NCV 3 Management Practice Hands-On Support Slide Show - Module 3

Management Practice 3 Management Practice Level 3 Future Managers

Module 3: Strategic planning Management Practice Level 3 Future Managers

Module 3: Strategic planning

After completing this module, you will be able to:

Define and discuss the concept of strategic planning in managing business performance

Management Practice Level 3 Future Managers

1. Define and discuss the concept of strategic planning in managing business performance

After completing this outcome, you will be able to:

Define the concept of strategic planning

Discuss the concept strategic planning using examples

List the benefits of strategic planning for performance monitoring using examples from a business venture

Identify aspects of a good strategic plan, using examples

Determine the relationship between the timing of a strategic plan and performance of a venture

Determine the relationship between the timing of a strategic plan and performance of a venture using examples

1. Define and discuss the concept of strategic planning in managing business performance

After completing this outcome, you will be able to:

Discuss and explain the role of the various organisational strategies in business performance

Determine the role of key elements – purpose, process, props, prototype – in the strategy/plan

Identify alternative organisational structures

Explain how key elements operate within each structure

Explain the advantages and disadvantages of all organisational structures, using examples from a business venture.

Discuss the reasons for choosing particular organisational structures in terms of a particular business venture

Provide examples of organisational structures for own context

1.1 Define the concept of strategic planning

What is strategic planning?

A process whereby the organisation’s resources are reconciled with the threats and opportunities in the external environment

There are three key elements:

The courses of actions determined for obtaining goals

The process of seeking key ideas as opposed to modifying existing company policies

How the strategy is formulated

1.1 Defining the concept of strategic planning

Points to remember:

Strategic planning is not a once off

Strategic planning is not a process that is conducted at a one or two day planning session

Critical choices will need to be made

Strategic planning helps the demands and changes caused by the external environment

Activity 1

Divide into groups and discuss the reasons why the following businesses or companies have to do strategic planning in advance:

Eskom

Transnet

South African Ports

Department of Transport

1.2 Discuss the concept of strategic planning using examples

Strategic plans

Are designed to ensure the organisation is aligned to the changing external environment

Create a vision for the future of the organisation

Translate the mission statement into measurable long-term goals

Choose a strategy or strategies to attain the above

Tactical plans

Are plans to implement the strategic plans

Tactical plans across different functional areas must complement each other

Operational plans

Focus on the day-to-day operations of the company

Have a short-term focus

Must put the strategic and operational plans into simple, workable steps

Corporate strategy

Focuses on the organisation’s scope of activities and resource deployment

Business strategy

Determines how best to compete in a particular industry or market

Decisions must be made about

Which new or additional products will fit in with the existing product range

How existing activities should be altered to keep pace with the changing environment

How change and renewal in general will be implemented in the business

Strategic planning is the process of:

Analyzing the organisations external and internal environments

Developing a mission and a vision

Formulating overall goals

Identifying general strategies to be pursued

Allocating resources to achieve the organisations goals

Reasons for strategic planning:

Highly skilled workers who are technologically orientated and highly educated are replacing employees in manufacturing positions

Worldwide organisations are downsizing

Businesses have realised the importance of providing services as opposed to manufacturing products.

Employees are required to be more flexibly and undertake complex thinking because work has become and continues to become less predictable and routine

Employees have more interdependence than the past. They are required to understand the business, its goals and they are held accountable for business decisions and results

Who should be included in the strategic planning process

Board members

The leadership of the organisation

Staff and/or volunteers

Members of the organisation

Representative of the communities you serve

External stakeholders

1.3 Characteristics of strategic planning

Characteristics of strategic planning

Strategic planning is an ongoing activity (a process); plans are developed and constantly reviewed after considering the environmental factors

Strategic planning has an extended to time-frame, usually more than five years. However, the time-frame depends on the type of industry and may be longer or shorter than five years

To management carries out strategic planning and it requires well-developed conceptual skills

It focuses on the organisation as a whole, and not individual business units

Characteristics of strategic planning

It is future orientated

It is concerned with the organisation’s vision, mission, long-term goals, and strategies

Strategic planning aims at integrating all management functions

Strategic plans look at reconciling the organisation’s resources with threats and opportunities in the external environment.

The focus of strategic planning is on creating and maintaining a competitive advantage for the organisation

Aspects of a good strategic plan

A strategic plan is an ongoing activity or process and is not just done for a fixed period

It requires well developed conceptual skills

It focuses on the organisation as a whole

It is time orientated

It is concerned with the organisation's vision, mission, long-term goals and strategies

It focuses on opportunities or threats that may be exploited or have to be dealt with

Determine the relationship between the timing of a strategic plan and the performance of a venture

Management must constantly try to predict the future

Change must be made at the right time

Activity 2 – Strategic planning

Visit a nearby business or an organisation and ask the own/manger questions concerning the strategic plan of the business or organisation:

What is the goal of the organisation?

Is there a strategic (long-term) plan to support the goal?

What is the length of the strategic plan – how long (duration) will it take to achieve the goal – in years?

What resources are required for the organisation to achieve it’s goal?

Are the resources easily available or is it scarce resources?

What is the quality and cost of the resources required in the process?

1.4 The strategic planning process

Goal formulation

Identifying current objectives and strategies

Environment analysis

Resource analysis

Identification of strategic opportunities and threats

Gap analysis

Strategic decision making

Measurement and control of progress

Goal formulation

Reasons why managers are reluctant to set goals

Managers may be unwilling to give up alternative goals

Managers may be afraid of failing

Managers may lack organisational knowledge

Managers may lack knowledge of the environment

Identifying current objectives and strategies

The organisation’s current strategy can be determined by asking questions such as:

What business are we in?

What business should we be in?

What does the business serve and how?

Why are we in business?

How do we do business?

Where are we leading?

Environment analysis

What are our competitors’ weaknesses and strategies?

What political, social, economic or technological changes are taking place the could hold threats or opportunities for the enterprise

1.4 The strategic planning process Management Practice Level 3 Future Managers Micro environment Market environment Macro environment Vision Consumers Economical Mission Suppliers Political Goals and objectives Competitors Technological Resources Intermediaries Legislation Culture or climate Public Social International National

4. Resource analysis

Which factors could promote or restrict the choice of future actions?

5. Identification of strategic opportunities and threats: SWOT analysis

6. Gap analysis

A performance gap is the difference between the objectives established in the goal formulation process and the results likely to be achieved if the existing strategy is continued

7. Strategic decision making

Strategic alternatives should be chosen to close the performance gaps

Managers should evaluate the strategic alternatives

The chosen strategy should have a definite advantage over its rivals

8. Strategy implementation

Programming – the order in which activities must take place to achieve goals

Scheduling – putting this to a time frame

Budgeting – calculating the finances required

9. Measurement and control of progress

Progress has to be evaluated

Corrective measures should take place

1.5 Select the overall strategy for the company

Growth strategies

Internal growth strategies

External growth strategies

Corporate combinations

Growth strategies

Internal growth strategies

Concentration growth strategy

Market development

Product development

Innovation

Growth strategies

External growth strategies

Integration strategies

Diversification

Decline strategies

Growth strategies

Corporate combinations

Joint ventures

Strategic alliances

Acquisitions

Institutionalising strategy

Selective blend situation

Stable situation

Reorientation situation

1.6 Using procedures to facilitate implementation

Procedures to facilitate strategy implementation include:

Setting annual objectives

Management by objectives

Reward systems

Barriers to effective strategy implementation

Environmental constraints

Internal constraints

Barriers to effective strategy implementation

Internal constraints

Inflexibility

Executive obsolescence

Disloyalty

Values, styles and traditions

Lack of CEO power

1.7 Organisation systems

Formal and informal

Line organisation

Line-and-staff organisation

Functional organisation

Project organisation

Matrix organisation

Formal and informal

Management Practice Level 3 Future Managers Formal Informal Structured Unstructured Rigid Elastic Defined Undefined Planned and permanent Spontaneous

Line organisation

1.7 Organisational systems

Advantages of line organisation

A simple and inexpensive (cheap to set up) organisation system

Unity of command is possible and the number of subordinates reporting to one manager can visually shown

The authority and responsibility lines are clear and strictly vertical

It is stable

It is a stable organisation structure that ensures quick decision-making

Relationship problems are minimised

Disadvantages of line organisation

Inflexible organisation structure that impedes adaptation to change

A lack of specialist knowledge resulting in heads of departments being overloaded with a variety of tasks

Advisors become frustrated because they do not have enforceable authority

Dependence of multi-faceted heads of department who are difficult to replace

Too many management levels impeding communication

Each department is only busy with its own activities and there is hardly any co-ordination between departments

Line-and-staff organisation system

Using line-and-staff organisation effectively

A good understanding of and support for both line-and-staff functionaries are essential

Under no circumstances must staff functionaries give instructions to line functionaries;

Staff functionaries must be given the assurance of free opinion and advice without prejudice from line functionaries;

Line functionaries must take heed of advice and suggestions

Staff functionaries must be fully engaged in and form an integrating part of the business activities

A climate of mutual trust, recognition and support between line and staff functionaries must be created so that both parties will act to the benefit of the business

Advantages of line-and-staff organisation

Expert advice is freely available to expand the knowledge of line functionaries

Specialisation is possible

Unity of command can be retained if applied correctly

Opportunity for the development of employees exist

Disadvantages of line-and-staff organisation

Unity of command can be threatened if it is not applied correctly

Heads of department can be unhappy about the interference and actions of staff functionaries – they could feel threatened

Staff functionaries can easily feel dissatisfied, frustrated and useless if their advice is not taken seriously since they do not have enforceable authority and cannot influence unity of command

Staff functionaries can try to prove themselves unnecessarily by empire-building, unjustified investigations and lengthy reports;

Decision-making can be impeded if line managers do not first consult staff functionaries

Staff functionaries can adopt a too theoretical approach and consequently give line functionaries impractical advice

Salary expenses for the organisation increase

Functional organisation system

Advantages of functional organisation

Maximum specialisation is allowed while it forces line management to apply expert advice

Expert knowledge and skills are available and can be obtained immediately

Unity of command is maintained if applied correctly

There is little need for the rare, multi-faceted heads of department

There is flexibility in the use of staff from the functional department in which the project is based

Knowledge and expertise may be shared more freely between individuals in a functional department, resulting in more creativity within the project team

Disadvantages of functional organisation

Subordinates can be responsible to more than one supervisor. The principle of unity of command is thus affected while co-ordination is impeded

The tasks of heads of department are hindered by numerous prescriptions about specialised aspects outside their field of experience

Frequently, no one is given full responsibility for the project, so there is more possibility of failure

The project is not the central focus since the functional department has its own focus, which can result in a slow response to client needs

Project organisation

Advantages of the project organisation system

Employees involved in the project can give their undivided attention to the project

Communication is easier when team members are only required to communicate with other members of the team

Team members report directly to the project manager

The project manager has full authority over the project

A project team can develop a stronger sense of commitment

Decision-making is easier

Members co-opted to the project gain invaluable experience

Disadvantages of the project organisation system

Pure project groups tend to be inconsistent in the way they carry out policies and procedures

Rivalry can develop between the project members and the parent organisation

The concerns that project members feel can cause problems, since there might be uncertainty about their future once the current project is completed

When several projects are being worked on simultaneously, there can be duplication of effort in many areas

Matrix organisation

Management Practice Level 3 Future Managers Manage-ment Product A Product B Product C Research Produc-tion Sales

Advantages of the matrix structure

The project manager has access to all of the resources within each functional department

Team members still have their functional “home” once the project is completed, reducing anxiety and increasing motivation

Matrix organisations are generally flexible and can respond rapidly to change, the need for conflict resolution, and project needs

Policies and procedures can be developed independently for a project, but since representatives from administrative units of the parent organisation are involved, these policies are usually consistent with those of the parent firm;

When several projects are going at once, there is better use of company-wide resources

Authority and responsibility for achieving the overall project goal are shared

A better balance of time, cost, and personnel can be developed

Disadvantages of the matrix structure

Project team members have two bosses, the project manager and the functional manager, which can result in confusion, split loyalties, a division of authority, and unsuccessful completion of the project goal

There is more of a possibility of role ambiguity for managers as well as team members

The balancing of time, cost and performance can be an advantage, but it must also be monitored carefully so that the success of all projects is ensured

More time is needed initially to define policies and procedures

Multi-dimensional information and workflow can lead to confusion and complicate communication

Conflict can result if a functional manager’s goal differs from the overall project

1.8 Reasons for choosing particular organisational structures

What is the need of the organisation?

If there is a need for advice then a staff functionaries will be more advisable. Expertise can be added to the organisation with a line-and-staff structure

If the organisation focuses on specific functional tasks, for example, marketing of their product, then in that situation the functional organisation structure will be more convenient