The first three decades of the twentieth century witnessed significant changes in business activity. Firms focused their energies on increasing production of standardized goods to derive the economies of scale. They were more comfortable working with day to day operational plant. Whatever came into the market, got readily absorbed, large volumes, standardized products, ever increasing demand characterized this era.
After the 1930s firms witnessed increased environmental turbulence. Competition became intense with the emergence of new players technological changes were swift and government policies restricted the economic freedom of the firms in most countries. Consumer tastes and preferences changed radically. New products with novel features made headlines and to sustain demand, firms had to promote heavily and spend significant amounts on market segmentation. They had to commit their resources carefully assessing various alternatives offered by the external environments from time to time. The reactive temporary response rarely yielded results forcing firms to change their orientation (from short term to long term) and look beyond the four walls of the organization more closely
The 1950s saw dramatic changes in technology new products emerged rapidly competition became cut throat multinational corporations began to dominate global markets and governmental policies encouraged free markets forces. These environmental complexities literally compelled the firms to come out with proactive steps by pinning their hopes on roadmaps provided by strategic plans. They had to be lean and flexible so that they could remain solvent and move fast. The had to almost undo existing styles, systems and standards looking at internal as well as external environments from a strategic perspective .
Why strategic planning?
No business firm can afford to get ahead without a clear map of where it wants to go and why. Strategic planning provides the roadmap for the firm. It serves as comprehensive guide it provides the big picture for all employees of an organization. By defining the mission of the organization in specific terms, it helps managers provide direction and purpose to organizational efforts. The organization is able to function better as a result and becomes more responsive to a dynamic environment. It helps in identifying opportunities early and exploit the same vigorously. It helps decide where and when to use the available resources in an optimal way. Additionally, it provided a complete and broad base for judging each executive’s contributions. Targets are clarified and the means to follow are outlined. As the future unfolds, adequate controls can be established to see whether the right course of action is adopted or not and whether the results are satisfactory or not. Strategic planning also minimizes the chances of mistakes and unpleasant surprises, because goals strategies are subjected to careful examination. There are less chances or committing mistakes and decisions arrived as can ultimately stand to test of time.
Strategic planning is laborious and time consuming. There are very few satisfactory short cuts. Immediate results are rarely obtained. Further, establishing and maintaining a formal system involves many expenses. Sophisticated strategic planning systems are a luxury for a small scale organization. Again, it should be remembered that trying to reach 100 percent perfection is an ideal, a pious intention that can never be satisfied through strategic planning.
Many executives enthralled by strategic planning tend to overdo the fact gathering job. Much time and effort is wasted thus in collecting all sorts of data that is not fully put to fruitful use.
Strategic planning, quite often, restricts the organization and executives to the more rational and risk free options. Managers are wedded to a philosophy of adoption those strategies or objectives that bear the weight of careful scrutiny and detailed analysis. In the process, many attractive opportunities may be lost since they are characterized by a high degree of risk, and uncertainty.