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This Report addresses Strategic Planning which discusses about the external environment affecting an organisation, the reviewing of business plans, developing options for strategic planning, factors that affect an organisation plan and the implementation of strategic planning.
Several models such as the PESTLE, Porters 5 Forces, Ansoff Matrix, Quality circles, PDCA, BPR, and SWOT have been discussed in detail. There are two case studies whose examples been given a) Morgan Stanley Case Study b) DETR case study
Morgan Stanley is a global bank advising with investments, mergers, acquisitions, privatisations. It is a major underwriter of stocks and bonds etc.
DETR is known as the ETR Environment Transport Regions. The case study focuses of four school transport plans and shows how the schools, teachers and students together have worked on plans to improve the journey of the school.
Strategic planning offers transparency in understanding where the organisation is headed it answers questions like;
How it is going to get there?
And whether it will get there or not?
Strategic planning is about the entire organisation whereas a business plan focuses on service, product or program. The strategic plan depends on several aspects of the organisation that is the organisations leadership, culture size etc.
The key components of strategic planning are the vision mission values and strategies.
According to Mullins (2007) Business Planning is a systematic, disciplined approach of planning. Plans are the route maps of where the organisation is now and where it has to get. Management theorist Henri Fayol (1841-1925) said planning was one of the most important criteria for management; it is the base of any organisation.
He explained planning as: (Mullins 2007 p 415) 'examining the future, deciding what needs to be done and developing a plan of action'.
Strategic Planning: Definition
Johnson and Scholes (1993) define strategic planning as "Strategic planning helps determine the direction and scope of an organisation over the long term, matching its resources to its changing environment and, in particular, its markets, customers and clients, so as to meet stakeholder expectations''
According to Burns (2004) Igor Ansoff was regarded as one of the initiators of strategic planning; he was a strong believer of the 'Planning' school of thinkers. His published a book 'Corporate Strategy' in 1965 it focused on the external environment, concerns of organisations, his own Matrix Ansoff's Matrix, a strategic planning tool is still widely used today.
The Classic 4-Step Approach to Strategic Planning
According to Allan (1993) Price Waterhouse accountants back in the1980s had a structured approach to change and strategic management.
The 4-Step approach is easy to understand. It asks questions such as;
Where are we now?- Situational Analysis
A situational analysis is all about conducting an audit, looking at the organisations history and profile, stakeholders, financial assessment, previous and current strategies thus analysing and answering questions where we are now.
Where do we want to be?- Future Directions
This is the Vision and Mission statement of an organisation shows the employees, stakeholders where the organisation is headed. It answers what is the purpose of the organisation, the policies in place, the competitive position and values the organisation believes in.
How are we reaching there?-Strategy development
Strategy development is a Road Map to make the organisation work towards the vision. There will be a lot of resistance to change during a strategy development using Kurt Lewin's Force Field Analysis resistance can be overcome.
How will we tell when we have reached there? Monitoring and evaluating.
Performance Indicators (KPIs), KPI's are used guarantee continuous measurement to improve performance in order to satisfy customer needs and achieve overall organisation's vision Evans (2008). According to Khandker (2010) a monitoring system consists of comparing goals and targets with those that were set.
Q1. Learners need to show that they understand the external environment affecting an organisation by:
a) Explaining the importance of external factors affecting an organisation
b) Analysing the needs and expectations of stakeholders of an organisation
c) Analysing the major changes taking place in the external environment that will affect strategy
Ans) The external environment consists of the customer's needs and expectations, shareholders, changes in politics, product design, shareholders, and technology. To understand the external environment models such as the PESTLE can give an organisation an insight into the problems that can be faced externally by an organisation that may arise and how to deal with them.
A SWOT can be carried to check the strength weaknesses opportunities and threats an organisation may face. A feasibility study and scanning the environment can assist in studying the external environment and eliminating weaknesses. Market research is done to analyse the current market situation. Customer's feedback and complaints are taken to improve the quality of the product or a particular process.
PESTLE- Green (2007) The P.E.S.T.L.E framework takes into consideration the Political, Economical, Socio Cultural, Technological, Legal and Environmental
Predicting the future circumstances the organisation could deal with. The PESTLE can forecast the events that will influence the organisation as well as the ability to deliver the product.
Henry (2008) 'Understanding strategic management.'
FEASABILITY STUDY- According to James (2000) A feasibility study is a study on a proposed project which examines it extensively to put the decisions makers at ease. Feasibility studies uncover the strengths and weaknesses of an organisation or proposed project. It provides an insight into the opportunities and threats that are present in the environment. EXAMPLE: A feasibility study is conducted by an assessment that is Total estimated cost of the project, Financing of a project the debt equity, Projected cash flow and profitability
ENVIRONMENTAL SCANNING - According to Kroon (1995) Environmental scanning takes into consideration the macro environment. The macro environment is the external forces that affect an organisation. The environmental analysis consists of Environmental monitoring, assessment and forecasting. It is concerned with markets, companies, industries competitors and clients. On the other side there also exist the micro-level which is analysed within the industry. Customers, Suppliers and competitors signify the micro environment of a company.
SWOT- The SWOT Analysis analyses the Strengths, weaknesses, opportunities and threats of an organisation. Threats and opportunities are considered external factors whereas strength and weakness are considered internal factors (Weihrich, 1982) cited by Leung et al (2000)
Strengths- The strength establishes the company's strong points
Weaknesses- It determines the weakness of the organisation not only from its standpoint but from the customer's vision.
Opportunities- It predicts how an organisation can grow within a market place
Threats- It analyses the threats that can crop up and thus establishing a plan of action to surpass them without getting affected.
Ferrell (1999) 'Marketing strategy.'
CASE STUDY EXAMPLE- Morgan Stanley faced an external threat of technology, they realised their weaknesses and planned by bringing IT into the system to improve performance of the system. They also realised it was not only the knowhow of technological systems but employees coming together from diverse backgrounds as teams, to feel comfortable and confident with the technology and processes that were an integral part that was necessary for the organisation.
Q2. Learners will be able to review existing business plans and strategies of an organisation by:
a) Using appropriate tools to analyse the effects of current business plans
b) Reviewing the position of an organisation in its current market
c) Evaluating the competitive strengths and weaknesses of an organisation's current business strategies
Analysing the effects of current business plans is useful when there are certain uncertainties about how the business is performing. It helps in showing whether the business is headed in the correct direction, all business plans are up to date, and the company is making most of the market opportunities. It is also useful if to decide if a company is ready to move on to another level. Business plans and strategies can be reviewed with the following models such as the BCG matrix, Life cycle analysis, Porters 5 forces.
PROCESS MAPPING- Process mapping can be used to plan strategic quality change. According to Hunt (1996) Process mapping is all about 'where are we' and 'where we need to be.' Process mapping serves a range of functions it enables an organisation to see know where a process starts and ends, recognise what functions the process has, create several maps and scrutinise specific process steps. Process maps can support quality recognitions such as ISO 9000. It helps decision making to improve their actions and can be a useful communication tool.
Porters 5 force model-
Porters 5 force model takes into account the
Risk of entry by potential competitors
The intensity of rivalry among established companies
The bargaining power of buyers
The bargaining power of suppliers
The closeness of substitutes to and industry's product
According to Jones (2008) the task a manager faces is recognising how the changes in the five forces would give rise to opportunities or threats therefore formulating appropriate strategic responses.
JONES (2010). 'Strategic management theory: an integrated approach.'
BCG Matrix- The BCG matrix also known as the BOSTON CONSULTING GROUP framework evaluates the performance of an organisation. The BCG matrix helps to understand how different strategic business units add to the organisation. By assessing the strategic business unit on the basis of its growth rate and market share it is easy for managers to make decisions about committing to future financial resources to the strategic business unit or sell or liquidate it, Griffin (2013).
Stonehouse (2004) The BCG Matrix.
MONITORING- While implementing change the organisations change has to be monitored constantly. According to Khandker (2010) a monitoring system consists of setting goals and targets. The results that are derived from it are used to evaluate the performance. Monitoring helps in promoting accountability and dialogue among the policy makers and stakeholders and also policy design and implementation. Evaluation is an assessment of the results that are achieved by the programme.
The challenges in monitoring are to;
Identify the goals that are supposed to be achieved.
Identify key indicators that are used to monitor progress against these goals.
Set targets that are supposed to be achieved by a given date.
Set up a monitoring system to track progress to achieve specific targets. Therefore, encouraging better management and responsibility for projects and programmes.
CASE STUDY EXAMPLE- Morgan Stanley reviewed their existing business plans and noticed how the impact of technology would affect them. They realised the creative use of new technologies by other organisations. In the past IT was considered a cost, a change in thought with IT being looked at as an investment that offered an easy and finer way of working plus with the substantial return, made Morgan Stanley go for IT and since then it has doubled its market share within a short span of 18 months.
Q3. Learners will be able to develop options for strategic planning for an organisation by:
a) Using modelling tools to develop strategic options for an organisation
b) Developing a comparative understanding of activity from organisations in the market
c) Creating options to form the basis of future organisational strategy
There are a lots models and approaches used in strategic planning. The growth and application of these different tools depend on a large number of aspects, such as size of the organisation, character and complexity of the company's environment, and the company's leadership and culture. Models such as benchmarking help to measure up to other organisations processes and products. The gap model is used to fill in the gaps that is concerned with service quality. Quality circle is about bringing everyone together when planning strategy.
BENCHMARKING- According to Damelio (1995) Benchmarking is used to make improvements in the organisation. It is used to discover the best way to do a business. Benchmarking is targeting the best competitor or successful organisation and understanding the elements that make the business victorious. Adapting their elements with certain changes to rise in the market. Benchmarking can be used for a particular process or for the organisation in whole. Operations management can use benchmarking as a tool to improve their process.
5 GAP MODEL BUILD TO DEAL WITH THE SHORTFALL OF THE QUALITY SERVICE Nargundkar (2010) .
According to Grigoroudis (2010) the Servqual model is used to manage quality and measure quality in an organisation.
The gaps are as follows
Gap 1. Between Customers Expectations Managements perceptions about these perceptions.
GAP2. Between Managements Perceptions Customers expectations
GAP3. Between Service quality specifications Service Delivery
GAP4. Between Service Delivery External Communication to customers about service delivery
GAP5. Between Customers expectations their perceptions on service quality
The GAP model takes into account the tangibles, reliability, responsiveness, assurance and empathy that is required in Quality Management.
Ansoff Matrix- According to Bachmeier (2008) the Ansoff model suggests that several strategies can be used at once. It is based on beliefs that the most appropriate growth strategies are based on decision to sell old or new products or vice versa. The Ansoff matrix is used by managers for decision making and to forecast. It is also used to describe optional strategies in a growing economy.
Lester (2009) 'Growth Management Two Hats are Better than One.'
MARKET SEGMENTATION- Cant (2007) asserts that market segmentation divides the market in a uniform group that responds differently to marketing thus implying that every group or segment can be targeted by different marketing mix. A market segmentation helps establishing the price a consumer is prepared to pay.
QUALITY CIRCLES- Quality circles is a group of members who are volunteers that form a team to come together and problem solve. This technique came from Japan from Dr Kaoru Ishikawa. Dr Ishikawa realised the need of transferring the responsibility of problems to people who were closest to it so they would suggest the best way to solve the problem. EXAMPLE; solving a problem on the factory floor, workers on the factory floor were closest to the problems and could provide solutions to dealing with problems such as delivery and meeting production deadlines. Quality circles meet regularly once a week and develop solutions to problems Bagad (2008). Quality circles are important in implementing change by gathering ideas from everyone.
FISHBONE DIAGRAM- According to Lighter (2004) the fishbone diagram provides an insight into the root causes of the problems instead of treating it from the top. The base line of the fishbone represents main problem and the branches that come from it gather information. The fishbone diagram relies on IQ, brainstorming, team work etc. The fishbone is an excellent tool in Quality improvement as it visually represents the root causes of the problem and is a great tool to implement strategic quality change.
Shelly (2001)- Systems analysis and design.
CASE STUDY EXAMPLE- Horndean community schools objective was to reduce the use of car journeys to school, to raise interest of the impact transport had on the environment and reduce accidents they developed options when planning their strategy. They achieved that by restricting car parking on site, establishing a park and walk arrangement with supermarkets, improved routes for cycling and walking, encouraged car sharing through a database, use of school vehicles etc.
Q4. Learners will be able to construct a strategy plan for an organisation by:
a) Proposing a suitable structure for a strategy plan that ensures appropriate participation from all stakeholders of an organisation
b) Developing criteria for reviewing potential options for a strategy plan
c) Constructing an agreed strategy plan that includes resource implications.
Stakeholders offer significant insight into each phase of program planning, evaluation and implementation. Stakeholders are normally involved at the beginning stages of planning. They provide insight for the various requirements that a project should meet. A successful strategy plan can be prepared by using a PDCA Model and a balanced scorecard.
PDCA- PDCA is known as PLAN-DO- CHECK- ACT. It is also known as the Deming Wheel. The PDCA is used for continuous improvement. The PDCA cycle permits two types of counteractive action namely temporary and permanent. The temporary stage goal is to tackle and fix issues that are a hindrance and permanent counteractive action is used to eliminate the source of that cause Basu (2004)
P (PLAN)- Formulate the plan
D (DO)- Implement the plan
C (CHECK) - Compare the results that are recorded after implementation to targets set.
A (ACT) - If the change has triumphed then outcome is standardised.
Kanji (1998) 'Fundamentals of total quality management: process analysis and improvement.'
BALANCED SCORECARD- The balanced scorecard represents how the company deals with different stakeholder groups. It is aimed at senior management but operation managers can find themselves accountable for activities that are seen on the scorecard Brown (2011).
CASE STUDY EXAMPLE- George Abbot School in Guildford presented a report by GNVQ Business Studies Group whose aim was to make it easier to walk or cycle and use the bus to school. They constructed a strategy plan by conducting surveys from students and the reasons why they wouldn't use the cycle or walk or bus, did they have an accident or they don't feel safe walking etc. After their research they proposed a plan which was cycle lanes, cycle parking, pedestrians crossings, improved capacity on certain bus routes and a discount on travel cards.
Q5. Learners will be able to examine factors affecting an organisational strategy plan by:
a) Comparing core organisational values (ethical, cultural, environmental, social and business) with the current business objectives of an organisation
b) Developing appropriate vision and mission statements for an organisation
c) Producing agreed future management objectives for an organisation
d) Developing measures for evaluating a strategy plan
Core values establish the base of the culture. Until deciding what those values are, and how the organisation will work with each other, it's very hard to do anything else such as decision making, setting goals, solving problems, establishing measurements etc. The vision and mission of an organisation and SMART Goals can assist in factors that affect an organisation by creating a better plan and accomplish goals.
VISION VS MISSION- Vision Statements and Mission Statements are motivational and inspirational words that are chosen by a leader to clearly and concisely convey the direction of the organisation. The vision and mission statement works better when the employees and employer sit together and decide on it rather than the employer making it alone, as the employees would feel valued and optimistic.
The vision and mission of an organisation is a clear and concise statement that answers the Question 'what business are we in?' A well devised mission statement has to answer five basic questions Ferrell (1999).
Who are we?
What customers are we serving to?
What are our competitive advantages?
What are our responsibilities?
What is our operating philosophy (values, ethics, beliefs etc)?
The Vision statement is used to communicate the end result. It is mostly written in the future. The vision and mission statement both have to be aligned with each other. The vision statement is important as the stakeholders will not understand the big picture of the organisation without it.
SMART GOALS- the SMART model is used for setting objectives while planning a quality change.
According to Ramsey (1999) Smart stands for;
Specific- that is well defined
Measurable- so that you measure the progress
Action- Action oriented
Realistic- challenging but doable
Time Oriented- include deadlines
The SMART model is designed to lessen vague assumptions, removes ambiguity and forces hidden agenda to come out, allowing to measure progress. The SMART Model prevents unnecessary costs and schedule overruns, establishes stakeholder expectations and reduces politics Richman (2006).
CASE STUDY EXAMPLE- Morgan Stanley understood the factors that would affect a strategy plan, they were aware of the technological mishaps that would leave the organisation defenceless. They built in a strategic programme the EFL that is the Electronic trading laboratories into the system to trade large quantities. The system would make decisions such as buying and selling with the parameters set in the programme.
Q6. Learners will be able to plan for the implementation of a strategy plan by:
a) Developing a schedule for implementing a strategy plan in an organisation
b) Creating appropriate dissemination processes to gain commitment from stakeholders in an organisation
c) Designing monitoring and evaluation systems for the implementation of a strategy plan in an organisation
Accountability is necessary in strategic planning and implementation process. If the investment of time and effort needed to develop a plan strategic planning process is highly important, then supervising and insuring that goals are met are highly important too. It is clear that the director or board members must direct this is the long-term strategic plan. The implementation of plans, employee level and department level drives towards short and long-range goals that lead to achievement of the long range strategic plan targets.
Dissemination refers to the development of results of the projects accessible to the stakeholders and to the people in the organisation. Dissemination is essential for start of a project, and the start is crucial for the success of the project and for maintaining outputs long term.
A strategy plan can be implemented by using the BPR, successful communication strategies- open loops, and action planning.
BPR- BPR is known as Business Process Reengineering can be used in operations management to manage quality to meet strategic objectives. According to Radhakrishnan (2008) BPR was introduced by Frederick Taylor when he printed 'principles of scientific management' in 1900s. BPR is an analysis of the existing processes in an organisation and reengineering it for improvement in performances instead of a complete replacement of a process. BPR is used to bring about change in an organisation through focusing on employee responsibilities, organisational structures, incentive systems the use of information technology etc. It can reduce the time and cost of processes to do a certain job.
Effectiveness of the organisations existing communication strategies
Carr et al. (2001) the level of job satisfaction that is associated within organisations is associated with communication strategies. Every business has a unique selling point (USP) and for an organisation to succeed there has to be a communication strategy in place.
Communication is an intangible input to an organisation that is very essential for its success.
According to Carr et al. (2001) Management communication strategies have major job satisfaction. Clear communication of goals, job responsibilities have significant improvement in higher output quality. Communication within customers creates employer loyalty and quality production.
Clark (1996) Leaders have to look inside the organization to ease tensions making sure quality does not fail in the corporation. Mills et al (2009) communication should be continuous and training should be supported to overcome the change, Resistance is bound to happen during change but leaders can overcome them with great ease if there is proper communication.
According to Deming (1986) MBO (Management by objective) Management by objective does not take into consideration the environment in which goals are set in. Management by imposition of results takes into consideration the results and does not stress on the quality of the product. It hinders workers performance and makes them undervalued. These objectives need to be interchanged with Leadership
According to Kubr (2002) Action planning is all about using the right people so that their talents are mobilised and cost of the project can decrease. Participation is generated with action planning thus making commitment, which will be tested at the implementation stage. Lastly a range of learning opportunities is available for the clients.
CASE STUDY EXAMPLE- The public transport for schools wanted to reduce car dependency and traffic congestion. It considered a member of staff, involvement from a parent teacher, information for parents and students about options to car travel in the prospectus, newsletters and other types of communications.
This report demonstrates how the external environment affects an organisation. How PESTLE, SWOT can aid in the improvement of the organisation before it gets worse. It shows how to review existing business plans by monitoring, using the gap model and porters 5 forces to implement change. How strategic planning options are devised via benchmarking, quality circles etc. A strategy plan is formulated using the PDCA Model and a balanced scorecard. Factors that affect an organisational plan can be dealt with by the use of proper vision and mission statement using smart goals in place. Planning the implementation of strategy is easy by using proper communication, Business Process Reengineering.
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