Relationship between planning and strategy formulation

relationship between planning and strategy formulation

Strategic planning is a backbone support to strategic management and it is a major process in the conduct of strategic management. According to Wagner. of developing a good substantive strategy, without which no formal planning system or .. detailed causal empirical relationships between a firm's adoption of. The study concludes that successful formulation of strategic plan has taken root relationship, strategy formulation, performance, public organization, county.

The achievement orientation aligns people with a common vision or purpose. It uses the mission to attract and release the personal energy of organizational members in the pursuit of common goals.


With a support orientation, the organizational climate is based on mutual trust between the individual and the organization. More emphasis is placed on people being valued more as human beings rather than employees.

Typically an organization will choose some mixture of these or other predefined culture roles that it feels is suitable in helping it to achieve is mission and the other components of strategy design.

The main idea of this stage of planning is to take an Figure 2 SWOT Analysis in-depth look at the company's internal strengths and weaknesses and its external opportunities and threats.

relationship between planning and strategy formulation

This is commonly called a SWOT analysis. Developing a clear understanding of resource strengths and weaknesses, an organization's best opportunities, and its external threats allows the planning team to draw conclusions about how to best allocate resources in light of the firm's internal and external situation.

This also produces strategic thinking about how to best strengthen the organization's resource base for the future. Looking internally, there are several key areas that must be analyzed and addressed. This includes identifying the status of each existing line of business and unused resources for prospective additions; identifying the status of current tracking systems; defining the organization's strategic profile; listing the available resources for implementing the strategic thrusts that have been selected for achieving the newly defined mission; and an examining the current organizational culture.

relationship between planning and strategy formulation

The external investigation should look closely at competitors, suppliers, markets and customers, economic trends, labor-market conditions, and governmental regulations. In conducting this query, the information gained and used must reflect a current state of affairs as well as directions for the future. The result of a performance audit should be the establishment of a performance gap, that is, the resultant gap between the current performance of the organization in relation to its performance targets.

To close this gap, the planning team must conduct what is known as a gap analysis, the next step in the strategic planning process.

Steps in Strategy Formulation Process

All too often, however, planning teams make the mistake of making this step much more difficult than need be. Simply, the planning team must look at the current state of affairs Figure 3 Gap Analysis and the desired future state.

The first question that must be addressed is whether or not the gap can feasibly be closed. If so, there are two simple questions to answer: If there is doubt that the initial gap cannot be closed, then the feasibility of the desired future state must be reassessed.

First, an action plan must be developed for each line of business, both existing and proposed. It is here that the goals and objectives for the organization are developed. Goals are statements of desired future end-states.

Strategy Formulation vs Strategy Implementation

They are derived from the vision and mission statements and are consistent with organizational culture, ethics, and the law. Goals are action oriented, measurable, standard setting, and time bounded. In strategic planning, it is essential to concentrate on only two or three goals rather than a great many. The idea is that a planning team can do a better job on a few rather than on many. There should never be more than seven goals. Ideally, the team should set one, well-defined goal for each line of business.

Writing goals statements is often a tricky task.

relationship between planning and strategy formulation

By following an easy-to-use formula, goals will include all vital components. Specifically, each objective statement must indicate what is to be done, what will be measured, the expected standards for the measure, and a time frame less than one year usually tied to the budget cycle. Objectives are dynamic in that they can and do change if the measurements indicate that progress toward the accomplishment of the goal at hand is deficient in any manner. Simply, objectives spell out the step-by-step sequences of actions necessary to achieve the related goals.

With a thorough understanding of how these particular elements fit and work together, an action plan is developed. If carefully and exactingly completed, it will serve as the implementation tool for each established goal and its corresponding objectives as well as a gauge for the standards of their completion.

relationship between planning and strategy formulation

Contingency plans should identify a number of key indicators that will create awareness of the need to reevaluate the applicability and effectiveness of the strategy currently being followed.

When a red flag is raised, there should either be a higher level of monitoring established or immediate action should be taken. To be successful, the strategic plan must have the support of every member of the firm.

As mentioned in the beginning, this is why the top office must be involved from the beginning. A company's leader is its most influential member. Positive reception and implementation of the strategic plan into daily activities by this office greatly increases the likelihood that others will do the same. Advertising is key to successful implementation of the strategic plan. The more often employees hear about the plan, its elements, and ways to measure its success, the greater the possibility that they will undertake it as part of their daily work lives.

It is especially important that employees are aware of the measurement systems and that significant achievements be rewarded and celebrated. This positive reinforcement increases support of the plan and belief in its possibilities.

Also known in the United States as policy deployment, management by policy, and hoshin management, it is a careful and deliberate process by which the few most important organizational goals are deployed throughout the organization. It consists of five major steps: Development at the executive level of a long-term vision. Selection of a small number of annual targets that will move the organization toward the vision.

Relationship between Strategy Formulation and Strategic Planning

Development of plans at all levels of the organization that will together achieve the annual targets. Execution of the plans. Regular audits of the plans. Hoshin management was developed in Japan as part of the overall refinement of quality programs in that country after World War II. At one time, "made in Japan" was synonymous with shoddy quality, but with the encouragement of the American occupation force, the Japanese Union of Scientists and Engineers JUSE made great efforts to improve Japanese manufacturing.

Edwards Deming and Joseph M. Juran to train managers and scholars in statistical process control SPC and quality management. So significant were these visits, especially Deming's, that the highest Japanese award for quality is called the Deming Prize. Each company developed its own planning methodology, but the Deming Prize system involves the sharing of best practices, and common themes developed.

In Bridgestone Tire published a report described the planning techniques used by Deming Prize winners, which were given the name hoshin kanri. By hoshin planning was widely accepted in Japan. Evaluating the Organizational Environment - The next step is to evaluate the general economic and industrial environment in which the organization operates. This includes a review of the organizations competitive position. It is essential to conduct a qualitative and quantitative review of an organizations existing product line.

Setting Quantitative Targets - In this step, an organization must practically fix the quantitative target values for some of the organizational objectives. The idea behind this is to compare with long term customers, so as to evaluate the contribution that might be made by various product zones or operating departments.

Aiming in context with the divisional plans - In this step, the contributions made by each department or division or product category within the organization is identified and accordingly strategic planning is done for each sub-unit.

This requires a careful analysis of macroeconomic trends. Strategic Management and Business Policy 12th Edition. Best practices in linking assessment and planning. Assessment Update, 17, Innovation in public management: Public Administration Review, 54 4 Journal of Planning Literature, 1 2 Research Methodology Methods and Statistics 2nd ed. Strategic planning for public and nonprofit organizations: Initiation of strategic planning by governments.

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Strategic long range planning for intercollegiate athletic programs. Journal of Applied Research in Coaching and Athletics, 3 4 From strategy to action. University Business, February, Strategic planning in practice:

Advantages and Disadvantages of Rational Model- Process of strategy formulation