Strategy is defined as the determination of the basic long term objectives of an enterprise and the adoption of courses of action and allocation of resources necessary to achieve these goals.
Today most business enterprise engages in strategic planning, although the degree of sophistication and formality vary considerably. Conceptually, strategic planning is deceptively simple; analyze the current and expected future situation, determine the direction of the firm, and develop means for achieving the missions.
Planning is done in an environment of uncertainty. No one can be sure what the external as well as the internal environment will be in the next week, much less several years from now. Therefore people make assumption, or forecast about the anticipated environment. Some of the forecast become assumptions for other plans. For example the gross national product forecast becomes the assumption for sales planning, which in turns becomes the basis for production planning, and so on.
To be effective strategies and policies must be put into practice by means of plans, increase in detail until they get down to the nuts and bolts of the operations. Tactics then, are the actions plans through which strategies are executed. Strategies must be supported by effective tactics.
A strategic planning process consists of:
· Inputs to the organization
· Industry analysis
· Enterprise Profile
· Orientation, values and Vision of Executives
· Mission (purpose), Major Objectives and Strategic Intent
· Present and Future External Environment
· Internal Environment
· Development of Alternative Strategies
· Execution and Choice of strategies
· Consistency Testing and Contingency Planning
Off all the above mentioned process "Consistency Testing and Contingency Planning" is given utmost importance since future cannot be predicted with a high degree of certainty, thus contingency plans needs to be prepared.
A strategy may be prepared with the assumption that gross national product may increase three per cent annually over the next three years. A contingency plan may be prepared in which the scenario includes a major recession. This ensures that the manager is having an alternative course of action if the plan is hit by recession. Thus it is important to have a contingency strategy in place while planning strategy