CHAPTER 3 ABE MANUAL SUMMARY

Strategic Management vs. Operational

Management
Strategic Managers see 'blue ocean' currents; Operational Managers only see 'red
ocean' currents.

Strategic management as long-term planning requires a vision. In other words, a

company needs to define where it wants to be in a decade or two (what's the vision) and
how they want to get there (Strategy) and then Operational Management will translate the
long-term plans into smaller scale plans to operationalize the move toward the vision.

Strategic Managers see 'blue ocean' currents; Operational Managers only see 'red
ocean' currents: Strategic Leaders have the capacity to read change and emerging
change wave fronts, in the same way, navigators read ocean currents; Operational
Managers only see 'red ocean' currents. Strategic management is focusing on
empowering company's resources for its competitive advantage in facing the
competition... Operational management is getting things done through team efforts.

Strategy Management takes a holistic view; and Operational Management takes an

internal view: A strategic perspective or capability is an analytical, synthetic and rational
decision-making process combined with innovative, out of the box thinking and most
important of all whilst being a visionary; an operational view is being pragmatic and
committed to realizing the strategy. Operational Management may be viewing things from
a single side (internally) and strategic management is a holistic view of things (both

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internally and externally) as the way of coming up with actions that will improve
organizational performance and conformance in order to achieve the set goals.

Strategy Management focuses on effectiveness and agility, Operational

Management focuses on efficiency:
"Strategic Management" is concerned with establishing "where" the organization
competes (which product, customer, geographic markets) and "how" it chooses to
compete and capture value in each market;
Operational Management, on the other hand, is concerned with "how do we run the
business?" including (1) determining the role of the corporate center, individual business
units, divisions, and the employees who staff them. (2) establishing standards and
procedures used to make decisions around strategy and resource allocation. (3) defining
and developing the employee capabilities and behaviors that are required to execute, and
(4) establishing and monitoring KPIs that will be used to manage the business and
individual employee performance.
The purpose of strategic management is to thrive business in the long term, and the goal
of operational management is to make the business survive at the moment, both are
crucial and interdependent management practices in running a truly successful
business.

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Difference Between Strategic Planning and
Operational Planning

Planning is an important activity, performed by the management, keeping in

view, the vision, mission, goals and objectives of the enterprise. It implies
thinking in advance, what we need to do in future and creates a rough draft, so
as to fulfill the business objectives. Planning occurring at the corporate level is
termed as strategic planning, while the planning process taking place at the
functional level is called operational planning.

Strategic Planning is concentrated towards attaining the long-term objectives

of business. On the other hand, operational planning is done to achieve short-
term objectives of the company. These are used to set priorities and align the
resources, in such a way that leads to the accomplishment of business goals.
Take a read of the article given below, to understand the difference between
strategic planning and operational planning.

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Comparison Chart

BASIS FOR
STRATEGIC PLANNING OPERATIONAL PLANNING
COMPARISON

Meaning The planning for achieving Operational Planning is a process of

the vision of the organization deciding in advance of what is to be done
is Strategic Planning. to achieve the tactical objectives of
business?

Time Horizon Long term planning Short term planning

Approach Extroverted Introverted

Modifications Generally, the plan lasts The plan changes every year.
longer.

Performed by Top level management Middle level management

Scope Wide Narrow

Emphasis on Planning of vision, mission Planning the routine activities of the

and objectives. company.

Definition of Strategic Planning

Strategic Planning is a planning process undertaken by the top level

management, to decide Where the organization wants to reach in future? And
What should be done to pursue the organizational vision, mission, and
objectives? It is an analytical process which examines the micro and
macro environment of business. The process is used to define the company’s
vision, ambitions, and set priorities to make a route that will lead the company
towards its ultimate goal.

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Strategic Planning Process

The planning is not made for a particular department or unit, but it covers the
entire organization. The strategic planning is done to determine the factors of
the internal and external environment which directly influences the
organization. The plan focuses on the enduring development of the
organization. The tools used in this process are:

• SWOT Analysis (Strength, Weakness, Opportunities, Threats)

• Portfolio Analysis
• PEST Analysis (Political, Economic, Social, Technological Environment)
• Porter’s 5 forces Analysis (New Entrants, Rival Sellers, Substitute
Products, Buyer Bargaining Power, Supplier Bargaining Power)
• BCG Matrix (Boston Consulting Group)

These tools help the management to design a strategy considering various

elements, that will lead the organization towards its vision.

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Definition of Operational Planning

The process which predetermines the day to day activities of the business is
known as Operational Planning. The planning is done to support the strategic
planning to accomplish the organizational goals. In this process, short run
objectives of the company are determined as well as a means to achieve those
objectives are also discovered.

Middle-level management performs the function of the operational planning

process. It includes planning of regular business activities and operations for a
short period. Under this process, the organization is classified into the various
department, division, unit, and center for which planning is performed
individually, which is aligned with the strategic planning to reach the
organization’s vision. The following are the features of Operational Planning:

• Objectives need to be clearly defined.

• Achievement of the desired result.
• The activities are to be performed as decided.
• Maintenance of quality standards.
• Measuring performance.

Key Differences Between Strategic Planning and

Operational Planning
The following are the differences between strategic planning and operational
planning:

1. The planning to pursue the organization’s vision is known as Strategic

Planning. The planning to achieve the tactical objectives of the
organization is known as Operational Planning.
2. Strategic Planning is long lasting as compared Operational Planning.
3. Operational Planning is done to support Strategic Planning.
4. Strategic Planning takes into account the internal as well as the external
environment of business. Conversely, Operational Planning is concerned
with the internal environment of business.
5. Strategic Planning is done by top level management, whereas the
Operational Planning is a function of middle-level management.
6. Strategic Planning covers the whole organization, but Operational
Planning is done in a particular unit or department of the organization.

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Conclusion

As we have discussed in the beginning that planning can be done for anything,
so in a business organization it can be done for various purposes right from
reaching the vision to its regular business activities, but their names, ways, and
planning techniques are different. Strategic Planning and Operational Planning
are two types of planning process performed by the managers and executives of
the organization.

Strategic Plans are made to achieve the vision, mission, goals, and objectives.
On the other hand, Operational Plans are made to effectively perform the basic
activities of the business in order to achieve tactical objectives.