STRATEGIC PLANNING

Strategic planning is a long term planning that focuses on the organization as a whole. Commitment principle is a management guideline that advises managers to commit funds for planning only if they can anticipate, in the foreseeable future, a return on planning expenses as a result of the long-range planning analysis. Strategy is a broad and general plan developed to reach long term organizational objectives; it is the end result of strategic planning. Strategy Management is the process of ensuring that an organization possesses and benefits from he use of an appropriate organizational strategy.
Step 1: Environmen tal Analysis General Operating Internal Step 2: Establishing Organizatio nal Direction Mission Objective Step 3: Strategy Formulatio n

Step 4: Strategy Implementati on

Step 5: Strategi c Control

STEP 1: ENVIRONMENTAL ANALYSIS Environmental Analysis is the study of the organizational environment to pinpoint environmental factors that can significantly influence organizational operation. It helps managers understand what is happening both inside and outside their organization. General Environment. It is the level of an of an organizations external environment that contains components normally having broad long-term implications for managing the organization; its components are economics, social, political, legal, and technological. Economic Component. It indicates how resources such as goods and services are produced, distributed, and used within the environment. Social Component. It describes the characteristics of the society particularly its demographic and social values. Political Component. This pertains to the elements related to government affairs as to its type, attitude towards the industry, passage of law, etc. Legal Component. It contains passed legislation. They are the rules and laws that societys members must follow. Technological Component. It includes new approaches to producing goods and services. Operating Environment. This level of an organizations external environment that contains components normally having relatively specific and more immediate implications for managing the organization. Customer Component. Segment that is composed of factors relating to those who buy goods and services provided by the organization. Competition Component. It is composed of those with whom an organization must battle in order to obtain resources. Labor Component. These are the factors influencing the supply of workers available to perform needed organizational tasks. Supplier Component. This entails all variable related to the individuals or agencies that provide organizations with resources need to produce goods and services. International Component. This comprises all the factors relating to the international implications of organizational operations; though not all organizations must deal with international issues. Important variables in this component include legal, cultural, economic and political system of ones country. The Internal Environment. This level exists inside the organization and normally has immediate and specific implications for managing the organization. In broad terms, the

internal environment includes marketing, finance, and accounting. From a more specific management viewpoint, it includes the following: Planning Aspect, Organizing Aspect, Influencing Aspect, Controlling Aspect.

The organization, the level of its environment

General Environment Operating Internal Environment Environmen t

STEP 2: ESTABLISHING ORGANIZATIONAL DIRECTION Through an interpretation of information gathered during environmental analysis, managers can determine the direction in which an organization should move. Two important ingredients of organizational direction are organizational mission and organizational objective. Organizational mission is the purpose for which or the reason why an organization exists. Mission Statement is a written document developed by management, normally based upon input by managers as well as nonmanagers, that describes and explains what the mission of an organization actually is. Organizational Objective is long-range plan that serves as the goals for management in achieving the organizational mission. Importance of mission statement. First, its existence helps management to focus human effort in a common direction. Second, it helps managers because it serves as a sound rationale for allocating resources. Third, it can help managers pinpoint broad but important job areas within an organization. A well-developed mission generally helps management define critical jobs that must be accomplished. Relationship between Mission and Objective. Sound organizational objectives reflect and flow naturally from the purpose of the organization. The purpose of the organization is contained in its mission statement. Useful organizational objectives must reflect and flow naturally from an organizational mission that, in turn, was designed to reflect and flow naturally from the results of an environmental analysis. STEP 3: STRATEGY FORMULATION Strategy Formulation is the process o determining appropriate courses of action for achieving organizational objectives and thereby accomplishing organization purpose. Tools for Developing Organizational Strategies. 1. Critical Question Analysis is a strategy development tool composed mainly of four questions: a. What are the purposes and objectives of the organizations? b. Where is the organization presently going? c. In what kind of environment does the organization exist? d. What an be done to better achieve organizational objectives in the future?

2. SWOT Analysis is a strategic planning tool that matches internal organizational strengths and weaknesses with external opportunities and threats. It is an acronym for firms Strength and Weakness and its environmental Opportunities and Threats. 3. Business Portfolio Analysis is the development of business-related strategy that is based primarily on the market share of businesses and the growth of markets in which businesses exist. Just as sound financial investments should be supported and unsound ones should be discarded, sound organizational activities should be emphasized and unsound ones deemphasized.