Top executives ponder strategic objectives and missions. Mere planning has lost its glamor; the planners have all turned into […]. Mere planning has lost its glamor; the planners have all turned into strategists. All this may have blurred the concept of strategy, but it has also helped to shift the attention of managers from the technicalities of the planning process to substantive issues affecting the long-term well-being of their enterprises.
Instead of behaving like large unwieldy bureaucracies, they have been nimbly leap-frogging smaller competitors with technical or market innovations, in true entrepreneurial style. They have been executing what appear to be well thought-out business strategies coherently, consistently, and often with surprising speed. Repeatedly, they have been winning market shares away from more traditionally managed competitors. Is it the result of their substantial investments in strategic planning, which appear to have produced something like a quantum jump in the sophistication of their strategic planning processes?
If so, what lessons can be drawn from the steps they have taken and the experience they have gained? To explore these questions, we embarked on a systematic examination of the relation between formal planning and strategic performance across a broad spectrum of companies see the sidebar.azydicunap.tk
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We looked for common patterns in the development of planning systems over time. In particular, we examined their evolution in those giant companies where formal planning and strategic decision making appeared to be most closely and effectively interwoven. For two years, we and our colleagues studied the development of formal planning systems in companies, mainly industrial goods manufacturers client and nonclient in seven countries.
The concept of strategic management described in this article differs somewhat from that of H. Igor Ansoff, who invented and popularized the term. Igor Ansoff, Roger P. Declerch, and Robert L. Our findings indicate that formal strategic planning does indeed evolve along similar lines in different companies, albeit at varying rates of progress.
This progression can be segmented into four sequential phases, each marked by clear advances over its predecessor in terms of explicit formulation of issues and alternatives, quality of preparatory staff work, readiness of top management to participate in and guide the strategic decision process, and effectiveness of implementation see the Exhibit. The four-phase model evolution we shall be describing has already proved useful in evaluating corporate planning systems and processes and for indicating ways of improving their effectiveness. In this article, we describe each of the four phases, with special emphasis on Phase IV, the stage we have chosen to call strategic management.
In order to highlight the differences between the four stages, each will be sketched in somewhat bold strokes. Obviously, not all the companies in our sample fit the pattern precisely, but the generalizations are broadly applicable to all. Most companies trace the origins of a formal planning system to the annual budgeting process where everything is reduced to a financial problem. Procedures develop to forecast revenue, costs, and capital needs and to identify limits for expense budgets on an annual basis. Information systems report on functional performance as compared with budgetary targets.
Companies in Phase I often display powerful business strategies, but they are rarely formalized.
Instead, they exist. Based on their knowledge of their own cost structure, can they estimate what the impact of a product or marketing change will be on their plants, their distribution system, or their sales force?
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If so, and if they do not plan for the business to grow beyond traditional limits, they may not need to set up an expensive planning apparatus. The complexities of most large enterprises, however, demand more explicit documentation of the implicitly understood strategies of Phase I. The number of products and markets served, the degree of technological sophistication required, and the complex economic systems involved far exceed the intellectual grasp of any one manager.
The shoe usually pinches first in financial planning. As treasurers struggle to estimate capital needs and trade off alternative financing plans, they and their staffs extrapolate past trends and try to foresee the future impact of political, economic, and social forces. Thus begins a second phase, forecast-based planning. Most long-range or strategic planning today is a Phase II system. At first, this planning differs from annual budgeting only in the length of its time frame. Very soon, however, the real world frustrates planners by perversely varying from their forecasts.
In response, planners typically reach for more advanced forecasting tools, including trend analysis and regression models and, eventually, computer simulation models.
They achieve some improvement, but not enough. Sooner or later plans based on predictive models fail to signal major environmental shifts that not only appear obvious after the fact, but also have a great and usually negative impact on corporate fortunes. Nevertheless, Phase II improves the effectiveness of strategic decision making.
It forces management to confront the long-term implications of decisions and to give thought to the potential business impact of discernible current trends, well before the effects are visible in current income statements. The issues that forecast-based plans address—e.
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One of the most fruitful by-products of Phase II is effective resource allocation. Under the pressure of long-term resource constraints, planners learn how to set up a circulatory flow of capital and other resources among business units. As practiced by Phase II companies, however, portfolio analysis tends to be static and focused on current capabilities, rather than on the search for options. Moreover, it is deterministic—i. And Phase II companies typically regard portfolio positioning as the end product of strategic planning, rather than as a starting point.
Phase II systems also do a good job of analyzing long-term trends and setting objectives for example, productivity improvement or better capital utilization. But instead of bringing key business issues to the surface, they often bury them under masses of data. Moreover, Phase II systems can motivate managers in the wrong direction; both the incentive compensation program and informal rewards and values are usually focused on short- or medium-term operating performance at the expense of long-term goals.
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In an environment of rapid change, events can render market forecasts obsolete almost overnight. Having repeatedly experienced such frustrations, planners begin to lose their faith in forecasting and instead try to understand the basic marketplace phenomena driving change. The result is often a new grasp of the key determinants of business success and a new level of planning effectiveness, Phase III. In this phase, resource allocation is both dynamic and creative.
A Japanese conglomerate with an underutilized steel-fabricating capacity in its shipyard and a faltering high-rise concrete smokestack business combined them into a successful pollution control venture. The team members discovered that design improvements had given the competitor such a commanding advantage in production cost that there was no point in trying to compete on price. Accordingly, the sales force was trained to sell life-cycle cost advantages.
Another strategy, derived from an external perspective, was devised by a U.
When sales in one of its major product lines declined swiftly following the introduction of a new, cheaper competitive product, it decided to find out the reason. Through field interviewing with customers, it discovered that the sales slide was nearly over, something competitors had not realized. Since sales of the product had dropped off to a few core markets where no cost-effective alternative was available, it decided to put more support behind this product line, just as the competition was closing its plants.
F — The protection of international markets. Sometimes it is important for a company to protect its position in the foreign market by making a foreign direct investment e. G — The attainment of managerial and technological knowledge. Moreover, the countries belonging to the triad also invest in poorer nations.
The developing countries often have difficulties in attracting the triad members because many MNEs rather build regional networks than investing into poor nations. The fact that the countries located in the triad area are constantly strengthening their position by investing into one another makes trade and investments complicated for the poorer countries.
It becomes therefore clear that non-triad members are in the need of being linked to the triad in some way. Concerning the future, it is expected that the triad will persist in leading the worldwide markets. The triad countries are overall interrelated.
FDI The members of the triad have a significant fdi flow between them. Part of this was because of the deregulation in Japan. American firms were very eager to buy local Japanese firms. Also, European countries were very interested in pouring money into American firms. Some countries that cannot adapt their processes to new developments quickly enough might easily fall behind compared to other nations.
Totalitarianism — this is a state of government in which there is only one leader or only one leading party. It is also those distributing goods and services to individuals, as well as determining how much is to be produced by companies. Iran Secular Totalitarianism — a form of totalitarianism in which the military has power over the government and makes decisions for the whole country.
Iraq In general, due to political systems, an economic infrastructure within a country is being established. In general, over the past years, a movement from centrally determined economies to market-driven and mixed planning can be observed. Privatization gives companies and individuals the possibility to obtain these businesses and therefore make high potential profits. Nationalization — this is the process in which governments control business assets.
In order to be able to overtake privately-owned companies, governments sometimes pay a certain amount to the previous owners to compensate for his loss. Reasons for countries to engage in privatization:. They have actively supported research consortia monetary in their research on technological development. Economic Integration — Regulations that have been created in order to improve trade and cooperation among nations.
Despite this, there are some difficulties concerning the implementation.
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