type of business and the context that strategic planning will be used in.

Introduction

Strategic practitioners recognised the importance of strategies in the processes and operations of an organization which saw a lot of emphasis being placed on strategy which later saw the development of strategic planning as an organizational concept. Strategic planning slowly replaced corporate planning which mostly involved developing formal plans that lacked any strategic focus. This change was largely due to the emphasis placed on the planning activities of an organization.

The relationships that were meant to result from this change sometimes could not be achieved. Researchers found that only few organizations were able to succeed in achieving their goals and objectives through the use of strategies. Practitioners of strategic planning have founded their research efforts on the assumption that the creative task of formulating and implementing strategies can be designed into a series of actions referred to as planning that will lead to results that can be repeated in the future.

Definition of Strategic Planning

Strategic planning is a technique that is used to organize the present activities of an organization to reflect the desired future projections of what the organization wants to achieve over a certain period of time. A strategic plan is a map or guide that will be used to lead the organization from where it is now to where it would like to be. Strategic planning mostly focuses on the external environment of an organization.

Since every organization has different activities and operations that set it apart from other companies, the strategic plans of every organization will therefore be different from that of the other organization; therefore Strategic planning systems will be designed to deal with the unique characteristics of organizations (Samson and Daft 2009).

Strategic planning is derived from strategy which is the layout of a plan or set of actions that will be used by the organization to achieve their objectives. Strategic planning is the systematic and formalised effort made by an organization to develop detailed plans that would be used to implement the objectives, goals, strategies, and policies of an organization (Wittman and Reuter, 2008). Planning deals with looking at the future results of current decisions that are made by decision makers.

This means that strategic planning provides managers and people in positions of decision making with the cause and effect of consequences that would occur over time if that particular decision was made. If the decision maker does not like the results of the decision, he can easily change it to one that would yield positive results. Strategic planning looks at the alternative courses of action that are available in the future and what options are chosen from these alternatives, they are used as a basis for making present day decisions

Grunic and Kuhn (2008) viewed strategic planning as a process that began with the identification of objectives and goals which later led to the development of organizational strategies, plans and policies that would be used to achieve these goals.

Strategic planning was seen to be a process of making decisions in advance that would determine what kind of planning activities would be undertaken and how these activities would be done. The process was also systematic as the various activities were organized in a sequence. Strategic planning process was geared towards companies that had their operations and activities in one particular industry within the market.

The basic format of a strategic planning process that is used by most organizations is to first develop the company’s mission, objectives and goals as a first step. Once this is done the organization’s internal and external environment is assessed to determine the strengths and weaknesses as well as the opportunities and threats.

The next step will involve selecting strategies that will be used to deal with the identified strengths and weaknesses as well as the opportunities and threats. The organization should ensure that the identified strategies are in line with its mission ad goals. After the appropriate strategies are identified and developed, they are finally implemented.

Hills and Jones (2009) note that organizations go through a new process of strategic planning every year as a result of changing business environments and the global economy. This however does not mean that new strategies have to be identified and implemented every year. What usually happens in most organizations is that the strategies are modified or reaffirmed since the strategic plan is usually designed for a period of more than five years.

Strategic Planning for Small businesses and Improved Performance

Given all the evidence on the benefits of strategic planning, most small businesses still do not practice planning. Most of the concepts and research on strategic planning have been geared towards helping larger organizations.

Managers of small businesses mostly focus on the short term rather than on the long term strategies. Their decision making technique is characterised to be reactive instead of proactive and deliberate. For those managers who do practice strategic planning, the process is mostly characterised by ad hoc instead of formal activities (Wang et al. 2006).

According to May (2010), small business owners today are realising more than ever that they need strategic planning to make decisions. This has emerged out of their uneasiness about what the future holds for their businesses or the fact that they have attained the present level of small business success without any strategic planning and they don’t feel like proceeding with ventures that they are unsure will yield any profits. Such uncertainties lead them to secure stable and predictable styles of management that mostly involve strategic planning.

The main difference of strategic planning for both the large and small businesses is that the larger organization can financially afford to conduct extensive strategic planning activities which at times might be very expensive while the small business has a limited amount of financial resources. The strategic activities of the smaller organization might be limited or constrained due to finances; the smaller business will also mostly rely on its internal resources do the planning (May, 2010).

Wang et al (2006) conducted investigations on why some small businesses failed in their activities and operations. They noted that the major reason was attributed to the lack of strategic planning and poor business motivation. Previous studies by scholars such as Mintzberg, Crawford and Lefebvre also suggested that formal strategic planning systems in small organizations were absent.

The authors noted that small business strategic planning was mostly characterized by informal planning systems that were unstructured and sporadic. Other characteristics were that the process was viewed to be incomprehensive, incremental and reactive.

Wang et al (2006) note that the motivation for a small business owner to be in business was mostly interwoven with their personal lives. Most small businesses are family owned which shows that the personal motivation in starting the business lies in trying to provide a better life for the business owners and their families. Some of these owner usually lack a business background or the technical known how of running the business. This means that they lack basic strategic planning information.

Such a situation enables the businesses owners and entrepreneurs to get away with developing short term strategic plans for their businesses .Because of the size of the firm and constant uncertainty in the global business environment, small business have a limited ability to control events. That is why their focus is on short term and medium planning instead of long term. The strategic model should be designed in a simple and inexpensive way

Pitfalls of Strategic Planning

The main problems experienced by small businesses when trying to initiate the planning process have been identified as the lack of time and lack of proper strategic planning knowledge. But when managers discover ways to overcome these constraints, strategic planning can lead to the improved performance of the business.

Small business managers need to gain an understanding of the advantages and disadvantages of small businesses which will set a strong foundation for strategic planning activities. The size and simple structure of small firms allows them to increase their responsiveness to external changes.

In discussing the failure of the concept, various studies have been referred to further explain why strategic planning sometimes fails in organizations. One pitfall is that no one study has been found that has assessed the outcomes of deviating from the long range plans.

All studies that have been conducted on the subject do not show whether there has been any negative consequences of not following the long range strategic plan. Another pitfall came from an earlier study that highlighted that while particular companies engaged in systematically planned activities, other organizations that did not engage in strategic planning were able to surpass these companies performance wise; this showed that the best planners did not always perform the best (Dimitrou and Thompson, 2007).

Studies done in the 1970s by scholars such as Malik and Karger found favourable results when strategic planning was used while other studies such as those done by Sheehan, Grinyer and Norburn did not see any benefits of practicing strategic planning. Henry Mintzberg after a review of these studies came up with a conclusion that planning was not the only best way. He noted that in some circumstances it did not pay and that when planning was at its best, it might have had some suitability to particular and not all organizational contexts.

Another pitfall of strategic planning is that most companies find the solutions derived from the formal process of strategic planning to not be what they had actually expected. They usually had a basic idea of the kind of results to expect once the process was done.

Strategic planning makes a majority of the firms today to engage in less risky forms of long range planning in their decision making activities which often at times do not yield the best results. Major criticisms have been drawn to the fact that strategic planning does not in any way contribute to the strategic thinking of major decision makers in organizations.

Many of the benefits that accrue from strategic planning cannot be measured and it is difficult to prove the planning process in absolute terms. This is due to the fact when the planning process is initiated; it becomes hard to compare what has happened with what could have happened. This leads to a lot of speculations and formation of assumptions that are in most cases usually wrong. There is also another pitfall in the form of identifying the amount of costs that have been used in the planning process (Hill and Jones, 2009).

These costs can only be seen if additional profit made by the organization exceeds the additional costs used in planning. Logical expectations of most organizations are that strategic planning will lead the company to be successful in the future; this is a big misconception. Most managers view strategic plans to be the key that will lead the organization to market success which explains why they become devastated when the strategic plans fail (Hill and Jones, 2009).

Conclusion

Planning activities are important to an organization to ensure that everything moves in a systematic and orderly manner. Without planning the members of an organization would lack a guide or plan that would direct them to achieve the organizational mission, vision, goals and objectives. Planning is therefore to be the most important activity that an organization should undertake to ensure that it runs smoothly and effectively. Strategic planning should also be given the same level of importance as general organizational planning.

While strategic planning for organizations has been going on for a very long time, the smaller businesses are yet to catch on, yet planning is very important for an organization to achieve optimum success through the proper utilization of resources.

Strategic planning might have some pitfalls but when used in the proper way and in the right organizational context, it can improve the performance of both large and small businesses. Managers should therefore exercise this concept to ensure the decisions they make now will reflect what the organization wants to achieve in the future.

References

Dimitrou, H.T., and Thompson, R. (2007) Strategic planning for regional development in the UK. Oxford, UK: Routledge

Grunic, R. and Kuhn, R. (2008) Process based strategic planning. 5^th Edition. Berlin: Springer- Verlag

Hill, C., and Jones, G. (2009) Strategic management theory: an integrated approach. Ohio, US: South Western Cengage Learning

May, M.G. (2010) Strategic planning. New York: Business Expert Press

Samson, D., and Daft, R.L. (2009) Management Third Asia Pacific Edition. Australia: Cengage Learning

Wang, C., Walker, E.A., and Redmond, J. (2006) Ownership motivation and strategic planning in small businesses. Journal of Asia Entrepreneurship and Sustainability. Vol II, No.4

Wittman, R. and Reuter, M.P. (2008) Strategic planning: how to deliver maximum value through effective business. London: Kogan Page

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