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Currently, the numerous organizations pour huge sums of capitals into competitive market in order to get a larger market share and seek more financial profits. Some of them are success, while others are eliminated with a huge financial loss by the fierce competition. However, the main reason why those companies failed is nothing but not having an all-round strategic planning. This essay will discuss that a company with an all-round planning in terms of external and internal environment of the business will help businesses achieve company’s objectives and survive from the intensive competition of the capital market.
Planning for internal environment mainly based on company’s weakness and strength can increase the working efficiency and coordination for the purpose of reducing in the operation cost associated with production mistakes, while planning for the external in terms of company’s threats and opportunities can help the business effectively analyze local market and expand company in order to gain more financial benefits.
It is undeniable that a formal planning for a company makes contributions to achieving organization’s objective under the assumption of unchanged and predictable environment (Robbins et al. 2012 p.87). However, it is commonly believed that the capital market is changeable and unpredictable (Kumar 2011, p.18). As a result, a well-constructed plan might not be able to fit in every circumstance of business. Some negative discussions on a formal planning have been issued recently (Robbins 2012, p.
87). Firstly, a formal planning may create some rigidity to the working environment that makes management lack flexibility and selectivity, which leads managers to be simply tied on a specific course of action (Robbins 2012, p.87). Secondly, a formal planning may restrict staff’s creativity and intuition. As a company needs someone’s creativity and innovation to be improved, the result of formal planning may reduce the vision to an inflexible company routine, which will be a receipt of disaster (Robbins 2012, p.87).
Thirdly, planning may limit managers’ strategic vision. There is a tendency that a planning especially for the strategic performance of business only focuses on how to maximize organization financial benefits in the capital market. As a result, the managers may simply focus on the field the company currently has, rather than re-creation or reinvention in aims of company expansion in the future (Robbins 2012, p.87). Fourthly, a formal planning can enhance success that maybe a receipt of failure. According to Robins (2012, p.87), managers may follow some precedential business cases that succeed before. Thereby, it is hard and unwilling for them to discard the successful experience of precedents when make a plan for the company. However, this plan may keep managers from doing things in a new way that would be even more successful because successful experience cannot work in every company environment, especially in current uncertain and changeable capital market (Robbins 2012, p.87). However, for the business long-term success, the importance of strategic planning in terms of internal for a business is incredibly meaningful (Topfer 2011, para.1).
Firstly, an internally focused planning can provide an internal analysis of organization that considers internal weakness of company (Ingram 2014, para.3). Through an internal management planning, managers of a company can immediately identify the lack of company’s abilities and resources and then analyze the weaknesses may exist in the future development at the first beginning of a company’s operation, such as the staff skill limitation, the limitation of its product design or the shortage of technical and financial support (Flott 1997, pp.42-3). Thus, remedial measures, such as employing higher educated employees or improvement of manufactory equipment, can be timely acted. Consequently, financial loss or resources shortage can be effectively avoided during the operation (Flott 1997, p.43).
Secondly, an internally focused planning plays an effective role in helping managers identify company strengths as well (Robbins et al. 2012, p.90). Analyzing company strengths by finding out any unique resource or any performance the business does better than other companies, managers are able to discover some competitive advantages (Ingram 2012, para.5). For instance, the world largest mobile company, Apple, they know that they have abundant financial strengths, thus they fully take financial advantages by making considerable investment over $160 million annually in the area of innovation and design of products (Clark 2014, para.1). As a result, Apple attracts millions of loyal customers around the world and makes them willing to purchase the products constantly because of the highest quality and best performance of products (Clark 2014, para.2). Thirdly, internal planning helps managers do some internal adjustment for increasing working efficiency.
For instance, by thoroughly analyzing staff working capabilities in terms of education level, work experience and overall competence, managers can optimize the utilization of human resources. Effectively deploying different human resources into different working departments, where is suitable for each employee, can maximize their strengths in order to achieve higher work efficiency and coordination (Loton 2007, p.373). As a result, the errors of production and wastage that caused by staff’s working against during the operation can be substantially avoided and declined. In other words that the operation cost can be reduced and keep company moving effectively towards its objective (Robbins et al. 2012, p.86). Fourthly, it is also helpful for managers to determine whether the operation of organization is on the right track and check how far they have drifted away from the original objective by an internal planning (Topfer 2011, para.4). Internal planning is a reference point that can allow managers to return to any point of operation once the mistakes happened (Topfer 2011, para.3). The functions of a strategic planning which externally focused are critical for company’s success as well.
An external planning can provide an analysis that examines the threats and opportunities of company that independently exists in the external environment (Olsen 2010, para.10). According to Olsen (2010, para.10), the threats are obstacles that prevent organization from achieving its objectives and have negative effects on future development in terms of external; while the opportunities refer to a positive condition in the external environment that will produce constructive contributions on organization’s success. Through analyzing company’s threats when makes an externally focused plan, managers are able to clearly identify, for instance, what the supply and cost of labor is in the location where operates and whether the labor cost will significantly affect the profit of products (Robbins et al. 2012, p.87). A remarkable example of this is Apple Company. Apple has currently occupied the market of mobile phone over 60%, so a large amount of labor force is required during the production (Worstall 2013, para.2).
In order to have a lower labor cost, the production planning center of Apple decided that settled the factories into Asian countries because Asia have a relatively lower labor cost and plenty of labor supply (Worstall 2013, para.1). A latest statistical data has been carried out that Apple has to pay more $4.2 billion to the production staff if Apple manufactures iPhone in the US rather than in Asia (Worstall 2013, para.1). So, it is obvious that a company analyzing its external condition when makes an external plan is crucial to its objectives in terms of financial benefits. Furthermore, having an external plan is helpful for managers to find out the company’s opportunities, such as a market gap that no organization is currently serving, a new field that can be stepped in for the purpose of exploring market to seek more financial return and developmental opportunities (Ingram 2012, paras 6-7). After analyze external environment of company, managers can timely know what products can affect market share and what changes are in consumers favor that may increase the sale of products (Ingram 2012, para.6).
As a result, effective adjustments in terms of improvement and innovation of products and can be carried out in order to remain company’s long-term competiveness in the market and meet the customers’ demand immediately (Ingram 2012, para.6). Hence, the sales of product can be increased and more financial profits can be brought out. In conclusion, although having a formal planning may bring some negative effects on company’s success, a well-constructed strategic plan in terms of internally focused and externally focused makes contribution to its financial profit and surviving from the market competition. To an internal plan, combining company’s industry status with its strength, it can help company enhance its market position and do some positive adjustment in order to get a higher working efficiency and coordination, while identifying company’s weakness, such as scarcity of resources, some remedial measures can be acted in advance in order to avoid financial loss in the further development.
To an external plan, analyzing company’s opportunities can help business explore new market in order to reach developmental potential. At the same time, an external plan can provide an external analysis that assist managers with identifying company’s threats, such as labor cost and supply. According to Apple’s example, choosing a most beneficial manufactory location not only can have a sufficient labor supply but also save plenty of labor cost. Overall, adhering a strategic plan both internally and externally for a company is constructive and meaningful in its long-term success.
Flott, LW 1997, ‘Quality Control: Corporate Planning’, Elsevier Science, July, pp.42-5. Ingram, D 2014, ‘Internal & External Strategic Plan
Development’, Chron, viewed 21 April 2014, . Kumar, B 2011, Capital Market, Anurag Jain, New Delhi, India. Loton, C 2007, ‘Using good business planning to ensure good governance’, Keep Good Companies, July, pp.372-5. Olsen, E 2010, ‘Internal & External Analysis’, OnStrategy, 5 April, viewed 1 May 2014, . Robbins, S, DeCenzo, D, Coulter, M & Woods, M 2012, Management: The Essentials, 1st edn, Pearson, Australia.
Topfer, S 2011, ‘The Importance of Business Planning’, NASDAQ, 25 February, viewed 20 April 2014, . Worstall, T 2013, ‘If Apple Brought iPhone Manufacturing To The US It Would Cost Them $4.2 billion’, Forbes, 25 September, viewed 2 May 2014, .
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