Strategic planning and strategic management are those set of decisions and actions that result into the formulation, selection and implementation of organization’s long-term objectives. That is, the setting of strategies for achieving organization’s objectives. A strategy is simply a company’s game plan. Take a football team for example, their goal as a team is to win their games while their strategies are their game plan (game formation) to win the game.
The international, competitive and dynamic business environment of today has made it impossible for companies to survive without a clearly articulated strategic plan in place to help managers see the future of a business on a global scale. To earn profit which is largely the main objective of companies, the company need to modify processes that responds to increases in the number and size of competitors; to the more rigorous regulations of the government and influences of globalization. These modifications to responses are what strategic planning and strategic management is all about.
As accountants get deeper and deeper into managerial position in various companies and industries, it becomes even more pertinent that every accountant should be well grounded in the process of setting and implementing strategic plans. Before I go on discussing the strategic planning processes, I would like to first of all point out the questions that need to be addressed by any strategic planning process. The questions are:
- What is our business and who are our customers?
- What advantageous strength do we have in our business?
- What impression do we want to create in the mind of our customers about our products and services?
- What are the actions of government and our competitors?
- What is our target rate of return on assets, earnings or cash flow?
- What are our social responsibilities?
Whatever approach a company chooses to develop her strategic plans, an attempt should be made to provide answers to the above questions.
NINE PROCESSES OF STRATEGIC MANAGEMENT | PLANNING
For a strategic plan to provide answers to the above questions, it must comprise of the following nine critical tasks/ processes.
- Formulation of company’s mission statement and vision statement
- Conduct an analysis of company’s internal conditions and capabilities. One way of doing this is to carryout a SWOT analysis.
- Evaluate the company’s external environment.
- Carryout alternative/ option analysis. That is, finding out which alternatives or options are available to the business.
- X-ray the options in the light of the company’s mission statement thereby selecting the perceived best option(s)/ alternative(s).
- Select long-term objectives and grand strategies that will help achieve the most pleasing and desirable option(s).
- Breakdown your long-term objectives into short-term objectives and strategies that will help in the actualization of short-term goals. One way of doing this is to develop an annual budget.
- Implement the selected strategic plans taking into consideration the economic and non-economic factors/ constraints.
- Monitor the progress of the strategic process, gather feedbacks and convert those feedbacks into input for future strategic planning.
The last aspect of strategic planning process reveals that strategic planning and strategic management is a continuous process that needs to be refined at every cycle.
WHO IS RESPONSIBLE FOR MAKING STRATEGIC PLAN AND DECISIONS?
Strategic planning is the responsibility of strategic management as it involves overriding issues facing organizations, strategic planning is concerned with planning, directing, organizing and controlling of a company’s strategy-related decisions and actions. The reasons for this are:
- Strategic issues require top management decision.
- Strategic issues require large amounts of a company’s resources.
- Strategic issues are future oriented.
- Strategic issues often affect the company’s long-term success.
- Strategic issues usually have multiple consequences.
- Strategic issues deals with macro environment.
We have three levels of management that makes decisions at difficult levels of the corporate hierarchy. They are:
(1) Strategic management: this is the management team that operates at the corporate level of a business. Board of directors, chief executive and administrative officers are the principal members of this level of management. Their decisions are unstructured.
(2) Tactical management: this level of management is positioned at the middle of the corporate hierarchy. These are the business level managers. They comprise of business and corporate managers.
(3) Operations management: this level of management is at the bottom of the corporate hierarchy. Functional managers are the constituents of this level of management. Example of operations managers are: product managers, geographic managers and functional managers. Their decisions are structured in nature.
Structure in this context means the degree of repetition and routine in the decision. So, when I said that strategic management is unstructured, I simply mean that strategic management face unique situation that requires unique approach to solving. While structured decision that characterizes operations management simply means that their decision is repetitive in nature.
STRATEGIC PLANNING AND ACCOUNTANTS
Before concluding this article, I would like to briefly talk about the relationship that exists between strategic management and finance specialists (accountants included).
Accountants should be involved in the planning process of every company. One reason why it is a must to have an accountant at the strategic management level is to make sure that the financial structure of the organization and that of the competitors are properly analysed to determine financial strengths weaknesses of the company and their competitors.
Wow! What a lengthy post? But, it is worth the time invested in reading this article as am sure you enjoyed it. So, be prepared to participate in the strategic planning process of your company as an accountant.