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Strategic Planning Module 1 Introduction to Strategy, Planning and Structure Instructor: Moataz Darwish, MBA
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Contents 1. Strategic Planning: The Context 2. What Is Strategic Planning? 3. The Process of Strategy and Decision Making 4. Business and Corporate Strategy 5. The Development of Strategic Ideas 6. Is Strategic Planning Only for Top Management? 2
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Strategic Planning: The Context • Strategic planning is usually the capstone course in MBA courses. • Core courses: – Organizational behavior – Economics – Marketing – Finance – Accounting – Project management – Strategic planning One thing is certain: strategic planning is not independent of the other core disciplines. 3
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Contents 1. Strategic Planning: The Context 2. What Is Strategic Planning? a. Managers’ Definitions of Strategy b. Academic Definitions of Strategy c. Three Approaches to Strategic Planning i. The Planning Approach ii. Emergent Strategy iii. Resource Based Strategy d. Rittell’s Tame And Wicked Problems e. The Origins of Strategy and Tactics f. Strategy and the Scientific Approach g. Strategic Planning and Strategic Thinking 3. The Process of Strategy and Decision Making 4. Business and Corporate Strategy 5. Is Strategic Planning Only for Top Management? 4
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?What Is Strategic Planning • Strategic planning is a complex activity. • Compare its degree of complexity with another complex activity economic policy making. 5
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?What Is Strategic Planning Managers’ Definitions of Strategy • Knowing where you are going and how you are going to get there. • Setting a clear set of objectives and mobilising resources to achieve them. • Thinking in the long rather than the short term. • Working out how to do better in the market place than your competitors. • Deriving and selecting a course of action. 6
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?What Is Strategic Planning Academic Definitions of Strategy • 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 - portrays strategy as a pattern of objectives which define what the company is and intends to be in a broad sense. • 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 in that it does not refer to an explicit plan. In fact, by my definition strategy may be implicit as well as explicit - suggest that strategy can only be understood after the event 7
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?What Is Strategic Planning • Several ways of approaching the idea. • Three Approaches to Strategic Planning 1. The Planning Approach (purely planning exercise) 2. Emergent Strategy (a course of action which emerges over time) 3. Resource Based Strategy (the outcome of the resources which are available to the company). 8
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?What Is Strategic Planning • Three Approaches to Strategic Planning 1. The Planning Approach (purely planning exercise) • set of objectives have been determined • the business environment analyzed and forecasts made, • a plan worked out by senior management • passed down for implementation; • this plan is then adhered to over the planning time scale. BUT 10
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?What Is Strategic Planning • Three Approaches to Strategic Planning 1. The Planning Approach ASSUMES: • The future can be predicted accurately enough to make rational choices. • It is possible to detach strategy formulation from everyday management. • It is possible to forego short-term benefit in order to gain long- term advantage. • The strategies proposed are capable of being managed in the way proposed. • The CEO has the knowledge and power to choose among options. He does not need to persuade anyone, nor compromise his decisions. • After careful analysis, strategy decisions can be clearly specified, summarized and presented; they do not need to be altered because circumstances outside the company have changed. • Implementation is a separate and distinctive phase that only comes after a strategy has been agreed. 11
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?What Is Strategic Planning • Three Approaches to Strategic Planning 1. The Planning Approach the attempt to drive corporate strategy in this restrictive fashion is unproductive. 12
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?What Is Strategic Planning • Three Approaches to Strategic Planning 2. Emergent Strategy: • strategy is not planned before the event. • Strategy emerges over time in an unpredictable manner. – hence may appear to have little structure. • the world is actually too complex. • ‘bounded rationality’ (it is impossible to take into account the complexity of real life). • ‘Satisfying’ – Decision makers collect information and defer selecting a course of action until the costs of further delay and information collection are considered to be greater than the potential benefits of searching out a better option. – the decision maker satisfies himself that there is nothing more to be gained from further delay. • In fact, it turns out that you can not actually get hold of the really important information. BUT 13
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?What Is Strategic Planning • Three Approaches to Strategic Planning 2. Emergent Strategy: • the company can still be directed along the general lines of a broad mission. • There is a need for efficient resource allocation; • Compromises are more of a constraint than a barrier to action. • degree of long term planning is inevitable for long term investments. • Satisfying is in itself a rational basis for choice, 14
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?What Is Strategic Planning • Three Approaches to Strategic Planning 2. Emergent Strategy: There is some middle ground between trying to plan for all eventualities and simply reacting to events as they occur. 15
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?What Is Strategic Planning • Three Approaches to Strategic Planning 3. Resource Based Strategy: • Emphasis on the internal resources available to the company. • Source of competitive advantage rests within the organization's resources. • Focus on the way labor and capital resources are utilized. • Resources develops the ability not only to take advantage of opportunities as they arise, but to create the opportunities themselves by innovative behavior. • Research in this school is in the relatively early stages; 16
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?What Is Strategic Planning • Rittell’s Tame And Wicked Problems – Strategic planning emerges overwhelmingly as a wicked problem, which means: • tend to be loosely defined. • Not always clear what the problem is. • Never quite clear whether a satisfactory solution has been arrived at. 17
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?What Is Strategic Planning Rittell’s Tame And Wicked Problems For example, consider the case of a company that is losing market share. What is the root cause? The type of argument and suggested solutions that might be submitted by different managers are as follows: This discussion, variations of which occur repeatedly in real life, touches on all eight Rittel properties. There is no agreement on formulating the problem (1). Each formulation suggests its own solution: lower the price, increase R&D expenditure, borrow money, or whatever; but if the strategist is right, then understanding the problem is the solution (2). None of the suggested solutions provides a full answer (3). It is not possible to test which solution will solve the problem (4). There is no agreement on howt he problem can be solved (5). The strategist claims the problem is a symptom (6). There is only one opportunity for action before the company goes bankrupt (7). The set of circumstances facing the company is unique in its experience (8). 18
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?What Is Strategic Planning • The Origins of Strategy and Tactics – The roots of the word ‘strategy’ lie in the Greek strategio, meaning a general, stratos meaning ‘an army’, and agein meaning ‘to lead’. – Tactics is a notion which is closely related to strategy. Again, the meaning can be clarified by the Greek roots: taktikos meaning fit for arranging, and taktos meaning ordered. The military definition relates to the science or art of manoeuvring in the presence of the enemy. – In the military context, • Strategy is deciding what is to be done, • Tactics is deciding how individual objectives are to be achieved. the military analogy does not fit exactly with the business environment, the difference between strategy and tactics 19
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?What Is Strategic Planning • The Origins of Strategy and Tactics – Given the imprecision of the terminology, and the activity itself, it is not surprising to find that various terms are used to describe the process, they include: • Strategic management, • Business strategy, • Business policy, • Corporate planning and • Long range planning. 20
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