Strategic and Tactical Planning in Business Management

Introduction

Though the concept of planning is generally known to most people, it assumes confusing connotations in business parlance depending on the prefixes added to it — such as long-range planning, annual planning, and strategic planning. Long-range planning is usually associated with forecasting, annual planning with budgeting, and strategic planning with the growth strategy of the organization. The term "corporate planning" carries yet another implication; however, it is usually an overall organizational plan encompassing all the other plans and is mainly guided by strategic planning and strategic management principles.

Strategic and Tactical Planning: Definition

The word "strategy" was originally used extensively by the armed forces. In war, the two warring factions plan ahead by taking into account what the opponent is expected to do and strategize accordingly to overcome them. In business, there is no enemy or opponent as such, but there are many factors that can adversely affect the business — thus strategic planning assumes significance in business management. The term "strategy" began to be used in business with the increase in competition and the growing complexity of operations. McFarland defines strategy as "executive behavior whose purpose is to achieve success for the company or personal goals in a competitive environment, based on the actual or probable actions of others." Strategy is also defined as "a complex plan for bringing the organization from a given posture to a desired position in a future period of time."

The purpose of strategies is therefore to determine and communicate a picture of the kind of enterprise that is envisioned, through a system of major objectives and policies. Strategy is normally influenced by both external and internal considerations. The external factors that influence a strategy include the competitive environment and overall industry standards, the company's market opportunities and threats, and societal, political, and regulatory factors. The primary internal considerations are the organization's strengths, weaknesses, and unique capabilities; management's philosophies and ethics; the personal ambitions of managers; and the organization's culture and shared values. A good strategy addresses both external and internal considerations effectively, leading to sustained competitive advantage and enhanced business performance.

Strategic Planning Through the Years

Strategic planning thus involves assessing the company's current business environment, defining and articulating the company's business mission, envisioning the state of the business at a future point in time, identifying the company's strengths, weaknesses, opportunities, and threats, and charting a course of action for executives to follow so that the company reaches its envisioned status. This means that management today is more complex, and managers need to think strategically in light of changing business conditions. They must be knowledgeable about the company's external environment and internal strengths, and must understand the nature of the business thoroughly in order to set strategic policies. As Thompson and Strickland (2003) prescribe, "A strategic vision indicates management's aspirations for the organization, providing a panoramic view of 'what businesses we want to be in, where we are headed, and the kind of company we are trying to create.'"

Corporate planning has advanced through distinct phases since its widespread inception in the 1960s. Planning in that decade was essentially based on long-range forecasting, as industrial growth was relatively stable and planning usually meant developing expansion and growth plans through capacity expansions, diversification, acquisitions, mergers, and resource allocation. During those years, the corporate planning process paid little attention to enhancing service quality or competitive performance. Strategic planning was introduced in the mid-1970s, with new planning techniques that encouraged the formulation of corporate and business strategy before the preparation of detailed operating plans. During this time, many western countries faced economic recession following the energy crisis of 1973–74, marked by high inflation, turbulent industrial relations, and large-scale public investment.

The Eight Maxims of Strategy

The Japanese, however, pursued clear strategies built on new standards of product quality, customer service, and marketing, and were spearheading business and economic growth. Lack of strategic vision and the inability to make tough decisions quickly were identified as key reasons for economic turmoil in the West. As a result, business organizations began articulating their strategies within corporate plans, and corporate planning became guided by strategic and tactical thinking. Strategic planning techniques include scenario planning (encompassing social and political change), business portfolio analysis, sensitivity and risk analysis, zero-base budgeting, experience curves, and environmental impact assessment. In the 1980s, questions such as how to grow and prosper in an uncertain environment and how to change corporate cultures to meet competitive standards in productivity, quality, and customer service began to challenge managers, and a new management style — strategic management — emerged as the solution.

Sir Basil H. Liddell-Hart (1968), in his book Strategy, proposes eight maxims for deciding on a strategy. The first maxim is "Adjust your end to your means," suggesting that policies and strategies should be based on what is achievable. The facts should be thoroughly considered as to what is possible and what is not. The second maxim is "Keep your object always in mind, while adapting your plan to circumstances," meaning that although alternate courses of action may be considered, they must ultimately serve the objective initially identified, and that objective should itself contribute to the achievement of the envisioned result. The third maxim states "Choose the line (or course) of least expectation," advising the strategist to adopt the course of action that the opponent considers least probable and would therefore not prevent. The fourth maxim is "Exploit the line of least resistance," provided that line will eventually result in the achievement of the underlying business objective. The opportunity should be thoroughly analyzed and tactically verified to ensure success, and resources and management methods should be strategically chosen to secure it.

The fifth maxim states "Take a line of operation which offers alternative objectives," suggesting that a single course of action should be chosen that inherently presents different objectives, so as not to reveal the real objective and prevent the opponent from outmaneuvering the strategy. The sixth maxim advises to "Ensure that both plans and dispositions are flexible — adaptable to circumstances," and that contingency plans be included to respond effectively to either success or failure; resources should be allocated and organized in a way that facilitates adaptation. The seventh maxim proposes "Do not throw your weight into a stroke whilst your opponent is on guard — whilst he is well placed to parry or evade it," meaning that an opponent should be engaged only after they are psychologically stranded and sufficiently demoralized to fight back. The eighth maxim cautions "Do not renew an attack along the same line (or in the same form) after it has once failed," because failed strategies seldom prove successful the second time.