STRATEGIC PLANNING IN A DYNAMIC SCENARIO

The Indian Scenario

The regulatory framework and the licensing policy of the Government of India from independence until 1991 was such that there was no need for strategic planning exercises to be carried by corporates in India since corporates operated in a protected environment with no fear of foreign competition, limited domestic competition as a result of the self-reliance policy and the licensing policy that restricted manufacturing in the country.

The exercise of corporate planning to the extent that it was carried out by firms was a simplistic one where one merely noted the demand-supply gap as seen by the Government policy and its licensing policy. Thus a strategic planning exercise was one of extrapolation of financial projections for ‘the next few years’ based on this.

TREND EXTRAPOLATION

“I mistrust isolated trends in a period of rapid change, strategic planning based on straight-line extrapolation is inherently treacherous... what is needed for planning is multidimensional models that interrelate forces - technological, social political, even cultural, along with the economics.”

Alvin Toffler

Some companies have gone a step further and some have attempted forecasting by gathering data with the help of market-survey organisations, of competition, demographics, geographic data etc. and have used this to elaborate on their financial projections and ‘planning exercise’.

LIMITS OF FORECASTING

“Forecasting can be thought of as analogous to the illumination by the headlights of a car driving through a snow storm at night.

A bit of what lies ahead is revealed, not very clearly.

The driver merely tries to avoid danger and pick out enough detail needed to arrive at his destination.

But he needs to be prepared for sudden major obstacles, be aware of his limited view and try to adjust his speed accordingly. He will know only when it appears, and then it may be too late to adjust.”

Albert Olensak, Corporate Planner, Sun Oil.

The environmental turbulence created by the Government’s liberalisation process initiated in 1991 has many Indian corporates caught on the wrong foot. Further liberalisation by the Government with every subsequent year, the signing of GATT and emergence of the WTO as the true regulatory body for global free trade has resulted in unprecedented global competition and accentuated the pace of change in the Indian business environment. The third major development - the media explosion with the convergence of satellite and computer technologies giving rise to Internet and E-mail at low prices and the awareness of the availability of goods and services worldwide through international television programmes has increased the level of sophistication of Indian buyers enormously in a short while.

“On average, most managers devote less than 3% of their time to thinking about the future and building a corporate perspective on the future.”

the result:

difficult questions go unanswered because they challenge the assumption that top management is in control the urgent desire out the important - fire fighting becomes the mode of management the future is left unexplored the capacity to act rather than think and imagine becomes the measure of leadership when problems arise, the scalpel becomes the answer to everything

Gary Hamel & C.K. Prahalad

The absence of any real corporate planning exercise in the past renders the concept of ‘redefining corporate strategy’ in respect of most Indian firms as superfluous. What is needed is understanding the fundamentals of corporate strategy and commencing to implement it in the real world and the real time context.

Understanding Strategic Planning

Strategic management is an ongoing process of analysis planning and action that attempts to keep a firm aligned with its environmental opportunities while strengthening organisational weaknesses and minimizing or avoiding external threats. Strategic management is thus a future oriented proactive management system.

According to Kenneth Andrews, a professor at the Harvard Business School, a corporate strategy is the pattern of company purposes and goals and the major policies and actions for achieving them. Together they define the business of businesses the company is to be involved with and the kind of company it is to be. A written statement of strategy should communicate both a company’s mission or missions and its primary goals. The written strategy should also include the company’s major direction or thrust in products market research and production methods. A supporting strategic plan should indicate the major actions resources allocations and other changes that will occur during the planning horizon.

Michael Porter, the renowned Harvard Business School professor has identified three well known strategies that may lead to competitive success. His first strategy is in pursuit of overall cost leadership for the entire market. Firms such as Dupont are well known for such a strategy. Various actions such as increasing production efficiencies underpricing competitors and cutting costs are directly related to the successful pursuit of this strategy. Porter’s second strategy is differentiation of products so that the consumers see them as unique or very distinctive. General Motors takes this tack in the automotive industry. Distinctive brands a heavy investment in product innovation and memorable marketing campaigns are linked directly to this general strategy. The third strategy involves focusing on only a narrow segment of a larger market emphasizing either overall cost leadership or differentiation to achieve goals that top managers set for the organisation.

The actual strategic management process is often described as a rational and analytical one involving the following steps:

Environmental Scanning - This step examines and forecasts government and competitor actions, industry trends, buyer behaviour and preferences and company specific threats and opportunities.

Company Analysis - In this step, managers analyse and assess company activities to identify current performance, corporate cultures, strengths, weaknesses and managerial values and to examine current mission goals and strategic thrusts.

Strategic Goal Setting - Strategic goal setting defines a mission and sets long term goals.

The above analysis is used to generate a new strategy that fits the organisation’s environment, its strengths, mission and goals.

Strategic Management also entails the reconciliation of the above analysis with market opportunities, corporate capabilities, the values of senior management and legal requirements and social and environmental responsibilities.

The next step is to translate strategies into organisational actions. This involvesproviding leadership, communication with managers and down the line and making many detailed plans and day-to-day decisions.


Finally, Strategy Control monitors strategies and strategic planning to improve both future performances and the planning process.

Constraining factors to Strategic Planning in all situations, there are constraining factors in the design and implementation of the strategic management process. It is important to recognise these factors and take these into account while designing the strategy. Some of these are:

History and culture of the organisation - The culture of the organisation will impact the values, philosophy and attitudes towards factors such as new business opportunities, people development policies and attitudes towards shareholders and government agencies in the regulatory framework.

Organisational size and structure - The organisational size and structure will determine the complexity of strategic planning which has to be carried out and the need to take into account proper understanding of the internal strengths of the organisation as well as its weaknesses and to take into account, the power relationships and the informal and formal nature of the communication process.

Environmental turbulence and dependence - The environmental change and turbulence taking place will determine to a very large extent, the dynamic nature of the strategic planning exercise, specially in the current changing environmental context in India.

 
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