Evolution of planning approaches: - Strategic Management

Approaches to planning tend to co-exist, which means that it is possible to find all forms in current use. Gluck and his coauthors noted that at the time of their work only a few companies were managing strategically, and that all of these were multinational and diversified companies.

Phases-in-the-evolution

Phase 1 could also be described as extended budgeting, and the approach is largely based on projecting the figures in the budget out for a few more years. This tends to emphasise the existing aspects of the business, and allows little room for major changes in strategy. In these companies any new strategic thinking occurs outside of the planning system.

In phase 2 the approach tries to match the company’s strategies to the perversities of the real world. The feeling is that more accurate forecasting would lead to better planning, and the emphasis on this approach is on forecasting techniques and models. Operational research techniques were high on the list of the planner’s tools when this approach was at its most popular. The Gluck study observes that one benefit of this approach was greater attention to resource allocation, and the growing use of portfolio analysis techniques to aid this. Repeated frustration from the discontinuity of the events in the world in which we operate created a realisation that accurate forecasting was not possible.

The figure suggests 1970 as the time when phase 3, externally based planning began to appear, but for the majority of companies the trigger was the 1973 oil crisis, which overnight put the world into a situation of unexpected turbulence. Externally based planning is characterised by more attention to markets, and the dynamiccauses of market change, and much closer examination of competitors. Resource allocation takes a more dynamic role, and the approach was accompanied by the formal grouping of businesses with like strategic characteristics into SBUs, or strategic business units.

Planners are expected to produce alternative strategies, anaction which under the forecast-based approach would have been seen as indecisiveness. According to the Gluck study the weakness of externally based planning is that it imposes a burden of choice on top management which is too heavy, with the consequential result that many major decisions by default end up being taken by the planners rather than the managers. Phase 4 melds strategic planning and management into one process. In their definition of strategic management, Gluck and his co-authors differ a little from the Ansoff.

They define it as ‘a system of corporate values, planning responsibilities, or organisational responsibilities that couple strategic thinking with operational decision making at all levels and across all functional lines of authority in a corporation’. The main difference between phases 3 and 4 is of management philosophy rather than technique, and as the Ansoff view described earlier suggests, more emphasis is placed on the ‘soft’ internal aspects of management such as values and culture. Some of these themes will be picked up later when we look at the main behavioural advances in planning. Without putting too much weight on the conclusion, I think we can roughly correlate the Gluck and Ansoff conclusions.

Ansoff turbulence level


All rights reserved © 2018 Wisdom IT Services India Pvt. Ltd DMCA.com Protection Status

Strategic Management Topics