Strategic planning is an important activity of managers of all organizations. Managers and directors periodically plan the short-term and long-term goals of the business and the organization.
This includes projects and goals. Project managers, product managers, marketing, and sales participate as competent specialists in middle management.
All together they submit their reports and the ultimate goal is a common strategic plan of the organization.
What is the strategy of the organization?
The word “strategy” comes from the Greek “strategos”, which means “the art of the general.” Strategic planning emerged as a concept in the late 1960s.
A strategy is a plan of action in a specific situation to defeat the opponent. Strategic management is a means to achieve and maintain a kind of “social contract” between all related in some way to the functioning of the organization.
It is a continuous process that consists of a series of activities:
- Strategic planning;
- Choice of strategy;
- Strategy update.
Strategic planning is a choice of actions and decisions taken by management that lead to the development of specific strategies aimed at achieving the goals of the organization.
Strategy is the product of strategic planning. It is a detailed, comprehensive, comprehensive plan that is designed to ensure the implementation of the mission and the achievement of its goals.
The strategy is formulated and developed by senior management but is implemented with the participation of all levels of government.
It gives the organization individuality and specificity, which allows it to attract a certain type of collaborators.
Stages of strategic planning in organizations
The strategy must be comprehensive over a long period, but also flexible enough. The strategic planning process goes through the following stages:
- Choice of goals of the organization;
- The mission of the organization;
- Assessment and analysis of the external environment;
- Analysis of the strengths and weaknesses of the organization;
- Development and analysis of strategic alternatives;
- Choice of strategy;
- Implementation of the strategy;
- Evaluation of the strategy.
Solutions in the planning process
The first and most important decisions in the planning process are the choice of goals of the organization.
The main common goal of the organization, which is the reason for its existence, is its mission.
The wording of an organization’s mission should include – the tasks of the organization in terms of its core products and services, core markets and core technologies, the external environment concerning the organization, which determines the working principles of the organization, and the culture of the organization.
Objectives must have the following more important characteristics – be specific and measurable; time-oriented – long-term, medium-term, and short-term; to be accessible and not to contradict each other.
Diagnostic stage of the strategic planning process
After formulating the mission and goals, the leadership should start the so-called. diagnostic stage of the strategic planning process, the first stage of which is the analysis of the external environment.
It is a process by which the developers of the strategic plan “control” the external factors concerning the organization to determine the opportunities and dangers.
The analysis makes it possible to predict the possibilities, it also gives time to develop a plan in case of unforeseen circumstances, time to develop an early warning system in case of possible dangers, and time to develop a strategy.
The dangers and opportunities faced by an organization are divided into seven areas: economic factors including inflation rates, employment rates, international balance of payments, stability of the national currency, etc .; political factors; market factors such as changing demographic conditions, the life cycle of various products or services, market share, etc .; technological factors; international factors; competition and social factors.
Every organization also encounters a problem in analyzing the internal strengths and weaknesses of the organization. It is done through marketing; finance; production; Human Resources; culture and image of the organization. Reference: “Aligning people with organizational strategies”, https://bvop.org/learn/aligningpeoplewithstrategies/
Strategic alternatives for managers
After comparing the internal strengths and weaknesses of the organization, managers should determine the strategy to follow. In principle, the organization has four main strategic alternatives – limited growth, intensive growth, downsizing, and a combination of the previous three.
Limited growth strategy – this is an alternative to which a large number of organizations adhere, it is characterized by the formulation of targets reached, adjusted for inflation. It is applied in the so-called “mature” industries in established static technologies;
Intensive growth strategy – implemented on an annual basis, significantly raising the level of short-term and long-term goals above the level of the previous year. It is applied by managers who strive for diversification, ie. selection of new industries in which the organization should enter and deciding on the way of entering these industries
Reduction strategy (last resort strategy) – this alternative has the following options: liquidation, ie. full sale of inventories and assets of the organization, elimination of surplus, reduction and reorientation;
A combination of limited growth, intensive growth, and liquidation – this strategy is typical for large companies.
The Boston Consulting Group matrix or the portfolio analysis matrix is most often used to select a strategic alternative.
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The Growth to Share Matrix, better known as the Boston Consulting Group Matrix, is the most popular matrix developed and used by the world-renowned Boston Consulting Group. It was created by Bruce Henderson in 1970. The matrix is used in strategic planning to make decisions about the future development of a product, project, or even department.
This matrix uses a simple two-dimensional space with four quadrants. The compared dimensions are market growth to market share, as each product of the company is positioned relative to them. As a result, the product can be classified as:
“Star” – the product has a high market share, which is growing. This is a highly promising product that deserves further development.
“Dairy cow” – the product has a good market share, but no market growth. It brings revenue but does not have many prospects, so it is not recommended to make efforts for further development.
“Dog” – low share and short stature. This is usually a product we want to get rid of but can’t (eg we have to guarantee support, strategic customers require it).
“Questionable” – products with a low share but potential for growth. Such products are still unclear and risky. It is recommended that decisions related to them be postponed if possible until they become “dogs” or “stars”.
Once management is aware of all possible strategic alternatives, it should choose one of them. The strategic choice is influenced by the following factors – risk, knowledge of past strategies; the reaction of the owners; the time factor.