STRATEGIC PLANNING AND

CONTROLLING

INRODUCTION TO STRATEGIC
PLANNING

Presenter: JUAN F. PUJOL, JR. | MBA 205 | Strategic Planning &

Jan. 21, 2020 Controlling
Contents

I Chapter Objectives

II What Is Strategic Planning?

III Strategic Planning Process

IV Benefits of Strategic Planning

Contents

V Three Approaches to Strategic Planning

VI
The Development of Strategic Ideas
Learning Objectives

Define strategic planning as it is used in

business
Visualise strategy as a structure of thought that
can be applied to the complex strategy process
Describe the role of the scientific approach
Describe the different strategy concerns at the
corporate and business levels
Explain how the major approaches to strategy
have developed
What is Strategic Planning?
 Managers’ Definitions of Strategy

1. Knowing where you are going and how you are

going to get there.
2. Setting a clear set of objectives and mobilizing
resources to achieve them.
3. Thinking in the long rather than the short term.
4. Working out how to do better in the market
place than your competitors.
5. Deriving and selecting a course of action.
What is Strategic Planning?
 Academic Definitions of Strategy

The following are more academic definitions of

strategy, each with its own particular focus:
The decisions taken over time by top managers,
which, when understood as a whole, reveal the
goals they are seeking and the means used to
reach these goals. Such a definition of strategy
is different from common business use of the
term.
What is Strategic Planning?
 Academic Definitions of Strategy

The following are more academic definitions of

strategy, each with its own particular focus:

The determination of the basic long term goals

and objectives of an enterprise, and the
adoption of courses of action and the allocation
of resources necessary for carrying out these
goals.
What is Strategic Planning?
 Academic Definitions of Strategy

The following are more academic definitions of

strategy, each with its own particular focus:

The pattern of objectives, purposes or goals,

and the major policies and plans for achieving
these goals, stated in such a way as to define
what business the company is in or should be in
and the kind of company it is or should be.
What is Strategic Planning?
 Academic Definitions of Strategy
The following are more academic definitions of
strategy, each with its own particular focus:

What determines the framework of a firm’s

business activities and provides guidelines for
coordinating activities so that the firm can cope
with and influence the changing environment.
Strategy articulates the firm’s preferred
environment and the type of organization it is
striving to become.
What is Strategic Planning?
Strategic Planning Defined

Strategic planning is a complex activity and before

attempting a definition it is useful to compare its
degree of complexity with another complex
activity:
Economic policy making, which has a general
similarity with strategic planning in that
strategic planning is concerned with running a
company and economic policy is concerned
with running the economy of a country.
What is Strategic Planning?

Strategic planning is the art of formulating

business strategies, implementing them, and
evaluating their impact based on organizational
objectives.
What is Strategic Planning?
The concept focuses on integrating various
business departments
(accounting and finance, research and
development, production, marketing,
information systems, management) to achieve
organizational goals.
What is Strategic Planning?

The term strategic planning is synonymous

with strategic management, only that the former
is used in the corporate world and the latter in
the academic setting.
The concept of strategic planning originated in
the 1950s but only became popular in the mid-
1960s and the mid-1970s.
During that time, managers and the entire
corporate world believed that strategic planning
provided answers to most if not all business
problems.
What is Strategic Planning?

In the 1980s, however, the hype reduced since

some plans did not produce the expected
returns. Its application was later revived in the
1990s and remains relevant in modern business.
Strategic Planning Process

Strategic Planning Process

The application of strategic planning in business is
a result of difficult managerial decisions that
comprise good and less desirable courses of action.
The development and execution of strategic plans
is a well-thought-out plan performed in three
critical steps:
1. Strategy Formulation
2. Strategy Implementation
3. Strategy Evaluation
Strategic Planning Process

Strategic Planning Process: Three critical steps

1. Strategy Formulation
In the formulation of strategies, the business
assesses its current situation by performing an
internal and external audit. Strategy
formulation also involves identifying the
organization’s strengths and weaknesses, as
well as opportunities and threats (SWOT
Analysis).
Strategic Planning Process

Strategic Planning Process: Three critical steps

1. Strategy Formulation
As a result, managers get to decide which new
markets they can venture or abandon, how to
allocate the required resources, and whether to
expand its operations through a joint venture or
mergers.
Business strategies result in long-term effects
on organizational success; only top business
executives understand their impact and are
authorized to assign the resources necessary for
their implementation.
Strategic Planning Process
Strategic Planning Process
2. Strategy Implementation
After the strategy formulation, the company
needs to establish short-term goals (usually
one-year goals), devise policies, and allocate
resources for their execution.
It is also referred to as the action stage and is
the most important phase of strategic planning.
The success of the implementation stage is
determined by the firm’s ability to nurture an
environment and a culture that motivates
employees to work.
Strategic Planning Process

Strategic Planning Process

2. Strategy Implementation
A manager’s interpersonal skills are critical
during this stage.
Effective strategy implementation also involves
developing a functional organizational
structure, maximum utilization of information
systems, and redirecting marketing efforts.
Strategic Planning Process

Strategic Planning Process

3. Strategy Evaluation
It is important for managers to evaluate the
performance of various strategies after the
implementation phase.
Strategy evaluation involves three crucial
activities:
1. Reviewing the internal and external factors
affecting the implementation of the strategies,
2. Measuring performance, and
3. Taking corrective steps.
Strategic Planning Process

Strategic Planning Process

All the three steps in strategic planning occur in

three hierarchical levels: the corporate, middle,
and operational levels.
Thus, it is imperative to foster communication
and interaction among the employees and
managers in all the levels so as to help the firm
to operate as a functional team.
Benefits of Strategic Planning

The volatility of the business environment

causes most firms to adopt reactive strategies
and not proactive ones.
However, reactive strategies are short-term,
causing firms to spend a significant amount of
resources and time.
Strategic planning helps firms prepare
beforehand; it lets the company initiate
influence instead of just responding to
situations.
Benefits of Strategic Planning
The following are the benefits of Strategic
Planning:
1. Helps formulate better strategies using a
logical, systematic approach
It is still the most important benefit.
Some studies show the strategic planning
process makes a significant contribution
more than the decision itself.
2. Enhanced communication between employers
and employees
Communication is crucial to the success of the
strategic planning process.
Benefits of Strategic Planning

2. Enhanced communication between employers

and employees
Communication is initiated through
participation and dialogue among the managers
and employees, which shows their commitment
to achieving organizational goals.
Strategic planning also helps managers and
employees to show commitment to the
organization’s goals.
It is because they know what the company is
doing and the reason behind it.
Benefits of Strategic Planning

2. Enhanced communication between employers

and employees
Strategic planning makes organizational goals
and objectives real, as the employees can
understand the relationship between their
performance and compensation.
As a result, both the employees and managers
become innovative and creative, which fosters
the growth of the company further.
Benefits of Strategic Planning
3. Empowers the individuals working in the
organization
The increased dialogue and communication
across all the stages of the process strengthens
the employee’s sense of effectiveness, initiative-
taking, and imagination.
It explains the need for companies to decentralize
the strategic planning process by involving
lower-level managers.
A good example is that of Walt Disney Co.,
which dissolved the strategic planning
department and assigned the roles to Disney
business divisions.
Strategic Planning
 Three Approaches to Strategic Planning

The Planning Approach

Emergent Strategy
Resource Based Strategy
Strategic Planning
 Three Approaches to Strategic Planning
The Planning Approach
This approach is based on the notion that once a set
of objectives has been determined and the business
environment analyzed and forecasts made, a plan
can be worked out by senior management which is
then passed down for implementation; this plan is
then adhered to over the planning time scale.
This is usually thought of as the strategic planning
approach, and it has been claimed by its supporters
that this prescriptive form of strategy is rational and
objective.
Strategic Planning
 Three Approaches to Strategic Planning
Emergent Strategy

This approach starts from a different premise: that

people are not totally rational and logical. The extent of
this irrationality has been the subject of research and
the general findings accord with common sense.
• Managers can only handle a relatively small
number of options.
Strategic Planning
 Three Approaches to Strategic Planning

Emergent Strategy
• Managers are biased in their interpretation of
data – in fact any data set can be interpreted in a
number of legitimate ways, and it is not
surprising that managers often select the
interpretation which backs up their previously
determined views.
• Managers are likely to seek a satisfactory
solution rather than maximise profits.
Strategic Planning
 Three Approaches to Strategic Planning
Emergent Strategy
• Organizations consist of coalitions of interest
groups. The implementation of decisions
depends on negotiation and compromise
between those groups, leading to unpredictable
outcomes.
• When making decisions, managers pay as much
attention to a company’s culture and politics as
to factors such as resource availability and
external factors
Strategic Planning
 Three Approaches to Strategic Planning
Emergent Strategy
According to this approach, strategy is not
planned before the event but emerges over time
in an unpredictable manner and hence may
appear to have little structure;
It is therefore argued that the claim of a cause
and effect relationship between analysis and
strategy choice and implementation is
fundamentally imperfect.
Strategic Planning
 Three Approaches to Strategic Planning

Emergent Strategy
There is another very good reason why there is
a limited use of information in decision making:
the world is actually too complex to be
understood by the human brain.
Rationality has to be seen in the context of
what is possible in the real world, rather than
what might be done in an ideal world.
Strategic Planning
 Three Approaches to Strategic Planning
Emergent Strategy
The term used to describe rationality when it is
impossible to take into account the complexity
of real life is ‘bounded rationality’;
The decision maker is rational given the
information available, but is quite aware that
more information could be obtained at a cost.
In economics it is argued that decision makers
act in accordance with profit maximization, but
it is impossible to reconcile strict profit
maximization with bounded rationality.
Strategic Planning
 Three Approaches to Strategic Planning
Resource Based Strategy
This approach lays emphasis on the internal
resources available to the company.
While it does not overlook the importance of
the competitive environment, it starts from the
basic premise that strategy is primarily
concerned with the search for competitive
advantage and to a large extent the source of
competitive advantage rests within the
company’s resources.
Strategic Planning
 Three Approaches
Resource to Strategic Planning
Based Strategy
The resource based view does not focus so
much on the actual labor and capital deployed
by the company, but rather on the way in which
these resources are utilized.
A successful company is not a passive
collection of resources which reacts to changes
in the competitive environment, but one that
develops the ability to take advantage of
opportunities as they arise and to create the
opportunities themselves by innovative
Strategic Planning
 Three Approaches to Strategic Planning
Resource Based Strategy
The resource based approach uses various terms
for different types of resources. Without going
into detail at this stage it is important to
distinguish among them.
Resources include physical resources, human
resources, financial resources and intellectual
resources.
Competences arise from the continual
deployment and integration of resources over
time and across activities.
Strategic Planning
 Three Approaches to Strategic Planning

Resource Based Strategy

Core competences are necessary for successful
performance.
Distinctive capabilities are competences
superior to competitors.
Strategic Planning
 Three Approaches to Strategic Planning

Resource Based Strategy

The role of strategic capabilities in creating
sustainable competitive advantage depends on
several characteristics, including the following.
Core competences are necessary for successful
performance.
Distinctive capabilities are competences
superior to competitors.
Thank

You
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