Planning

Planning encompasses defining the organization’s objectives or goal, establishing an

overall strategy for achieving those goals, and developing a comprehensive hierarchy of
plans to integrate and coordinate activities. It is concerned, then, with ends (what is to be
done) as well as with means (how it is to be done)

Planning is the primary functions of management. Planning is the basis for other
managerial functions-organizing, directing and controlling the organization. Effective
planning includes the total organizational activities. Without planning, managers do not
know how to organize activities, people and recourses effectively. In the absence of
planning, they do not even have the direction, sense of purpose, and activity plans. This
ultimately affects the organization and its future existence.

Planning in Uncertain Environment

If managers performed their jobs in organizations that never faced changes in the
environment, there would be little need for planning. What a manager did today, and well
into the future, would be precisely the same as it was decades ago. There would be no
need to think about what to do. It would be spelled out in some manual. In such a world,
planning efforts would be unnecessary, but that world doesn’t exist. Technological,
social, political, economic and legal changes are ever-present. The environment manager
face is too dynamic and has too great an effect on an organization’s survival to be left to
chance. Accordingly, contemporary managers must plan- and plan effectively

Why Should Managers Formally Plan?

Managers should engage in planning for several reasons. Four of the more popular
reasons are that planning provides direction, reduces the impact of change, minimizes
waste and redundancy, and sets the standards to facilitate control

Planning establishes coordinated effort. It gives direction to managers and non-managers

alike. When all organizational members understand where the organization is going and
what they must contribute to reach the objectives, they can begin to coordinate their
activities and cooperation and teamwork are fostered. On the other hand, a lack of
planning can cause various organizational members or their unit to work against each
other. Consequently, organization may be prevented from making efficiently toward the
objectives.

By forcing managers to look ahead, anticipate change, consider the impact of change, and
develop appropriate responses, planning reduces uncertainty. It also clarifies the
consequences of the actions managers might take in response to change. Planning, then,
is precisely what managers need in a chaotic environment.

Planning also reduces overlapping and wasteful activities. Coordination before the fact is
likely to uncover waste and redundancy. Furthermore, when means and ends are clear,
inefficiencies become obvious.

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Finally, planning establishes objectives or standards that facilitate control. If
organizational members are unsure of what they are attempting to achieve, how can they
determine whether they have achieved it? In planning, objectives are developed. In the
controlling function of management, performance is compare against the established
objectives. If and when significant deviations are identified, corrective action can be
taken. Without planning, then, there truly cannot be effective control.

Strategic Planning

When an organization attempts to develop its strategy, senor management goes through
the strategic management process, a nine-step process that involves strategic planning,
implementation, and evaluation. Strategic planning encompasses the first seven steps, but
even the best strategies can go awry if management fails either to implement them
properly or to evaluate their results.

Before the early 1970s, managers who made long-range plans generally assumed that
better times lay ahead. Plans for the future were merely extensions of where the
organization had been in the past. However the energy crisis, deregulation, accelerating
technological change, and increasing global competition as well as other environmental
shocks of the 1970s and 1980s undermined this approach to longer-range planning. These
changes in the rules of the game forced managers to develop a systematic means of
analyzing the environment, assessing their organization’s strengths and weakness, and
identifying opportunities where the organization could have a competitive advantage. The
value of thinking strategically began to be recognized.

Strategic management has become increasingly important today for business organization
for maintaining and improving their performance. Studies have also supported the
premise that companies that plan strategically have better financial measurements than
those without plans. Traditional management tended to emphasize the internal affairs of
organizations. Contemporary management thinking extends this approach to take into
account external changes and developments. Strategic management has, thus, evolved
from modest extensions of the planning functions to more analytical and complex
representations of organizational-environmental interaction.

Prasad (1983) defines strategic management as “a process that identifies present and
future critical issues for the organization and develops ways to resolve them within the
organization’s resources and external constraints”. A strategic plan consists of clearly
stated organizational mission, organizational goals, and organizational strategies.
Strategic planning involves the review of external and internal forces that lead to the
specific opportunities and threats facing the organization. It is a process of determining
how to pursue the organization’s long-term goals with the resources expected to be
available.

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How Does the Strategic management process operate?

In order to develop their strategy, organizational members must first identify the
organization’s current mission, objectives and strategies (step 1). Every organization has
a mission statement that defines its purpose and answers the question, “What business or
business are we in?” Defining the organization’s mission forces management to identify
the scope of its products or services carefully. For example, Oticon Holding A/S,
Denmark, set its sights on becoming the world’s premier hearing-aid manufacturer.
Achieving the mission “drives the business, mobilizes the workers, and gets the high
quality products to the market.”

Once its mission has been identified, the organization can begin to look outside the
company to ensure that its strategy aligns well with the environment. As a case in point,
Panasonic is a major producer of home entertainment systems. But beginning in the mid-
1980s, technological breakthroughs in miniaturizations and their trend toward smaller
home dramatically increased the demand for powerful, but very compact, sound systems.
The success of Panasonic’s home audio strategy depends on understanding the
technological and social changes that are taking place.

Management of every organization needs to analyze its environment (step 2). The
organization needs 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. By analyzing the external environment, managers are
in a better position to define the available strategies that best align with their
environment. For example, to address a customer desire for and environmentally friendly
grill, Thermos developed an electric barbecue grill that cooked foods that tasted as if
they were cooked on gas and charcoal grills but did not cause air pollution. By
understanding their environment, Thermos was able to capitalize on a product that
increased its total revenue by more than 13 percent. That’s what understanding an
organization’s environment is all about.

Step 2 of the strategy process is complete when management has an accurate grasp of
what is taking place in its environment and is aware of important trends that might affect
its operations. This is aided by environmental scanning activities and competitive
intelligence.

What is environmental scanning?

Managers in both small and large organizations are increasingly turning to environmental
scanning to anticipate and interpret changes in their environment. The term refers to
screening large amounts of information to detect emerging trends and create a set of
scenarios. There is some evidence to indicate that companies that scan the environment
achieve higher profits and revenue growth then companies that don’t.

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Environmental Scanning is the method or technique of acquiring information and
analyzing the trends emerging in the environment. In other words, environmental
scanning involves the monitoring the evaluation of information from the organization’s
internal and external environments. This information is then disseminated to key
individuals within the organization for whom such information is needed for decision-
making.

For scanning purpose, both the internal and external environments of an organization
are to be considered... The top management of the organization has to scan the
environment to develop corporate strategy. Scanning helps them to understand and
define current environmental realities and predict future changes. The top management
can observe the changes taking place in the external environment through sources like
journal, reports, colleague, employees, personal experience, meetings and conferences.
Similarly, changes in the internal environment can be observed through reports,
committee meetings, memoranda, subordinate, managers, employees, and outsiders.
Once the top management receives this information about changes taking place in the
environment, the can then assess, correlate, extrapolate, and interpret the events or
signals to develop their corporate strategy.

Steps in Environmental Scanning

The essence of environmental scanning is identifying relevant environmental changes,

monitoring them to determine their nature and direction, forecasting their rates of
change and their likely impact, and strategically responding to them. There are thus, the
major steps in the environmental scanning process. The four steps involved in the
scanning process are:
1. Identifying potentially relevant environmental changes. This step involves the
collection of facts and minute observation of the environmental forces to identify
the relevant changes.
2. Monitoring the nature and direction of change. This step involves learning
about the nature, direction, rates of change, and magnitude of forces.
3. Forecasting probability of impact. This step involves estimating the probable
impact of the environmental changes, and the timing of potential consequences.
Numerous sources of information are available for this. Forecasting is an
important technique.
4. Developing and implementing strategic responses. This step involves developing
strategic responses. This requires the attention of the management to the
probabilities of the occurrence, the likely consequences, and timing of change.

Frequency of Scanning
Environmental scanning may be conducted on a regular (annual), irregular (as and
when needed), or continuous (periodic) basis
• Where the rate of environmental change is relatively slow, sanning can be done
only periodically and after longef internals
• Where the rate of environmental change is erratic or rapid, scanning should be
done on a continuous basis.

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Methods of environmental Scanning
For comprehensive analysis of environmental forces, organizations can make use of a
wide variety of technique, ranging very simple quantitative estimates to highly
complicated predictions. These technique3s includes: extrapolation methods, intuitive
reasoning, scenario building, cross-impact matrix, Morphological analysis, Network
methods, Missing link approach, Model Building, Delphi Technique

How is competitive intelligence useful?

One of the fastest growing areas of environmental scanning is competitive intelligence. It
seeks basic information about competitors: who are they? What are they doing? How will
what they are doing affect us?

One researcher who has closely studied competitive intelligence suggested that 95% of
the competition related information an origination needs to make crucial strategic
decisions is available and accessible to the public. In other words, competitive
intelligence isn’t organizational espionage. Advertisements, promotional materials, press
release, reports filled with government agencies, annual reports, want ads, newspaper
reports, information on the Internet, and industry studies are readily accessible sources of
information. Specific information on an industry and associated organization is
increasingly available through electronic databases that are sold by private organizations.

What are the primary steps in the strategic management process?

After analyzing and learning about 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 (step 3). In a very simplistic way, opportunities are positive
external environmental factors, and threats are negative ones.

Next, in step 4, we move from looking outside the organizations to looking inside. That
is, we are evaluating the organization’s internal resources. What skills and abilities do the
organization’s employees have? What is the organizations cash flow? Has it been
successful at developing new and innovative products? How do customers perceive the
image of the organizations and the quality of its products or services?

This fourth step forces management to recognize that every organizations no matter how
large and powerful, is constrained in some way by its resources and skills it has available.
An automobile manufacturer, such as Ferrari, cannot start making minivans simply
because its management sees opportunities in the market. Ferrari does not have the
resources to successfully compete against the likes of DaimlerChrysler, Ford, Toyota, and
Nissan.

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

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system. Internal resources or thing that the organization does well are its strengths. And
any of those strengths that require unique skills or resources that can determine the
organization’s competitive edge is its core competency. On the other hand, those
resources that an organization lacks or activities that the firm does not do well are its
weaknesses.

What is SWOT Analysis?

SWOT is an acronym for internal Strength (S) and Weakness (W) of an organization,
and external Opportunities (O) and threats (T) facing that organization.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. That is merging organization’s resources with the
opportunities in the environment results in an assessment of the organization’s
opportunities. This merging is frequently called SWOT analysis because it brings
together the organization’s Strengths, Weakness, 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 (step 6). 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 counties as Russia, India, and
Brazil, where many of the “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 the 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, that 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.

Strength: Strength is a resource, skill, or other advantages relative to competitors. It is

distinctive competence that gives the organization a comparative advantage in the market
place. Market leadership, public image, experience, financial and human resources,
organization network and alliances, etc., is examples of organizational strength.

Weakness: A weakness is a limitation or deficiency in resources, skills, and capabilities

that seriously affect performance. Lack of facilities, resources, management capabilities,
marketing skills, etc. are sources of weakness.

Opportunities: An opportunity is a major favorable situation in the organization’s

environment. The example of an opportunity could be new market, reduction in
compaction, higher economic growth rate, technological changes, and so on.

Threats: A threat is a major unfavorable situation in the organization’s environment. The

entry of a new competitor, increased bargaining power of the suppliers and buyers, major
changes in technology and government regulations, slow market growth, etc are some
examples of organizational threats.

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SWOT analysis provides a useful framework for making the best strategic choice. A
business strategy can be seen as an optimal match between the external opportunities and
threats, and the organizational strengths and weakness. This process of optimal matching
is essential for developing appropriate course of action

Internal Aspect Strengths (S) Weakness (W)

List major organizational List major organizational

External Aspect Strengths Weakness

Opportunities (O) SO WO
List major organizational Strategies Strategies
opportunities
Threats (T) ST WT
List major organizational Strategies Strategies
threats

OS: This is the most favorable situation. The organization has several environmental
opportunities and has numerous strengths. The organization in this situation has to adopt
and aggressive strategy to take advantage of the opportunities.

WT: This is the least favorable situation. The organization faces environmental threats
and also has relative weakness. This situation calls for a defensive strategy. The
organization has to reduce the involvement in existing products and markets, and sustain
itself until situation improves.

OW: This is a situation in which the organization faces impressive market opportunities
but is constrained by several internal weaknesses. The only strategy in this situation is to
eliminate internal weaknesses to exploit market opportunities.

ST: This is a situation in which the organization’s key strengths face an unfavorable
environment. The strategy in this situation is to use current strengths to build long-term
opportunities and diversity the business.

In actual situation, it is not easy to identify and visualize the position of a business as
shown above. There could be multiple of combination of these positions. Hence,
matching the internal strengths and weakness with external opportunities and threats is
not always easy. This needs a thorough analysis of the overall position of the
organization in terms of the strategy to be pursued. The goal is to then develop good
strategy that exploits opportunities and strengths, neutralize threats, and avoid weakness.
As a guideline, some relevant question for SWOT analysis are given in Table below

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Potential Strengths Potential Potential Weakness Potential Threats
Opportunities
Well developed Expand core business? Poorly developed Attacks on core
Strategy? Exploit new market strategy? business?
Strong product line? segment? Obsolete, narrow Increase in domestic
Broad market Widen Product range? product lines? competition?
coverage? Extend cost of Rising manufacturing Increase in foreign
Manufacturing differentiation advantage? costs? competition?
competence? Diversify into new growth Decline in R&D Change in consumer
Good marketing skills? business? innovations? tastes?
Good material Expand into foreign Poor marketing plans? Fall in barriers to entry?
management system? markets? Poor materials Rise in new or substitute
R&D skills and Apply R&D skills in new management system? products?
leadership? area? Loss of customer Increase in industry
Human resource Enter new related goodwill? rivalry?
competencies? Business? Inadequate human New forms of industry
Brand-name Vertically integrate resources? competition?
reputation? forward? Loss of brand name? Potential for takeover?
Cost of differentiation Vertically integrate Growth without Changes in economic
advantage? Backward? direction? factors?
Appropriate Overcome barriers to Infighting among Downturn in economy?
management Style? entry? divisions? Rising labor costs?
Appropriate Reduce rivalry among Loss of corporate Slower market growth?
organizational competitors? control? Others?
structure? Apply brand-name capital Inappropriate
Appropriate Control in new areas? organizational structure
System? Seek fast market growth? and control systems?
Ability to manage Others High conflict and
strategic changes? politics?
Others Others?

How do you Formulate Strategies?

Strategy formulation involves manager in analyzing an organization’s current situation

and then developing strategies to accomplish its mission and achieve its goals. Strategy
formulation begins with managers analyzing the factors within the organizations and
outside that affect or may affect the organization’s ability to meet its goals now and in the
future.

A strategy represents an organization’s game plan. It reflects an organization’s

awareness of how to compete and survive in the changing situation. A strategy, thus,
provides framework for management actions and decisions. It is a future-oriented plan for
interacting with the competitive environment to attain an organization’s goals. A well-
formulated strategy provides a frame for guiding strategic plans.

Strategies need to be set for all levels in the organization (step7). 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. For most organizations, four primary

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strategies are available. 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. A growth strategy is one in which 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 firm. 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 and do business the
“Dunkin’” way. Growth, too, 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 offering to include furniture for children,
it, too was focusing on a growth strategy.

Companies may also grow by merging similar firms. A merger occurs when two
companies- usually of similar size- combine their resources to form a new company.
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 stated amount of money
or stocks, or both-and incorporates the acquired company’s operations into its own.
Examples include Samsung Electron’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-A stability strategy is best known for what it is not. That is, 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
non-significant opportunities and threats.

The retrenchment strategy- Before the 1980s, very few North American companies
ever had to consider anything but how to grow or maintain what they currently 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, organizations such as Sears, General Motors, the US Army

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and Apple Computer 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. For instance, Black and Decker sold off its small household appliances and
sporting equipment product lines in an effort to bolster its core business of power tools.

The Combining 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.

Determining the competitive strategy – 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. That is, to fulfill the grand strategy, managers will seek to position their units
so that thy can gain a relative advantage over the company’s rivals. This positioning
requires a careful evaluation of the competitive forces that dictate the rules of
competition within the industry in which the organization operates.

One of the leading researchers into strategy formulation is Michael Porter of Harvard’s
Graduate School of Business. His competitive strategies framework demonstrates that
managers can choose among three generic competitive strategies. According to Porter, no
firm can successfully perform at an above-average profitability level by trying to be all
things to all people. Rather, Porter proposed that management must select a competitive
strategy that will give its unit a distinct advantage by capitalizing on the strengths of the
organization and the industry it is in. These three strategies are: Cost Leadership (low-
cost producer), differentiation (uniqueness in a broad market), and focus (uniqueness in a
narrow market).

According to Porter, when an organization sets out to be the low-cost producer in its
industry, it is following a cost-leadership strategy. Success with this strategy requires
that the organization be the cost leader, not merely one of the contenders for that position.
In addition, the product or service being offered must be perceived as comparable to that
offered by rivals or at least acceptable to buyers. How does a firm gain such a cost
advantage? Typical means include efficiency of operation, economies of scale,
technological innovation, lo-cost labor, or preferential access to raw material. Firms that
have used this strategy include Wal-Mart, Canadian Tire, and Southwest Airlines.

The firm that seeks to be unique in its industry in ways that are widely valued by buyers
is following a differentiation strategy. It might emphasize high quality extraordinary
service, innovative design, technological capability, or an unusually positive brand
image. The attribute chosen must be different from those offered by rivals and significant
enough to justify a price premium that exceeds the cost of differentiating. There is no
shortage of firms that have found at least one attribute that allows them to differentiate
themselves from competitors. Intel (technology), Maytag (reliability), Mary Kay
cosmetics (distribution), and L.L. Bean (service) are a few.

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The first two strategies sought a competitive advantage in a broad range of industry
segments. The focus strategy aims at a cost advantage (cost focus) or differentiation
advantage (differentiation focus) in a narrow segment. That is, management will select a
segment or group of segments in an industry (such as product variety, type of end buyer,
distribution channel, or geographical location of buyers) and tailor the strategy to serve
them to the exclusion of others. The goal is to exploit a narrow segment of a market. Of
course, whether a focus strategy is feasible depends on the size of a segment and whether
it can support the additional cost of focusing. Stouffer’s used a cost-focus strategy in its
Lean Cuisine line to reach calorie-conscious consumers seeking both high-quality
products and convenience.

Which strategy management chooses depends on the organization’s strengths and its
competitors’ weakness. Management should avoid a position in which it has to slug it out
with everybody in the industry. Rather, the organization should put its strengths where
the competition isn’t. Success, then, depends on selecting the right strategy, the one that
fits the complete picture of the organization and the industry of which it is a part. In so
doing, organization can gain the most favorable competitive advantage.

What if an organization cannot use one of these three strategies to develop a competitive
advantage? Porter uses the term stuck in the middle to describe that situation.
Organizations that are stuck in the middle often find it difficult to achieve long-term
success. When they do, its’ usually the result of competing in a highly favorable market
or having all their competitors similarly stuck in the middle. Porter notes, too, that
successful organization may get into trouble by reaching beyond their competitive
advantage and end up stuck in the middle.

Sustaining a competitive advantage Long-term success with any one of Porter’s

competitive strategies requires that the advantage be sustainable. That is, it muist
withstand both the action of competitors and the evolutionary changes in the industry.
That isn’t easy, especially in environments as dynamic as the ones organization face
today. Technology changes. So too, do customers’ product preferences. And competitors
frequently try to imitate and organization’s success. Managers need to create barriers that
make imitation by competitors difficult or reduce the competitive opportunities. The use
of patents, copyrights, or trade marks may assist in their effort. For example, to protect its
“environmentally friendly computer chip process” the Radiance Service Company has
secured patents in 37 countries. Similarly, Kendall-Jackson has trademarked its
packaging of its Turning Leaf chardonnay wine and has used that trademark in an effort
to keep E&J Gallo Winery from selling its chardonnay in similar packaging.

In addition, when there are strong efficiencies from economies of scale, reducing price to
gain volume is useful tactic. Organizations can also “tie up” suppliers with exclusive
contracts that limit their ability supply material to rivals. Or organizations can encourage
and lobby for government policies that impose import tariffs that are designed to limit
foreign competition.

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The one thing management cannot do is to become complacent. Resting on past successes
may be the beginning of serious trouble for the organization. Sustaining a competitive
advantage requires constant action by management in order to stay one step ahead of the
competition. For example, to keep ahead of the competition and ensure closeness with its
customers, Harley-Davidson started the Harley Owners Group (HOG), which now boasts
more than 360,000 feedback-providing members.

Examples of some other Strategies

• An organization may adopt, depending upon the environmental circumstances, a
strategy of market penetration. The purpose of this strategy is to concentrate on
maintaining the present customers. The organization seeks increased sale for its
current products through more aggressive adverting, sales campaign, etc. the
effort here is to motivate and encourage the customers to buy more of its products
and use additional services.
• An organization may follow market development strategy. This strategy
concentrates on finding new customers for its products and services. Market
development occurs when an organization seeks increase sales by taking its
current products into new markets.
• An organization may adopt product development strategy. This strategy seeks
increased sales by developing new and improved products. New products or
improved products are developed to cater to the changing needs of its present
customers.
• An organization may follow a strategy of diversification. This strategy requires
organization to increase sales by developing new and improved products in new
markets. New customers and new markets are target. Sometimes, diversification
means adding products and services.

Formulating Organizational Portfolio Plans

Another important concept in strategy formulation is organizational portfolio plans.
Organizations may have multiple business and programmes. The problem for these
organizations is: how to allocate resources among these different business and
programmes? An organization cannot afford to invest sufficient amount of resources to
all these programmes. Hence, it has to make a choice. The management has to fix
relative priorities of the businesses and allocate resources accordingly. The method used
to accomplish this task is called business portfolio matrix. The Boston Consulting
Group (BCG) developed this method. This matrix illustrates two business indicators of
great strategic importance. The first is called the vertical indicator indicating the market
growth rate. The other is called horizontal indicator. This indicates the relative market
share or the market dominance. The horizontal indicator compares the market share of
each unit of activities to that of the competitors. On the basis of these two indicators,
management decides which business unit to be strengthened, maintained, or dropped.

What happens after strategies are formulated?

The next-to-last step in the strategic management process is implementation (step8). No
matter how good a strategic plan is, it cannot succeed if it is not implemented properly.

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Top management leadership is a necessary ingredient in a successful strategy. So, too, is
a motivated group of middle-and lower-level managers to carry out senior management’s
specific plans.

Finally, results must be evaluated (step 9). How effective have the strategies been? What
adjustments, if any, are necessary?

Implementation of Strategic plan

Formulation of a strategic plan is vital. Even more vital is its implementation. Without
implementation, plans remain theoretical and only on papers. If strategies are not
implemented well, no results can be achieved. The success of a strategic plan, therefore,
depends significantly on the effectiveness of its implementation.

The following are the three vital aspects of strategy implementation:

1. Successful strategy implementation depends in part on the organization’s
structure. An organization’s activities should be properly divided, organized, and
coordinated. There should be proper matching between strategy and structure.
2. Strategy must be institutionalized. This means the strategy must be incorporated
into a system of values, norms, and roles that will help shape employee behavior,
making it easier to reach strategic goals.
3. Strategy must be operational zed. It should be translated into specific policies,
procedure, and rules that will guide planning and decision-making by managers
and employees.
4. Policies and Procedures are powerful tools for strategy implementation. Similarly
annual budgets and targets are also at the heart of strategy implementation. It is
through these annual targets and budgets that organization’s goals are achieved.
5. Reward and incentives are also equally important for effective strategy
implementation. Well-designed rewards and incentives motivate employees to
direct their performance toward organization’s goals

Strategic Control
Control means managerial efforts to monitor deployment of resources. Control is
essential to ensure that these scare resources are put to use efficiently and effectively.
Control also implies comparison of actual performance against targets and plan. The
essence of the control system is to measure the variation, identify the reason for the
variation, and take remedial action to minimize the chances of such unfavorable
variances occurring in future.

Strategic control is intended to steer the organization toward its long-term strategic
direction. The following two questions are the vital part of strategic control:
1. Are we moving in the right direction?

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 2. How are we performing?

Strategic control is, thus, designed to answer these two questions. Any problems found in
strategic direction and performance is being timely detected and corrected. Since strategic
planning is continuous activity, a system of feedback should be interrelated to the plan.
Performance reports should be obtained and acted upon regularly to ensure that
performance is in line with the plan. Such reports would indicate whether plan
implementation is satisfactory or corrective measures are needed. If the strategic plan has
been drawn on the basis of a realistic assessment of the market and the organizational
strengths, then the variation between performance and target should be fairly small. If
larger variation occurs, this may indicate that the plan assumptions were wrong to begin
with or have changed because of altered environmental conditions.

Why Planning Fails

As seen above, there are many benefits of planning. However, some plans fail, despite the
best intentions and efforts. The following are some of the reasons for plan failure:

1. management at all levels is not engaged in or involved in the planning process

2. Corporate planning is not integrated with the total management system
3. Planning is not simple. This creates confusion among the managers about its
different dimension and expectation. This ultimately affects effective plan
implementations.
4. Standards and targets are either too easily reached or impossible to attain.
Unrealistic expectations may lead to plan that cannot be completed.
5. Planning lacks clear-cut and carefully worked our statement of goals and
objectives.
6. Planning is based on inadequate information inputs and wrong assumption.
Sometimes, the information and assumption on what the plan is based may
change
7. Planning is not balanced. It gives too much emphasis on any single function or
aspect of management. The other does not get equal prominence.
8. Planning does not possess build-in flexibility. On-going plans need adjustments or
modifications, if required. Rigidity in planning does prevent management to
adjust to changes in the situation.
9. Planning is not well monitored, coordinated, implemented, and controlled. The
follow-up aspect is neglected
10. Short-range plans and decision conflict with long-range plans. Lack of proper
integration and consistency in planning leads to problem of conflict
11. A suitable internal climate for planning is not created
12. Planning fails to consider the external environment and its proper perspective.
Unforeseen events may occur in the environment that are beyond the
management’s control

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