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

Management Practice 3

Management Practice Level 3 1Future Managers

Module 3: Strategic planning


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


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

Management Practice Level 3 Future Managers 20

• Visit a nearby business or an organisation and ask the own/manger questions concerning the strategic plan of the business or organisation:1. What is the goal of the organisation?2. Is there a strategic (long-term) plan to support the goal?3. What is the length of the strategic plan – how long

(duration) will it take to achieve the goal – in years?4. What resources are required for the organisation to achieve

it’s goal?5. Are the resources easily available or is it scarce resources?6. What is the quality and cost of the resources required in the

process?

1.4 The strategic planning process

1. Goal formulation2. Identifying current objectives and strategies3. Environment analysis4. Resource analysis5. Identification of strategic opportunities and

threats6. Gap analysis7. Strategic decision making8. Measurement and control of progress



1. 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



2. 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?



3. 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



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


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


1.7 Organisational systems• 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


1.7 Organisational systems• 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


Manage-ment

Product A

Product B

Product C

Research Produc-tion Sales

1.7 Organisational systems• 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


1.7 Organisational systems• 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

– When the organisation decides on a project then the project organisation structure will be more useful


Activity 2 – Organisational structure


• Visit various businesses in your environment and ask management / owner about:– What organisation structure is used in the

business?

– Why are they using that structure?

– Will they in the near future change the structure and for what reason?


Education

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