FREE online courses on Introduction to Strategic Management - Path to Strategic Management - Obstacles to Reaching Phase IV

 

The promised benefits of strategic business planning are only realised in the latter stages of phase 3 and in the final phase in which planning is fully integrated with operating decision making and resource allocation throughout the company.  Prior to this, management encounters the bulk of the cost of planning with only the promise of future benefits.  Since management's tolerance of such a state of affairs is not without serious limitations, the task is to move through the first three phases of planning as quickly as possible.  Passage through the first two phases proceeds smoothly enough at most companies.  The extension of annual financial planning to a three- to five-year horizon occurs naturally as the length of investment paybacks, contractual commitments, and product cycles grows with the success and maturity of the company.  The introduction of forecasting techniques in phase 2 imposes no great burdens on the company if one excludes the despair of those who expected to foretell the future with reasonable accuracy.

 

It is in phase 3 of the planning process that the difficult processes really begin.  It is here that the company is organised, for planning purposes, into strategic business units (SBUs); extensive training is required; through analyses of competitors and the external environment and an inventory of internal strengths and weaknesses are undertaken; and formal business plans are written, reviewed, and monitored for the first time.  It is also here that the organisational changes are most severe, and that the planning process becomes most vulnerable to its natural enemies – inertia, entrenched interests, and risk aversity. It is at this point that many companies, unable to steer the process safely through the many obstacles encountered in phase 3, abandon planning altogether.