Wednesday, March 29, 2017

Interpretation and understanding on strategic planning process


The article The Real Value of Strategic Planning introduces some basic concepts and rules when commercial companies should be aware of or follow when designing strategies. In my opinion, all these rules and suggestions do useful and could be extended to broader areas in the society.

 

In the article, the main reason managers need to make strategy is to take measures in response to the unpredictable and uncertain market. I do not have a lot of experience in corporations, but as a student majoring in civil engineering, I have interned as a supervising engineer on a construction site. In the construction site, even all operations workers do should follow the design drawings and design code, sometimes there are uncertainties caused by extreme weathers, systematic error in materials like concrete and steel. In such dilemma, I had to make strategy as fast as possible, making a judgment whether workers should rework these steps or could move to the next task. In such strategic planning, I have to reach the maximum balance between the time saving and high quality of the construction. This intern experience shows me the core value of strategic planning which is to react the market change in time, and I believe it is similar to the cases in business.

 

Since strategy is usually not made in a formal conference room, as the article points out, the number of people participate the strategy planning process should be limited below a certain number and the time and place of the process should also be moderate. I totally agree on this idea. Democracy should be pursued by everyone, but excessive democracy may decrease efficiency in administration. For example, in the history, one of the reasons that the Roman Republic was replaced by Roman Empire is that the regime ruled by emperor instead of Roman Senate could highly improve its efficiency in making strategy, which accommodated the trend of history development. In addition, if the right of making strategy owed by too many people who do not have enough capacity to take such responsibility, sometimes wrong strategy would be made. In specific, we all praise the political structure in ancient Greece, but in the story that Socrates was sentenced to death, the murderers were actually those citizens voted in the Athens citizen assembly.

 

After creating prepared minds, managers still require focusing on the strategies they have adopted. As the article indicates, a new multi-business expanded successfully because of the aggressive strategy in market. Growing up in China, I have seen the dramatical growth of some international brands, like Pizza hut, McDonald’s, Walmart and Nike. The common reason they succeed is that they entered the new market with great consuming potentials earlier than their competitors, which makes them take up a large proportion and earned good reputation among consumers. On the contrary, as competitors entered the market later, Papa Jones, BestBuy, and Under Armor missed the chance expanding market in China. Prepared minds can also help companies reject moves that don’t make sense. Sometimes a trend of product may be popular, but could not last for a long time. So even the product could have earn benefit in a short-run, managers should consider the long-run operating, average total cost, marginal revenue, and other factors. Most importantly, company must have a judgment how long could their product be popular in market, in order to determine the quantity they produce in the future, or when should they exit the market. The Iridium Satellite was overconfident on their satellite phone system which was replaced by ground communication system in a few years. With an incorrect strategy, the company spent too much budget on a technique which would be obsoleted in a short time, inducing its bankrupt.

 

In conclusion, strategic planning is a necessary process in the commercial competition.  With a lot of benefits stated in the article, strategic planning is what we want to make naturally, even instinctively, to perform better in the market full of uncertainties. So the duration, the scope, the holding place and some other rules of the process should also be considered by managers and followed as the article suggests.

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