Strategic planning is an important activity of managers of all organizations. Managers and directors regularly plan the short-term and long-term goals of the company and organization.
This includes projects and goals. Project managers, product managers, marketing and sales work as competent specialists in middle management.
All together they submit their reports and the ultimate goal is a common strategic plan of the organization.
Table of contents
What is the organization's strategy?
The word "strategy" comes from the Greek "strategos", which means "the art of the commander". Strategic planning emerged as a concept in the late 1960s.
A strategy is a plan of action in a given situation to defeat the opponent. Strategic management is a means of achieving and maintaining a kind of “social contract” between everyone involved in the functioning of the organization in some way.
It is a continuous process consisting of a series of activities:
- Strategic planning;
- choice of strategy;
- strategy update.
Strategic planning is a selection of management actions and decisions that lead to the development of specific strategies aimed at achieving the organization's goals.
Strategy is the product of strategic planning. It is a detailed, comprehensive, comprehensive plan designed to ensure the implementation of the mission and the achievement of its objectives.
The strategy is formulated and developed by senior management, but implemented with the participation of all levels of government.
It gives the organization individuality and specificity that allows it to attract a certain type of employees.
Stages of strategic planning in organizations
The strategy must be comprehensive over a long period of time, but also flexible enough. The strategic planning process goes through the following phases:
- choice of goals of the organization;
- The organization's mission;
- assessment and analysis of the external environment;
- Analysis of the strengths and weaknesses of the organization;
- development and analysis of strategic alternatives;
- choice of strategy;
- implementation of the strategy;
- Evaluation of the strategy.
solutions in the planning process
The first and most important decisions in the planning process are choosing the goals of the organization.
The most important common goal of the organization, which is the reason for its existence, is its mission.
Formulating an organization's mission should include – the organization's missions in relation to its core products and services, core markets and core technologies, the organization's external environment that drives the organization's working principles, and the organization's culture.
Goals must have the following more important characteristics – be specific and measurable; time-oriented – long-term, medium-term and short-term; be accessible and not contradict each other.
Diagnostic phase of the strategic planning process
After formulating the mission and goals, the leadership should begin with the so-called. diagnostic phase of the strategic planning process, the first phase of which is the analysis of the external environment.
It is a process in which the developers of the strategic plan "check" the external factors affecting the organization to determine the opportunities and threats.
The analysis allows to predict the possibilities, it also gives time to develop a plan in case of unforeseen circumstances, time to develop an early warning system in case of possible dangers and time to develop a strategy.
The threats and opportunities faced by an organization are broken down into seven areas: economic factors, including inflation rates, employment rates, international balance of payments, national currency stability, etc.; political factors; Market factors such as changing demographics, the life cycle of different products or services, market shares, etc.; technological factors; international factors; competition and social factors.
Every organization also encounters a problem in analyzing the organization's internal strengths and weaknesses. This is done through marketing; finance; Production; human resources; Culture and image of the organization.Reference: "Aligning people with organizational strategies", https://bvop.org/learn/aligningpeoplewithstrategies/
Strategic alternatives for managers
After comparing the organization's internal strengths and weaknesses, managers should determine the strategy to be followed. In principle, the organization has four main strategic alternatives - limited growth, intensive growth, downsizing and a combination of the previous three.
Limited Growth Strategy – This is an alternative adhered to by a large number of organizations, characterized by the formulation of achieved goals adjusted for inflation. It is applied in the so-called "mature" industries in established static technologies;
Intensive growth strategy – implemented annually, raising the level of short- and long-term targets well above the level of the previous year. It is used by managers who seek diversification, ie. Selecting new industries for the organization to enter and deciding how to enter those industries
Reduction strategy (last resort strategy) – this alternative has the following options: liquidation, i.e. complete sale of inventories and assets of the organization, elimination of surplus, reduction and realignment;
A combination of limited growth, intense growth and liquidation - this strategy is typical of large companies.
The Boston Consulting Group matrix, or portfolio analysis matrix, is most commonly used to select a strategic alternative.
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The Growth to Share Matrix, better known as the Boston Consulting Group Matrix, is the most popular matrix developed and used by the world-renowned Boston Consulting Group. It was created by Bruce Henderson in 1970. The matrix is used in strategic planning to make decisions about the future development of a product, project or even a department.
This matrix uses a simple two-dimensional space with four quadrants. The dimensions compared are market growth versus market share as each of the company's products is positioned relative to them. As a result, the product can be classified as:
"Star" - the product has a high market share, which is growing. This is a promising product that should be further developed.
“Dairy cow” – the product has a good market share but no market growth. It brings income, but does not have many prospects, so it is not recommended to strive for further development.
"Dog" - low proportion and short stature. This is usually a product that we want to get rid of but can't (e.g. we need to guarantee support, strategic customers need it).
"Questionable" - Products with a small share, but potential for growth. Such products are still unclear and risky. If possible, it is recommended that decisions concerning them be postponed until they become "dogs" or "stars".
Once management is aware of all possible strategic alternatives, they should choose one of them. The strategic choice is influenced by the following factors - risk, knowledge of past strategies; the reaction of the owners; the time factor.
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