Functions of Management

STRATEGIC PLANNING

Strategic planning is one specific type of planning. Strategies are the outcome of strategic planning. An organization's strategies define the business the firm is in, the criteria for entering the business, and the basic actions the organization will follow in conducting its business (Higgins, Page 229.) Strategies are major plans that commit large amounts of the organization's resources to proposed actions, designed to achieve its major objectives and goals. Strategic planning is the process by which the organization's strategies are determined. In the process, three basic questions are answered:

1. Where are we now?

2. Where do we want to be?

3. How do we get there?

The "where are we now?" question is answered through the first three steps of the strategy formulation process:

(1) Perform internal and external environmental analyses,

(2) Review vision, mission and objectives, and

(3) Determine SWOT: Strengths, Weaknesses, Opportunities and Threats.

SWOT analysis requires managers to be honest, self-disciplined and thorough. Going on to strategy choices without a comprehensive SWOT analysis is risky.

Strengths and weaknesses come from the internal environment of the firm. Strengths can be exploited, built upon and made key to accomplishment of mission and objectives. Strengths reflect past accomplishments in production, financial, marketing and human resource management. Weaknesses are internal characteristics that have the potential to limit accomplishment of mission and objectives. Weaknesses may be so important that they need to be addressed before any further strategic planning steps are taken.

Opportunities and threats are uncontrollable by management because they are external to the firm. Opportunities provide the firm the possibility of a major improvement. Threats may stand in the way of a firm reaching its mission and objectives.

SCENARIO OF EFFECTIVE PLANNING AT SHELL (www.shellus.com)

In 1984, iol was $30 a barrel and most analysts and managers, believed that it would hit $50 a barrel by6 1990. Nevertheless,