Page 135 - DMGT514_MANAGEMENT_CONTROL_SYSTEMS

Management Control Systems

Notes shows how strategic planning process can help narrow the range of strategic options such
that intelligent resource allocation decisions can be made during the budgeting process.

Figure 6.1: A Company without a Strategic Planning Process

Strategic Option A

Strategic Option B
Budgeting
Strategic Option C
Strategic Option D

Figure 6.2: A Company with a Strategic Planning Process

Strategic option A Strategic option A
Strategic option B Strategic
Planning
Strategic option C Budgeting
Strategic option D Strategic option C

2. A management development tool: Formal strategic planning is an excellent management
education and training tool. It provides the managers to think about strategies and their
implementations.
3. A mechanism to force managers to think long-term: Managers are more concerned about
managing the present, day-to-day problems than thinking about future plans. Formal
strategic planning forces managers to make time for important long-term issues.
4. Help in aligning managers with corporate strategies: The debates, discussions and
negotiations that take place during the planning process help clarify corporate strategies,
units and align managers with such strategies and show the implications of corporate
strategies for individual managers.
5. A framework for short run actions: The strategic plan shows the implications of
programming decisions for action plans in the short run. Programme decisions are made
one at a time and the strategic plan brings them altogether. Preparing the strategic plan
may reveal that individual decisions do not add up to a satisfactory whole. Planned new
investments may require more funds in certain years than the company can obtain in
those years, planned changes in the direct programs may require changes in the size of
support programmes (e.g. research and development, administrative) that were not taken
into account when these changes were considered separately.
Limitations

1. Strategic planning could end up becoming a form-filling, bureaucratic exercise devoid of
strategic planning: In order to avoid this situation, it is necessary for the organisation to
review periodically whether fresh ideas are coming as a result of strategic planning process.
2. Creation of large strategic planning department and delegating the preparation strategic
planning to the staff department: Strategic planning is a line management function and
the role of the staff in the strategic planning department should be kept to minimum and
their role should be of a catalyst, an educator and a facilitator of the planning process.

3. Strategic planning is time consuming and expensive: Lots of time is devoted by the senior
management and managers at other levels in the organisation. A form process is not
worthwhile, if the senior management does not desire, organisation small and relatively
stable, and in organizations where reliable estimates about the future cannot be made.

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