Strategic Business Planning Management And Decision Making
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The term strategy has found a limited definition arising, principally, from military origins. This definition has been expanded into the business context where many authors have argued strategy in terms of quantitative and qualitative processes. However, it continues to defy a singular, definitive definition. In order to understand strategy, we must look beyond its military antecedents and identify strategy as a life process.
Different possible definitions of strategy are:
"Strategy is the direction and scope of an organisation over the long term, which achieves the advantage in the changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations".
"Strategies are developed in order to achieve the goals and objectives of the organisation".
"Aconsistency of direction based on a clear understanding of the "game" being played and an acute awareness of how to manoeuvre into a position of advantage".
"Strategy is not just a notion of how to deal with an enemy or set of competitors or a market. It draws us into some of the most fundamental issues about organizations as instruments for collective perception and action".
Scope and nature of strategic business management and planning:
Scope and nature of strategic business management and planning is a widespread topic and it is hard to list down every aspect of it. I am using JS&W model to describe some of the key aspects of strategic business management and planning:
The organisation's long termdirection: no specific timescale is envisaged but one should think in terms in excess of one year and more probably of several years.
The scope of an organisation's activities: This will include both the overall roles and purposes the organisation accepts for itself and the activities it undertakes in pursuit of them.
For commercial organisations and for many not for profit organisations too, strategic planning will be about gaining some kind of advantage in competition.
Strategic decisions are affected by the values and expectationsof organisation's stakeholders. Stakeholders are people who have a legitimate interest in what the organisation does.
Characteristics of strategic business management and planning:
Using JS&W model as an reference, some of the key characteristics of strategic business management and planning are:
Decisions about the strategic planning are likely to be complexsince there are likely to be a number of significant factors to take in to consideration and a variety of possible outcomes to balance against one another.
There is likely to be a high degree of uncertaintysurrounding strategic planning, both about the precise nature of current circumstances and about the likely consequences of any course of action.
Strategic planning and management have extensive impact on operational decision making, that is, planning and decision at lower levels in the organisation.
Strategic planning affects the whole organisation and requires processes that cross operational and functional boundaries within it. An integrated approachis therefore required.
Strategic planning and management are likely to lead to changewithin the organisation as resource capacity is adjusted to permit new courses of action. Changes with implications for organisational cultureare particularly complex and difficult to manage.
Key strategies of British Airways are:
Be the airline of primary choice for long haul premium customers:
So people will want to fly with us at any time they can. We will carry on to come up with great stuff such as the new business class seat on long haul and a restyled First cabin.
Deliver a incomparable service for customers at every touch point:
By training crew, on the ground and in the sky, in world-class warmth and customer service. Customers can check-in from their mobiles or PDAs.
Grow our survival in key global cities around the world:
To render the best global connectivity for our customers. In addition toour new long haul service from London City to New York JFK, our network depth will strengthen with more flights to Dubai and Johannesburg and a return to Saudi Arabia.
Build on our leading stance in London:
The world's biggest aviation market. Ensuring Heathrow remains a world classhub is vital to give us a powerful London base to cater the largest international long haul markets. We will obtain new slots, support plans for athird runway and work with BAA to improve baggage and terminal conveniencesat Heathrow.
Meet our customers' needs and improve profit margins through new revenue streams:
By coming up with profitable supplementary services that offer customers great value and re-enforce our brand. Our aspire is to grow our mileage business and further revenues from third-party engineering, in-flight sales and a new online retail website. On ba.com we have now launched a variety of great value hotel and car hire options packaged with our flights.
The decisions we are taking now will establish how strongly we materialize from the downturn. The airline industry is in a period of unprecedented change and we have developed a clear strategy for our business.
In order to become the principal global premium airline, we necessitate to look at the way we work as well as what we are doing as a business.
For that rationale, along with our five key strategies, we have launched a three-year change programme - Compete 2012 - correlated to our sponsorship of the London 2012 Olympics. This programme is being progressively rolled out across our business to revive our culture and will reform the way we work.
Need of strategy in global environment:
Today's environment is very much dynamic. Organisations are in a constant exercise of realigning themselves to the needs of the environment. Defined and thorough strategy plays a vital part here. Especially for a globally operating organisation like BA, it could be a matter of success or failure. Managers must be aware that markets, supplies, investors, locations, partners, and competitors can be everywhere. Successful businesses will take advantage of opportunities wherever they are and will be prepared for downfalls. International strategy is the continuous and comprehensive management technique designed to help companies operate and compete effectively across national restrictions, For example, some companies form partnerships with companies in other countries, others acquire companies in other countries, others still develop products, services, and marketing campaigns designed to appeal to customers in other countries. Some rudimentary aspects of international strategies mirror domestic strategies in that companies must determine what products or services to sell, where and how to sell them, where and how they will produce or provide them, and how they will compete with other companies in the industry in accordance with company goals.
Generally, a Company develops its international strategy by considering its overall strategy, which includes its operations at home and abroad. We can consider four aspects of strategy: (1) scope of operations, (2) resource allocation, (3) competitive advantage, and (4) synergy.
Besides the fact that well defined strategic business management and planning processes bring structure, control and consistency to the overall decision making of the organisation but we (the company) should also consider that the formal decision making model discussed above may distract manager's attention from controlling actual process as making strategic plans is not the same thing as managing the process. A split may also develop between the people responsible for planning and those responsible for implementation. Particularly in large organisation like ours (BA) the planning system may be too complex and extensive for even quite senior managers to understand the way it works. Over-formal planning systems and over-rigid control can hamper innovative thinking.
As the national and international environment is always in a constant move so one can say that there is no one best planning and management model. Now a days the environmental factors and most importantly the customer are in a greater power than before that influences the overall structure, strategy, planning and management processes of the organisation.
Prescriptive and Emergent (Mintzberg) strategies:
In real world, 100% "intended or prescriptive" strategies does not get "realised". Some intended strategies fail as predicted environment keeps changing. Emergent strategies arise in response to unexpected changes in the environment and may be better than intended strategies. Hence, organisations should keep some room for emergent strategies alongside the formal process i.e. Rational model.
Following diagram is a snapshot of how a mix of prescriptive and emergent strategies get realised in the practical world:
Different levels of strategy and their relationship with each other: (Hofer and Schender)
Strategic business management and planning can be formulated on three different levels:
Tactical or business level.
Corporate level strategy makers analyze the common needs of business units and add impact to the whole system in addition to individual development of participating business units. Issues with reference to the introduction of new products or growth into new markets or segments are all a part of this strategic level.
Corporate level strategy forms the stem of the strategic decision tree and the management has to be wholly responsive of its implications as well as the sensitivity of all succeeding strategies, no matter at what level. It is of prime substance that corporate level strategy is entirely associated by and large with the vision of the business and the values and prospect of stakeholders.
Business or tactical level strategies are in essence position strategies whereby businesses safe for themselves uniqueness and spot in the market. The endeavour here is to augment the business value for the corporate and stakeholders by increasing the brand understanding and value professed by the customers.
The third level of strategy is the operational level which chiefly is concerned with successfully implementing the tactical decisions prepared at Corporate and business unit level through optimal consumption of resources and competencies of the business unit.
A methodical understanding of the three levels of strategy makes their strong co-dependence and non-hierarchical nature obvious. All strategies have to be in absolute harmonization with each other since the accomplishment of one is inseparably related to the other. So as a substitute of being in a top-down order, the inter-connecting can be visualized as a triangle with the three corners indicating the three levels.
Visions, missions and objectives:
The two organisations which are to be contrasted and compared are British Airways (for Profit) and Oxfam (Not for Profit).
Vision means the category of intentions which are broad, all-intrusive and forward-thinking. The corporate success is reliant on the vision set by the top management. A vision is the image that a business must have of its objectives before it sets out to reach them. It describes ambitions for the future, without specifying the means that will be used to achieve those desired ends.
Vision of British Air :
The Vision focuses on employees and customers â€¦.it emphasizes BA's desire to be the world's global airline.
Vision of Oxfam UK :
Oxfam's vision is that diverse communities of people living in poverty will exercise their rights to a decent and secure standard of living in developed society.
A mission statement is an organization's vision converted into written form. It makes tangible the management's view of the direction and purpose of the organization.
Mission of British Airways :
To be the undisputed leader in world travel for the next millennium.
Mission of Oxfam :
The main areas of Oxfam mission focus are poverty alleviation, action against violence, making people exercise their rights, removing gender inequality and preventing and reducing environment damage.
Objectives give the organization a clearly defined target. Planning can then be made thereafter to achieve these targets. This is helpful in motivating the employees. It also allows the business to measure the progress towards to its stated aims.
Objectives of British Airways :
The main objectives of British Air revolve around the following key areas:
Employee satisfaction and retention
Being more effective as an international carrier as compared to other airlines.
Making efficient use of resources.
Using methods that are environmentally friendly.
Making the airline more competitive in terms of fares while at the same time focusing on profitability.
Objectives of Oxfam :
The main objectives of Oxfam address the following:
Creating programs for people to make them exercise their rights.
Taking measures to reduce environmental damage.
Creating awareness among women and thus working towards gender equality.
Taking practical measures against the use of violence.
Methodology for creating Vision, Mission and Objectives:
The methodology used would be:
Vision: Based on the views of the management to create a certain image of the airline in the long-term and how the founding members/key stakeholders want to see the organization in future.
Mission: It will be based on the vision and the methodology used will depend on the need for to stand out amongst the airline industry.
The Objectives will be decided comparing the performance of other airlines and the key steps / indicators required to translate the vision in to tangible results.
Methodology for creating Vision, Mission and Objectives:
Vision: This will be decided according to the core principles on which a charity like Oxfam is founded. The factors considered would be the environment in which the charity operates and the people affected by its activities.
Mission: This area is decided according to the aims of the key stakeholders and the different areas on which Oxfam focuses including poverty reduction, disaster relief and development projects around the world.
The objectives will be set for the short or long term and the performance measures for the charity taking into consideration the main areas of operations as well as the likely hurdles in attaining a particular goal.
Strategic business management and planning method:
Strategic Business Management and Planning Method of the organization :
One of the main methods used is the SWOT Analysis and the PEST analysis. It takes into account the likely impact of the steps taken by British Air to meet its objectives taking into account the competitors as well as the global conditions existent in the world of travel and transport. This will focus on the main areas which can have a direct impact on the running of the airline including the fuel prices , customer satisfaction, competitor fares etc.
Strategic Business Management and Planning Method of the organization :
The methods used for a non-profit like Oxfam would be different as they will focus on key achievement areas in its global relief and humanitarian efforts rather than profitability. A key method might be the Value for Money (VFM) process. The likely areas taken into account during these methods might include the amount of donations received, the number of people served and the effectiveness of the work undertaken by Oxfam.
The influence of corporate governance and regulations:
Influence of Corporate Governance and Regulations:
British airways has to take into account different areas of corporate governance including the performance of the board and the regulation concerning the executive pay, the roles and duties of chairman and the chief executive , regulation concerning the functioning of board committees, shareholder accountability , environmental regulation.
Influence of Corporate Governance and Regulations:
Oxfam's corporate governance procedures will take into account the requirement for directors and trustees and adhering to a code of conduct(based on the Nolan Committee Principles of Standards in Public Life),also looking into possible conflicts of interests . The specifications of the memorandum of association and the key charitable aims of the charity.
Relevance of visions, missions and objectives:
Many organisations never explore their reasons for being in business. They are so involved in day-to-day actions they fail to see the bigger picture. So what is the significance of having an articulated Vision, Mission and Objectives?
It starts with establishing your core values. Core values are things that drive an organisation. They are the driving force of an organisation. They are fixed and do not change over time.
Once the core values are established, the next step is the Vision, a long-term goal. It can be something minute or something that is huge.
The Mission flows from an organisation's Vision. A Mission is important because it embraces the commitment of an organisation to staff, customers, and the community at large. It may define the company ethos, core beliefs of the owners, service levels, quality, excellence, training and commitment.
Setting objectives is the stage that comes next in the process. It is important because it shows how an organisation delivers on the promises made by its Mission. If there is clarity in both the Vision and Mission, it is easy to decide on the objectives. Objectives can be set for each key area of the business along with a time-line for completion. Objectives may be corporate, product, market, sales, financial, operations, or staff related or any combination of these.As can be seen, this is a trickle down system with higher level aspirations that flow down to every level of the business and become the glue that holds everything together. The benefits of having a vision, mission and objectives are clear and unambiguous. Every step that an organisation takes is in pursuit of its articulated end game.
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