The Benefits Of Strategic Planning Business Essay

The Benefits Of Strategic give Business EssayFormal strategicalal be after is affected by the macro- environs and this is the highest level layer in the mannikin, this consists of a wide range of environmental work outs that impact to some extent on al close all organisations. The PESTEL framework basis be used to describe how future trends in the Political, Economic, Social, Technological, surroundings and Legal environments might affect an organisation. Pestel synopsis provides the broad date from which chance on drivers to sort bottomland be identified. By using these severalise drivers organisations basis envision scenarios for the future. Scenarios fucking be used to help organisations decide if change needs to happen depending on the different ways in which the personal line of credit environment may change.It is important for managers to psychoanalyze these factors in the present and how they ar likely to change in the future. By analysing these, managers w ill be open to d stark(a) out implications for the organisation.Pestel factors ar sometimes linked together i.e. scientific factors throne impact on economic factors. It is necessary to identify the key drivers of change these atomic number 18 environmental factors that argon likely to have a high impact on the success or failure of the strategy. get wind drivers vary by industry i.e. Primark may be concerned by social changes that can change customer tastes and behaviours.The critical issues atomic number 18 the implications that are drawn from the understanding in guiding strategic decisions and choices. The next submit is drawn from the environmental synopsis specifically strategic opportunities and holy terrors for the organisation.Having the index to identify these opportunities and threats is extremely valuable when thinking rough strategic choices for the future. Opportunities and threats form iodine half of the swot up compend that shapes a companys formulati on.The use of SWOT analysis can help summarise the key issues from the business environment and the strategic cap capability of an organisation that are most likely to impact on strategy development. Once the key issues have been identified an organisation can whence assess if it is capable to deal with the changes taking place inwardly the business environment. If the strategic capability is to be understood the business essential(prenominal) remember that it is not absolute plainly relative to its competitors. SWOT analysis is only useful if it is comparative, that is it examines strengths, weaknesses, opportunities and threats. SWOT analysis should help focus give-and- acquire on the future choices and to what extent an organisation is capable of supporting these strategies. SWOT analysis should not be used a substitute for more in-depth analysis.In responding strategically to the environment the goal is to reduce identified threats and withdraw advantages of the best opp ortunities.Peter Drucker (1954), discussing the importance of business policy and strategic formulation in his book The Practice of Management says we cannot be content with plans for a future that we can foresee. We essential prepare for all possible and a just many impossible contingencies. We mustiness(prenominal) have a workable solution for anything that may come up.By taking advantage of the strategic gap (which is an opportunity in the private-enterprise(a) environment that has not been amply endeavored by competitors) organisations can manage threats and opportunities.Core competencies are a set of linked business swear outes that deliver superior value to the customer, when these are combined they create strategic value and can lead to warring advantage. By using Porters louver forces analysis which is a framework for organisations to analyse industry and business strategy, they can draw upon the five forces that determine the competitive intensity and therefore attractiveness of a market. Three of Porters five forces tinge to competition from external sources and the other two are internal threats.This analysis is just one part of the complete Porter strategic good event the others include the value chain (VC) and the generic strategies.According to Porter (2008) the work of a strategist is too understand and cope with competition even so managers define competition too narrowly as if it has occurred only among nowadays direct competitors. Competition goes beyond profits to include competitive forces much(prenominal) as customers, suppliers, potential entrants and substitute products the extended rivalry that results from all five forces defines an industrys structure and shapes the nature of competition within an industry. For example Apple are good at technology and innovation therefore they can take the opportunities that give them competitive advantage and cast offs them leaders compared to Samsung or Nokia.Porters says there are 5 forces that shape the competitionThreat of new entrantsBargaining military group of customers powerful customers ordinarily bargain for better services which involve salute and togmentBargaining power of suppliers may determine the cost of raw materials and other inputs effecting profitabilityRivalry among competitors competition influences the pricing and other be like advertising etc.Threats from substitutes where-ever substantial investments in RD is taking place, the threat of substitutes is expectant. It overly affects profitability.Competitive advantage is the heart of strategy and for the strategy to pull ahead the organisation should have applicable competitive advantage.We can see an example of this with Toshiba who operate in electrical goods, through a flexible manufacturing agreement it manufactures different products / varieties of some products on the same assembly lines. At Ohme it assembles ball club varieties of computers on the same line and on the adjacent line it assembles 20 varieties of lap top computers.It is able to switch from one product / variant to another instantly at low cost and makes profits on low volume runs too. This flexibility of Toshiba to respond quickly and easily to the closely changing market demand is definitely one of its competitive advantages. Whereas its competitors make profits only through long volume runs of a special model.yet, there are a lot of companies who are choosing not to invest receivable to the box however Lidl and Aldi are taking advantage of supplying cheaper products giving them competitive advantage over say Waitrose.Benefits of Strategic formulationEffective strategic planning can positively improve the implementation of an organisation and give them the ability to serve more clients, access extra resources or enhance the quality of service/product. It can also quip solutions to major organisational issues or challenges and gives stakeh aged(prenominal)ers of the or ganisation an opportunity to develop harmonic solutions to long-term issues/challenges that have been affecting the organisation. Furthermore it stomachs for forward thinking, allowing an organisation the opportunity to go bad and revisit the mission and create long-term vision. It allows clear future mission allowing stakeholders to look to the future, plan and respond to changes.EvaluationOne of the major draw abides of ceremonious strategic planning is the uncertain dynamic environment, things change constantly and everything becomes shorter. The recession at the present time is making everything unpredictable and this is not good for strategic planning.According to Mintzberg (1994) strategic planning should be used to fig out and implement the competitiveness of each business unit.Scientific management was pioneered by Fredrick Taylor (1856-1915) and involved separating thinking from doing and thus creating a new function staffed by specialists. Planning systems were expec ted to produce the best strategies as well as step by step instructions on how to achieve this, but this never worked well. According to Mintzberg strategic planning is not strategic thinking, the most successful strategies are visions, not plans.When an organisation can differentiate surrounded by planning and strategic thinking they can then get back to what the strategy making process should be. Once a manger has the ability to learn from all sources around him, including personal experiences and market research and can integrate this into a vision of the direction that the business can then pursue.Mintzberg suggests that strategic planning is a misconception and rests upon three unsound arguments that prediction is possible, thats strategists can be detached from the subjects of their strategies, and that the strategy-making process can be formalised.Strategic thinkers can apply lessons learned from Mintzberg (1994) three inherent fallacies of traditional planningThe phantasm of Prediction is the assumption that we can actually ascertain events through a formalised process that involves people engaged in creative or even routine work and can manage to stay on the predicted course. You need more than hard facts you need the personal touch. People are not objective, they are complex.The phantasm of Detachment is the assumption we can disjoined the planning from the doing, if the system does the thinking, then strategies must be detached from the tactics. cooking from implementation, thinkers from doers. One objective is to make reliable senior managers receive relevant information without having to immense themselves in the details. One fact is innovation has never been institutionalised and systems have never been able to reproduce the synthesis created by the entrepreneur or the ordinary strategist and probably never will.The Fallacy of Formulisation suggests that systems could certainly process more information, at least hard information. However they could never internalise it, comprehend it, and put it all together. Such control is more a dream that a reality. Reality tells us that anomalies, the quicksilver(a) behaviour of humans and the limitations of analysis play a huge factor in the organisational outcomes and to disregard them is risky and could lead to incomplete planning.What are the limitations of strategic planning when things are changing rapidly?The limitations of formal strategic planning can be seen if the future is uncertain and the expectations divert from the plan. in that location could also be internal resistance to formal strategic planning payable to factors includingInformation flows, decision making and power relationships could be unsettled veritable operating problems may drive out long-term planning effortsThere are risks and fears of failureNew demands will be placed on managers and staffConflicts with the organisation are exposedPlanning is expensive in time and moneyPlanning is difficult and hard workThe entire plan limits choices and activities for the organisation in the futureCONCLUSIONSThe question posed seems to be is strategic planning worthwhile. The answer to this lies within the organisation and is dependent upon size. It seems that the ability to learn and implement strategies contributes to the business performance of small or modal(a) sized companies in a dynamic industry.Leadership is important and organisations now have to deal with dynamic and uncertain environments. To ensure success organisations must be strategically aware. They must understand how changes in their competitive environment are unfolding. They should constantly be on the lookout for new opportunities to exploit their strategic abilities, build on awareness and understanding of current strategies and successes. Organisations must be able to respond quickly in response to opportunities and threats.Organisations must compete effectively and out-perform their rivals in a dynamic environm ent they must find suitable ways for creating and adding value for their customers. Overall they must be flexible. Organisations could think about changing their strategy to an emergent strategy which would allow them to adapt to new ideas and according to change. Emergent strategy implies that an organisation is erudition what works in practice. An example of this is Groupon who provide daily deals in large cities and in return Groupon get a percentage of the deal usually 50% from the company providing the deal. The company is on track to make $500M in revenue this year and has raised its last round at a $1.35B valuation. Groupon is an example of an emergent strategy which has transformed several times.Organisations could think about downsizing production before closure as companies are killed due to an uncertain dynamic environment.In an article labelled The Real take account of Strategic Planning one manager said our planning process is like a primitive tribal ritual there is a lot of dancing, waving of feathers and beating of drums. No one is exactly sure why we do it, but there is an almost mystical believe that something good will come out of it. Another said, Its like the old Communist system We pretend to make strategy and they pretend to practise it. Henry Mintzberg has gone so far as to label the give voice strategic planning an oxymoron. He notes that real strategy is made colloquially in hallway conversations, in working groups, and in quiet moments of reproval on long plane flights and rarely in the panelled conference inhabit where formal planning meetings are held.