Chapter 8 Answers Project Management The Managerial Process 5th Edition 58
Honorato Winkel
Strategic planning evolved from the process of annual budget planning in the 1950s. In the 1960s, fast-growing demand caused companies to extend their planning horizon beyond an annual basis, making long-range planning necessary. For example, when Rich[1] wrote his textbook on forest products marketing, he referred to long range planning and business strategy. In long range planning, the future is predicted through extrapolation of historical growth.[2]
Scion (formerly Forest Research) in New Zealand has used scenario planning in several projects to help its wood industry envision potential futures of housing in the region. One project created three visions for the future urban built environment in Australasia. The project team used existing literature, personal interviews, and group interviews to gather information about the social, economic, environmental, and technological aspects of society. With this information the team created and described three different scenarios of the future: Pining Away, The Industrial Revolution, and The Renaissance. Each scenario is described through the story of an older woman who was a city planner, her husband who was a master carpenter, and her son, a chemical engineer. Using these characters, each scenario is described via a short story of the situation with the family in about the year 2015. The team suggests that the scenarios are not exactly predictions of the future, but should be used as a set when making strategic decisions. In other words, the scenarios are a way of taking complex, and extensive information and combining it in a way that can be digested by strategic planners and effectively utilized in planning processes. An example of one scenario, in its original text, is provided below.
chapter 8 answers project management the managerial process 5th edition 58
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Jessie stepped out of her apartment building and smiled up at the sun. Taking a deep breath, she smelled the cool air that always resulted from a brisk southerly storm. She enjoyed these refreshing interludes in the increasingly warm and muggy weather. Feeling a rare wave of youthful energy, she headed off to the local shops with a spring in her shuffle.
Taking a short detour through the new sculpture garden, Jessie sat for a while on a park bench and marveled at the transformation. She remembered when this area had been a car park; now it was a pleasant oasis among a cluster of townhouses. Jessie had seen a major turning point in industrial history during her lifetime, and as a town planner she had helped to shape many of the changes. At the turn of the twenty-first century, she and her colleagues had expected consumers to follow green market trends, but nothing had prepared them for the rate at which public consciousness had changed.
In the past, consumers always had a remarkable ability to disregard most environmental problems. When Jessie was young, she remembered, there was concern about pollution, climate change, and resource depletion, but efforts to address these problems never seemed to get anywhere. Finally, a chain of events shifted public opinion to a critical mass and Government intervention was demanded. Hydro lakes slowly became depleted through drought, natural gas fields diminished, and oil prices fluctuated wildly due to supply difficulties. Climatic disasters became common and a crippling cyclone caused widespread blackouts to the city along with major disruptions to transportation. Graced with a mandate for radical change, Smart Growth planners such as Jessie seized the opportunity to rebuild a different type of community.
The increased cost of transportation meant the price of imported consumer goods went up, so there was an upsurge in local processing. Manufacturers close to the market could suddenly compete with goods produced by large international producers, and this fostered the development of local businesses around a strong green economy. Within a relatively short time, certification and green branding had become compulsory, sustainable production was strictly enforced, and socially responsible businesses prospered.
As she stared across at a beautiful wooden sculpture, Jessie reflected on how the new society was built on a strong sense of tradition and creative expression. When it came to the crunch, people had turned to their roots for the answers and the economy found its strength in the land. The value of producing food and fibre in a world of increasingly scarce resources had been realised and primary producers capitalised on their comparative advantage by building a strong knowledge economy around agriculture and forestry.
Diminishing landfill space also prompted more use of wood and other organic materials as local bodies pushed for zero-waste. Laws had made the cost of demolition almost prohibitive and so building systems evolved around durable low-maintenance exteriors and easily modified interiors to suit individual tastes. Jim had also been heavily involved in the refurbishment of existing housing stock to meet new energy codes. Jessie smiled to herself as she recalled how former State-housing tracts had become trendy suburbs. Their construction from native timber, combined with clever refitting, had made them desirable to an extent that would never have been believed 50 years ago.
Still, changes like these had been par for the course. Looking back, it amazed Jessie how well people had adapted when circumstances dictated it. A bird caught her eye as it flitted around the sculptures and she smiled when she noticed a nest tucked among the artistic curves. Humans may have been slow to learn the art of compromise, but they were getting there. How could they not, when nature provided such good role- models?[7]
It is important to note that individual companies also evolve through the stages listed above. As a first step, companies develop budget plans on an annual basis. As they gain experience in the marketplace, they begin to forecast beyond an annual basis and move toward long range planning. As the expertise of company personnel grows, the tools for true strategic planning and strategic management are developed.
A major difficulty in implementing marketing strategies is that the current definitions are exceedingly vague and provide no guidance for the strategic planning process or the decisions that must be made. Our approach is to view strategy in the context of the decisions a manager must make as well as the information needed to make those decisions. In this way, we begin to illustrate the practical steps that occur in a successful strategic planning process. In this text we emphasize the principle that the strategy concept must tell what should be done when making plans and decisions concerning strategies.
When viewing strategy from outside the company, the distinction between these two concepts is not so critical. Even if strategies have not been developed through a logical process as described in the rational school, they can nevertheless be seen in the activities of a company. In other words, even if strategies have not been defined, company activities and their results can be used to characterize strategies.
Although there are differences in definitions for strategic planning and strategy, some general features of strategy can be outlined. There are many classifications or definitions of strategy. For example, Niemel[15] identified the following approaches to strategy:
The idea of strategy as a framework can be seen in Figure 4-1, where it is referred to as a tool of management. The functioning of a company is based on its business idea (mission), and is aimed towards specific goals within a framework formed by strategy. Strategies are defined by top management and are based on analysis of internal and external conditions.
Strategy can be described as laying the groundwork of general principles through which the company tries to secure its competitive advantage, customers, and fully utilize its resources.[17] This demonstrates three cornerstones of strategic thinking: customer attraction, competitor consideration, and company resources development. However, when using a framework concept of strategy, the actual contents of the strategy often remain undefined. The definitions describing strategy as a framework or atmosphere are not operational. Making inferences and decisions concerning strategies require strategy concepts with clear ways of measuring them.
According to Thorelli and Becker[21], goals give direction for setting strategies. The results of everyday activities are the measures of the effectiveness of those strategies. If the results are unsatisfactory, the strategy is not functioning correctly as an adjuster between the company and its environment, indicating that the strategy must be further developed. Although the authors define strategy as an instrument in the adjustment process, they do not define strategy thoroughly. Strategy is said to be the approach or position that a company takes in order to succeed in its actions. Again, this definition is somewhat insufficient because it is not operational, it does not specify what must be done when making plans and decisions concerning strategies.
Practical examples of these strategies are provided in Example 4-2. Typically, companies follow several at the same time. In fact, pursuing market penetration, market development, and product development at the same time is a sign of a progressive, well-run company.[23]
Precise and operational definitions of strategy were emphasized by Ansoff[26] when he defined it as a move or series of moves that a company makes. Thorelli and Becker[27] refer to the same idea when stating that the best strategies are those that are based on the use of relative advantage and aim at satisfying precisely defined customer needs. Efforts to precisely define strategy led to consideration of the components which constitute strategy. These components should be well-defined and measurable, as discussed in the next section.
Ansoff[28] provided a starting point for the analysis and development of strategy components and strategic decisions. In his opinion, the traditional definitions of the common thread of the company based on mission and the business concept of the firm are too loose and vague. As a replacement, he developed a strategy system composed of the following four components:
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