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THE ROLE STRATEGIC PLANNING

Planning is of great importance to a business organisation if it is to maintain a competitive


edge over its rivals and if it is to survive in the volatile and unpredictable economic and
business environment. The aim of this essay is to ascertain the role and importance of
strategic planning in business. The writer will first define the key terms (planning, strategy,
manager and strategic planning), outline the process of strategic planning and then proceed
to discuss the role and importance of strategic planning, after which a concluding statement
shall be given, to sum up the discussion.

DEFINITION OF KEY TERMS


Planning:
it is a continuous process of thinking and deciding for the future, in advance, taking into
consideration facts, projections and estimates, so as to achieve the desired results. Koontz
and ODonnell (1972) concur, as they define planning as an intellectual process, conscious
determination of course of action and the basing of decisions on purpose, facts and
considered estimates. Planning involves defining the organizations goals, establishing
strategies for achieving those goals, and developing plans to integrate and coordinate work
activities. Its concerned with both ends (results) and means (how).

Strategy-Is a predetermined course of action, taken, with the desire to reach set targets.
Thompson et al (2005) opine that strategy defines how the organization will do what it is in
business to do, how it will compete successfully, and how it will attract and satisfy its
customers in order to achieve its set goals.

Strategic Planning-is an organization's process of defining its purpose, goals and


overalldirection and itsstrategy and general course of action in a bid to achieve those goals,
and making decisions on the allocation of its resources in pursuit of this strategy. Goldstein &
Pfeiffer (1993:400) also define strategic planning as a process by which the guiding members
of an organization envision its future and develop the necessary procedures and operations to
achieve that future.Olsen and Eadie (1982:66) add that it is a disciplined effort to produce
fundamental decisions and actions that shape and guide what an organization is, what it
does, and why it acts as it does and it involves wide-scale information gathering, formulation
and exploration of optional courses of action, and emphasis on the future implications of near-
term decisionswhile Nolan et al (1993), suggest that it includes envisioning and developing
procedures to achieve the future andit is part of the strategic management process. Ansoff,

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(1965:31), further explains that strategic planning involves the alignment of the opportunities
in the organisations external environment and use of the organizations strengths to capitalize
on the environment, according to the organizations capabilities.

THE STRATEGIC PLANNING PROCESS


Strategic planning is a six-step process, according to Robbins & Coulter (2012:99),
thatinvolves planning, implementation, and evaluation. Although the first four steps
describethe planning that must take place, implementation and evaluation are just as
important. Eventhe best strategies can fail if management doesnt implement or evaluate
them properly.It is therefore imperative that great care and expertise is taken during the
planning process, as the success or failure of the organisation is dependent upon the
resolutions that will emanate from the planning process. The following diagram summarizes
the strategic planning process.

(Source: Robbins & Coulter, 2012)

STEP 1: IDENTIFYING VISION AND MISSION:


Every organization needs a Vision. It is a statement of its purpose, defining what it is that the
organisation seeks to achieve. The organizations vision is a birds eye view of the objectives
of the organization and gives direction to and acts as a guideline for the organisation
activities. The Mission statement then translates the Organizations vision into a reality, by
stating how the organisation is going to achieve its vision (Robbins & Coulter, 2012:100).

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STEP 2: FORMULATION OF GOALS & OBJECTIVES:
The nuts and bolts of the strategic planning process are expressed in measurable goals.
Management decides on the targets they want the organization to achieve and these should
be specific, realistic and concrete, expressed in terms of quantities and timelines. This is
important in that it allows management to evaluate progress and pace of developments.

STEP 3: UNDERTAKING OF ENVIRONMENTAL SCANNING:


Management needs to stay alert for changes in its organizations environment. Environmental
scanning is undertaken by way of either a SWOT analysis, PESTEL analysis or using Porters
Five forces model or a combination of all methods, where management looks at the strengths
and weaknesses of the organization (Internal environment), the opportunities and threats in
the external environment, as well as the political, environmental, socio-economic,
technological, legal environment, competition, customer power and supplier power. The
organizations strengths are used to exploit the opportunities in the external environment,
while improvements are done to the organizations weaknesses in order to combat the threats
to the business.

STEP 4: FORMULATION OF STRATEGIES:


Managers formulate strategies, based on the results of the environmental scanning process,
(considering the realities of the external environment and the organizations available
resources and capabilities), linking the strengths to the opportunities at the same time working
on its weaknesses to eliminate the threats and thus help the organization move forward and
achieve its goals. Robbins & Coulter (2012:102) postulate that the main types of strategies
managers will formulate include corporate, competitive, and functional and tactical strategies.

STEP 5: IMPLEMENTATION OF STRATEGIES:


Once strategies have been formulated, they must be implemented. No matter how effectively
an organization has planned its strategies, performance will suffer if the strategies arent
implemented properly.If strategies are to succeed it may require hiring of new employees with
different skills, transferring some employees to new positions and even laying off some and
also, new machinery might need to be acquired in order to meet the demands of the
strategies that would have been agreed upon. Top management support is necessary in
terms financial support if success is to be achieved.

STEP 6: MONITORING AND EVALUATION:


The final step in the strategic management process is to monitor the progress and evaluating
the results from the implemented strategies. Here, the management looks at how effective the

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strategies have been at helping the organization reach its goals and if there are any
necessary adjustments to be made. If the results are not satisfactory or not in line with the
expectations, adjustments will be made so as to align the activities with the goals, vision and
mission of the organisation.

ROLE OF STRATEGIC PLANNING


Planning is one of the most important and crucial functions of management. According to
Koontz and ODonnell (1972:69), Without planning, business becomes random in nature and
decisions become meaningless and impromptu choices. Terry (1973:143) posits that
Planning is the foundation of most successful actions of any enterprise. Strategic planning,
therefore, becomes important and necessary due to the following reasons:

GOAL SETTING:
Goals are desired outcomes or targets and these drive organizations. Koontz & ODonnell
(1972:77) opine that the whole process of strategic planning is meant to come up with a set of
goals that are deemed desirable by the owners and the management of an organization.
When management undertake strategic planning, they take into consideration a lot a variables
from within the organisation and also from without, and finally come up with decisions that
affect the functioning of the organisation. By devising a vision and a mission statement for the
organisation, a clear direction as to what the organisation sets out to achieve can be seen.
From the Vision and Mission, specific goals and realistic targets can be derived. The goals will
then serve as the driving force, as they would in turn dictate how the management and
employees would work, if the vision and mission are to become a reality.

GIVES GENERAL DIRECTION:


Strategic planning gives management a sense of direction that enables them to clearly see
where the organization is headed and where the future will lead it and also provide
management and the organisation with a vision and a plan for how to reach predetermined
goals. It also includes smaller milestones (objectives) that need to be achieved before the
larger goals can come to fruition. Ansoff (1965:33) advances that when explicit plans are
clearly laid down, a clear route or course of action to be followed appears. This then helps
managers to plan for the day to day activities of the organisation, taking into consideration the
available resources and the broad objectives that would have been agreed upon by the
organization. Without a sense of direction, an organization will spend its time moving around
in circles and reacting to problems, thus, taking hurried and uninformed decisions that may be
very costly.

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FACILITATES MANAGEMENT BY OBJECTIVES:
Management by objectives refers to the use of mutually agreed goals and objectives as a
basis of evaluating employee performance (Romani: 1997; Schrader & Seward; 1989). As
strategic planning helps in the determination of objectives, it highlights the purposes for which
various activities are to be undertaken and helps in focusing the attention of employees on the
objectives and broad goals of the organisation. Since the major focus is on goal and objective
achievement, employees are evaluated on how well they accomplish these specific goals that
have been agreed upon. For the manager, this has the advantage of making sure that
everyone works and puts the maximum possible effort towards achieving the set goals rather
than on other activities that do not contribute to the success of the organization.

RESOURCE ALLOCATION:
When clear and concise plans are laid down, the management will be able to know what
resources and how much resources are needed to carry out certain tasks in the organization.
Resources are paramount in the achievement of organizational goals and objectives. Without
the right and adequate resources, organizational projects and programmes will suffer and not
yield the required and expected results. When strategic planning as been done, tasks and
activities can be graded according to their needs and importance and as such resources will
be allocated to the various activities accordingly (Russel & Taylor, 1995:88). This has the
advantage of making sure that no activity is starved of the necessary equipment, resources
and personnel and therefore optimum resource utilization will be achieved.

REDUCES/ELIMINATES UNNECESSARY WASTAGES:


When resources are allocated in a way that allows for optimum utilization, little or no
wastages are incurred. Strategic Planning helps in knowing and determining what resources
and how much resources are to be allocated to a certain department and towards a certain
activity (Russel & Taylor, 1995:87). Thistherefore, leads to best possible utilization of
resources, thus improving on quality of production and reducing possible and unnecessary
wastages across the whole organization, were possibly the wrong resources would be
allocated, or more than the needed (surplus) resources are allocated towards a certain
activity. Wastage of resources is also eliminated by selecting the most appropriate use that
will contribute positively to the objective of organization. When wastages are eliminated or
reduced, the organization saves on resources and thus leading to profitability.

HELPS IN AWARENESS OF THE BUSINESS ENVIRONMENT:


For an organisation to thrive, managers have to and must be aware of both the internal and
external environment of their organisation. These affect the organisation in its daily execution

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of its strategy and thus should be given due consideration. By undertaking the environmental
scanning stage of the strategic planning process, managers become aware of and establish
to what extent and how the general environment has an impact on the activities of the
organisation (Robbins & Coulter, 2012:112). External factors like legislation, competition,
economic policies, politics, social behaviour, technological changes and the likes all affect the
business, whether directly or indirectly, and managers should be aware of their impact on the
business. Moreover, managers must be aware of internal factors like staff, skills, finance
systems, ethics, organisational culture and products, to cite a few. These also affect the
organisation and managers should be well aware of the impact they have on the daily
activities of the business. Strategic planning brings these to the forefront and when SWOT
analysis has been carried out, managers will have a clear idea of how to deal with them
before they can adversely impact the organisation.

GIVES COMPETITIVE EDGE:


Robbins & Coulter (2012:102) advance the opinion that strategic Planning gives the
organization a competitive edge overits competitors and rivals. This is because during the
strategic planning process, decisions to change production techniques, work
methods,product/service quality, quantity, designs, staffing and personnel changes and
extension of work can be adopted and even the redefining of goals and objectives, etc.With
the help of forecasting not only does the organisation secure its future, it is also able to predict
and estimate the future moves of its competitors and the general trends in the industry and
economy in which it operates, thus the organisation can counteract and beat the competition
and the industry,and have contingency plans in place which will help in facing future
challenges should there be changes in the external and internal environment alike..

BUDGETING:
A budget is a numerical plan for allocating resources to specific activities (Russell & Taylor;
1995:322), thus budgeting is planning for resource allocation. Budgeting is one of the most
critical elements in the day to day running of an organization as it has a direct bearing on the
results of the organizations plans. It is imperative that the management gets the budgets right
as resource allocation stems out from the budget. When strategic planning has been carried
out effectively, managers will have correct and concise figures regarding to the funds and
resources that would be needed to carry out the organisations strategic plan. If they get it
wrong in the budgeting phase, it is likely that the organisation will face challenges in pursuit of
their goals and objectives.

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HIRING AND STAFFING IS MADE EASY:
During the environmental scanning stage of the strategic planning process, an internal skills
audit is conducted. This is where the management look at all its human resources (personnel)
and try to match each employees skills against the work and duties that arise as a result of
the new strategies that will have to be adopted by organisation, so as to determine the right
job/work and duties of each and every employee. For strategies to be effective, management
will have to match each employee to their right duties according to their expertise and
experience. Sometimes, it becomes necessary for other employees to be retrenched if they
are deemed surplus to requirements or if they do not meet certain required standards and at
times it would also be necessary to hire new employees who possess certain skills that would
be required in order to achieve the set targets, objectives and goals.

FACILITATES COORDINATION AND ACTIVE PARTICIPATION:


Strategic Planning revolves around attainment of organizational goals (Goldstein & Pfeifer,
1993:401).Good plans unify the interdepartmental activity and clearly lay down the area of
freedom in the development of various sub-plans. Various departments work in accordance
with the overall plans of the organisation. Thus, there is harmony in the organisation, and
since all activities are directed towards the achievement of common goals, this leads to an
integrated effort throughout the organizations various departments. This in turn helps avoid
duplication of efforts and conflict of jurisdiction, leading to better co-ordination and productivity
and profitability. Strategic planning also helps managers find out problems of work
performance and aims at rectifying the same.

REDUCTION OF UNCERTAINTY
The future is always full of uncertainties. A business organisation has to function in these
uncertainties. It can operate successfully if it is able to predict the uncertainties. Some of the
uncertainties can be predicted by undertaking systematic forecasting. Thus, strategic planning
helps managers in foreseeing uncertainties which may be caused by changes in the business
environment, be it changes in technology, fashion and taste of people, government rules and
regulations, legislature, economic changes etc.

ALLOWS FOR INNOVATION:


During the planning process, managers come up with new, innovative and creative ideas of
doing things and going about day-to-day business. This improves the overall functioning of
systems within the organisation, thus saving time and valuable resources. When new ways of
conducting business are discovered, the organisation attains a competitive edge over its rivals

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and competitors. This creates a forward-looking attitude among the managers and spurs and
propels the organisation forward towards goal achievement.

CRITIQUE OF STRATEGIC PLANNING


Strategic planning has been used as a tool for revitalizing and transforming organizations, be
it multi-national corporations, government agencies, nonprofits and small to medium
organizations. However, there has been a rise in skepticism about planning. Since strategic
planning targets the long term, many factors come into play to render such ineffective, and
these include:

UNCERTAINTY:
Political and economic uncertainty is the norm and order of the day. One day, the political and
economic climates are favorable, and on the other, things change. These changes in the
landscape happen on a daily basis and it is difficult to keep pace with these, such that
management plans can be adversely affected by these rapid changes, and as such the
organization may fail to attain it goals and objectives.

THE WORLD IS NOT STATIC:


The assumption that the world will hold still while a plan is being developed and then stay on
the predicted course while that plan is being implemented is a misleading notion (Evans;
2007:58). In fact, the environment within which all organizations operate, far from being
predictable and static, keeps changing at an ever-faster rate, meaning that plans can quickly
end up out of date or irrelevant. This risks reification the tendency for a plan to become an
end in itself that must be pursued even when unexpected changes in the environment
invalidate the assumptions on which it was based. Following the blueprint becomes a
substitute for addressing the realities facing the institution.

PLANS CANT BE DEVELOPED FOR A DYNAMIC ENVIRONMENT:


Technological and social changes have accelerated to unimaginable speeds. There is some
disillusionment with planning efforts that cant keep pace with the rapid change in
technological advancements (Robbins & Coulter, 2012:103). Because of these
advancements, new and better ways of doing things arise everyday and these cannot be
predicted, planned and budgeted for. It therefore makes it difficult and makes less sense to
plan, considering that tomorrow the environment might be different from what it is today.

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FORMAL PLANS CANT REPLACE INTUITION AND CREATIVITY:
Another fallacy of strategic planning is the assumption that structural systems and a rational
sequence, (from analysis through to administrative procedure to eventual implementation),
are superior to human judgment, intuition and creativity. In practice, however, formalized
procedures almost never forecast discontinuities or create novel strategies (Mintzberg;
1994:109). Rather, they incline planners to concentrate on means rather than ends, on how to
do things rather than on why to do things and on better ways of pursuing current objectives
rather than reconsidering which objectives should be pursued

CONCLUSION
Planning is important, in that it sets out a road map for an organization and gives it focus and
goals to target. It is important that an organisation has a purpose for existence; otherwise, all
activities will be meaningless. Also, strategic planning gives the modern day manager the
tools for control and for leading his subordinates. By setting out goals and objectives, all
within the organisation have targets and that is to attain the set goals, thus managers will
have a basis for control and assessment of the effectiveness of their employees and methods.

Moreover,strategic planning provides a base from which progress can be measured and
establish a mechanism for informed change when needed. Finally, as the old saying goes,
failing to plan is planning to fail, if managers fail to plan, it would be difficult to tackle and take
on the everyday challenges in the business world, since they would not be anticipated, but if
strategic planning has been done, and diligently so, the manager can easily anticipate these
challenges and thereby have counter measures for such problems as he faces them on a day
to day basis. On the other hand, strategic planning has its weaknesses, in that, since the
world is dynamic, it is difficult to plan for and predict the future. Although strategic planning is
not without criticism, the positives that can be realized by undertaking strategic planning far
outweigh its negatives and not having a plan of action at all.

It is the writers feeling that, despite the dynamics of the business environment, managers
should plan for the future and in the process leaving enough room and allowance to
maneuver in relation to those changes. Plans therefore should not be rigid, but rather they
should be fluid, so as to accommodate the unforeseeables as business continues.

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