STRATEGIC PLANNING VERSUS STRATEGIC MANAGEMENT

The previous section discusses the differences between strategic thinking and strategic planning. Although the differences between the concepts seem subtle, it is important to understand and recognize them. The same is true when it comes to the differences between strategic planning and strategic management. Although very closely related, and to some interchangeable, there are important distinctions between them. One can actually look at the variations as a continuum, where strategic thinking begets strategic planning, which in turn begets strategic management. However, in reality the process is a continuous loop, not a continuum with a beginning and an end.

As discussed earlier, Mintzberg61 calls the phrase "strategic planning" an oxymoron. He argues that real strategies are rarely the result of paneled conference room meetings, but are more likely to result informally from real-time hallway conversations, casual work groups, or casual moments of reflection.62 Mintzberg sees strategic management as encompassing both strategic thinking and strategic planning, where strategic thinking is synthetic and divergent and strategic planning is analytical, systematic, and convergent. Taking this view, one can see that strategic management is the result of both the thinking and planning processes. However, it should not be viewed as the end; rather it is the action and subsequent checkpoint of the previous steps that then serves as the new beginning to the recursive cycle.

Having examined some of the differences between thinking and planning, with an emphasis on thinking, let's examine the more intricate aspects of planning. Hax and Majluf6 3 suggest three levels of planning: corporate, business, and functional. The corporate strategic plan is the result of a disciplined and well-defined organization-wide effort aimed at completely specifying corporate strategy. Andrews64 expressed corporate strategy as "the pattern of decisions in a company that determines and reveals its objectives, purposes, or goals, produces the principle policies and plans for achieving those goals, and defines the range of business the company is to pursue, the kind of economic and human organization it is or intends to be, and the nature of the economic and non-economic contribution it intends to make to its shareholders, employee, customers, and communities. . . . [it] defines the businesses in which a company will compete, preferably in a way that focuses resources to convey distinct competences into competitive advantages."

The planning process entails three major tasks that need to be updated and revised at every planning cycle. These three tasks are strategy formulation, strategic programming, and strategic and operational budgeting. Planning at the corporate level should not be considered a top-down or a bottom-up process. Rather, it is a complex, integrative activity requiring participation by all the key members of the organization who propose objectives from the top; and equally, participation from business and functional levels of the organization for specific pragmatic alternatives. It provides a rich communication mechanism giving voice to managers about their personal beliefs regarding the conduct of the firm. It offers key participants a valuable shared experience.65

A cornerstone of the strategic planning process involves segmenting the organization's various activities in terms of business units. This requires asking and answering the question: What business are we in? On the surface, this question is deceptively simple, yet in practice, it represents one of the most challenging and vexing questions faced by most organizations and requires creative and extensive analysis to fully answer. This criterion of segmentation may be valid for a vertically integrated, multidivisional corporation. However, most companies have difficulty breaking their businesses into totally unrelated units. In general, businesses within the same organization share resources in order to exploit economies of scale and maximize resource utilization. As such, most business activities need to be properly and adequately coordinated.66

It should be noted that "general planning" and strategic planning are not the same. Although the role of planning in general is indisputable, the value of formal strategic planning is subject to something less than unanimity. However, there seems to be little doubt that most managers find it extremely useful, if not outright essential. What then is the real value of formal strategic planning? The extant literature seems to conclude that its principal role is to help an organization make better strategies using systematic, logical, and more rational approaches to strategic choices.67 Henry68 describes the functions of a fully developed strategic planning system to:

1. Determine organizational purpose and management philosophy,

2. Identify internal strengths and weaknesses,

3. Monitor changes in the external environment,

4. Forecast future conditions and establish planning premises,

5. Determine threats and opportunities,

6. Formulate specific goals,

7. Identify and evaluate alternative policies and strategies,

8. Select the best strategic plan,

9. Prepare functional action plans, and 10. Prepare action plans.

The ultimate success of strategic planning is very much dependent upon the willingness and abilities of senior managers to make strategic decisions in the first place. It may well be that strategic planning is felt necessary by managers, analysts, and lower-level professionals in the organization because of a leadership vacuum. The call for strategic planning is really a call for leadership and direction. Because strategic planning is viewed primarily as a means for making strategic decisions, it is often mistakenly imagined that a mere formal process can generate a strategy.69

The path of strategic planning has been less than smooth. At the end of the 1970s, it had suffered a downturn in popularity and influence. This was attributable, in large part, to the apparent inability of strategic planning tools to deliver what was expected of them. The 1970s were a period of turmoil and firms had begun to learn that what was then called "long-range planning" and less ambitiously, "strategic planning," did not lead to the requisite adaptability or even survival. During the 1990s, strategy and strategic planning had regained some of the reputation and influence they previously lost. A contributing reason may well have been the increasing belief that practical strategic advice can be based on sound deduction and systematic observation.70 This resurgence of practical strategy making may be attributable to the development of Barney's71 resource-based view of strategy. The core implication to management of this view is that a firm may secure a strong performance with the acquisition of unique or scarce resources.72

Quinn73 suggests that the real contribution of the corporate strategic planning systems is actually the process itself, rather than the decision. The main role of the planning session is to create a network of information, to force managers to focus on the future, to encourage rigorous communications about strategic issues, to raise the comfort level of managers, and to confirm earlier strategic decisions. Formal strategic planning and strategic planners do not make strategic decisions; rather, people and organizations make strategic decisions. Sometimes they use strategic planning as a discipline to facilitate the outcome. It appears that formal strategic planning is as much a social as a rational analytical process that varies according to organizational type. This view is supported by Boyd74 who notes that strategic planning is one tool to manage environmental turbulence. Others, notably Sinha75 and Ramanujam and Venkatraman,76 argue that it is the act of planning that is the real value.

 
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