CHAPTER TWO
REVIEW
OF RELATED LITERATURE
2.1 Conceptual
Issues
This
chapter covers a review of relevant literatures which act as a foundation to
the rest of the study. It explores areas that are pertinent to the study. It
provides the conceptual issues for this study and to guide readers to
understand the concepts and principles of strategic planning and other related
concepts.
2.2 Theoretical
Framework
According
to Kotler (1991), Strategic planning is a managerial process of developing and
maintaining a viable fit between an organization’s objectives and its changing
market opportunities. Strategic planning also deals with making long-term
decisions that enable organizations to respond to changing environments.
There
are numerous definitions of strategic planning, and there are many different
approaches that can be used to undertake strategic planning. Olsen and Eadie
(1982) define strategic planning as a disciplined effort to produce fundamental
decisions and actions that shape and guide what an organization is, what it
does, and why it acts as it does. Strategic planning usually requires
broad-scale information gathering, generation and exploration of alternative
courses of action, and emphasis on the future implications of near-term
decisions.
Strategic
planning according to Stoner and Fry (1987) is a management tool designed to
enable organizations competitively adapt to anticipated or future changes in
the environment. The process provides an overview and analysis of the business
and its relevant environment. That is describing the key external factors
affecting its success. The process then describes an action plan of how the
business will proceed to capitalize on its strengths while minimizing or
avoiding threats.
Kotler (1991) describes strategic planning as a
managerial process of developing and maintaining a viable fit between the organization’s
objectives and resources and its changing market opportunities. The relevance
of strategic planning is to shape and reshape the company’s and business products
or services so that they combine to produce satisfactory profits and growth.
Strategic
planning is often defined as an integrated system or process included in the
strategic management process, which ranges from formulation to implementation
(Ansoff, 1965).
Bryson (1995) also states that,
strategic planning is an excellent method for an organization-a governmental or
quasi-governmental one- to contend with fluctuating situations and
circumstances. He argues that strategic planning’s aim is to think and act
strategically.
Although many authors define the concept
of strategic planning differently, the various definitions above, nevertheless
share a common theme; the future prosperity and survival of an organization in
its environment.
2.3 Empirical
Analysis
The empirical analysis of the study lies in the fact
that there is a mediating relationship between strategic planning and organizational
growth (Ekpe, Mat and Razak (2010).
Accordingly, organizations that have strategic plans are able to thrive
and grow. Strategic planning provides
opportunities for business activities and the ability to exploit such
opportunities will definitely lead to business growth.
2.3.1 The Strategic Planning Process
Different authors in the field of
strategic planning offer different models of strategic planning. In spite of
the differences, the concepts and features are basically the same in most
literature. Here are some optional processes from various important authors: Byars
(1984) proposes a five-step process, which includes:
1.
Defining the
organization’s mission;
2.
Environmental
analysis;
3.
Establishing
objectives;
4.
Identifying
strategic objectives; and
5.
Selecting
a strategy.
Mintzberg
et al (1976) also identified in their research three phases and sub-phases in
most strategic planning process clearly summarizes all the various processes
available for practitioners:
1.
The identification phase which includes:
(b)
The Diagnosis Routine: Information
relevant to opportunities, problems, and crises are collected and problems are
identified.
2.
The
Development phase which includes:
(a)
The search Routine: Organizational
decision makers go through a number of activities to generate alternative
solutions to problems;
(b)
The Design Routine; Ready-made
solutions, which have been identified are modified to fit the particular
problem or new solutions are designed.
3.
The
selection phase which includes:
(a) The Screen
Routine: Identifies more alternatives to evaluate;
(b) The
Evaluation-Choice Routine: selections of alternatives; and
(c) The
Authorization Routine: the decision is authorized.
A simplified
view of the strategic planning process is shown in the following diagram.
Mission &
Objectives
Environmental
Scanning
Strategy
Formulation
Strategy
Implementation
Evaluation
& Control
2.3.2 Strategic Planning Characteristics
Duton
and Duncan (1987) claim that there are different planning characteristics such
as planning focus, planning formality, planning diversity and planning
intensity. Their research summarizes the important characteristic of the
planning process:
1.
Planning Focus: this
strategic planning characteristic is either a bottom-up or top-down planning
process. In the bottom-up focus, lower level managers are involved in the
strategic planning process and it could also be described as a more
participative focus.
The top-down approach is the opposite in
that the strategic levels of the organization or executives are the ones
involved in the strategic planning process and participation is limited.
2.
Planning Formality: this
strategic planning characteristic is the extent to which the strategic
planning process is described in documents and plans.
3.
Planning Diversity: this
characteristic deals with the variety of individuals who are involved in
the strategic planning process. To differentiate this characteristic from
planning focus, it is important to clarify that Dutton and Duncan are
discussing the variety in horizontal involvement and not vertical.
4.
Planning Intensity: this
characteristic is the frequency of contact between the participants
involved in the strategic planning process.
2.3.3
Relevance/ Benefits Of Strategic
Planning
While there are a number of potential
benefits associated with strategic planning, a number of arguments or
criticisms have been leveled against it.
Notable among the critics are Peters and
Waterman (1982) in the USA, and Stacey (1991) in the United Kingdom (UK).
Despite some criticisms, some other authors like (Byars, et al, 1996) have
argued the need for strategic planning. Bartol and Martin, (1998), and other
scholars also agree
that
strategic planning has relevance for organizations. Some benefits or relevance
of strategic planning as advanced by Byars et al, (1996) are as follows:
First,
strategic planning enables management, staff, and other stakeholders to reflect
on the nature of the organization, the present and future needs of its customers,
and possible changes in the environment including technology, social trends,
and economic forces. A systematic and objective assessment of the forces
enables management to come to terms with unique strength of the organization.
In this regard, the required strategic decisions can be taken.
Second,
strategic planning can provide opportunity to involve the various levels of
management in the process. As different levels of management participate in
strategy formulation, they get a clearer sense of where the organization wants
to go.
This
to a very large extent facilitates the integration of employees and management
to the goal and objectives of the organization thereby assuring higher
performance.
Third,
strategic planning ensures that all the different units of the organization
work together towards achieving the same objectives. Without a strategic plan,
the organic units of the organization will slew off track. Strategic planning
therefore provides an integrative mechanism for all organizational units to
work together.
Fourth,
through strategic planning, an organization is able to have a sense of
direction or road map‟ that
enables it to
clearly see. Without a sense of
direction, an organization will spend its time reacting to problems thus,
taking hasty and uninformed decisions that may be very costly.
Fifth,
strategic planning enables organizations to understand how the expectations of
stakeholders (e.g. government, customers, shareholders and employees) and the environmental
forces that impact it (e.g. political-legal, economic, socio-cultural, and
technological) affect the organization’s goal.
Sixth,
strategic planning also nurtures in management the habit of periodically
appraising the competitive position of their organizations.
This
compels management to be more proactive and conscious of the environment in
which their organizations are operating.
Finally,
strategic planning provide a base from which progress can be measured and
establish a mechanism for informed change when needed.
2.3.4
Guidelines To Ensure Successful Strategic Planning And Implementation
Here
are ten (10) identified keys to successful strategic planning as summarized below:
1. A clear and Comprehensive grasp of external
opportunities and challenges:
No
organization exists in a static environment. Social, political and economic
trends continually impact the demand for its offerings and services. Even as
advances in technology present new opportunities, they also generate new
expectations. Needs and community demographics are all subject to change. So
too are methods for delivering programs and services. It is thus essential that
a strategic plan reflect the external environment. Programs, services and
operations should be reexamined and reshaped in the light of current realities
and future projections.
2.
A realistic and comprehensive
assessment of the organization’s strengths and limitations:
The bedrock of any successful strategic
plan is a warts-and-all consideration of capabilities and strengths, weaknesses
and limitations. Information, both objective and subjective, must be gathered
from a wide array of sources, including staff and board members, clients,
community leaders, funders and partner organizations among others.
3. An inclusive approach:
At
one point or another, all important stakeholder groups should have a voice in
the planning effort. At a minimum, that includes staff, current and incoming
board members, clients, founders and partner organizations. To be sure all
views will not be weighted equally, nor will every staff member be involved at
every stage, it is possible to be inclusive without falling into the
too-many-cooks trap. But a strategic plan should not become the exclusive
responsibility of a small cadre of stakeholders. If the planning process is to
succeed, It must incorporate the views of all the constituencies that will be
affected by the plan or have role in its implementation.
4.
An empowered planning committee:
Strategic planning should be a participatory
undertaking-but not an anarchic one. As a matter of practical necessity, the
core work will generally be entrusted to a small planning committee with
sufficient decision making authority to keep the project moving forward
5.
Involvement of senior leadership:
Some executive directors and board
members are inclined to take a hands-off approach when it comes to strategic
planning. They may simply lack the necessary time or interest to get involved.
Or they may underestimate the significance of the task at hand and its
potential impact on the organization.
6.
Sharing of responsibility by board and staff
members:
An effective plan takes multiple
elements into account; the funding climate, the expectations of clients and
other stakeholders, the competitive landscape and the exigencies of operations
and programs. Neither board nor staff, acting on its own, has
a full grasp of all those areas, hence the need to ensure that both are fully
involved.
7. Learning from best practices:
Clearly, each organization has its own
individualized mission, client base and operating culture. Thus, each must map
a strategy, incorporating goals and action steps carefully customized to its
needs.
8.
Clear priorities and an implementation plan:
While missions and
visions are essential to inspiring commitment to your organization, they may be
seen as hollow unless accompanied by an organized description of activities
needed to fulfill desired aims. Developing a workable strategic plan means
dissecting the organizations objectives and strategies and determining which
take precedence.
9. Patience
For small and mid-size
organizations, strategic planning often moves forward on a speedy timetable.
But for larger organizations with many constituencies, the process may advance
much less quickly.
When an organization is
making major changes and needs extensive buy-in, the process may not be
perfectly linear. As information is gathered, sifted and analyzed, assumptions
are rethought, new ideas advanced and old ones revamped or discarded. It is
important to keep things on course and maintain momentum, but rushing is
counterproductive.
10. A commitment
to change
No matter how relevant its original
mission, no organization can afford to shackle itself to the same goals,
programs and operating methods year after year. If they are to remain viable
and effectiveness, organizations must be prepared to change extensively as
conditions require.
2.3.5 The
Relevance Of Strategic
Planning On Organizational Growth
During the period between 1960 and early
1970, a number of researchers set out to investigate whether or not planning
pays.
Most of the studies were conducted in
the United States of America (USA) using a sample of American companies.
Indeed, strategies of organizations at the time were merely mathematical
computations of past performance. However, factors such as deregulation,
increasing technological change and globalization made meaningless this
approach to long-range planning. Organizations were therefore compelled to put
in place a systematic approach of proactively dealing with environmental threat
and opportunities as related to organizations weaknesses and strengths.
Thus organizations recognized the
importance of strategic thinking and planning (Hart, et al, 1994:251-269).
There is a growing body of literature examining the relevance
of formal strategic planning on the organizational performance and growth (e.g.
Robinson, et al, 1989). There are also numerous fields of study examining the relevance
of various forms of strategic and operational planning activities on a variety
of organizational performance. It measures for both large and small firms
(Robinson, et al, 1994).
Researchers who have undertaken these studies,
especially those of small firms, have drawn conflicting conclusions: some claim
that formal strategic planning provides structure for decision making, helping
small business managers take a long-term view, and in general, benefit small
firms; others conclude that formal strategic planning has no potential payoff
for small firms because it is a heady, high-level, conceptual activity suited
solely to large firms and therefore has no effect on small firms. This
controversy is interesting and there is much to be gained from it.
2.4 Summary Of Review
In this section the researcher tries to summarize the empirical findings
with regard to the relevance
of strategic planning on organizational growth.
The
theoretical findings reveal the relationship between strategic
planning and organizational growth and came to the conclusion that, there is a
favorable relationship. Thus strategic planning is a vital framework for
enhancing organizational performance and future growth.
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