Operational Plans and Strategies
Major Elements and Dimensions of Operational Plans and Strategies
In order for any company to achieve its growth objectives and remain profitable, it requires to design and implement a comprehensive strategy which will allow it to beat competition, and retain a niche in a competitive market. This requirement does not only hold for the perfect market, but also for oligopolistic and monopolistic markets because every businesses entity needs to ensure continuity. An operational plan is intended to present a stepwise order of individual actions whose cumulative effect is a notable positive change towards the realization of a business`s objectives in line with its desired visions and missions. Once such a plan is laid out, a strategy is then designed that will allow the optimization of time and resources in achieving the laid out objectives.
Therefore, a good operational plan without an accompanying strategic approach will not yield optimally (Williams &Kinicki, 2006). In order to fully realize the goals of an operational plan, certain elements exist which must be considered. These include the formation of good strategic goals containing a vision, mission, values and mini-strategies, conduction of a Strength- Weaknesses-Opportunities-Threats (SWOT) analysis, education or information gathering as a continuous process, as well as formulation of overall goals and objectives (Teece, 2010).
These include a company`s vision, mission, values and strategy. The four elements named above provided a guided framework to ensure that a company or business has the necessary focus, as well as checks and balances to remain competitive and achieve growth (Teece, 2010). The section below will discuss these elements in detail.
The world is drastically changing. In order to remain in business for years, any company must evaluate the emerging issues, understand the emerging market trends as well as the forces shaping the future business environments and move fast in preparation of what is expected to come. The company must get ready for what is to come for tomorrow, today (Grusenmeyer, 2010). The company`s vision should aims at creating sustainable long term destinations for the business through provision of roadmaps for a win-win situation for the firm and all its partners. A company`s vision benchmarks where the company expects to be in a specified time period in terms of profitability, customer base, growth, market share, innovativeness, product development, consumer rating or any other aspect which is the company`s core marker of success (Grusenmeyer, 2010).
A vision is normally expressed through a company`s vision statement. The statement is crafted to be as brief as possible without compromising the key message it seeks to deliver. A vision statement should also be so written as to inspire the reader, as well as to raise interest in the mind of whoever reads it. In so being, the vision serves the purpose of drawing observers closer to the company, and of making them want to be associated with it, grow with it, invest in it. A vision is long term, and helps create a mental image of the future of any business, company or any other entity (Grusenmeyer, 2010).
A company`s mission is an arrangement of all immediate actions executable with the aim of realizing the company`s visions. Therefore, the missions are an immediate fulfillment of detached aspects of the company`s vision. The underlying purpose of a company or organization is therefore its mission. It lays out a path towards the vision. A mission statement will therefore focus inward, while visions point outwards from the business entities` perspective. A vision will tend to address the outside audience, but a mission is mainly intended for the business`s stakeholders such as owners, customers, leadership team among similarly place individuals. A mission statement is easy to change with changing business environments however, it should always retain the intended core purpose of the company or business (Haines, 2004). The mission should not be ambiguous, and should focus on a positive future for the business through a carefully worded arrangement of ideas. The mission should state what the company does today, for whom it does it, and the ends to which it must continue doing this. For instance, a flight company might want to state why its daily operations add more value to its customers` lives than other similarly placed flight companies. In other worlds, why should a person taking a flight want to use company A and not company B or C, where all the companies are doing the same routes and charge similar amounts? Answering these questions should reveal the company`s mission statements, or guide their wording (Haines, 2004). A company or business without a concise mission statement is bound experience ambiguity in its operations, which may lead to retarded growth, or in the world cases, total collapse.
While it is arguable that most businesses operate with the aim of making a profit, the company`s values must not be target primarily at profit making. On the contrary, every company that will succeed in the long term must have values that deviate from profitability, and focus on enhancing the lives of their stakeholders. While profits may be good at one period, competition and other market forces will always tend to sway the customers away from a business, and therefore profitability alone should not be a marker of success for any business. On the contrary, good businesses will always plan ahead to make sure that their processes come with value addition for the customer. The sum total of all these factors will generate the company`s stated values (Erica, 2012). To this end, a company need ask itself what are its guiding principles when conducting business? For what will the company or business be remembered in the generations to come? Will people still want to be associated with it even when there is a paradigm shift in the societal structures in terms of norms, traditions, cultures, expectations and other changing elements of the globalized trends? Therefore, a company`s values will mostly be in line with the accepted values of the society in which it is doing business.
For instance, a fashion shop would be in order if its values were revolutionizing fashion for future generations (Grusenmeyer, 2010). Similarly, an investment company would in order if its values were enhancing investment growth within a time shorter than competitors, or making investments possible for everyone. In addition, every modern company that will attain a niche needs to concern itself with the surroundings. It needs to collect sufficient business intelligence to determine what the current concerns are in its society (Haines, 2004). For instance, green technology, combating global warming, reducing harm to the environment are some of the current concerns across all sectors of the global economy. A company`s values should therefore be tuned so as to accord it a leading position in line with meeting these concerns. As such, a company should include these factors in its core values.
This line of thought has popularly been included in a company`s corporate social responsibility policy. Corporate social responsibility is a company`s way of giving back to the society in terms of services, grants, sponsorships, user end initiatives and humanitarian programs aimed at making the society from which it draws its clientele a better, more satisfied society. A company`s values should change in line with the overall society`s values, because it is meting a society`s needs that bring forth the need for such a company (Lymbersky, 2008).
The strategy of a company is the overall process of harnessing its sum total resources, including ideas, manpower, capital, partnerships, assets and all other such fundamentals with the sole aim of realizing its objectives (Haines, 2004). The strategy will indicate, for instance, how capital will be injected into the business in order to allow the implementation of the underlying business ideas. A strategy will point out what business partners are suitable to use for which period of the business cycle in order to realize certain strategic objectives (Bradford, 2000). The main aim of proper strategies in to defeat competition and gain a larger market share, while still meeting the intended corporate social responsibility demands and enhancing good values. A business strategy should basically be modeled with the following dynamics what to do, what to use, when to do it, the reasons for doing it, what results to expect, when to evaluate feedback, how to interpret feedback, and how to handle the feedback obtained (Erica, 2012). All these concerns should be fine-tuned to help the business or company meet its objectives as set in its mission and vision statements.
A good strategy is guided by multiple other business procedures such as good book keeping, statements of accounts, profit and loss documents, proper and thorough market analysis, good strategic plan documents and other elements (Bradford, 2000). If a company lacks a strategy, or if the strategy it has is weak, then it may find it hard to survive in a competitive market. It may miss out on emerging opportunities to grow and expand, fail to realize emerging concerns in its market segment both within and without its operations, it may fail to map out developing threats to its success, and may even fail to meet the rules and regulations relevant for its operations. All the stated factors may lead to reduced productivity or even collapse of a business entity (Bradford, 2000).
Strengths, Weaknesses, Opportunities and Threats analysis (SWOT) is a proper modern tool for use for analyzing a business`s viability before commencing it, as well as periodically after starting it. It helps a business entity know where it is standing, how properly suited it is in its current position, what opportunities are available for uptake, and what threats it needs to combat in order to realize its prospects (Haines, 2004).. All modern businesses should periodically perform SWOT analyses as a necessity.
The strengths of a business are the very core considerations that were made in order for the business idea to be termed as worth. In other words, the strengths form the basic reasons why the inventors of the business thought the business was possible and profitable. The strengths of a business may include such factors as product uniqueness, high product or service demand in the market segment, lack of competition (though this in itself does not guarantee a strength but may do so in certain market settings of a high demand and low production combination, such as in the case of a pioneer product guarded by intellectual property rights), monopolistic and oligopolistic market settings may also present certain strengths for a limited time but these are not to be taken as genuine strategic strengths since they are not healthy for a perfect business environment, and do not as such, stand the test of changing times.
Other strengths may be inherent in the business. One such strength is the availability of a huge capital base, which may enable the business procure any such assets as are required to dispose of the business`s functions and processes. A huge asset base, properly applied, may present a certain competitive advantage for a business if its competitors do not have such facilities, especially where assets are a key factor in the business process. In addition, especially for big companies, a huge asset base is also a key factor because it enables the business to have a suitable leverage- or the ratio of a company`s own assets to its overall capital.
The advantage is that in the event of an economic downtime, such as a crisis, a company`s profitability may decline, and its debt obligations will rise in proportion with its leverage. When therefore a company owns the majority of its operating capital, its debt obligations are low and will therefore not be bankrupted by crises. Another inherent strength is the skills or knowhow that employees have. This becomes especially important if the nature of the business is specialized, such as the modern IT development companies requiring competent and innovative manpower. The lack of such skilled labor is equivalently disadvantageous, sometimes to the point of rendering the business impossible. Obviously, the presence of the requisite raw materials and other supporting infrastructure for the smooth running of a business is assumed as an inherent strength. But then it may not stand in relation to other similar businesses since it is assumed that they too have access to this infrastructure, or the market would be monopolistic or oligopolistic in nature.
The weakness in a business is all those factors that position it unsuitably in terms of competition, or sustainability, or compliance with regulations guiding such a business entity. Like the strengths, the weaknesses are also inherent or external, and the way to handle them defined by their nature. Inherent weaknesses are those relating to the business without considering the external environment. They include such weaknesses as lack of capital, unfavorable leverage, lack of manpower or skilled labor, mismanagement of assets, poor book keeping, poor business intelligence gathering, low employee morale, lack of visionary leadership and management among others (Erica,2012). All these factors tend to destroy a business from within. Luckily, most inherent weaknesses are containable just by sheer will, and are within the reach of most businesses.
External weaknesses incident on a business are those weaknesses which emerge when the business is compared to others of a similar nature, or when regulations are instituted which position the business unfavorably in its market segment. For instance, any modern business involved in manufacturing where environmental issues are raised must meet the regulations governing pollution control, and any entity unable to upgrade its operations to so conform maybe considered weak in this regard. A good business is one that is able to detect upcoming weaknesses in its structure, operations and with regard to legal issues, and acts accordingly to amend the weaknesses. Where capital deficiency presents the challenge, a good business should seek solutions to find capital through, for instance, bank financing, merging, acquisitions and other means. Alternatively, the business should seek to change its operations to adopt less capital incentive procedures which could procure the same benefits.
Opportunities mean all changes in a business environment which if properly utilized could lead to growth in whichever aspect the business perceives it be it in productivity, profitability, market share among others. A business should always seek to discover new opportunities, and should continually lay out plans to invest in such opportunities. Normally, business-worth opportunities are not easily discovered, and rely principally on sound business intelligence gathering, as well as a dedicated framework of operational changes which ensure that the business adapts to these changes in a timely manner.
Opportunities are mainly external, and occur outside the business in the larger market environment (Erica, 2012). Opportunities when properly utilized can help a business entity beat competition, or otherwise attain a competitive edge with respect to its competitors. Information gathering should be made a continuous process by any company, and sufficient resources should be set aside for use in emergency cases, similar to contingency funds, for use in adapting new opportunities. Some of the opportunities include the presence of a good business environment in which the services or goods that the business deals in are available, and there is hope for a continued presence. Another opportunity can be in the form of emerging external markets in which the company may invest its resources and capital.
Threats are the occurrences in the business environment which, if not carefully handled, may adversely affect the business`s productivity, profitability, growth or any other marker of success. Threats, like the other elements in SWOT analysis, maybe internal or external, and internal threats are threats that arise due to improper management, poor employer- employee relationship, poor book- keeping, and de-motivated workers among other internal issues. These issues must be detected and handled in a conclusive sustainable manner in order to ensure that the internal environment is supportive in the business`s efforts to remain productivity. External threats are those threats found outside the business entity and which the business may not have direct control over. Such threats may involve environmental challenges, government regulations, emerging competition, emerging or changing trends and consumer preferences among others.
The manner in which a business handles these threats depends on the nature of the threat, but the baseline is that every business must ensure it maintains a threat detection information system which is proactive in order to enable sufficient time to respond to the threat. A good business should look into diversification as a means to handle changing trends in the market, as well as due to competition. Other means of handling competition include better customer services, after sale services, alternative solutions among others. Globalization is emerging as a threat as well as an opportunity in the modern business setting. The formation of a global culture is making obsolete current methods, forcing companies that are rigid to experience a reduction in productivity. Globalization should necessarily encourage businesses to take up new methods of operation in order to suit consumer demands. For new businesses, this is not a major challenge. For older companies, however, it is a significant threat for those firms unwilling to change their operational processes. It is important in a company`s operational plan that it defines how it intends to handle threats in its operations.
This refers to the methods applied by a business in order to analyze its business environment and identify its current situation in terms of strengths, weaknesses and future prospects (Emmons, 1996). The SWOT analysis as well as Porter`s Five Forces analysis is applicable for this purpose. A situational analysis is one of the elements of a good market plan. It is only after a solid situational analysis has been done that the other subsequent elements of a market plan are implemented. The other elements include the goals, objectives and targets (Lymbersky, 2008).
Goals, Objectives and Targets
A goal is basically the result desired by a person or business in the business process. A good business should set parameters for the desired results, including the duration of implementation, the quantitative nature of results, and the response to be adopted basing on the output. Goals can be long term or short term, depending on a business`s scope (Haines, 2004). Where more than one goal is in sight, a process of goal sequencing is applied. Sequencing helps to arrange goals in terms of urgency, practicality and time frame, so that a smooth realization of the overall business goals, objectives and targets are met. Goal hierarchy is an arrangement of goals basing on which ones can lie within other goals, while congruency handles goals which are essentially similar and which may therefore be handled simultaneously (Haines, 2004).
In business, education is as key a factor as capital, assets or regulations. Without proper guidance, persons conducting business may make decisions which may lead to serious losses. Education ranges from a simple basic understanding to dedicated experts in the subject matter (Karniel, 2011). In strategic planning, it is important to know the nature of skill and knowhow needed, and to arrange for the provision of such (Karniel & Reich, 2011).
Basic understanding Requirements
This applies where only a minimal understanding of the business requirements is needed in order for the employee or proprietor of the business to successfully operate the business. Employees in a general retail business, for instance, may need little more than a basic understanding of retail business. An employee in a software development company, however, may need to be a skilled expert in IT and programming in order to operate properly (Karniel & Reich, 2011).
Subject Matter Experts
Dedicated businesses may sometimes require experts in order to remain competitive. In their operational plans, therefore, such businesses may need to differentiate the level of skill needed in different levels of their business operations, and arrange accordingly (Kahn, 2006).
How these Elements and Dimensions are Integrated by Local Industries
The sections above have indicated that business success requires planning. There are various considerations that are necessary, including people, capital, planning, government policies, external and internal environments, competition, threats and opportunities (Kahn, 2006). A good operational plan enables a company to interlink these factors, and integrate them in a way that allows it to attain wholistic growth and development, ensuring profitability and expansion. To achieve this, the above mentioned factors can successfully be dealt with along three dimensions namely: market, operational and finance.
Developing Market Strategies
The market plan helps a business entity in its market approach. The market strategy guides a business on how to penetrate a market, or retain its market share, or expand its territory. Depending on the level of advancement of a business, different strategies are applicable. Newer businesses need to penetrate emerging or existing markets. To do this, they may need to create customer awareness through such activities as sponsorships, free samples, road campaigns, community services among others. Existing businesses need to retain market share through promotions, offers, community services, sponsorships, among other activities (Kahn, 2006). All businesses regardless of age or scope need to continually advertise their products or services. Other market strategies include organic growth, partnerships, mergers, acquisitions among others depending on the nature of market, age of business and nature of competition.
These strategies govern how the businesses carry out their operations. These strategies help guide the people factor. It involves such variables as employer- employee relationship, routines and procedures, employee management, record keeping, business information gathering among other operational dynamics. All these factors should be harnessed with an aim of promoting the business situation and improve its overall standing. The operational strategy of a business is the engine that drives every other aspect of the business, for without people, no business will be (Kahn, 2006).
Every business needs financing, and every entity must manage its finances efficiently so as to progress in its operations. The first strategy is how to acquire finance, and maybe through several different means (Mittra &Robert, 2007). This includes savings, credit facilities, dividends and profits, formation of partnerships among others. The key factor in financial strategy is that every business must achieve sufficient capital to break even in terms of economies of scale, while at the same time retaining its debt ratio favorable to avoid solvency in case of asset depreciation. In addition, every business must have in place proper methods to manage its finances, ensuring accountability and proper records for all transactions (Khanna &Palepu, 2010).
Once the goals have been set and the requisite processes instituted to that end, it is necessary that a business entity periodically reviews its goal realization levels. This helps the entity to determine whether the set goals are practical and constructive, and to also determine what routine procedures it should change, improve or replace in order to realize the set objectives (Williams, 2006). The underlying factor is that each marker of success should be measurable within a stipulated, meaningful term so as to guide the business in its future activities. Goal review should be incorporated in every business`s operational plan as a necessary item.
Ambiguity is a leading reason why businesses fail. Where there is no specific definition of duty, no duty is anyone`s responsibility, and therefore no one is accountable for any losses resulting from bad business practice. It is vital that every stakeholder in a business setting have clear mandates, so as to ensure personalized response and accountability for every action or omission (Anderson & Anderson, 2001). However, while it is important that every individual have specific responsibilities, it is also important that there be teamwork. This teamwork arrangement is such that everyone is responsible for their actions and the actions of team mates. Such a close arrangement also depends on good operational strategies.
How do both of the above items compare between Small Business and Large Corporations?
Different classifications exist for small businesses. However, they all use similar market and operational strategies.
Sub-stages of Development
A small business has the following sub-stage development phases existence, survival, success, takeoff and resource maturity. These steps are in their early stages, and only appear to mature during the take-off stage during which the business is established (Tracy, 2000).
Assigning of roles and goal review are interconnected in the sense that every individual has individual goals, while the business entity as a whole has goals and targets. In smaller businesses, the two parameters are coincidental, because the overall business mandate is entrusted to a few people, and therefore becomes their personal responsibility (Bulla, 1994). Their individual goals are also the firm`s goals. Larger entities however show more specialization, and different departments emerge. Such separate divisions are evaluated differently in the year end (Robbins, 2004).
Pitfalls in financial Statements Assessments
The major problems in reviewing financial statements are that, the people mandated with their preparation may not know what information is needed by auditors in their statements, and may therefore skip important data in the financial reports. It is important that the internal team responsible for financial documents preparation take in consideration the necessary information in all financial statements.
Driver based Data Planning
Driver Based Planning is modeled around the factors that really drive a business as revealed by numbers. For instance, sales software might filter the correlation indices between employee motivation and sales volumes in a company (Khana, 2010). The company therefore relies on this data to come up with a driver parameter- either sales or customer motivation depending on what study the company is conducting. In modern corporate America, traditional strategies are being complemented using driver based planning as a means to gather required information and implement strategies. A company starts by defining its operational drivers and proceeds to model its operations around these drivers to realize growth.
Bottom-up operational Planning
This type of planning is most suitable for businesses with variable outputs that cannot be quantized using a single top- down thread. Given the constantly variable global business environment, it is therefore more appropriate that a good operational plan utilizes the bottom up approach so as to estimate the overall productivity using a wider, more dynamic range of values. In workforce, bottom-up planning focuses on the bottom employees, as opposed to top level management, in building a business model. This approach is important in the current market setting given the changing global trends.
Scope of Operations as well as Access to Resources
The scope of operations of a business entity is guided by various factors including the nature of the business, its market size, its capital range, its geographical range and government regulations. A good operational plan should take into consideration this factor before allocating resources to the operations. Therefore, businesses will develop different operational plan approaches in line to any or a combination of the factors above (Mejia et.al 2008). Access to resources also guides an operational plan in the sense that planners will only allocate the available resources to the business operation, which in turn guides the type and extent of plans that can be adapted.
Strategic Managerial Methods
These are methods which a company adopts in order to respond to the external business environment. It is mainly a responsibility of top level management to formulate clear and practical strategic managerial methods. Different methods can be adopted, but the baseline is that it helps a business achieve its stated objectives within the required time. Some of the methods include PEST, PESTLE, the balanced scorecard as well as the Porter`s Five Force Analysis (Lawrence, 2010).
Structural Impediment Initiative
Originally used in Japan in 1986 where the market was forced to target on the domestic market for growth, the term later was used across the globe and in business terms to mean scenarios in which trade barriers between entities had been removed. The initiative is designed to improve trade relations between two sides through a barrier reduction initiative (Chan, 2005).
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