SUMMARY

For the better part of a decade, strategy has been a business buzzword. Managers now focus at
strategic planning instead of just planning. Every single operation needs to be planned properly
so that all the resources can be used effectively without faults. All the planners have now turned
into strategists mainly in big companies like General Electric, the focus has shifted to
formulating strategies. They have been nimbly leap-frogging smaller competitors with technical
or market innovations, in true entrepreneurial style. Many studies have been conducted till now
to study the relationship between formal planning and strategic planning. The findings indicated
that formal strategic planning does indeed evolve along similar lines in different companies,
albeit at varying rates of progress. The progression can be segmented into four sequential phases,
each marked by clear advances over its predecessor in terms of explicit formulation of issues and
alternatives, quality of preparatory staff work, readiness of top management to participate in and
guide the strategic decision process, and effectiveness of implementation. The four phases are as
follow
1) Basic Financial Planning:- Companies in Phase I often display powerful business
strategies, but they are rarely formalized. The quality of phase 1 depends upon the CEO
and the top management of the organization.
2) Forecast-based Planning:- Here, planning is done using forecasting tools. The drawback
is that sooner or later these plans fail to signal major environmental shifts which result in
negative impact on the organization. But, it result in effective resource allocation and for
analyzing long term trends and setting objectives.
3) Externally Oriented Planning:- In this phase, resource allocation is both dynamic and
creative. Here, the planners try to shift the business into attractive sector.
A distinguishing character followed by diversified companies in Phase 3 is The SBU
Concept which is the formal grouping of related businesses into strategic business units. It
recognizes two distinct strategic levels which are

Corporate decisions that affect the shape and direction of the enterprise as a whole
Business-unit decisions that affect only the individual SBU operating in its own
environment.

The most significant way in which Phase III differs from Phase II is that corporate planners are
expected to offer a number of alternatives to top management. The alternate strategies
approach becomes both the strength and the weakness of Phase III planning, for it begins to
impose a heavy-sometimes unacceptable burden on top management.
Strategic Management:- This is the fourth phase, here planning and management is joint into a
single process. Most of these are followed by multinational, diversified and manufacturing
companies. It is the not only the planning which ensures the success for an organization but its
the thoroughness with which management links strategic planning to operational decision
making. This is largely accomplished by three mechanisms:

1. A planning framework that cuts across organizational boundaries and facilitates strategic
decision making about customer groups and resources.
2. A planning process that stimulates entrepreneurial thinking.
3. A corporate value system that reinforces managers commitment to the companys strategy.

Planning Framework:
Many Phase III companies rely on the SBU concept to provide a planning frameworkoften
with disappointing results. But, there are more levels at which strategic decisions can be made
except for The SBU concept. There are five distinct planning levels

1)
2)
3)
4)
5)

Product/market planning
Business-unit planning
Shared resource planning
Shared concern planning
Corporate-level planning

For small corporations which have related products, a 2-3 level planning is adequate even
when more levels are required. These companies need not insert another level of
organizational hierarchy in order to plan shared resources or customer sector problems.

Planning Process:
While planning as comprehensively and thoroughly as possible, Phase IV companies also try to
keep their planning process flexible and creative. In strategically managed companies, the
managers thinking is challenged by

Stressing competitiveness
Focusing on a theme
Negotiating objectives
Demanding strategic insights

Corporate Value System:

The value system shared by the companys top and middle managers provides a third, less visible
linkage between planning and action. There are four common themes emerge from interviews
with personnel at all levels in strategically managed companies
1. The value of teamwork, which leads to task-oriented organizational flexibility.
2. Entrepreneurial drive, or the commitment to making things happen.
3. Open communication, rather than the preservation of confidentiality.

4. A shared belief that the enterprise can largely create its own future, rather than be
buffeted into a predetermined corner by the winds of environmental change.

Reference
https://hbr.org/1980/07/strategic-management-for-competitive-advantage