Strategic Planning in Business

Whatever may be done by management nothing affects the success or

failure of a business enterprise more than how well the long-term direction of
the business is set. This is a well recognised dictum but its fuller
understanding can be possible only through the delineation of what is meant
by Strategy.
Strategy of a business enterprise consists of what management decides
about the future direction and scope of the business. It entails managerial
choice among alternative action programmes, commitment to specific
product markets, competitive moves and business approaches to achieve
enterprise objectives. In short, it may be called the game plan of
management.
The decisions constituting strategy ideally involve matching of enterprise
resources to the changing environment, and determining what the enterprise
ought to be engaged in doing in future and how it should position itself to
take advantage of the future market opportunities.
The concept of strategy has a bearing on what is known as the business
model. Briefly speaking, a companys business model refers to the revenuecost-profit implications of its strategy. In other words, the business model
centres round the issue of a given strategy being appropriate from the point
of view of revenue generation, cost structure and profit margins reflecting
business viability.
Aspects of Strategic Planning
Strategic planning or the formulation of strategy involves deciding what the
strategy should be. In other words, it involves decision-making by corporate
management that (a) determines, shapes and reveals its objectives,
purposes or goals; (b) produces the principal policies and plans for achieving
these goals; and (c) defines the business the company intends to be in, the
kind of economic and human organisation it intends to be, and the nature of
the economic and non-economic contribution it intends to make to its
stakeholders, i.e. the employees, customers, shareholders and the
community.
Strategic planning is thus defined by Robert N. Anthony as the process of
deciding on objectives, on the changes in the objectives, on the resources
used to attain these objectives, and on the policies that are to govern the
acquisition, use and disposition of these resources. Essentially, it is the
determination of the basic long-term goals and objectives in an enterprise
and the adoption of courses of action and the allocation of resources
necessary for carrying out these goals.

In the nature of things, strategic planning requires (a) identification of

opportunities and threats in the companys environment along with the
estimate of risks attaching to the discernible alternatives, and (b) appraisal
of the companys strengths and weaknesses, and objective assessment of its
actual or potential capacity to take advantage of perceived market needs or
cope with the attendant risks.
The strategic alternative which results from a matching of opportunity and
corporate capability at an acceptable level of risk is what is called an
economic strategy. But the formulation of corporate strategy also requires
consideration of what alternative is preferred by senior executives quite
apart from the economic considerations. Personal values, aspirations and
ideals do influence the choice of strategy. Thus, along with the intellectual
process of ascertaining what a company might be able to do in terms of
capability, what the executives want to do in terms of preferred values has
also a bearing on strategic decisions. Strategic planning also includes
consideration of the corporate obligation to segments of society,
stakeholders in the community. Thus, the four major determinants of
strategy may be said to consist of (a) external opportunities and constraints,
(b) internal capabilities, competence and resources, (c) personal values of
the executives including propensity to assume risks, and (d) obligations to
society and the stakeholders.
The purpose of strategy is to define the nature of relationship between a firm
and its environment. There are five key decisions which may be said to
comprise the overall strategy of any company, namely, (a) customer-mix, (b)
product-mix, (c) geographical limits of the market to be served, (d)
competitive emphasis, and (e) objectives. Thus, the determination of
strategy involves answering a set of questions in the relevant areas such as:
What is to be the target group of customers? What are their needs and
preferences? What segment of the market do they represent? What is the
geographic area of the market to be covered? What will be the market niche?
What specific products or services should be produced? Which products
should receive the maximum emphasis? What ought to be the price-quality
relationship of the product lines? What are the distinctive characteristics of
the product? Can these characteristics be differentiated from those of similar
competing products? What are the end uses to be served by the products? At
what point of time should the new products be launched? What factors
should be stressed by the company to secure a unique competitive
advantage? Will it be the Price, Quality, Service, Design, or Special
Characteristics? What could be done better than the competitors?
The five basic decisions which are essentially the components of strategy
may be regarded as the first order decisions to be made by executives.
They are formulated rather than implemental. They define the nature of
firms relationship with the environment; they do not indicate how the

relationship will be established. Once delineated, they provide direction to

the lower-order implemental decisions with respect to production, marketing,
finance and other areas. It should be obvious that the basic decision areas
which define strategy are interrelated. A definition of the customer-mix can
hardly be possible without deciding on the product-mix; similarly,
determination of the product-mix presupposes the decision on the customermix. Likewise, objectives defining the desired profitability, growth and market
share can be formulated only in the light of the other elements of strategy
because objectives which may be considered feasible in one industry may
not be so in another industry. Besides, ongoing firms are usually subject to
various environmental constraints (economic, financial, social and political)
which have a strong bearing on the setting of objectives.