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IMPORTANCE OF STRATEGIC PLANNING.
Term Paper ID:30537
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Essay Subject:
Discusses need for corporate planning.... More...
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6 Pages / 1350 Words
14 sources, 14 Citations,
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Paper Abstract:
Discusses need for corporate planning. Focuses on the performance of CEOs of major corporations relating to the success or failure of planning. Defines process of strategic planning. Interrelated components that make up the entire strategic process. Relationship of levels or trends in financial performance. Five elements of the strategic cycle.
Paper Introduction:
IMPORTANCE OF COMPANY PLANNING
Introduction
This research reviews the importance of strategic planning to companies. The research focuses where appropriate on the performance of CEOs of major corporations in relation to the success or failure of corporate planning.
Strategic Planning and Its Importance
Strategic planning is the process of determining the mission, major objectives, strategies, and policies that govern the acquisition and allocation of resources to achieve organizational aims. Strategic planning is a process that generates specific actions that are required to carry out a particular strategy (Thompson & Strickland, 2001).
By definition, thus, the strategic planning process begins subsequent to the
Text of the Paper:
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This approach was a primary problemfor Goodwin at United Airlines and Nasser at Ford Motor Company. U.S. Perspectives on strategy fromThe Boston Consulting Group. Colvin, G. One of the primary problems related to the traditional concept ofstrategic planning is the rigidity with which a plan, once made, is treatedby management. Journal of Management in Engineering, 15(5), 37-43. Some studies base theirassessments on the use or non-use of strategic planning, while others areconcerned with the formality of the planning process (Jayaraman, Khorana,Nelling, & Covin, 2 ). They contend that the dynamiccharacter of the environmental factors dictate against strategic planningbased on predetermined objectives and goals. Although the strength of the links between strategic planning andperformance remains a matter of some dispute, recent studies demonstratethat such links, indeed, do exist. Journal of Business Strategy, 22(5), 6-8. (1999, Spring). (2 1, November 12). Journal ofManagement in Engineering, 14(4), 25-27. L. Burstein, D. There is generally widespread acceptance of the proposition that acorporation's chief executive officer (CEO) is the strongest influence inan organization on the direction of a firm's strategic planning (Dalton,Daily, Ellstrand, & Johnson 1998). Conclusion A major problem with some CEOs in relation to strategic planningappears to be a condition of inflexibility once a plan is made. M., Ellstrand, A. Some CEOs are legendary in theirsuccess in the area of corporate strategic planning. As the descriptionof the strategic cycle indicates, strategic planning is closely associatedwith an organization's external environment. What is strategy? (1999, September-October). L. There are five generally recognized elements of the strategic cycle.These elements are as follows: (1) organizational considerations, which areconcerned primarily with the organizational structure; (2) resourcerequirements, (3) strategic control, which is concerned primarily with theorganization's internal environment; (4) strategic planning, which isconcerned primarily with the external environment of the organization; and(5) the development of strategy, which is the end result of the combinedeffects of the other elements of the strategic cycle. Strategic Management Journal, 19(3), 269-29 . The contend further thatstrategic planning must be an intuitive process, if it is to be effective.Such an intuitive strategic planning process is one in which strategicplanners proceed to (1) identify arenas of activity, and (2) preferred (bythe organization) styles of action (Burstein, 1999). Jack Nasserpushed the development of a sound strategic plan at Ford Motor Company.When disaster struck the company in the form of the tire scandal on FordExplorers, however, both Nasser and Ford's strategic planning becameinflexible and apparently incapable to responding to changing conditions(Lim, 2 1). Unfortunately, all of these factors have adynamic characteristic. S. The problematic issue, however,is the attempt to related strategic planning in a company to specificlevels or trends in financial performance. Journal of the Academy of Marketing Science, 27(2),144-163. What every CEO should knowabout strategic planning. New York: John Wiley & Sons. Thompson, A., Jr., & Strickland, A. (1998,March). (2 1). (2 1, September). Stern, C. Politics. (2 1, November 12). Importance of company planning Introduction This research reviews the importance of strategic planning tocompanies. Porter, M. News & WorldReports, 42. Hax, A. Goodwin warnedof bankruptcy for United Airlines and the company fired him ("A To-Do Listfor United's Mr. Fix-It," 2 1). Thus, in the so-called real world,strategic planning will often precede strategy development, because of thecyclical character of the strategic process (Hax & Majluf, 2 1). CEO: Long-term strategist, or short-term hired gun? Strategic planningis a process that generates specific actions that are required to carry outa particular strategy (Thompson & Strickland, 2 1). D. Strategic Planning and Its Importance Strategic planning is the process of determining the mission, majorobjectives, strategies, and policies that govern the acquisition andallocation of resources to achieve organizational aims. As Nasser at Ford was to do later,Goodwin and the strategic planning process at United Airlines wereinflexible. Assessments of the relationshipbetween strategic planning and financial performance tend to vary accordingto the focus of the research. Maximizing CEO performance. Economist, 56. The general contention isthat, only when objectives have been established and goals set for theaccomplishment of these objectives, can strategy planning be effective.Some analysts challenge this assumption. Jayaraman, N., Khorana, A., Nelling, E., & Covin, J. The generalthrust of the literature is that the use by an organization of strategicplanning has positive effects on the organization's future financialperformance (Hunt, 1999). Thisapproach tends to freeze companies in the face of a changing externalenvironment. The air transportation industry slumped and UnitedAirlines went into a financial and operational crash dive. James Goodwin assumed control of United Airlines in 1999 whenthe company already was in trouble. Hensey, M. R., Daily, C. E. W., & Stalk, G., Jr. (1998). Goodwin and Nasser either did not knowand understand or ignored the external environment. The strategy concept and process.(3rd ed.). The research focuses where appropriate on the performance ofCEOs of major corporations in relation to the success or failure ofcorporate planning. J., III. (1996 November-December). Goodwin decided to stick with his plan and ride out the roughspot. Jacques Welch and Herb Kelleher were the architects of strategic plansthat guided the companies they led to the very top in their industries andlodged the companies at the pinnacle of corporate success. The characterization of the nature ofthe relationship, however, differs in different studies. (2 , December).CEO founder status and firm financial performance. (1 th ed.). Au revoir, Jacques. BusinessWeek (3757), 62. What's love got to do with it?Fortune, 144(9), 6 -61. While the validity of a flexible approach to the process of strategicplanning - an approach which recognizes that changing conditions in afirm's external environment both constrain the feasibility of alternativestrategies, and demands, at times, changes in a strategic plan - appearsobvious, too few contemporary managers appear to be able to accommodatesuch flexibility. Goodwin's approach was to placate thepilots' union with an excessively costly contract, and then to direct theairline's strategy toward a heavy reliance on business-class customers toboth pay for the contract and return United Airlines to profitability. The entire strategic process within anorganization, however, is a set of highly interrelated components, whichfunction within a dynamic environment. W. Many researchers contend that a firm's strategic planning mustnecessarily begin with the firm's objectives. Welchand Kelleher knew and understood. It is difficult to overstate the importance of strategic planning tocompanies, because the strategic plan leads the organization in thedirections of either success or failure. Englewood Cliffs, New Jersey: Prentice-Hall. Some studies define financial performance ina narrow context, while others are more inclusive. Hunt, S. Thebottom began to fall out of the air transportation market just a yearlater, when the dot.com collapse began and businesses generally begantightening their collective belts. With such a perspective, objectives and goals would be determinedsubsequent to the development of strategy, as opposed to providing basesfor strategy development (Hensey, 1998). Strategic ManagementJournal, 21(12), 1215-1224. The strategic imperative and sustainablecompetitive advantage. Homewood, Illinois: Irwin. Lim, P. Many managers, in an attempt to eliminate uncertaintyfrom their strategic planning, simply ignore the dynamism of their firm'sexternal environment (Stern & Stalk, 1998). Dalton, D. Strategicmanagement: Concepts and cases. (2 1, November 3). Meta-analytic reviews of board composition, leadership structure,and financial performance. Notorious for their lack of success inthe contemporary are James Goodwin, until recently CEO at United Airlines,and Jacques Nasser, until recently CEO at Ford Motor Company ("Politics,"2 1). A firm's external environment is composed of an incredibly complex anddiverse array of factors. The rough spot got rougher, however, and then came the terroristattacks on the World Trade Towers in New York and the Pentagon inWashington, DC. The one thing that strategic planners can count onis that the inputs on which they rely will not remain stable for very long;over the short-term, perhaps, but over the long-term, certainly not(Oliver, 2 1). E., & Johnson, J. This rigidity in adherence to a strategic plan is widelyevident among American organizations. Outstandingsuccessful examples in the contemporary period are Jack Welch, immediatepast CEO at General Electric, and Herb Kelleher, CEO at highly successfulSouthwest Airlines (Colvin, 2 1). HarvardBusiness Review, 61-78. Proceeding in the manner described above, the strategic planning modewithin an organization would depend primarily upon (1) the specific tasksconfronting a firm at a given point in time, (2) the character andstructure of the firm's organization at a given point in time, and (3) thecapabilities and preferences of the people within the firm at a given time. (2 1). References A to-do list for United's Mr. Fix-It." (2 1, November 12). Oliver, R. (1998, July-August). By definition, thus, the strategic planning process begins subsequentto the adoption of a strategy. C., & Majluf, N. It is, thus, necessary forthe strategic planner to (1) know of what the external environment of anorganization consists, and (2) understand how an organization's externalenvironment affects the strategic planning process (Porter, 1996).
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