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Strategic planning consists of the process of developing strategies to reach a defined objective. As we label a piece of planning "strategic" we expect it to operate on the grand scale and to take in "the big picture" (in contradistinction to "tactical" planning, which by definition has to focus more on the tactics of individual detailed activities). "Long range" planning typically projects current activities and programs into a revised view of the external world, thereby describing results that will most likely occur (whether the planner wants them or not!) "Strategic" planning tries to "create" more desirable future results by (a) influencing the outside world or (b) adapting current programs and actions so as to have more favorable outcomes in the external environment.
Strategic planning takes place primarily in military situations (see military strategy), in business activities and in government. Within business, strategic planning may provide overall direction (called strategic management) to a company or give specific direction in such areas as:
- Financial strategies
- Human resource/organizational development strategies
- Information technology deployments
- Marketing strategy
- Associations focused on Strategic Planning
Within government, strategic planning provides guidance for organizational management similar to that for business, but also provides guidance for the evolution or modification of public policy and laws. Areas of such public policy include:
- Funding of infrastructure and rate-setting (streets, water-supplies, sewers, and parks)
- Functional plans such as for land use, transportation, and water resources
- Growth management and/or comprehensive planning
But strategic planning can occur in a wide variety of activities from election campaigns to athletic competitions, as well as in strategic games such as chess. This article looks at strategic planning in a generic way so its content can apply to any of the above areas. An effective strategy will:
- Have the capability to obtain the desired objective
- Fit well both with the external environment and with an organization's resources and core competencies - it should appear feasible and appropriate
- Have the capability of providing an organization with a sustainable competitive advantage - ideally through uniqueness and sustainability
- Prove dynamic, flexible, and able to adapt to changing situations
- Suffice on its own - specifically providing value or favorable outcomes without the need for cross-subsidization
- 1 Methodologies
- 2 Situational analysis
- 2.1 Identifying cultures
- 2.2 Changing cultures and strategy
- 3 The External Environment 
- 4 Goals, objectives and targets
- 5 Mission statements and vision statements
- 6 Why strategic plans fail
- 7 External links
- 8 References
Methodologies[edit | edit source]
Most strategic planning methodologies depend on a three-step process (sometimes called the STP process):
- Situation - evaluate the current situation and how it came about
- Target - define goals and/or objectives (sometimes called ideal state)
- Path - map a possible route to the goals/objectives
An alternative approach, although equally effective is called Draw-See-Think
- Draw - what is the ideal image or the desired end state?
- See - what is today's situation? What is the gap from ideal and why?
- Think - what specific actions must be taken to close the gap between today's situation and the ideal state?
- Plan - what resources are required to execute the activities?
In general terms, strategic planning can proceed incrementally or revolutionarily.
Strategic Planning As A Set of Logical and Creative Steps
- Clarification of objective (end-state) to be pursued. The following terms have been used in the literature: desired end states, plans, policies, goals, objectives, strategies, tactics and actions. Definitions vary, overlap and fail to achieve clarity. The following concept has been found useful. The items listed above may be organized in a hierarchy of means and ends and numbered as follows: Top Rank Objective (TRO), Second Rank Objective, Third Rank Objective, etc. From any rank, the objective in a lower rank answers to the question "How?" and the objective in a higher rank answers to the question "Why?" The exception is the Top Rank Objective (TRO): there is no answer to the "Why?" question. That is how the TRO is defined. An example may help to clarify the concept presented above.
- Information gathering and analysis. This includes an external assessment (such as environmental scanning), and an internal resource assessment. Morphological analysis may be applied to both internal resource assessments and external assessments. SWOT (Strengths, Weaknesses, Opportunities, Threats) Analysis may be used to assess those aspects of the organization and the environment that are important to achieving the objective of the strategic plan. See exact definitions of SWOTs.
- Evaluation of the feasibility of the objective in view of the SWOTs.
- Strategy-development. This is a creative step that answers these four questions: How can we use the Strengths, stop the Weaknesses, exploit the Opportunities and defend against the Threats in pursuit of the selected objetive.
- Developing Action Programs for the more attractive strategies, covering: Name of the strategy, Benefits to be expected from implementing this program, Actions: What will be done? Responsible persons: Who will be in charge of the program? Timing: When will the program start? When will it be completed? Location(s): Where will the program be implemented? Resources: What will be needed: people, money, information, other resources? Control System: How will progress be measured and reported? Rewards for performance, if any. Contingency plans: What will be done if results fall short? See A Model for Strategic Planning for a detailed discussion and example.
- Implementation, monitoring, adjustment, and control.
Strategy as revolution
- Identify the unquestioned beliefs in an industry/sector/organization and challenge them - look for opportunities to re-write the rules of the environment
- Look for major discontinuities in technology, lifestyle, habits, and geopolitics, and embrace such changes wholeheartedly - do not waste time making small incremental adjustments - stand by to create a completely new business model at any time
Theorists frequently make the distinction between strategy and tactics. Strategy involves planning how to get where one wants to go. Tactics can potentially comprise the implementation of such over-arching plans. They deal with specific actions by particular people or by particular groups. Some theorists see it as a mistake to separate strategy and tactics. Constantinos Markides describes strategy formation and implementation (tactics) as an on-going, never-ending, integrated process requiring continuous re-assessment and reformation. He sees strategic planning as both planned and emergent - dynamic and interactive. J. Moncrieff also stresses strategy dynamics - he recognizes strategy as partially deliberate and partially unplanned. The unplanned element comes from two sources:
- Emergent strategies - resulting from the emergence of opportunities and threats in the environment
- Strategies in action - ad hoc actions by many people from all parts of an organization
Strategic plans typically look 5 or more years into the future. They differ in this respect from tactical plans (sometimes referred to as functional plans), which look 2 to 4 years into the future; and from operational plans [such as budgets] which have an annual scope. Henry Mintzberg could not identify one process that he would call "strategic planning". Instead he concluded that five types of strategies exist:
- Strategy as plan
- Strategy as ploy
- Strategy as pattern
- Strategy as position
- Strategy as perspective
Situational analysis[edit | edit source]
When developing Corporate strategies, analysis of the company and environment as it is at the moment and how it will be in the future, is very necessary, this is called the analysis phase of strategic planning. The analysis has to be executed at an internal level as well as an external level to identify all opportunities and threats of the new strategy.
One aspect of internal analysis that has been underestimated through the last decades in developing corporate strategies is the field of corporate cultures. Consultants, when developing corporate strategies, are mostly focused on tangible internal and external factors when analyzing the company and did not really take the cultural, often intangible and invisible, aspects into account.
In the next sections, the following will be elaborated:
- The process of identifying cultures, with the following subcomponents:
- Perspectives on looking at cultures.
- Artifacts that can be signaled and retrieved with use of these perspectives.
- Emerging culture types that can be derived from the identification phase.
- The concepts of changing corporate strategies and cultures, with the following subcomponents:
- Approaches towards changing strategies and cultures
- Forms of resistance against these changes
- Measurements that can be taken before, during and after changing cultures and corporate strategies.
Identifying cultures[edit | edit source]
When creating new corporate strategies, or adjusting existing ones, as said in the introduction, the business consultant most generally starts with identifying and analyzing the following aspects of an organization, also see the corporate strategy development method wiki:
- Visionary aspects such as goals and objectives.
- Situational aspects such as financial information, company structure and systems and the business which the company is operating in.
- External aspects concerning the environment, market findings, competitors and rules and legislations that apply to the region the company is in.
- Technical aspects that concern the amount of risk involved in the new strategy, the time span the strategy has to be enrolled in and resources and inputs needed.
The one aspect that is not often thought of is the cultural aspect of a company. With culture we mean:
“Culture is a series of values, standard interpretations, insights and ways of thinking that is shared by members of an organization and is passed on to new members of this organization. "(Daft, 2002)
This is hardly plausible when thinking of the resistance and problems a group of employees can cause if they oppose to-be-employed or already-employed strategies. The relation between culture and strategy has been described thoroughly by Kono (1994):
“The product-market strategy defines the work which employees have to do. If the work requires a high level of competence and new skills, this revitalizes the culture. The strategy also affects the financial performance and the level of salaries and incentives which are available to employees. On the other hand, the effective implementation of new strategies depends on the creativity of the employees and their willingness to change.”(Kono, 1994)
Kono precisely describes the relation that the company culture and the company strategy have with each other, they are interdependent.So it is key to analyze the company culture as good as possible, to be able to adjust the ‘to be developed’ strategy the best way possible to avoid conflicts and maximize compatibility.
Perspectives[edit | edit source]
To analyze the culture of a company, one has to use some kind of perspective to look at the artifacts (visible or not) that are active within the company and describe its culture. Basically two important schools with their perspectives can be distinguished:
- Ethnographical versus clinical analysis
- Functionalistic versus Interpretionistic analysis
The different perspective will be discussed now.
Ethnographical versus Clinical approach[edit | edit source]
This approach towards analyzing corporate cultures has been developed by Schein (1985) and makes the distinction between the following two ways of looking at artifacts within a company:
- Ethnographical – Focused on concrete data to understand the culture, which is mostly used for scientific research. Researchers who use this ethnographical way of analysis start with some predefined assumptions and try to find proof for these assumptions when investigating the organization (Harris, 2002)
- Clinical – Focused on cultural processes that are active within the organization and how these processes can be adjusted or modified to achieve a certain goal. Hereby looking at indicators such as artifacts, values and assumptions.
Functionalistic versus Interpretionistic approach[edit | edit source]
- The functionalistic approach towards analyzing culture is concerned with merely the same aspects as the clinical approach and is aimed at analyzing current cultural signals that can possibly be extracted to be used in other organizations (Harris, 2002)
- The interpretionistic approach is more interested in the processes that form the coherence between employees in the same company. The interpretionistic approach thus is more aimed at communicational processes between employees in contrary to the more ‘describing’ way of the functionalistic approach.
Artifacts[edit | edit source]
As described in the previous section, in both perspectives towards analyzing corporate cultures artifacts take a prominent place. These approaches are the clinical and functionalistic approaches. When looking at artifacts within an organization we can distinguish the following two main categories.
Visible artifacts[edit | edit source]
Visible artifacts include the following and can be experienced and analysed fairly easy because of the extrovert character they have. Visible artifacts include:
- Rituals and ceremonies
- Business Language
- The business language of a company is the use of language employees speak, common used words and textual expressions that characterize the companies culture.
Invisible artifacts[edit | edit source]
Next to visible artifacts, a company's culture also thrives on processes and events that are not that easily seen by outside consultants or even in-house employees. These include:
When looking at these invisible artifacts, one can state that these are of great value when creating a new corporate strategy, the attitudes and feelings that employees have towards for example radical changes can make or break your corporate strategy. The companies strategy also depends on the external / internal focus and needs from the environment of the company.
Culture types[edit | edit source]
When setting the external versus internal strategic focus against the environmental needs (flexibility versus stability) The following figure emerges:
In this figure, four types of cultures can be distinguished, according to Daft (2002) The four different cultures will be elaborated now:
- Adjustment based Entrepreneurial Culture
- This culture is known to be very externally oriented when it comes to the strategic focus. Companies that hold this culture are flexible and able to respond to outside needs and changes fast and adequately. Employees are stimulated to be innovative. Examples of these companies today are mainly in the services-sector such as online marketplaces like eBay or online communities such as Hyves in the Netherlands.
- Mission Culture
- The mission culture is externally oriented like the adjustment based entrepreneurial culture, but is not subdue to quick environmental and external changes. Companies that have the mission culture are focused on reaching targets that have been set earlier in order to be competitive. A company such as Iriver (Korea), which is a company that produces mp3 players, is a good example. Iriver is very externally focused, and copies existing mp3 player models like the Apple iPod, but is also very focused on internal targets to guarantee low prices.
- Clan Culture
- The clan culture is focused at flexibility when it comes to external needs, but this is reached through excellence of the employees, which makes the strategic focus internally focused. Examples of companies who fit the clan culture are Baan and IBM who are mainly considering the wellbeing of their employees as top priority and have the intention not to fire a single employee from the company perspective.
- Bureaucratic Culture
- The bureaucratic culture is internally focused and operates in a market that is not demanding high flexibility. Examples are some government institutions or insurance companies.
When a company's culture is analyzed, by using one of the perspectives used before, artifacts will make clear in what part of the quadrant (or very possibly also a combination of more than one) a company is in according to their culture. This information can be valuable to adjust the corporate strategy too but it can also be valuable to identify the current culture and change it according to for example changing needs from the external environment. This topic will be elaborated in the next section.
Changing cultures and strategy[edit | edit source]
When a corporate strategy is developed, or an existing strategy is altered, the previous sections prove that the culture aspect of an organization is important because it can oppose new strategies when culture and strategy do not fit together.
So what if the culture does not fit the strategy that is being developed?
When a culture does not match the strategy that is going to be deployed (which for some reason cannot be altered to the culture because of a changing external environment for example), some tactics to change this culture are available.
Approaches[edit | edit source]
- The All-Out attack (Kono, 1994)
- The all out approach of implementing a new culture consists of removing all the cultural and strategic plans that are active at the moment and turn it all around. This is mainly done when a big conglomerate acquires another company and wants to enroll their own culture and strategic goals.
- The inside venture approach (Kono, 1994 & Zahra, 1991)
- This tactic is based on the power of internal rewards and innovation. A company encourages employees to be innovative and come up with new ideas, and reward their employees with their own project team when the idea is feasible enough. This leads to a better external focus (employees are more focused on customer needs) and results in a company that is very flexible to the environmental needs.
- Strategic Alliances
- Include efforts such as joint ventures with other companies.
- Organizational and Personnel management approach
- When changing a corporate culture, expanding of the organizational (which formulates and regulates the strategies) and personnel departments is advisory.
Resistance[edit | edit source]
When situations change, especially not for the better, people generally resist this. When changing a culture, resistance will most probably also occur, resistance which most of the time is the result of the organizational climate, the shared meaning of employees about the way things go around in the company.
The existence of subcultures can also be a great cause of resistance and opposition against new plans. Subcultures, as the name says, are cultures with other assumptions and beliefs when compared to the general companywide culture. Subcultures can be horizontal (within the same hierarchical layer) or vertical (from manager to work floor employees) which in general can even cause more problems when changes are at hand.
So how to make sure that resistance is as low as possible? There are some measurements that can be taken, which will be discussed in the next section.
Measurements[edit | edit source]
- A status ladder system (Kono, 1994)
- A skill based method of paying your employees, derived from Japan, which pays employees according to the knowledge and capabilities they have instead of the jobs they perform.
- Salary Reduction
- Job Transfers
- Early retirements
- Less recruiting
These measurements are mainly meant to keep employees at the company, even though the new corporate strategy will change things inside the company.
The External Environment [edit | edit source]
The element of the environment that has the most immediate impact, and one which dominated management activities in the 1980s and 1990s - competitive strategy. Following the widely accepted frameworks developed by Michael Porter, this initially concentrates on the competitive features of different industry types, and in particular the entry barriers to them. The main part, however, revolves around competitive responses and strategies, especially between leaders and followers.
However, Pfeffer and Salancik made the following comment:
"The key to organizational survival is the ability to acquire and maintain resources. This problem would be simplified if organizations were in complete control of all the components necessary for their operation. However, no organization is completely self-contained. Organizations are embedded in an environment composed of other organizations. They depend on those organizations for the many resources they themselves require. Organizations are linked to environments by federations, associations, customer-supplier relationships, competitive relationships and a socio-legal apparatus defining and controlling the nature and limits of those relationships."
Most organizations, however, seem (at least formally) to ignore this dimension of their business. If they are well managed, they devote immense efforts to optimizing the internal factors which are within their control; but they barely notice what is happening outside, and make little attempt to formally manage that side of their activities, except for some marketing responses. A major element of that outside environment is made up from the factors which are now grouped under the global heading of `marketing'. Beyond this, however, there is a whole range of social and political factors which may have even greater impact. Not least is the impact of government regulation, which may make or break whole sectors of industry.
Theoretical Frameworks[edit | edit source]
As is frequently the case in marketing, a number of alternative frameworks for studying the wider environment are offered, the most conventional of which describes it in terms of an ` - onion - ':
This is a useful approach, since it distinguishes between three different degrees of interaction:
- Organization (or internal environment) - . This includes those activities, contained totally - within - the organization itself, which make up the daily life of most organizations.
- Marketing environment - . This is the area of the external environment which has the most immediate impact on organizations, and is generally recognized by them (and is the subject of much of this book).
- External environment - . This is often not recognized as a force impinging on organizations; and yet, as we have seen, it may well contain the - major - factors which determine the performance of that organization.
These external factors are most often grouped as the - STEP - factors (Social, Technological, Economic and Political). They can have dramatic effects on organizations. The (political) results of legislation, for example, determine the boundaries of the actions of most organizations, and yet they are often `taken as read', and are a relatively unnoticed element of organizational performance.
Sociocultural[edit | edit source]
Cultural traditions are not easily overturned, but over the years they can change quite significantly - without the organizations involved noticing. From the 1970s to the Millennium, for example, the role of woman in society - and, in particular, woman's role at work - changed dramatically; and this was of considerable significance to those supplying services to women. No longer could they assume that the average woman was the stereotypical housewife. The women's magazine industry, as one example, was changed out of all recognition.
Over the past two decades there have been major changes in a number of areas of the overall sociocultural environment. The `Information Revolution' in particular had a measurable impact on the patterns of employment; with economists pointing to a degree of `structural unemployment' caused by its progress. It is arguable, indeed, that the social effects of this particular `revolution' will dominate many of the changes in society over the coming two decades.
Related to this particular `technological' driver, there have been a number of predictions made about how society will change. One of the earlier ones, and also one of the most influential, was that by Daniel Bell, concerning the development of the - post-industrial society - :
As early as the 1970s he specified five dimensions, or components, of this:
- Economic sector: the change from a goods-producing to a service economy
- Occupational distribution: the pre-eminence of the professional and technical class
- Axial principle: the centrality of theoretical knowledge as the source of innovation and of policy formulation for the society
- Future orientation: the control of technology and technological assessment
- Decision making: the creation of a new `intellectual technology'.
As with many such `forecasts', the pace of change has been slower than Daniel Bell expected. However, Bell recognized that his `forecast' was based as much on hope and desire as on rational projection. In the context of his fifth element, for instance, he added:
"The goal of the new intellectual technology is neither more or less to realize a social alchemist's dream, the dream of `ordering' the mass of society... That this dream - as utopian, in its way, as the dreams of a perfect `commonwealth' - has faltered is laid, on the part of its believers, to the known human resistance to rationality."
Post-materialism[edit | edit source]
From the point of view of the marketer, perhaps the most important predicted change is that from a materialist society to a post-materialist one. It is only fair to report that `post-materialism' is taking longer to arrive than its most ardent supporters would wish.
Demography[edit | edit source]
Some changes are, however, totally predictable. The most obvious, and possibly the most important, are those resulting from demography. The `baby boom' of the 1960s, and the subsequent dramatic decline in birth rates, have produced very different cohorts of population; with accompanying (totally predictable) changes in earnings and consumption.
Technology[edit | edit source]
The impact of changing technology is also a major factor in the development of the external environment. The `Information Revolution' already mentioned is just one example of changes driven by technology.
The direct impact of new technology on organizations may be obvious. Even then, `marketing myopia' -where they are so involved in short-term problems that they cannot see wider perspectives which will determine the future - may blind them to the obvious. Less apparent, though, are the social or `structural' changes generated by such new technology. The `Information Revolution' is having its wider impact, for one example, by allowing much smaller organizations to achieve `economies of scale'. In the larger organizations it is having a different effect by encouraging horizontal communications (via electronic mail) to take over from the traditional vertical (hierarchical) organization; and in the process is creating new structures which are close to those of Japanese companies.
Peter Senker identified four main `drivers' in the field of technology:
- information technology
- new materials
- environmental issues
Economic[edit | edit source]
Some of the `theory' of marketing is also shared with other academic disciplines - or at least appears to be! Thus, although the `market' is clearly at the heart of marketing, it has also become central to economic theory; and, indeed, to the basic philosophies of `capitalism'. The way in which each of these two disciplines approaches the concept of the market could not, however, be more different.
The population in general, and the business community in particular, have uncritically accepted the basic tentets of economics as the given fundamentals of business life. Put simply, it is widely believed that economic theory accurately describes what happens in the wider business world. The reality (at least as described by marketing theory - and, even more clearly, by marketing practice) is often very different.
In the earliest days there was very little practical difference between economics and any theory of business management; or of `marketing' as then practised, in a society which had few surpluses to exchange. Adam Smith wrote his justifiably renowned - Wealth of Nations - as a treatise to be studied as much by businessmen as by government.
Even in the Victorian period, `neoclassical' economics, as developed by Alfred Marshall for example, was still spending much of its time trying to describe practical business processes, albeit in more scientific terms. The `laws of supply and demand', which now lie at the heart of modern micro-economics, represented a practical attempt to describe how prices were set at a time when almost all major markets were commodity markets, and the one variable which the seller could control was price.
At that time the political debate, led by Karl Marx, revolved around the ownership of the capital involved (and hence, most importantly, ownership of the profit), together with the associated division of wealth and income. `Capitalism' was about just that - about who owned the capital. It too, in its own perverse way, was firmly based on conventional economic theory. Even so, business economics, or the related `micro-economics', remained closely linked to actual business activities through the first half of the twentieth century.
Economists, however, increasingly focused on the need to create a body of theory which would justify their claim that economics was a legitimate academic discipline. At this time `macro-economics', that element which described the factors pertaining to the economy as a whole (and was clearly the responsibility of government rather than business), was split off as a separate subject - particularly after the pioneering work of Lord Keynes became generally accepted - to become the part of economics which received the most publicity.
The debate about whether the government should control demand or supply was won, in the 1970s, by the latter view (now espoused by many governments).
Over the same period, the political basis of capitalism has also shifted. As described above, the key factor had been seen to be the ownership of capital; the prime need was for `profit' to stimulate the `entrepreneur' to innovate, and improve business efficiency. Indeed, it had previously been widely believed that the strength of the capitalist West derived from that profit motive, which by itself led to enterprises almost automatically being better managed; for the good of all involved.
Unfortunately, by the 1970s, after the development of the global money markets, and after Kenneth Galbraith's very influential teachings, it had become clear that, at least in terms of routine operations, ownership of capital had largely become divorced from the management of most large organizations.
The political theme then became that of the `market'. The great benefit of `capitalism', it thus emerged, was that the `market' was the best (and only `natural') mechanism for allocating resources; for deciding how demand could be met. `The discipline of the market' or the `virtue of market-led economies', then became the central theme of `capitalist' governments; and is now espoused almost as enthusiastically by the governments of the former communist bloc.
Micro-economics and marketing[edit | edit source]
Modern micro-economics experiences no theoretical problem in describing the activities of the ` - perfect firm - '. This `ideal' organization is involved in perfect competition, where price is the one dominant factor (and this, above all, is the element manipulated in the many economic equations which are used to describe that firm). All decisions are taken rationally, based upon maximization of monetary outcomes (profit), where all the relationships are exactly known; and can be plotted upon definitive graphs.
In the 1990s the 'transaction cost' approach explored the relationships between economic theory and business management, by looking at the difference in `transaction costs' between the alternatives considered, as the reason for the logical choice made. This field of theory has, in particular, concentrated upon business structure - including the `make' or `buy in' decision. Here it argued, with some success, that the firm's decision as to whether to `make' a component itself or buy it from a supplier is (or at least should be) taken on `cost' grounds (though the definition of `cost' was complex than normal).
Whatever the approach, micro-economics finds considerable difficulty in dealing with ` - imperfect competition - ', since no generally agreed model for representing this state of affairs has yet emerged. Worst of all, particularly in the current climate of uncertainty, it cannot easily handle the `fuzzy' relationships which do not fit neatly into the exact equations. Finally, as Kenneth Galbraith and others so succinctly observed, management decision-making is often anything but rational; and is frequently not designed to achieve the simple monetary outcomes which are the staple diet of economics - and instead reflect rather more complex motivations.
Marketing, which has grown as a business function over this period (while economics has waned, in terms of its comparable use as a business management tool), thrives on precisely these elements, which are the stuff of real business life. Thus, the aim of every brand manager is to make competition ever - more - imperfect (aiming for the `ideal' brand which holds a monopoly over its customers, who will stridently demand Carlsberg beer and reject any alternatives). In this environment the `intangible' (and often seemingly irrational) needs and wants of the customer predominate. The tools of marketing are frequently the `creative' tools which address the `fuzzy' areas; of formulating the most attractive product or service, and of developing the most effective promotions. Having to compete on price, as the micro-economists would ideally wish for, is usually seen as defeat by such marketers.
Thus, there are many disadvantages to adopting the pure economic view-point. On the other hand, there still remain some clear advantages to investigating such an economic perspective. In particular, economics has benefited from almost a century of concentrated academic activity; developing a rigorous, logical, framework. It is the rigidity of thinking imposed by this framework which has often now detached it from real life. But the very strength of this body of academic theory means that economics can offer a useful reference framework with which to compare many marketing decisions.
Political[edit | edit source]
The boundaries within which organizations can operate are frequently set by legislation; from the ingredients they can legally put into their products to the buildings that their employees are allowed to work in. Pressure groups campaign directly to change legislation, but also work indirectly to change the public's buying habits.
Organizations themselves may well join pressure groups, to force government to protect their entrenched positions, and are often very successful.
It might be thought that only the larger organizations are the direct targets of pressure groups or have the resources to be involved in pressure groups themselves; but it is just as important that the smaller organizations understand the political machinations which are taking place around them, and which have a major, albeit relatively unseen, impact.
Law[edit | edit source]
Most aspects of marketing transactions will be covered by one or other form of legislation; not least that of contract law. The marketing manager or sales manager, then, must be well aware of those aspects that most directly affect them; and this will vary from industry to industry, and from country to country. The chemicals industry, for instance, is driven by legislation on safety, whereas financial services providers in the UK look to the Financial Services Act. Most managers, however, should at least understand exactly what their own contract means; and, even more importantly, what the implications are when others insist that their own contractual terms are followed instead.
The laws which affect your business need to be handled expertly, by specialists, for two main reasons:
- specificity - there is a vast array of laws, only some of which affect individual industries or organizations in specific countries
- currency - more importantly, laws change, often quite rapidly
Consumerism[edit | edit source]
The pressure group which has had the most direct impact on organizations in recent years has been that of the consumer movement; to which has now been added the environmental lobby and the green movement. The motivation of these movements has been sincere, no matter how annoying they may have been to the producers that they have targeted. They have aimed to benefit the consumer - high ideals, which are in stark contrast with those of some of the rather more self-interested industrial pressure groups.
These movements are often closer to the average consumer than the supplier. What they urge often makes very good marketing sense; and their views are often a sound guide to what future legislation may bring.
Multiple Publics[edit | edit source]
A concept which has recently emerged is that there are a number of different groups which can claim an interest or `stake' (Gareth Morgan actually referred to them as `multiple stakeholders') in the organization. Using a now more usual terminology, Lusch and Lusch define the `public' of an organization as `any group which has an actual or potential interest or impact on an organization's ability to achieve its objectives'.
Traditionally, especially in the view of economists, only the owners (the `stockholders') have been legitimately entitled to an interest in what the organization does. More recently it has been recognized that employees' interests should also be taken into account.
Mergers and Acquisitions[edit | edit source]
The power of the financial stakeholders should not, however, be under-estimated. It is often seen in its most active form (at least by the defenders) when acquisitions or mergers take place (not infrequently on an `unfriendly' basis). The rationale for mergers and acquisitions is not always financial. It is, indeed, often for reasons related to marketing; in the diplomatic terms which accompany such manoeuvres, `to obtain some synergy from complementary marketing assets', or in more forthright terms, `to try and increase monopolistic control over customers'.
Goals, objectives and targets[edit | edit source]
Differences between a current situation and a future aspirational state can appear as a deficiency or as a gap. Objectives and goals serve to eliminate this gap. Some writers distinguish between goals (inexactly formulated aims that lack specificity) and objectives (aims formulated exactly and quantitatively as to time-frames and magnitude of effect). For example, a gambler might have the ambiguous goal: "I want to get lucky tonight". Converting this into an objective, it might become: "I want to make $100 at the blackjack table by 8 o'clock tonight." Not all authors make this distinction, preferring to use the two terms interchangeably.
In the financial arena, or when talking statistically, one often refers to goals as "targets".
People typically have several goals at the same time. "Goal congruency" refers to how well the goals combine with each other. Does goal A appear compatible with goal B? Do they fit together to form a unified strategy? "Goal hierarchy" consists of the nesting of one or more goals within other goal(s).
One approach recommends having short-term goals, medium-term goals, and long-term goals. In this model, one can expect to attain short-term goals fairly easily: they stand just slightly above one's reach. At the other extreme, long-term goals appear very difficult, almost impossible to attain. (Strategic management jargon sometimes refers to "Big Hairy Audacious Goals" (BHAGs) in this context.) Using one goal as a stepping-stone to the next involves goal sequencing. A person or group starts by attaining the easy short-term goals, then steps up to the medium-term, then to the long-term goals. Goal sequencing can create a "goal stairway".In an organizational setting, the organization may co-ordinate goals so that they do not conflict with each other. The goals of one part of the organization should mesh compatibly with those of other parts of the organization.
Individuals within organizations will typically have personal goals. Although individuals often have goals that oppose organizational goals (such as having as high a salary as possible), if personal goals diverge too incompatibly from organizational goals they may result in limited progress towards the mere organizational goals.
Mission statements and vision statements[edit | edit source]
Organizations sometimes summarize goals and objectives into a mission statement and / or a vision statement:
- A Definition of Vision in a dictionary: 'An Image of the future we seek to create'.
- A vision statement describes in graphic terms where the goal-setters want to see themselves in the future. It may describe how they see events unfolding over 10 or 20 years if everything goes exactly as hoped.
- A definition of Mission in a dictionary: purpose, reason for being
Many people mistake vision statement for mission statement. They are fundamentally different. Mission statement defines the purpose or broader goal for being in existence or in the business. It serves as a guide in times of uncertainty, vagueness. It is like guiding light. It has no time frame. The mission can remain the same for decades if crafted correctly. While vision is more specific in terms of objective and time frame of its achievement. Vision is related to some form of achievement if successful.
For example, "We help transport goods and people efficiently and cost effectively without damaging environment" is a mission statement. Ford's brief but powerful slogan "Quality is Job 1" could count as a mission statement. "We will be one amongst the top three transporters of goods and people in North America by 2010" is a vision statement. It is very concrete and unambiguous goal.
To make the mission statement effective it needs to be aligned with the prevailing culture in that organization. Mission and Values go hand in hand. A lofty mission statement means nothing if it is not in congruence with the values practiced by the organization. A good example of this is Enron.
A mission statement can resemble a vision statement in a few companies, but that can be a grave mistake. It can confuse the people. While a mission statement helps inculcate values in employees, the vision statement has direct bearing on the bottomline and success of the organization. The vision statement can galvanize the people to achieve defined objectives even if they are stretch objectives provided the vision is SMART (Specific, Measurable, Achievable, Realistic and Timebound).
Mahatma Gandhi had a simple vision of getting rid of British rule in India and establish a vibrant democracy in India. He had a specific image of post British India in his mind and he talked of that image at every opportunity and to every one who was willing to listen.
The effect of such a powerful vision and articulation of this powerful vision in a simple to understand language was dramatic in the history of India. He and his followers defeated British without using any weapons or any violence. Their mission statement was not to use any violence and to love even the enemy. The 'Satyagraha' was not targeted towards the British people but to unjust, unlawful British imperial rule on India. They could come up with different strategies to achieve their vision while remaining loyal to their mission statement. So the mission and vision both served as a guide.
These two examples should be enough to demonstrate the profound impact a powerful vision can have on entire mass of humanity or even on entire generation. Powerful vision statements are very important for any organization to succeed in today's world.
Features of an effective vision statement may include:
- Clarity and lack of ambiguity
- Paint a vivid and clear picture, not ambiguous
- Describing a bright future (hope)
- Memorable and engaging expression
- Realistic aspirations, achievable
- Alignment with organizational values and culture, Rational
- Time bound if it talks of achieving any goal or objective
In order to become really effective, an organizational vision statement must (the theory states) become assimilated into the organization's culture. Leaders have the responsibility of communicating the vision regularly, creating narratives that illustrate the vision, acting as role-models by embodying the vision, creating short-term objectives compatible with the vision, and encouraging others to craft their own personal vision compatible with the organization's overall vision.
Why strategic plans fail[edit | edit source]
In general, strategic plans can fail for two types of reasons: inappropriate strategy and poor implementation.
Inappropriate strategies may arise due to:
- Failure to define end states (objectives) correctly
- Incomplete SWOT analysis with respect to the desired end state(s)
- Lack of creativity in identifying possible strategies
- Strategies incapable of obtaining the desired objective
- Poor fit between the external environment and organizational resources infeasibility
Poor implementation of a strategy may happen due to:
- Over-estimation of resources and abilities
- Failure to coordinate
- Ineffective attempts to gain the support of others or resistance
- Under-estimation of time, personnel, or financial requirements
- Failure to follow the plan
[edit | edit source]
- Strategic Decision Support using Computerised Morphological Analysis Presented at the 9th International Command and Control Research and Technology Symposium, Copenhagen, September 14-16, 2004.
- Strategic planning model
- White Paper: A Framework for Strategic Innovation
References[edit | edit source]
- Daft, R.L. (2002) Organizational Theory and Design. Schoonhoven: Academic Service
- Kono, T. (1994) Changing a company's strategy and culture. Long range planning, Volume: 27, Issue: 5 (October 1994), pp: 85-97
- Harris, T.E. (2002) Applied Organizational Communication: Principles and Pragmatics for Future Practice. Lawrence Erlbaum Associates, New Jersey.
- Zahra, S.A. (1991) Predictors and financial outcomes of corporate entrepreneurship: An exploratory study. Journal of business venturing, Volume: 6, Issue: 4 (July 1991), pp: 259-285
- J. Pfeffer and G. R. Salancik, 'The External Control of Organizations: A Resource Dependence Perspective' (Harper & Row, 1978).
- P. Kotler, Megamarketing, Harvard Business Review (March--April 1986)
- D. Bell, 'The Coming of Post Industrial Society: a Venture in Social Forecasting' (Heinemann, 1974).
- J. Naisbitt, 'Megatrends: Ten New Directions Transforming our Lives' (Macdonald, 1982)
- T. Levitt, Marketing myopia, 'Harvard Business Review' (July--August 1960)
- J. M. Keynes, 'The General Theory of Employment, Interest and Money' (1936)
- R. H. Coase, 'The Firm the Market and the Law' (University of Chicago Press, 1988)
- J. K. Galbraith, 'The New Industrial State' (1967)
- L. Fahey and V. K. Narayman, 'Macroenvironmental Analysis for Strategic Management'(West Publishing, 1986)
- R. F. Lusch and V. N. Lusch, 'Principles of Marketing' (Kent Publishing, 1987)
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