UNIT INTRODUCTION A Chinese proverb states that if you are planning for one year, grow rice. If you are planning for 20 years, grow trees. If you are planning for centuries, grow men. This unit focuses on how organisations undertake strategic planning and its importance in a fast changing, turbulent marketplace. Learners will understand why it is important to develop a strategic vision and mission, establish objectives and decide on a strategy.
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Strategy and strategic plans map out where the organisation is headed, its short- and long-range performance targets, and the competitive moves and nternal action required to achieve targeted business results. Learners will understand that a well-constructed strategic plan is essential for organisations to cope with industry and competitive conditions. In this unit, learner will discover how important it is for an organisation to understand what is happening in their external environment and how the environment is changing.
This will then enable learners to review an organisation’s existing business plans, using appropriate tools and techniques. Having explored the competitive environment, learners will understand how to develop strategic options sing modelling tools and then develop a strategic plan, giving due consideration to the core values, vision and mission of the organisation. Learners will then look at planning the implementation of a strategic plan and the creation of monitoring and evaluation systems to measure progress.
Introduction Simply put, strategic planning determines where an organization is going over the next year or more, how it’s going to get there and how it’ll know if it got there or not. The focus of a strategic plan is usually on the entire organization, while the focus of a business plan is usually on a particular product, service or program. There are a variety of perspectives, models and approaches used in strategic planning. The way leadership, culture of the organization, complexity of the organizations environment, size of the organization and expertise of planners. . 1 EXPLAIN THE IMPORTANCE OF EXTERNAL FACTORS AFFECTING AN ORGANIZATION Most successful business start-ups are owned by believers and proponents of good strategic management, a regimented 7-stage discipline involving vision and mission development, external assessment, internal assessment, long-term objective setting, strategy identification and selection, strategy implementation, and erformance evaluation. Businesses do not exist in a bubble. Rather, they exist as part of a community, in which they are responsible and accountable stakeholders.
Well-meaning strategic management practitioners consider five (5) key external forces in doing the external assessment exercise, and these are political, economic, social, technological (PEST), and competitive factors. The scope of external assessment embraces the analysis of opportunities and threats impacting a certain industry or business. The following discusses the key factors covered by an external assessment: Political factors Political issues occasionally come to influence the activities of the business community. Corporations often spend many billions of dollars lobbying to influence political decision makers for this reason.
Businesses may get involved in politics, for example, when their international operations come under fire from human rights groups, or when a high-profile politician recommends an increase in corporate taxes. Economic factors The most important external economic influence on a business is the level of make. Other factors, like consumer demand, tax rates and interest rates, affect usinesses by determining how much people are willing to pay for their products and how much of the resultant revenue must be given to the government. Social factors Social factors determine what a business can and cannot do.
Businesses that engage in racist marketing campaigns or abuse their employees may be subjected to boycotts, divestment campaigns, and other devastating forms of social backlash. Thus, social mores determine the informal rules that businesses must play by. Technological factors Technological factors include ecological and environmental aspects, such as R ctivity, automation, technology incentives and the rate of technological change. They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions.
Furthermore, technological shifts can affect costs, quality, and lead to innovation. Environmental factors Environmental factors have profound effects on the way businesses operate. The availability of natural resources in a given area determines whether resource companies could profit from operating there. The presence of pollution determines whether it is safe for businesses to put employees in a certain area. Environmental laws regulate the extent to which businesses themselves are able to pollute. Legal factors Laws determine the formal rules that businesses have to play by.
Business laws deal with competition: for example, no monopolies; employment: minimum wage; and taxation; among other things. Businesses that form illegal monopolies, for example, may be subjected to lawsuits and broken up into smaller businesses. Because the penalties for corporate malfeasance are so severe, most businesses take the law very serious. In analyzing the macro-environment, it is important to identify the factors that might n turn affect a number of vital variables that are likely to influence the organization’s supply levels and its costs (Kotter and Schlesinger, 1991 ;Johnson and Schole , 1993).
The “radical and ongoing changes occurring in societycreate an uncertain environment and have an impact on the funct ion of the whole organization” (Tsiakkiros, 2002). A number of checklists have been developed as ways of cataloguing the vast number of possible issues that might affectanindustry. A PESTEL analysis is one of them that is merely a framework that categorizes environmental influences as political, economic, social nd technological forces. Sometimes two additional factors, environmental and legal, will be added to make a PESTEL analysis, but these themes can easily be subsumed interplay with each other) on the business.
The results can then be used to take advantage of opportunities and to make contingency plans for threats when preparing business and strategic plans(Byars, 1991 ; Cooper, 2000). 1. 2 ANALYSE THE NEEDS AND EXPECTATIONS OF STAKEHOLDERS OF AN ORGANIZATION Stakeholders can be defined as all entities that are impacted through a business running its operations and conducting other activities related to its xistence. The impact can be direct in the case of the business’s customers and suppliers or indirect in the case of the communities in which the business chooses to place its locations.
Businesses must consider the needs and expectations of its stakeholders, though it need not consider them to be of equal importance. Each stakeholder brings something different to an organisation in pursuit of their own interests, takes risks in doing so and receives certain benefits in return but is also free to withdraw support when the conditions are no longer favourable. Shareholders expect increasing value of their investments. Customers expect high quality and benefit from product or service theyreceive in return of what they spent on it.
Employees expects good pay and conditions, good leadership and Job security but are free to withdraw their labour if they have a legitimate grievance or may seek employment elsewhere if the prospects more favourable. Suppliers expects payment on time, repeat orders and respect but may refuse to supply or cease supply if the terms and conditions of sale are not honoured. Society provides a licence to operate in return for benefits to the community as a whole and a respect for ethical values, people and the environment.
Stakeholder Analysis Before a business can consider the needs and expectations of its stakeholders in the course of its planning, It must identify those stakeholders and sort them in their order of importance to the business. One method to accomplish this is to list the stakeholders and then determine the degree of their interest and influence in the business. If stakeholders have a high degree of interest, the business needs to communicate with them on a regular basis and keep them informed about its activities. The business also needs to keep them placated.
Stakeholder Needs and Expectations Once the business has identified its stakeholders and their importance to the business, it can begin to plan based on their needs and expectations. Each stakeholder has concerns that it expects to be met by the business. For example, the business’s owners expect it to be profitable and to distribute that profit to them while local and federal government agencies expect it to obey the law and pay its taxes on time. The importance of each stakeholder to the business determines the degree to planning its actions.
Stakeholders and Business Planning The impact of stakeholder needs and expectations on businesses is inescapable and biquitous. Businesses exist to meet the expectations of one specific stakeholder in the sense that businesses are set up and operated to produce profit for their owners and investors. Businesses also must consider the needs and expectations of other stakeholders because of their ability to help and hinder their operations. For example, a business should be considerate of its host communities because that improves its reputation and strengthens its market presence.
On the other hand, if the business chooses to ignore its host communities, that disregard becomes a black ark on its reputation and can result in other sanctions if relations become bad enough. The only stakeholders that businesses can ignore are the ones with little interest and influence on their operations. 1. 3 ANALYSE THE MAJOR CHANGES TAKING PLACE IN THE EXTERNAL ENVIRONMENT THAT WILL AFFECT STRATEGY The external environment of the company is made up of several economic, social, demographical, management and ecologic factors.
It can directly or indirectly influence the activity and the evolution of a tourism company. The analysis of the external environment can lead to the possible identification of future trends. The evolution analysis is based at a company or geographical level as it can become a strategic opportunity; it can prove to boost cost efficiency and can increase income. Global strategies have emerged in the production of goods and services, distribution and management of labour. These have had an immense impact on business activities.
The world economy is now more closely interlinked and the finance has become a global resource. Taking advantage of such opportunities can consist in a better efficiency and productivity whilst the identification of opportunities depends on both, a close research of the nvironment and the capacity of the company to give a correct meaning to the collected information ahead of competition. Employees play a significant role in identifying the opportunities thus reaching to the conclusion that environmental research will be not be enough as to create new opportunities.
Success can only resources as the external environment of a tourism company is a highly complex structure made up of several factors. Economic factors include highly complex structures. They include external and internal markets, The pace of economic development, the purchasing power, economic potential, fiscal and credit policies, nflation, the currency rate etc. These factors can truly influence the company simply by having an impact on the demand and the income. Statistic data for some tourist regions of Romania are not that promising.
There are several regions with a high tourist potential but the local economy seems to have a decisive negative impact. One of the most import areas that are subjected to such influences includes the River Danube Delta and possibly the Black Sea Coast. Diminishing revenues is highly connected to the increasing prices in the tourism industry and basically leads to a decline in customers. 2. USE APPROPRIATE TOOLS TO ANALYSE THE EFFECTS OF CURRENT BUSINESS PLANS The PEST analysis is a useful tool for understanding market growth or decline, and as such the position, potential and direction for a business.
A PEST analysis is a business measurement tool. PEST is an acronym for Political, Economic, Social and Technological factors, which are used to assess the market for a business or organizational unit. The PEST analysis headings are a framework for reviewing a situation, and can also, like SWOT analysis, and Porters Five Forces model, be used to review a strategy or position, direction of a company, a marketing proposition, or dea. Completing a PEST analysis is very simple, and is a good subject for workshop sessions. PEST analysis also works well in brainstorming meetings.
Use PEST analysis for business and strategic planning, marketing planning, business and product development and research reports. You can also use PEST analysis exercises for team building games. PEST analysis is similar to SWOT analysis – it’s simple, quick, and uses four key perspectives. As PEST factors are essentially external, completing a PEST analysis is helpful prior to completing a SWOT analysis(a SWOT analysis – Strengths, Weaknesses, Opportunities, Threats – is based broadly on half internal and half external factors).
George (1997) Following is the five step model to analysis effects of business plan, develop future strategic options and options to form basis of future organizational strategy. This five step model was presented. 1 . Assess the external context, in terms of opportunities and threats (e. g. from environmental scan, institutiogramme, coverage matrix and/or stakeholder analysis) 2. Prioritise and cluster opportunities and threats If you have more than 15 of each, prioritise (e. g. through voting) Brainstorm which pportunities and threats can be related to each other 3.
Develop strategic options. that this is only a preliminary selection) in the SOP matrix The criteria in your BQ, and/or The mission and aspiration of the organisation. 5. Follow-up Implement internal organisational analysis of critical elements. Strategic orientation (SOR), the final selection of a (set of) strategic options. 2. 2 REVIEW POSITION OF AN ORGANIZATION IN ITS CURRENTMARKET Over 20 years ago, the concept of strategic positioning was popularized by Jack Trout and AIRies in their seminal publication Positioning: The Battle for Your Mind (McGraw
Hill, 1981). Although this concept has been enthusiastically embraced by many industries, its application in healthcare has been laggard at best. Because almost all healthcare organizations in the United States continue to operate in competitive environments, strategic positioning is a concept that warrants careful consideration. Defining Positioning Strategies: A healthcare organization’s strategic position can be defined around several parameters. Service Quality Access Scope Innovation 2. EVALUATE THE COMPETITIVE STRENGTHS AND WEAKNESSES OFAN ORGANIZATIONS CURRENT BUSINESS STRATEGY ompetitive analysis is a statement of the business strategy and how it relates to their competition. The purpose of the competitive analysis is to determine the strengths and weaknesses of their competitors within their market, strategies that will provide them with a distinct advantage, the barriers that can be dev eloped in order to prevent competition from entering their market, and any weaknesses that can be exploited within the product development cycle.
STRENGTHS OF UNILEVER I-JAE: The size of the company relative to others in the industry Balance Sheet strength Cash flows Perception of the company’s products Perception of the company’s brands Advantages of economies of scales that company has over its competitors WEAKNESS OF UNILEVER UAE: Poor management. High labour turnover. Lack of compliance with the regional legislation. Health & safety issues at Dubai production plan. Centralized recruitment process for management that lacks regionalunderstanding. 3. USE MODELLING TOOLS TO DEVELOP STRATEGIC OPTIONS FOR AN ORGANIZATION CAR’S view of strategy CFAR maintains that strategy is what you do, not what you say. Strategy is built on assumptions about the external and internal environments. When the environment hanges-sometimes noticeably and sometimes imperceptibly-leaders’ views of strategy may become out of sync with a dynamic reality. As leaders encounter the world from their different functions and perspectives, They need a way to synthesize their experience into a richer set of alternatives for the future.
Uncovering and examining the assumptions that drive what organizations do, advances the fundamental work of leaders as they lay out the future direction of their business. In activities in order to focus on others, potentially creating a sense of winning and losing among organization members. Strategic Options helps you become clear about assumptions and choices while productively harnessing the tension, energy, and risk inherent in these choices.
CFAR’s strategy method Strategic Options is one tool in CFAR’s approach to strategy, an approach that is rooted in merging hard analytics with organizational behaviour. As an introduction to this approach, Strategic Options is an efficient, cost-effective, tested tool for getting to the heart of strategy issues, providing data that moves from difficult conversations among a team of knowledgeable executives, to real choice. It sets the stage for plans hat envision a grounded path forward-one that has already dealt with the issues of execution that can otherwise derail change.
When you engage CFAR, you get both our expertise in the content of strategy as well as in the process of change-you get our way of working. Our tools are designed to be delivered by CFAR trained consultants- experienced in the art and science of business-in a relationship with you, driving results together. 3. 2 DEVELOP A COMPARATIVE UNDERSTANDING OF ACTIVITY FROM ORGANIZATIONS IN THE MARKET In todays highly competitive global markets, managers seek to mprove organizational effectiveness by identifying organizational metrics linked to business performance.
Market orientation is one such metric that has emerged as a significant predictor of performance and is presumed to contribute to long-term success. Market orientation the implementation of the marketing concept is the cornerstone of the marketing management and marketing strategy paradigms. This paper focuses on measurement of market orientation and business performance. 3. 3 CREATE OPTIONS TO FORM THE BASIS OF FUTURE ORGANIZATIONAL STRATEGY Objectives are those destinations which ultimately satisfy corporate desires.
Different organizations have different objectives, before starting any business, its objectives are defined. Though like many other profit making companies, Unilever I-JAE’S ultimate objective is profit maximization. Apart from profit maximization, business may have various other objectives. Before defining objectives, the strategic management must make sure those objectives are not virtually impossible and mutually agreed upon. The objectives which are focused on results consistent, specific, measurable, related to time and attainable are usually mutually agreed upon.
To attain such goals different sets of management strategies are implemented. It is less or more true that objectives of management strategy are same as that of the organization as a whole. Following is a brief summary of objectives by Unilever IJAE; Understand customers, competition and industry, and meet specific customer requirements. Improve product / service / channel / customer congruency. Grow the company by reaching new markets through new channel partners. Develop company values and culture. others.
It depends upon the three key success criteria which can be used to evaluate the viability of strategic options. These three key elements of evaluating the strategic options are suitability, acceptability and feasibility. 4. 1 PROPOSE A SUITABLE STRUCTURE FOR A STRATEFY PLAN THAT ENSURES APPROPRIATE PARTICIPATION FROM ALL STAKEHOLDERSOF AN ORGANIZATION The essence of organizational design is the manipulation of a series of parameters that determine the division of labour and the achievement of coordination.
By all the timekeeping in mind the organizational requirements of the Unilever UAE I would like to suggest a, ‘Matrix Organizational Structure’ based on the grouping by the market & functions. This proposed structure will serve the Unilever UAE’s end markets and because the workflow interdependencies are the important ones to some extent and theorganization cannot easily handle them by standardization adopting this structure will tend to favour the market bases for grouping in order to encourage mutual adjustments and direct supervision.
By adopting the proposed organizational structure the Unilever UAE can takeadvanta ge of the followings key benefits; Because key people can be shared, the project cost is minimized Conflicts are minimal, and those requiring hierarchical referrals are more easily esolved There is a better balance between time, cost and performance Authority and responsibility will be shared Stress is distributed among the team Improved ability to access resources across the old functional and geographic silos Better coordination on shared technologies across the organization (such as IT) Faster decentralized decisions Improved access to a diverse range of skills and perspectives. Improved global or regional projects Increased communication and coordination across the business Reflects the needs of regional customers Ref; Christian Scholz, Leadership management in Europe, 2008, page 248-249.