Why companies need strategic planning?

Transcription

1 Why companies need strategic planning? Anna Afonina, Ing. Faculty of Business and Management, Brno University of Technology, Kolejní 2906/4, Brno, Czech Republic, Abstract At the end of the 1970s strategic planning suffered a big popularity. Strategic planning and tools of analysis have been the subject of academic debate over the last 20 years. This paper analyse why companies need strategic planning, why it is important for firms using the tools of corporate strategic analysis, which tools of strategic analysis using by companies. Key words Strategic planning, strategic management, planning Introduction and research objectives In this paper, attention is focused on strategic planning. The research has two primary objectives: 1. To explore the extent to which tools of strategic management are employed by business 2. To assess the degree of practical acceptance of the subject of strategic tools by companies Used methods and research results The research is based on questionnaires. The questionnaire is placed on www page. The respondents are top managers from Czech companies; at the moment we do not suppose we will restrict the respondents according to type of industry/service. At the moment, we have preliminary research results on disposal. A major interest of the survey was to understand which tools of strategic planning organizations used. Discussion The literature on strategic management proposes numerous methods of analysis and planning which can be used to solve more or less closely defined

2 problems. To some extent different terms are in use for the same or similar methods. Strategic planning consists of planning processes that are undertaken in firms to develop strategies that might contribute to performance (Tapinos et al., 2005). Key aspects of strategic planning are a long time horizon, formality, the use of planning instruments, and frequent control of plans. Strategic planning can contribute to performance by generating relevant information, by creating a better understanding of the important environment, and by reducing uncertainty (Hodgetts and Kuratko, 2001) [6]. At a more fundamental level, the classical rationalistic approach to planning and strategy implementation was questioned by critics such as Mintzberg and Quinn. Confidence in the value of strategic planning was thus eroded leading many firms to dispense with their armies of planners. As advocated by Pearce et al. formal strategic planning is a process of determining the mission, major objectives, strategies, and policies that govern the acquisition and allocation of resources to achieve organisational aims. An effective strategic planning system will link long-range strategic goals with both mid-range and operational plans. In order to facilitate this activity those involved in the strategic planning process collect data, forecast, model and construct alternative future scenarios. The standard approach to strategic planning would incorporate an external environmental analysis to identify the opportunities and threats facing the organisation, and an internal analysis to identity the organisation s strengths and weaknesses. Such a SWOT analysis may itself encompass a number of different forms of analysis, for example, an examination of the industry structure as advocated by Porter, and an examination of the resource base of the organisation including the identification of core competencies. [5] For the purposes of this paper, strategic planning is defined as a long-time horizon planning, which determining mission, major objectives, strategies; contribute to performance by generating relevant information, creating better understanding and analysis internal and external environment. The theories and frameworks of strategic planning are well documented in academic circles, but the practical evidence of their application is in relatively short supply. On of the most recent surveys, conducted by Glaister and Falshaw

3 [5], examines the views of business to strategic planning and provides additional empirical evidence of the tools and techniques used in this area. [2]. Another one conducted by Bain & Сompany, they surveyed executives around the world about the management tool they used. The latest questionnaire was conducted by Bain & Сompany in January 2009 and reflects behaviour in They focus on 25 tools: which tools companies are use, how managers satisfied with them. It was completed by 1,430 international executives from companies in a broad range of industries. In our research we surveyed practionaries about which tools of strategic analysis they used. For today, 44 usable responses were received. The figure 1 illustrates which tools were most often used. The three topped the list: SWOT analysis (which 88.6 percent of respondents using), analysis of views and employee attitudes (85.7 percent) and customer satisfaction measurement (88.6 percent). Tools such as value chain analysis and portfolio analysis are seldom used by responding organizations. The results of this survey also yield similarities and differences in comparison with the results reported by Bain & Сompany. The last survey by Bain & Сompany show us that the five popular tools are benchmarking (76 percent); strategic planning (67%); mission and vision statements (65%); customer relationship management (63%); and outsourcing (63%). Another survey was conducted by James W.Wilson and Soren Eilerten [4] surveyed practitioners about how effectively strategic planning practices have served their organizations during the 18 months from the start of the crisis in 2007 to the summer The results suggest that organizations with the most serious commitment to strategic planning, those that actually rely of strategic planning principles and practices for decision making during a crisis, are in a position to be proactive rather than reactive, and are thus able to take advantage of growth opportunities as they appear in times of economic disruption.

4 Figure 1. Use of tools of strategic planning Analyzy stížností zákazníků (Analysis of customers complaints) (%) 37,1 62,9 Analýza názorů a postojů zaměstnanců (Analysis of views and employee attitudes) (%) Analýza spokojenosti zákazníků (Customer satisfaction) (%) 14,3 11,4 85,7 88,6 Benchmarking (%) 45,7 54,3 ABC (Aktivity-based costing) (%) 28,6 71,4 Analýza (celo)životní hodnoty zákazníků (Customer Life-time Value) (%) 22,9 77,1 Metody portfolio analýzy (Portfolio analysis) (%) 37,2 62,8 Unusable Usable Balanced Scorecard (BSC) (%) 28,6 71,4 Porterova analýza konkurenčního prostředí (Porter's 5-forces) (%) 34,3 65,7 Analýza strategických mezer (Strategic Gap Analysis) (%) 25,7 74,3 Analýza hodnotového řetězce (Value chain analysis) (%) 22,9 77,1 SWOT analýza (SWOT analysis) (%) 11,4 88,6 PEST analýza (PEST or STEP analysis) (%) % Greenley [3] has pointed out there are some basic reasons why companies need strategic planning. First, it should improve the performance of companies. Prescriptive strategic management theory stresses the planning of a mission, the setting of objectives (including performance objectives), and the implementation of strategies and control systems to ensure the objectives are achieved. Second, strategic planning could lead to indirect improvements in performance by improving the effectiveness of management throughout an organisation. Such benefits include process advantages, such as the ability to identify and exploit future marketing opportunities, personnel advantages such as the encouragement of a favourable attitude to change, and the view that strategic planning keeps the company synchronised with the external environment so that changes can be adapted to accordingly. Boyd, for instance, notes that strategic planning is one

5 tool to manage environmental turbulence. Others have argued that it is the act of planning which is of real value. Strategic planning may therefore be effective as a process of management, regardless of the performance achieved. James W.Wilson and Soren Eilerten [4] asked respondents what they would do differently in the a future crisis based on their organization s experience. The most frequent areas of improvement include: strengthen strategic thinking: place more emphasis on scenario planning, trends analysis; institute strategic planning cycle: make the process more regular and important inside the organization; make a stronger connection to resource allocation: ensure that strategic plans allocate resources and connect to budgets; increase leadership engagement: more visibility and direct involvement in the strategic planning process by senior leaders; improve strategic action: enhance operational execution through better change and performance management as well as overall communications. Conclusions The findings of this research, combined with other recent work in the field of strategic planning. Most frequently used tools in Czech Republic are SWOT analysis, analysis of views and employee attitudes and customer satisfaction measurment all of which help guide management s thinking on strategic issues. The worldwide five topped tools are benchmarking; strategic planning; mission and vision statements; customer relationship management; and outsourcing. In this article we demonstrate the results of different surveys. Analysis of these researches leads us to conclusion that companies can obtain benefits from a classical approach to strategic planning. Therefore in spite of the fluctuating popularity of strategic planning in its various guises since the 1960s, strategic planning is currently perceived to be a benefit. References Periodicals 1. Boyd K.B., vol Strategic planning and Financial performance: A Meta-analytic Review. Journal of Management Studies 2. George Stonehouse, Jonathan Pemberton, 40/ Strategic planning in SMEs some empirical findings. Management Decision, Greenley G.E., vol Does strategic planning improve company performance?. Long Range Planning 4. James W. Wilson and Soren Eilertsen, vol How did strategic planning help during the economic crisis?. Strategy and Leadership, Keith W. Glaister and J.Richard Falshaw, vol Strategic planning: still going strong?. Long Range Planning, Sascha Kraus and Rainer Harms, vol Strategic planning in smaller enterprises new empirical findings. Management Research News,