Strategic planning in organizations

Pskov State Polytechnic Institute 
 
 
 
 
 
 

EXAMINATION PAPER 

Subject: Business English 

Topic: Strategic planning in organizations 
 
 
 
 

           Student                                                                                           Egorova E.A.

           Group 67k  

          Tutor                                                                                             Markova M.V. 
 
 
 
 

Pskov

2010

     The maintenance

     Introduction...............................................................................3

        Chapter1. Strategic planning in organizations………………………...........4

     Chapter2.Levels of strategy in organizations…………………….......9

     The conclusion.........................................................................11

     The literature list......................................................................12 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

     Induction

        Nowadays the problem of the organizations is how to master the new markets, to satisfy needs of clients. Simultaneously it is also the problem of management. Successes and failures of the organization depend on successes and failures of management. Work at the enterprise should be organized in such a way so that it corresponds to needs of employees and allows to speed up their work and raise efficiency.

     Strategic management is the art, science and craft of formulating, implementing and evaluating cross-functional decisions that will enable an organization to achieve its long-term objectives. It is the process of specifying the organization's mission, vision and objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve these objectives and then allocating resources to implement the policies, and plans, projects and programs. Strategic management seeks to coordinate and integrate the activities of the various functional areas of a business in order to achieve long-term organizational objectives.

         Planning is always guided by the data of the past, but it aspires to define and supervise development of the enterprise in the long term. Therefore reliability of planning depends on accuracy and correctness of account calculations of the past. Any planning of the enterprise is based on the incomplete data. Quality of planning strongly depends on an intellectual level of competent employees, managers. All plans should be made so that it is possible to changes them, and plans are interconnected with available conditions. Therefore plans comprise the so-called " extra charges of safety ". However too big reserves make plans inexact, and a small entail often changes the plan. In a basis of scheduling on concrete directions of industrial sites of the enterprise separate problems which are defined both in monetary, and in quantity indicators are put.  
 
 

Chapter 1

Strategic planning in organizations

     Strategic planning is a part of a strategic management process. Strategic planning is a process of determining organization's strategies by analyzing strategic positions and identifying its internal and external factors, which can lead to achievement, stabilization and improvement of its competitive advantages. The result of a strategic planning is a strategic plan. Strategic plans are plans that apply to the entire organization, that establish the organization's overall objectives. Strategic planning encompasses seven steps.

     Step 1. In order to develop strategy, organizational members must first identify the organization's current mission, objectives, and strategies. Every organization has a mission statement that defines its purpose. Defining the organization's mission forces management to identify the scope of its products or services carefully.

     Determining the nature of one's business is as important for not-for-profit organizations as it is for business firms. Hospitals, government agencies, and colleges must also identify their missions. For example, a college training students for the professions, training students for particular jobs, or providing students with a well-rounded, liberal education. After answering such questions the organization clarifies its current purposes. Once its mission has been identified, the organization starts looking outside the company to make sure that its strategy aligns well with the environment.

     Step 2. The management of every organization needs to analyze its environment. That means that these organizations need to find out, for instance, what their competition is up to, what pending legislation might affect them, what their customers desire, and what the supply of labor in locations where they operate is like. Analyzing the external environment helps managers to define the available strategies that best align with the environment.

     Step 3. After analyzing and learning the environment, management needs to evaluate what it has learned in terms of opportunities that the organization can exploit and threats that the organization faces. In a very simplistic way, opportunities are positive external environmental factors, and threats are negative ones.

     However, the same environment can present opportunities to one organization and pose threats to another in the same or a similar industry because of their different resources or different focus. For example, communications. Telecommuting technologies have enabled organizations that sell computer modems, fax machines, and the like to prosper. But organizations such as the U.S. Postal Service and even Federal Express, whose business is to get messages from one person to another, have been adversely affected by this environmental change.

     Step 4. Then organizational members move from looking outside the organization to looking inside. That means, they are evaluating the organization's internal resources. What skills and abilities do the organization's employees have? What is the organization's cash flow? Has it been successful at developing new and innovative products? How do customers perceive the image of the organization and the quality of its products or services?

     This fourth step forces management to recognize that every organization, no matter how large and powerful it is constrains in some way by its resources and the skills it has available. An automobile manufacturer, such as Ferrari, cannot start making minibuses simply because its management sees opportunities in that market. Ferrari does not have the resources to compete successfully against the likes of DaimlerChrysler, Ford, Toyota, and Nissan. On the other hand, Renault and a Peugeot-Fiat partnership can, and they may begin expanding their European markets by selling minibuses in North America.

     The analysis in step 4 should lead to a clear assessment of the organization's internal resources - such as capital, worker skills, patents, and the like. It should also indicate organizational departmental abilities such as training and development, marketing, accounting, human resources, research and development, and management information systems. Internal resources or things that the organization does well are its strengths. On the other hand, those resources that an organization lacks or activities that the firm does not do well are its weaknesses. Identifying strengths and weaknesses is made in the 5th step of the strategic planning process.

     Step 6. A merging of the externalities (steps 2 and 3) with the internalities (steps 4 and 5) results in an assessment of the organization's opportunities. This merging is frequently called SWOT analysis because it brings together the organization's Strengths, Weaknesses, Opportunities, and Threats in order to identify a strategic niche that the organization can exploit. Having completed the SWOT analysis, the organization reassesses its mission and objectives. For example, as the demand for film continues to rise worldwide, managers at Kodak have developed plans to begin selling "yellow boxes of film" in such countries as Russia, India, and Brazil, where many "people . . . have yet to take their first picture." Although risk is associated with this venture, company executives feel that they have to exploit this strategic niche and take advantage of an opportunity in the external environment

     In light of the SWOT analysis and identification of the organization's opportunities, management reevaluates its mission and objectives. Are they realistic? Do they need modification? If changes are needed in the organization's overall direction, this is where they are likely to originate. On the other hand, if no changes are necessary, management is ready to begin the actual formulation of strategies.

     Step 7. Strategies should be set for all organization levels. Management needs to develop and evaluate alternative strategies and then select a set that is compatible at each level and will allow the organization to best capitalize on its resources and the opportunities available in the environment. The four primary strategies are available for most organizations. Frequently called the grand strategies, they are growth, stability, retrenchment, and combination strategies.

     The growth strategy. If management believes that bigger is better, then it may choose a growth strategy. With help of the growth strategy an organization attempts to increase the level of the organization's operations. Growth can take the form of more sales revenues, more employees, or more market share. Many "growth" organizations achieve this objective through direct expansion, new product development, quality improvement, or by diversifying - merging with or acquiring other firms. Growth through direct expansion involves increasing company size, revenues, operations, or workforce. This effort is internally focused and does not involve other firms. For example, Dunkin' Donuts is pursuing a growth strategy when it expands. As opposed to purchasing other "donut" chains, Dunkin' Donuts expands by opening restaurants in new locations or by franchising to entrepreneurs who are willing to accept the "Dunkin'" way and do business. Growth can also come from creating businesses within the organization. When Northwest Airlines decided to create and supply its own in-flight meals - as opposed to contracting with an external vendor - the airline was exhibiting a growth strategy by expanding its operations to include food distribution. And when IKEA, the Swedish furniture outlet expanded its offerings to include furniture for children, it was also focusing on a growth strategy. Companies may also grow by merging with other companies or acquiring similar firms. A merger occurs when two companies - usually of similar size - combine their resources to form a new company. For example, when the Lockheed and Martin-Marietta Corporations merged to form Lockheed-Martin, to compete more effectively in the aerospace industry. Organizations can also acquire another firm. An acquisition, which is similar to a merger, usually happens when a larger company buys a smaller one - for a set amount of money or stocks, or both - and incorporates the acquired company's operations into its own. Examples include Samsung Electronic's acquisition of Array, Harris Microwave Semiconductors, Lux, Integrative Telecom Technologies, and AST Research, and Seagram Company's acquisition of MCA (a film, television, and recording company).

     These acquisitions demonstrate a growth strategy whereby companies expand through diversification.

     The stability strategy.  The stability strategy is characterized by an absence of significant changes. This means that an organization continues to serve its same market and customers while maintaining its market share. When is a stability strategy most appropriate? It is most appropriate when several conditions exist: a stable and unchanging environment, satisfactory organizational performance, a presence of valuable strengths and absence of critical weaknesses, and no significant opportunities and threats.

     The retrenchment strategy. Before the 1980s, very few companies in the world considered anything but increased or maintained what they had. But, because of technological advancements, global competition, and other environmental changes, mergers and acquisitions growth and stability strategies may no longer be viable for some companies. Instead of this, organizations have had to pursue a retrenchment strategy. This strategy is characteristic of an organization that is reducing its size or selling off less profitable product lines.

     The combination strategy. A combination strategy is the simultaneous pursuit of two or more strategies described above. That is, one part of the organization may be pursuing a growth strategy while another is retrenching. The selection of a grand strategy sets the stage for the entire organization. Subsequently, each unit within the organization has to translate this strategy into a set of strategies that will give the organization a competitive advantage. 
 
 
 
 
 
 
 
 
 
 
 

     Chapter 2

     Levels of strategy in organizations

     Mаnу organizations develop strategies at three different levels: corporate, business and functional.

     Corporate-Level Strategy. Corporate-Level strategy addresses what businesses the organization will operate, how the strategies of those businesses will bе coordinated to strengthen the organization’s competitive position, and how resources will bе allocated among the businesses. Strategy at this level is typically developed bу top management, often with the assistance of strategic planning personnel, at least in large organizations.

     The board of directors also is involved in developing corporate-level strategy, although the degree of board participation varies. The three areas in which boards of directors cаn typically bе most helpful within the strategic management process are advising оn new directions for growth, suggesting when major changes are needed in strategy, and providing input оn the timing of major investments.

     Business-Level Strategy. Business-level strategy concentrates оn the best means of competing within а particular business while also supporting the corporate-level strategy. Strategies at this level are aimed at deciding the type of competitive advantage to bui1d, determining responses to changing environmental and competitive conditions, allocating resources within the business unit, and coordinating functional-level strategies. Business-level strategies are usually established for each strategic business unit. А strategic business unit (SBU) is а distinct business, with its own set of competitors, that cаn bе mаnaged reasonably independently of other businesses within the organization. Most often, the heads of the respective business units develop business strategies, although such strategies are typical1y subject to the approval of top management. When an organization comprises only а single business, corporate-level and business-level strategies essentially are the same. Thus the corporate-level and business-level distinction applies only to organizations with separate divisions that compete in different industries.

     Functional-Level Strategy. Functional-level strategy focuses оn action plans for managing а particular functional area within а business in а way that supports the business-level strategy. Strategies at this level address main directions for each оf the major functional areas within а business, such as manufacturing or operations, marketing, finance, human resources management, accounting, research and development, and engineering. Functional-level strategies are important because they often reflect strong functional competencies that cаn bе used to competitive advantage. Functional strategies usually are developed bу functional managers and are typically reviewed bу business unit heads.

     Coordinating strategies across the three levels is critical in maximizing strategic impact. The strength of the business-level strategy is enhanced when functional-level strategies support its basic thrust. Similarly, the corporate level is likely to have greater impact when business-level strategies complement оnе another in bolstering the corporate-level strategy. Thus the three levels must bе closely coordinated as part оf the strategic management process.  
 
 
 
 
 
 
 
 
 
 
 
 
 

     The conclusion

       Strategic planning itself does not guarantee success, and the strategic plans created by organization, can fail because of mistakes in the organization, motivation and the control. Nevertheless formal planning can create a number of essential favorable factors for the organizational activity of the enterprise. The knowledge of what the organization wants to reach, helps to choose the most suitable actions. Making of the proved and systematized scheduled decisions, the management reduces risk of acceptance of the wrong decision because of erroneous or a unreliable information about opportunities of the organization or about an external situation. Planning helps to create unity of an overall aim inside the organization.

     Strategic planning represents a set of actions and the decisions which are undertaken by a management which conduct to development of specific strategy. These strategies are intended to help the organizations to reach the purposes. Process of strategic planning is the tool, assisting to provide a basis for  business.    

     And as a conclusion, strategic planning is the basis of the strategic management process. Nowadays it is unreal to do successful business without strategic planning in our boundless competitive uncertain world. 
 
 
 
 
 
 
 
 
 
 
 

     The literature list

1. www.managementhelp.org
2. www.planware.org
3. en.wikipedia.org/wiki/