7.4: The Four Types of Managerial Planning

Management’s investment decisions and risk management strategies are informed by industry dynamics and the four stages of the industry life cycle (also referred to as the business cycle), which include expansion, peak, contraction, and trough (discussed in the chapter on economics).

An understanding of the industry life cycle can help companies manage their operational and financial decisions and activities so that they position themselves to achieve important goals, including product research and development, implementing innovative technology, expanding their customer base, and more. External factors that affect a business are often analyzed through a PEST analysis.

Strategic Planning

Strategic planning involves analyzing competitive opportunities and threats, as well as the strengths and weaknesses of the organization, and then determining how to position the organization to compete effectively in its environment. Strategic planning has a long time frame, often three years or more. It generally includes the entire organization and includes the formulation of objectives. Strategic planning is often based on the organization’s mission, which is its fundamental reason for existence. An organization’s top management is most often responsible for strategic planning. Strategic managers are often involved with developing and writing company mission, vision, and value statements.

Planning begins at the highest level of management and works its way down through the organization.

Step one is usually called strategic planning: the process of establishing an overall course of action. To begin this process, a manager/owner should ask a couple of very basic questions: why, for example, does the organization exist? What value does it create? Sam Walton posed these questions in the process of founding Walmart: his new chain of stores would exist to offer customers the lowest prices with the best possible service.

Once the purpose of the company has been identified, the manager is ready to take the remaining steps in the strategic-planning process:

1. Write a mission statement that tells customers, employees, and others why the organization exists. Review this BDC article, 5 Tips for Creating a Winning Mission Statement, for tips on writing a mission statement.
2. Identify core values or beliefs that will guide the behaviour of the members of the organization. Review this article, 4 Steps to Creating Your Company Core Values, for tips on creating company core values.
3. Assess the company’s strengths, weaknesses, opportunities, and threats. Performing a SWOT Analysis is a good start.  It is also important to conduct various business environment scans and analyze how these conditions will affect the business.
4. Establish goals and objectives, or performance targets, to direct all the activities that will be performed to achieve the mission. So, the next step in the strategic-planning process is establishing goals and objectives. Goals are major accomplishments that the company wants to achieve over a long period. SMART is an acronym used to guide and set goals: Specific, Measurable, Attainable, Relevant, and Time-Based. (Refer to Figure 7.3.) Review this article, SMART Goals: What They Are and How to Write Them, for tips on how to write SMART goals.
5. Develop and implement tactical and operational plans to achieve goals and objectives.

Tactical Planning

Tactical planning is intermediate-range (one to three years) planning that is designed to develop relatively concrete and specific means to implement the strategic plan. Middle-level managers often engage in tactical planning.

Operational Planning

Operational planning generally assumes the existence of organization-wide or sub-unit goals and objectives and specifies ways to achieve them. Operational planning is short-range (less than a year) planning that is designed to develop specific action steps that support the strategic and tactical plans. First-level managers engage in operational planning.

Contingency and Crisis Planning

Contingency and crisis planning are plans for what actions to take when things go wrong. Perhaps your plans were flawed, or maybe something in the environment shifted unexpectedly. Successful managers anticipate and plan for the unexpected. Dealing with uncertainty requires contingency planning and crisis management.

Media Attributions

“Figure 7.3: SMART Goals: specific, measurable, attainable, relevant, and time based” is adapted from Chapter 8: Management and Leadership in Fundamentals of Business: Canadian Edition, © Pamplin College of Business and Virgina Tech Libraries, licensed under CC BY-NC-SA.