• 18Sep

    What is strategic planning?

    Most managers today acknowledge the importance of strategic planning for the long-term growth and well-being of the company. Managers have discovered that if they precisely define the mission of their organization, it allows people to better understand and focus their activities to achieve the desired result. The outcome is better and faster functioning organizations that are more flexible and prepared for changes.




    Aspects of the strategy

    Strategy can be defined by two aspects: the first is what an organization intends to do, and the other  is what the organization ultimately does regardless of whether these actions have  been planned or not.

    The first aspect of the strategy covers a broad program of defining and carrying out the organizational goals, as well as an attempt to define processes that need to be implemented to achieve these goals. That definition involves managers and includes the active, conscious and rational role they have to play in organizational strategy development. That might be the moment when, for example, Toyota managers decide that they should make all their cars red. Probably not a very wise decision, but you never know… :)

    The second aspect refers to a strategy as “a model of the organization’s response to its environment during the time”. According to this definition, each organization has a strategy (although not necessarily an effective one) even if the strategy is not explicitly defined and developed. Each organization has an effect on the environment, planned or not. This aspect also involves managers, but it is a bit more focused on their  responsive behavior – managers should respond and adapt to the environment and potential problems that may arise. That is the phase where Toyota managers need to overcome all difficulties and do everything to make every Toyota car red ;).

    Process of strategic management

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    Every organization needs a mission – the answer to the questions: why are we here and where do we want to go?

    Usually the process of strategic management includes six stages that management of every company should consider. Those are: mission of the company, external and internal analysis, formulation of the strategy, strategy implementation and evaluation.

    Every organization needs a mission – a goal of the organization. Mission is the answer to the questions: why are we here and where do we want to go? Defining a mission determines the reason why the company is in business. For example, the mission of Avon is to offer products that meet the needs of women on the global level and satisfy female customers.

    Second stage is the external analysis. It refers to the process of analyzing the environment outside the organization like competition or legislation that might have an impact on the business. While analyzing the environment, the organization makes an effort to identify possible opportunities and threats that might influence the organization. For example, Apple might decide that their greatest concern is a new laptop model presented lately by Samsung.

    Internal analysis includes reconsideration of the situation inside the organization: resources, finances, structure, managers, etc. While analyzing the internal aspects of the organization, on one side the management tries to identify the strengths and advantages of the company, and on the other side, the weaknesses that might have a negative influence on the organization. For example, Apple management might notice that hiring another five managers and only two developers might have not been a good idea ;). Internal and external analysis done together are also known as SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats).

    After examining external and internal aspects of the organization, the next step is to formulate the strategy. During this process, management needs to decide which alternative is the best one to follow. In other words, management needs to formulate the strategy that relies on strengths and needs to eliminate the weaknesses of the organization.

    When strategy is formulated, it is time for implementation. Regardless of whether the strategy is good or bad (as that is not known yet, we might only presume it is good), it must be well implemented. It is important that all the people responsible for implementation are familiar with the strategy concept and know exactly what is expected from them. Another important aspect of the implementation is the leadership – a great leader should inspire and lead all the people in organization to accomplish the set goal. Even if the goal is to make all the cars red :).

    At the end of the process of strategic management, there is time for the evaluation of the strategy: Was the strategy effective? What has been done wrong? What optimizations need to be performed in the organization in the future? These are only a few questions that need to be considered after all the activities are done and the result is achieved. Evaluation of the strategy is very important as it indicates hidden weaknesses in the organization. It also helps management make corrections that can significantly improve performance in the future. For example, during such analysis at Toyota it might turn out that it would be better if the cars for men stayed black and for the ladies – pink :).

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