This article throws light upon the four key benefits of strategic planning process in an organisation. The benefits are: 1. Reaction to Environment 2. Defining Company Mission 3. Formulation of Long Range Objectives 4. The Specification of Programme Policies and Strategies.
Benefit # 1. Reaction to Environment:
The strategic planning process is invaluable to a company because it forces top management to be aware of its changing environment. In a dynamic world characterised by growing competition, rapid changes in tastes and preferences of buyers, technological change, etc., the environment of business may and does change very rapidly.
Such change opens up surprisingly new opportunities as well as presents frightening new threats. Failure to adjust to either can bring disaster. The strategic planning process not only focuses attention on opportunities and threats, but also raises certain fundamental questions the answers to which are of considerable importance to good management.
The questions that are likely arise in this context are:
(i) What are the weaknesses of our company?
(ii) What are our competitors doing and likely to do?
(iii) When will our present products require modification?
(iv) What is our cash flow?
(v) What are our capital needs?
(vi) Is our share of the market acceptable?
(vii) Are we moving in the right direction?
Benefit # 2. Defining Company Mission:
Secondly, strategic planning process addresses itself to defining the mission of the company. This includes the basic products and/or businesses of the company and the markets in which they are distributed.
Stenier has suggested that an understanding of mission permits management to deal explicitly with a number of fundamental strategic issues such as the following:
What is the competitive area in which we find ourselves? What are the requirements for success in this competitive environment? Is the size of the company quite optimum for achieving success? What are our relative strengths and weaknesses in our basic businesses? Is our basic mission appropriate in the light of our desires, capabilities, and opportunities?
The basic purposes refer to “fundamental aims the company seeks for such factors as product quality, customer service, response to community interests, and ethical conduct. These ends are usually broadly stated.” Most managers seek to set the technical standard that other companies in the industry will strive to meet.
In order to formulate purposes a manager has to effectively tackle such questions as: What emphasis will be placed on customer service? In what ways will we try to capture consumer confidence? What will be our ethical posture with respect to customers, suppliers, employees, government and creditors? The answers to such questions do have significant effects on business operations.
Benefit # 3. Formulation of Long Range Objectives:
A third major element of strategic planning is the formulation of specific long range objectives. Such rough and ready statements as “our objective is to make a profit” do not provide proper direction for a company’s activities. There is need to quantify business objectives. For example, it is necessary to specify that the company’s objective is to achieve 10% return on net capital employed.
As Steiner has put it “In the strategic planning process, specific objectives are set for sales, profits, share of market, return on investment, and other factors that top management use to measure progress.”
Benefit # 4. The Specification of Programme Policies and Strategies:
Another component of strategic planning is “the specification of programme policies and strategies. These are the decisions concerning deployment of resources and guidelines developed to direct more detailed decisions in their implementation. They provide a framework within which managerial decisions throughout an enterprise can be made consistent with the basic missions, purposes, and objectives of the firm, as established by top management.”
In short, the overall significance of master policy/strategy is that “it addresses itself to the core responsibility of top management that is to ensure the success of the business today and tomorrow. To do this top management must be continuously involved in the process of surveying the environment, determining the nature of the business, setting goals for it, devising programme policies and strategies to achieve objectives, and assuring that actions take place in such a fashion that the policies and strategies chosen really do result in the achievement of objectives and basic company purposes.”
The strategic planning process provides “a unified framework within which managers can deal with the major issues managers should face, for dealing with major problems that are unique to the company, for identifying more easily new opportunities and for assessing strengths that can be capitalized upon and weaknesses that must be corrected.”
It can enable managers — without benefit of inspiration — to make solid contributions that would otherwise be lost. To conclude, however, the strategic planning process is a training ground for managers to be better managers because it forces thought processes that are essential to better management and raises and answers questions that good managers must address.