STRATEGIC PLANNING: Meaning, Features, Process, and types of Business Strategies, McKinney’s 7s approach.
Introduction and Meaning
of strategic planning
·
Strategic Planning
is related with future.
·
A Strategic Planning
process involves different degrees of futurity/ time period.
·
Strategic
planning may be defined as the process of determining the objective of the
organization and the resources to be used to attain these objectives, as also
the policies to govern the acquisition, utilization and disposition of these
resources.
·
Every company
has different methods of strategic planning. But commonly, every company
strategic plan includes:
·
Information about the developments in the
marketplace.
·
Long term perspective usually time span from
three to ten years in the future.
STRATEGIC PLANNING |
Features and Nature of
Strategic Planning
1. Strategic Planning
is an analytical process which formulates strategic and operational plans for
the organization.
2. It performs
SWOT Analysis, i.e. during the planning process, the firm’s strengths,
weaknesses, opportunities and threats are taken into consideration.
3. It is helpful
in selecting the best strategy, among the various strategies taking into
account the firm’s interest, personal values and corporate social
responsibility.
4. It acts as a guide
to reduce the risk involved in the business and also to take the best possible
advantage of the opportunities.
Strategic Planning process
1) Understanding the
concept.
2) Mission
statement.
3) Environmental
analysis.
4)
Self-appraisal.
5) Strategy
Formulation/ Goals and objective.
6) Strategy Implementation.
7) Strategy Evaluation.
1) Understanding the
concept:
·
The first step
in the strategic planning process says that first the entrepreneur and his
organization must understand the concept of strategic planning.
·
This will help
in addressing various important issues like commitment, readiness and efforts
of the organization in order to attain the overall objectives of the
organization.
2) Mission statement:
·
The entrepreneur
should make the mission statement in clear terms.
·
A mission
statement describes the purpose of existence of an organization. Mission
statement tells two things of organization.
a) Organization
purpose.
b) Organization
values.
3) Environmental
Analysis:
·
In order to
identify the opportunities and threats, the external environment of the
organization is analyzed.
·
Strategic
planning includes thinking of resources with an eye to the future environment.
1 Competition
2 Economic
conditions.
3 Political conditions
4) Self appraisal:
·
In this step the
strengths and weakness of the organization are analyzed. Such an analysis will
enable the enterprise to capitalize on its strengths and minimize the
weaknesses.
5) Strategy
Implementation:
·
After
formulation of strategy the next step is to implement these strategies in order
to find out the desired outcome of these strategies. The best method to study
the implementation is to critically analyze the
McKinney’s 7s
approach.
a) Strategy.
b) Structure.
c) Systems.
d) Skills.
e) Shared
values.
f) Staff.
g) Style.
6) Strategy Evaluation:
·
This is final step
in the strategic planning process that generates the required feedback about
the outcomes of the strategy that was implemented.
·
If the required
end results are not obtained then this is developed to evaluate performance as
the strategy to meet the end results.
Harvest and exit
strategies
1)
Harvest
Strategies:
·
A harvest
strategy or harvesting strategy is a business plan for either cancelling or
reducing marketing spending on a product.
·
The management
has decided that it would cost too much to boost sales.
·
In other words,
they could not justify the expense after considering likely future revenues
from the product.
·
The term ‘harvest strategy’ may also refer to
a brand or line of business.
·
Companies use a
harvesting strategy when a product has reached the cash cow stage. Cash cow
refers to a product that makes a profit in a mature market and does not need
heavy reinvestment.
Types of harvest
strategy
a) Gradual Harvest
strategy:
·
In gradual
harvest strategy the entrepreneur decides to keep on with the company, product
line, or service.
·
The focus of
this strategy is more creating profits than expansion. The idea is to lower the
expenses as much as possible while keeping the revenue coming in which creates
profit.
·
The gradual
harvest strategy focuses first on cutting cost associated with business
expansion
Exit strategy
·
In
entrepreneurial circles exit strategy mean selling the business, product line
or company.
·
This is also
referred to as selling harvest strategy because the entrepreneur is going to
exit the company and be free to run another business.
·
Once the
entrepreneur has created a business and gotten it to a certain size and
profitability, they sell it to another person or company that can take their
idea and grow it further.
Types of exit strategy
1.
Merger &
Acquisition (M&A).
·
This normally
means merging with a similar company, or being bought by a larger company.
·
This is a
win-win situation when bordering companies have complementary skills, and can
save resources by combining.
·
For bigger
companies, it's a more efficient and quicker way to grow their revenue than
creating new products organically.
2.
Sell to a
friendly individual:
·
It’s a great way
to "cash out" so you can pay investors, pay yourself, take some time
off, and get ready to have some fun all over again.
·
The ideal buyer is someone who has more skills
and interest on the operational side of the business, and can scale it.
3.
Moving out cash for self:
·
In this strategy
the forward thinking entrepreneur simply channels the cash of the company to
themselves on a daily basis.
·
This is usually
done by paying oneself a huge salary and bonus regardless of the actual company
performance.
4.
Liquidation
·
Even lifetime
entrepreneurs can decide that enough is enough. One often-overlooked exit
strategy is simply to shutdown, close the business doors, and liquidate.
5.
Initial public
offer:
·
The Initial
public offer refers to a strategy of making available the stock of a
privately-owned company to any interested investor.
·
The primary
purpose of an IPO is to raise additional equity capital to finance company growth,
but it can also serve as an additional strategy for harvesting the investment
of owner.
Advantages of IPO:
1.
Signals to investors
that firm are a quality business and will likely perform will in future.
2.
Helps in
creating ongoing interest in company and continued development.
3. Stock traded publicly has access to more investors when capital needed to grow the business.
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