bus 520-stgc plan components-tmpp

8/7/2019 Bus 520-Stgc Plan Components-tmpp

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MZUMBE UNIVERSITY

FACULTY OF COMMERCE

DEPARTMENT: PROCUREMENT AND LOGISTICS MANAGEMENT

SUBJECT: BUS 5021 STRATEGIC BUSINESS MANAGEMENT

TERM PAPER

LECTURER: MNZAVA J.A

PREPARED BY: JACOB KECHIBI, RG NO. 3125/T.10

QUESTION: examine the major components of a strategic plan, and explain the importance of

each component to the success of a business.

SUBMISSION DATE: 22/01/2011


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Mzumbe university-term paper for strategic planning Page 1

TABLE OF CONTENTS pages

1.0 Introduction..1

2.0 Definitions of terms..1

2.1 Strategic Business Management..1

2.2strategic planning.33.0 Components of Strategic plan.............................................................................................4

3.1 SWOT Analysis/Environmental Analysis...5

3.1.1 External environment...5

3.1.2 Internal environment....6

3.2 Mission and vision..7

3.3 Objective ..10

3.4 Strategies...11

3.5 Policy.....12

3.6. Strategy implementation/execution..13

3.6 .1.Programme....13

3.6.2 Budget...13

3.6.3. Procedures.13

4.0Importance of each component of a strategic plan to the success of the business......144.1 Mission and vision...14

4.2 Objective..15


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4.3 Strategies .15

4.5 Procedures....17

4.6 Programs...17

4.6 Programs...18

4.7 Strategy implementation..18

4.8 Evaluation and control.19

5.0 The importance of strategic planning in an organization.....20

6.0 Conclusion and recommendation.20


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1.0 INTRODUCTION

Strategic planning is more than ensuring organization will remain financially sound and be ableto maintain its status in the market, its projecting where the corporation/organization expects to

be in five, ten, or fifteen years and how the organization will get there. It is a systematic planningprocess involving a number of steps that identify the current status of the organization, including

its mission, vision for the future, operating values, needs (strengths, weaknesses, opportunities,and threats), goals, prioritized actions and strategies, action plans, and monitoring plans.

Strategic planning is the cornerstone of every common-interest community/organization.

Without strategic planning; the organization will never know where it is going; much less knowif it ever got there.

An important concept of strategic planning is an understanding that in order for the corporation

to flourish, everyone needs to work to ensure the teams goals are met. Team members include,the board of directors, professional management whether onsite or through a management

company and various service professionals such as accountants and other professionals. Thisteam needs to work as a collective body to be successful. Part of the team concept is the

establishment of roles for the team players. Teams usually perform poorly if everyone or no oneis trying to be the quarterback.

2.0Definition of terms2.1 strategic business management

Strategic management is a set of managerial decisions and actions that determine the long-run

performance of a corporation. It includes strategy formulation, strategy implementation, and

evaluation and control. Strategic management is concerned with monitoring and evaluating

environmental opportunities and constraints in light of a corporations strengths and weaknesses.

According to: LM Prasad, defined strategic management as the set of decision and actions in

formulation and implementation of stages designed to achieve the objectives of an organization.

According to LM, said that this definition emphasizes two major aspects: strategy formulation

and strategy implementation and these aspects are oriented towards achieving organizational

objectives

2.2 Strategic planning

In an organization when comprehensive planning is undertaken for the organization as a whole,

divides strategic planning into two parts: strategic planning and operational planning. While

strategic planning has a long-term orientation, operational planning has a short term orientation.

Strategic planning is defined as the process by which the guiding members of an organization

envision its future and develop the necessary procedures and operations to achieve the future.


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According to C.B. Gupta (2005)- strategic planning is the process of determining the basic

objectives of an enterprise and decides on strategies and policies to achieve the objectives.

Strategic planning has the following characteristics:

yStrategic planning guides the choice among the broad directions in which theorganization seeks to move, the general planned allocation of its managerial, financial,

and physical resources over future specified period of time.

y Strategic planning takes into account the external environment and tries to relate theorganization with it. It is usually encompasses all the functional areas of the organization

and is effect within the existing and long-term framework of economic, political-legal,

technological, and social-cultural factors. Therefore, nature of external environment is of

prime concern of strategic planners.

y Since strategic planning sets trends and directions for managerial actions, its time horizonis usually long, say five years or more.

y Strategic planning is usually undertaken by top management supported by specifiedplanning staff and other key managers below the top-level. At this level, people can take

overall view of the organization and have the capability to relate the organization with the

external environment.

3.0Components of Strategic planA strategic plan composed of several components which include:

y Visiony Missiony Objectivesy SWOT Analysisy Strategiesy Policiesy Programmesy Budgety Proceduresy Strategy implementationy Strategy evaluation and control

The strategic management process

At the corporate level, the strategic management process includes activities that range fromenvironmental scanning to the evaluation of performance.

The top management scans both the external environment for opportunities and threats, and the

internal environment for strengths and weaknesses. Those factors which are most important tothe corporations future are referred to as strategic factors.


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The process of strategic management involves four basic elements:

y Environment scanningy Strategy formulationy Strategy implementationy Evaluation and control

3.1 SWOT Analysis/Environmental Analysis

y Internal environmental (strength and weaknesses)y External environmental( treat and opportunities)

Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis is a strategy development

tool that matches internal organizational strengths and weaknesses with external opportunities

and threats. http//www.venture.com.

SWOT Analysis is the Key Component of Strategic Development. It can prompt actions andresponses. Successful businesses build on their strengths, correct their weaknesses and protect

against internal vulnerabilities and external threats. They also keep an eye on their overall

business environment and spot and exploit new opportunities faster than competitors. SWOT

analysis is a tool that helps many businesses in this process.

SWOT analysis is based on the assumption that if managers can carefully review such strengths,

weaknesses, opportunities, and threats, a useful strategy for ensuring organizational success will

become evident to a corporation.

3.1.1 External environment

The external environment consists of variables that are outside the organization and not typically

within the short-run control of top management. These environments are opportunities and treats.

Opportunities are a favorable condition in the organizations environment which enables thecompany to strengthen its position in the market place. Examples of opportunities are customers,

a new markets etc

Always opportunities are abundant. The organization must develop a formula which will help it

to define what comes within the ambit of an opportunity, and then focus on those areas and

pursue those opportunities where effectiveness is possible. The formula must define

product/service, target market, capabilities required and resources to be employed, returns

expected and the level of risk allowed.

Weaknesses of your competitions are also opportunities for you. The company can exploit them

in two following ways:1.Marketing warfare: attacking the weak leader's position and focusing all efforts at that

point, or making a surprise move into an uncontested area.


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2.Collaboration: the organization can use complementary strengths to establish a strategicalliance with its competitor.

Threats are unfavorable condition in the organizations environment which causes a risk for, or

damage to, the organizations position. External threats arise from political, economic, social,

technological (PEST) forces. Technological developments may make your offerings obsolete.Market changes may result from the changes in the customer needs, competitors' moves, ordemographic shifts. The political situation determines government policy and taxation structure.

3.1.2 Internal environment

The internal environment of a company/organization consists of variables that are within theorganization itself and are not usually within the short-run control of top management. These

internal environmental factors are strength and weaknesses and they include the companysstructure, culture and resources.

StrengthIs a competence of the organization which it can use to gain competitive advantage over its

competitors. Examples of strength are (1) Versatility, which is ability to adapt to an everchanging environment. (2) Growth, which isability to maintain a continuing growth. (3)

Markets;ability to penetrate or create new markets. In terms of resources strength has thefollowing dimension:(4) Availability: ability to obtain the resources needed. (5) Quality: the

quality and up-to-dateness of the resources employed. (6) Allocation: ability to distributeresources both effectively and efficiently.

Weaknesses

Companys weaknesses are determined through failures, defeats, losses and inability to match

up with the dynamic situation and rapid change. The weaknesses may be rooted in lack ofmanagerial skills, insufficient quality, technological backwardness, inadequate systems or

processes, slow deliveries, or shortage of resources.

Figure 1: Elements of a SWOT Analysis


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A definition of the business - this should be given in terms of the benefits you provide or theneeds that you satisfy. It should not define what you do or what you make. These should have

been outlined as part of the first component.

An outline of your distinctive competencies - the factors that differentiate your business from

the competition. These will be the skills or capabilities you offer that are not, or cannot be,offered by your competitors.

The indications for the future - what the business will do. What it might do in the future andwhat it will never do.

Characteristics of mission

1. It defines who you are.

Mission Statement reflects your own personality, and should be uniquely identifiable with you,

mission is not what you do, it is who you are. If anyone of your peers can say the same statementin the same way as you, then you need to inject more of you in it. Stay away from the generic ("Ihelp people lead better lives"). Your personality can be projected in how you phrase your

statement, in the words you use, your tone of voice, etc.

2. It is independent of time, space, people, form or situation .

Mission Statement describes the gift you bring to the world. Mission Statement is not a job or

role description. The real test of your mission is if you can fulfill it alone on a desert island, on acrowded bus, at a party, at work, with your spouse, i.e. fulfilling it is independent of location,

time or situation. Think of Tom Hanks in the movie "Castaway". If you were in his situation,

how could you live your mission and feel success?

3. It is short and simple.

It can be stated from memory, without looking it up, even when you are under stress. A missionstatement should be no more than about ten words in length, and simple enough so that a child

can understand and say it.

4. It anchors the central principles in your life.

The focus of the Mission Statement expresses the central theme of your life in a positive way,

that which you would defend to be true at almost any cost. It also describes how people aretouched or influenced by your presence.

5. It is action oriented.

Mission Statement is built around action verbs that describe your passions. A successful Mission

Statement inspires you to act.


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Vision Statement

Vision Statements also define the organizations purpose, but this time they do so in terms of the

organization's values rather than bottom line measures (values are guiding beliefs about how

things should be done.) The vision statement communicates both the purpose and values of the

organization. For employees, it gives direction about how they are expected to behave and

inspires them to give their best. Shared with customers, it shapes customers' understanding of

why they should work with the organization. An example of vision statement is ofSongea

Municipal Council which aspires to have a community that enjoys sustainable high quality

standard of living.

Vision statement outlines what the organization wants to be or how it wants the world in which it

operates to be. It concentrates on the future. It is a source of aspiration. It provides decision

making criteria.

Characteristics of vision statement

Imaginable: It conveys a picture of what the future will look like. It is like painting a picture withyour words. It is an image that people can carry around in their heads.

Desirable: It appeals to the long-term interests of employees, customers, stockholders, and others

who have a stake in the enterprise. It is a vibrant, engaging, and specific description of what willbe like to achieve the vision. Passion, emotion and conviction are essential parts of the vivid

description.

Feasible: It comprises realistic, attainable goals. It has a clear finish line.

Focused: It is clear enough to provide guidance in decision making.

Flexible: It is general enough to allow individual initiative and alternative responses in light ofchanging conditions.

Communicable: People get it right away; it takes little or no explanation.

Visionary: Inventing such a vision forces executives to be visionary rather than just strategic or

tactical. It should not be a sure bet it will have only a 50% to 70% probability of success but

the organization must believe that it can reach the goal anyway.

3.3 Objective

The corporate mission determines the parameters of the specific objectives to be defined by top

management. The objectives state what is to be accomplished and when.


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Examples of objectives

1. Develop a customer intelligence database system to capture and analyze patterns inpurchasing behavior across our product line.

2. Launch at least three value stream pilot projects to kick-off our transformation to a leanerorganization.3. Centralize the procurement process for improvements in enterprise-wide purchasingpower.

4. Monitor and address employee morale issues through an annual employee satisfactionsurvey across all business functions.

3.4 Strategies

Monitor and address employee morale issues through an annual employee satisfaction surveyacross all business functions.

Dictionary definitions tend to emphasize strategy in terms of a military context, such as thescience of forming and carrying out projects of military operations.

In management terms Koontz and O Donnell describe strategy as a decision about how to useavailable resources to secure a major objective in the face of possible obstructions such as

competitors, public opinion, legal status, taboos and similar forces.

Strategy is a choice that is made after careful reflection of environmental condition, internal

capabilities and expected return. To some extent, the organization is betting available resourceson the success of a chosen strategy over alternate strategies.

Strategies are potential actions that require top management decision and large amount of thefirms resources. In addition, strategies affect companys long term prosperity, typically for atleast five years, and thus are future oriented. Strategies have multifunctional or multidivisional

consequences and require consideration of both the external and internal.

A strategy is what you are going to provide or deliver in your project/program. The strategy will

state what and how you are going to achieve your objective. (eg. running the plumber education

sessions promote tempering valves).

Effectiveness of strategies is measured by process evaluation.

In order to achieve the strategies, there will be a series of actions (eg. develop the plumber's

education session, liaise with Plumbers Association, invite guest speaker, promote the session

etc) that you will need to determine:

What you will do (eg. plumber's education session).

How you will do it (eg. two hour session with guest speakers and dinner in three

locations).


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Who can help (eg. Plumbers Association).

When will it be done i.e. a timeline of when each strategy will be completed by (eg.

develop training session by June, pilot test and training in July, conduct training in

August)

The formulation of sound strategy may be seen as having six important steps:

1. The company or organization must first choose the business or businesses in which itwishes to engagein other words, the corporate strategy.

2. The company should then articulate a "mission statement" consistent with its businessdefinition.

3. The company must develop strategic objectives or goals and set performance objectives(e.g., at least 15 percent sales growth each year).

4. Based on its overall objectives and an analysis of both internal and external factors, thecompany must create a specific business or competitive strategy that will fulfill its

corporate goals (e.g., pursuing a market niche strategy, being a low-cost, high-volume

producer).

5. The company then implements the business strategy by taking specific steps (e.g.,lowering prices, forging partnerships, entering new distribution channels).

6. Finally, the company needs to review its strategy's effectiveness, measure its ownperformance, and possibly change its strategy by repeating some or all of the above steps.

3.5 Policy

A policy provides guidelines for decision making throughout an organization. It is a broad

guideline which links the formulation of strategy with its implementation.

Policies represent the companys commitment to the future orientation of the sector. A clearlyformulated policy can play an important operational role as a reference for action. It can help

to guide decisions and future actions in sector development, including the interventions ofinternational and bilateral cooperation agencies, in a coherent way. It is important that policy

promote the coordination and success of programmes and projects. The formulation of a goodpolicy is a necessary step in promoting the emergence and effective implementation of action

plans, programmes and projects.

Policies may be general or specific, organizational or functional, written or implied. They shouldhowever, be clear and consistent. Various policies should be integrated in such a way that they

result in effective implementation of the strategy. A policy is helpful in choosing out thealternative course of action.


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Strategies and policies both are means used to direct a firm towards its goal. While strategies areplans of actions that lead to major commitments. Policies are guidelines to actions usually based

upon past experience. The strategic planner takes a comprehensive view of goal accomplishmentwhereas the policy maker operates in a more limited vein.

3.6. Strategy implementation/execution

It is the process by which strategies and policies are put into action through the development of

program, budgets and procedures. It may involve changes within the overall culture, structure ormanagement system of the whole organization. The implementation of a strategy is carried out

by middle and lower managers but it review by top managers. Strategy execution involves theday to day decisions in the allocation of resources. The divisional/ functional managers perform

their duties under the guidance of top managers to develop programs, budgets and proceduresthat are used to achieve the objectives of the organization strategies. The functional managers are

also involved in strategy formulation at their levels.

3.6.1.ProgrammeA program is a statement of the activities needed to accomplish a single-use plan.

3.6.2 Budget

A budget is a statement of a corporations programs in monetary terms. For planning and control

purposes, it lists in details the cost of each program.

3.6.3. Procedures

Procedures are sequential steps or techniques that described in details how a particular job or

activity is to carried out. A procedure details the various activities that must be carried out for thecompletion of the organizations program

4.0 Importance of each component of a strategic plan to the success of the business.

4.1 Mission and vision.

A good mission statement can put the organization in a good position in the market.

Several parts of a mission statement can help put the company in a good position. First, the

statement should help determine what business the company is engaged in and what the company

wants to become.

A vision statement define a broader goal of an organization

A Vision statement defines the purpose or broader goal for being in existence or in the business

and can remain the same for decades if crafted well. A Mission statement is more specific to


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what the enterprise can achieve itself. Vision should describe what will be achieved in the wider

sphere if the organization and others are successful in achieving their individual missions.

Mission statement enables an organization to define objectives

The mission statement can galvanize the people to achieve defined objectives, even if they arestretch objectives, provided it can be elucidated in SMART (Specific, Measurable, Achievable,

Relevant and Time-bound) terms. A mission statement provides a path to realize the vision in

line with its values. These statements have a direct bearing on the bottom line and success of the

organization.

Mission and vision statement guide the organization on its operation

If you have a new start up business, new program or plan to reengineer your current services,

then the vision will guide the mission statement and the rest of the strategic plan. If you have an

established business where the mission is established, then many times, the mission guides the

vision statement and the rest of the strategic plan. Either way, you need to know your

fundamental purpose - the mission, your current situation in terms of internal resources and

capabilities (strengths and/or weaknesses) and external conditions (opportunities and/or threats),

and where you want to go - the vision for the future.

4.2 Objective

It enables an organization to increase profitability.

The ability of any firm to operate in the long-run depends on attaining an acceptable level of

profits. Strategically managed firms characteristically have a profit objective, usually expressedin earnings per share or return on equity.

Through better objective an organization can increase productivity

Firms that can improve the input-output relationship normally increase productivity. Thus, firms

almost always state an objective for productivity. Commonly used productivity objective are thenumber of items produced or the number of services rendered per unit of input.

Objectives help the company to success

Objectives it shows direction, aid in evaluation and provide a basis for effective planning,motivating, organizing and controlling different activities.

Objectives enable the organization in making decision.

The objectives help to direct the decision makers on those areas where strategic decisions need tobe taken, objectives lead to desirable standards of behavior and help to coordinate strategic

decision making.


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Objectives enable to define company relationship/public responsibility

The company must recognize its responsibility to its customers, employees and societal at large.

An objective describes the changes you want to bring out in the in the target group or

problem. They relate to the risk factors and causes of the problem and are the smaller steps toachieving your goals. You will more than likely have a number of objectives to help you to

achieve your goal. Like goals, objectives need to be S.M.A.R.T.

4.3 Strategies

A business strategy generally refers to the overall objectives, goals and vision of an organizationand the means of achieving the objectives, goals and vision. It is the art of formulation and also

implementing specific decisions and actions aimed at achieving the overall goals and objectivesof an organization. A business strategy as such provides the bigger picture showing how

individual activities are organized and coordinate to ensure that the overall desired goals and

objectives are met.

Importance of strategies to an organization

Strategy gives the overall direction of an organization

Without strategies is difficult to attain or achieve the desired results or goals (Pearce II, &Robinson Jr, 2009), also aprovides the bigger picture showing how individual activities are

organized and coordinate to ensure that the overall desired goals and objectives are met.

The aim of a business strategy is to ensure that the threats posed by the external

environment are minimized and also to strengthen or minimize the effects of internalweaknesses.The opportunities and strengths are combined to ensure maximum productivity is achieved.

Without a business strategy, it would be difficult for an entity to realize the opportunitiesavailable to it as well as the threats. a business would not thus take advantage of an opportunity

posed by an environment thus would not be profitable. Without a strategy a business is also morevulnerable to threats and its own internal weaknesses which increases costs and reduces

productivity (Pearce II, & Robinson Jr, 2009).

Strategies provide/facilitate changes in the market placeThe formulation of strategy forces organizations to examine the prospect of change in the

foreseeable future and to prepare for change rather than to wait passively until market forcescompel it.

Strategies provide communication to members of the organization

A strategic plan, when communicated to all members of an organization, provides employees

with a clear vision of what the purposes and objectives of the firm are.


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Strategies assisting in allocation of funds decision

Strategic formulation allows the firm to plan its capital budgeting. Companies have limited funds

to invest and must allocate capital funds where they will be most effective and derive the highest

returns on their investments.

4.4 Policy

Policies and Procedures are the strategic link between the Company's Vision and its day-

to-day operations.

A well written policies & procedures allow employees to understand their roles and

responsibilities within predefined limits. Basically, policies & procedures allow management toguide operations without constant management intervention.

4.5 Procedures

The procedures help an organization to understood and implement its plan .

The ultimate goal of every procedure is to provide the reader with a clear and easily understood

plan of action required to carry out or implement a policy.

Procedures help an organization to eliminate common misunderstanding.

A well written procedure will also help eliminate common misunderstandings by identifying job

responsibilities and establishing boundaries for the job holders.

Procedures help managers to control events in advance

Good procedures actually allow managers to control events in advance and prevent the

organization (and employees) from making costly mistakes. You can think of a procedure as a

road map where the trip details are highlighted in order to prevent a person from getting lost or

"wandering" off an acceptable path identified by the company's management team.


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y organizational performance measurement system (continuous and periodic)y external environmental monitoring program (continuous and periodic)y condition reporting/corrective action program (event driven)y self-assessments program (periodic and event driven)y benchmarking (periodic)

Outputs from the various monitoring processes are often combined to create a richerunderstanding of organizational performance relative to both internal performance standards and

external benchmarks. Synthesized data drives actions on a day-to-day operational basis andserves as input to the strategic planning process. When predefined thresholds are reached or

exceeded, action is prompted to take advantage of opportunities or mitigate threats representing arisk to the business or its operations.

Evaluation and control program components play a key role in an organizations learning and

growth efforts. They not only identify improvement opportunities, they also identify internal andexternal best practices that can be used to better existing processes. This continuous growth

mechanism is critical to an organization seeking to maintain and advance its position in themarketplace. Articles in this topic are dedicated to discussing the leading practices of companies

successfully executing an evaluation and control program in support of strategic businessplanning and tactical business execution.

5.0 The importance of strategic planning in an organization

The Strategic Plan sets out the marketing plan in action, showing how to implement themarketing plan a cohesive and executable Sales plan.

The Strategic Plan developed a system to deal effectively with risks and potential problems,

culminating in the production of corporate strategies, tactics and programs. These programs areimplemented through the programs developed sales and marketing plan. Administrative

expenses, control mechanisms, milestones and sales forecasts are also part of the strategic plan.

The strategic plan is a strategic process for Management, Monitoring and reassessment. It

measures the performance of user control and corrective action, re-evaluation, when and whereneeded. .

It gives the company a strategic vision, focus, structure and discipline, providing an environment

learning and awareness, with a method for identifying deficiencies and, in turn leads tochallenges.

Strategic planning is top-down and bottom-up, fully integrated operations of the company, the

vision and leadership of the CEO(top managers) , management, monitoring implementation,sales and operations units.


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REFERENCE

www.ameinfo.com

http://EzineArticles.com/?expert=Davender_Gupta

www.associationlaboratory.com

Strategy Implementation - organization, levels, system, advantages, school, model, company,

business, system, Creating strategic plans, Implementing strategic plans, Cascading the planhttp://www.referenceforbusiness.com/management/Sc-Str/Strategy-

Implementation.html#ixzz19bC9BhCt.

Strategy Implementation - organization, levels, system, advantages, school, model, company,business, system, Creating strategic plans, Implementing strategic plans, Cascading the plan

http://www.referenceforbusiness.com/management/Sc-Str/Strategy-

Implementation.html#ixzz19bBLcsH6

(Pearce II, & Robinson Jr, 2009).

Exploring corporate strategy, Jerry Johson, Kevan Scholes and Richard Whittington

Nag, R.; Hambrick, D. C.; Chen, M.-J,What is strategic management, really? Inductivederivation of a consensus definition of the field. Strategic Management Journal. Volume 28,

Issue 9, pages 935955, September 2007.

Nag, R.; Hambrick, D. C.; Chen, M.-J,What is strategic management, really? Inductive

derivation of a consensus definition of the field. Strategic Management Journal.V

olume 28,Issue 9, pages 935955, September 2007.

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