STRATEGIC PLANNING IN INDIA
STRATEGIC PLANNING IN INDIA
*Shanmukha Rao. Padala **Dr. N. V.S. Suryanarayana
An Introduction:
Corporate planning had its genesis in India sometimes in the sixties when a number of subsidiaries of multinational companies introduced the process in compliance with their parent companies' directives. Since then quite a few companies have introduced formal planning for a variety of reasons. Some introduced it because their top managements felt that it would help them long term objectives; some introduced it because of a fad, not wanting to be behind by others, and some others because were directed to do so. Many public sector enterprises adopted corporate planning because they were to do so by the Bureau of public Enterprises, the governmental body that regulates all public enterprises. Despite the facts that are now quite a few firms which have introduced corporate planning, such firms still constitute a small minority.
On the academic side, research in India on strategic planning has not taken off. There are very few studies on corporate planning practices in India firms. Of late some leading Indian management education institutions have begun to offer short duration executives development programmes on corporate planning. A quick examination of the teaching materials used in these programmes clearly shows a predominance of materials originally developed in the United States. This is not surprising because strategic planning at the enterprise level had its genesis there. Strategic planning or corporate planning is a management process which enable a firm's management to explore the future impact of change and make current decisions to move towards the envisioned future. The Western economies, characterized by a rapid rate of change and fierce competition became an ideal home for the development of the concept of corporate planning. The Indian economy till recently provided protection to firms from change through a plethora of regulations which did not provide an impetus for the development of a planning orientation. However, this scenario is changing rapidly as a result of increasing liberalization effected by the Government in its policies towards industry. A number of industries are now characterized by a high degree of competition, e.g., textile, television, passenger car, two-wheeler, commercial vehicles, cable, paint etc. It is therefore very likely that strategic planning will be adopted by many firms in the near future.
The Indian Scenario:
Management education received a big boost in early 60s after the setting up of Indian Institute of Management (IIMs) and the Administrative Staff College of India. IIMs structured their curriculum along the followed in reputed American business schools. The case method of study (as followed in Harvard Business School) was an important pedagogical tool, employed in IIM, Ahmedabad all these years. But in India the Mater of Business Administration program is first introduced by the Andhra University. Successively several university departments, meanwhile, have started the Masters in Business Administration (MBA) programmes at various locations throughout the country. After the opening up of the Indian economy in early 90s, the All India Councial for Technical Education (AICTE) was set up to provide proper direction to the growth of management education. The Business Policy and strategic Management Course has gained wider acceptance as an integrative as an discipline in over 1500 management institutes that have come up in the recent past (1990-2003). A number of doctoral and post doctoral studies have also been undertaken with a view to enrich the knowledge in the area, especially with a clear focus on Indian companies. A professional association called Strategic Management Forum of India has also been formed in 1996- which is exclusively devoted to the development of issues relating to strategic management. A number of publications covering the concepts, techniques and case studies relating to business policy and strategic management have also gone up impressively, especially after 90s, such as Strategic Marketing, Business Standards strategist etc.
STRATEGIC PLANNING AT BHEL:
Bharat Heavy Electricals Limited (BHEL) is a highly diversified public sector. Undertaking operating in a number of business sectors: energy, industry, and transportation. Corporate planning at BHEL follows the general pattern in other public sectors enterprises in India. Public enterprises in the country have emerged as a part of the national planning exercises At the time of the inception of many of the Public Sector Enterprises (PSE 's),detailed feasibility reports with a long term orientation were prepared .However, there were no built in contingency plans for tackling uncertainties and discontinuities. When these Public Sectors Enterprises reached a stage when the original concepts forecasts were no longer applicable as a consequence of environmental changes, they faced enormous problems .Enterprises operating in high technology areas and which had a high investment found it extremely difficult to cope with changing environment .BHEL was no exception .However, it was able to overcome the problem by adopting comprehensive corporate planning .Planning had commenced at BHEL from the very beginning .Till 1969, planning was done with a short-term orientation .The real efforts in the direction of long-term planning were started during 1970-71. It was during this period that an Action Committee consisting of various PSE s including BHEL. The committee suggested a reorganization, including the merger of Heavy Electricals India Limited (HEIL) with BHEL An analysis of the corporation's strengths and weaknesses, and the opportunities and threats that were present in the external environment was undertaken and a detailed action plan was developed for achieving rated capacity .Beginning in 1973-74 efforts were made to built systems for comprehensive planning, programming and budgeting. A Corporate plan was developed and circulated among executives. Initially, revenue budgets for each division were prepared for two-years so as to achieve linkage between short-term and long-term plans. Frequent discussions were held, functional and cross-functional committees were appointed for achieving integration between head office and the divisions. The organization's structure was changed to transform the company from manufacturing orientation to an engineering orientation with an increased emphasis on marketing. A Corporate Planning and Development division was created at the corporate level with each division having its own planning and development cell.
The Corporate Planning and Development Division was placed under the charge of an Executive Director. The division was organized around the following groups: investment and facilities planning long range planning, operations planning, and optimization and modeling. The investment and facilities planning group was responsible for company-wide investment programmes.
Various activities included project formulation and appraisal, coordination of review committees, project monitoring and preparation of annual capital projects. The long-range planning group was responsible for environmental analysis, review and appraisal of long term plans, review of integrating devices, transfer of technology, collaboration, subject licensing and training. Operations planning included analysis of performance budgets, coordination of operations, monitoring, project management studies for industrial projects, production coordination and materials management. The optimization and modeling group was responsible for undertaking the development of various models using quantitative techniques and studies relating to optimal utilization and scheduling of machines and facilities, investment analysis and energy modeling.
The role of the Corporate Planning and Development Dision could be summarized thus:
i) Planning for modernization and expansion of manufacturing;
ii) Development of technology management capability in the context of rapid rate of technological obsolescence,
iii) Assisting in the development, review and evaluation of product plans,
iv) Synthesizing divisional plans and product plans into the sectoral plans and weaving them together as a corporate plan,
v) Introduction of contingency planning in all areas,
vi) Improving planning capability at the divisional level,
vii) Providing assistance in the preparation of functional plans, viz., engineering plans, technology plans, etc.
viii) Undertaking organizational studies,
ix) Strategic management development,
x) Monitoring of divisional performance,
xi) Enhancing information processing capability and analysis of environmental conditions.
The Corporate Planning and Development Division was responsible for directing and coordinating the total planning activity in the organization. But the basic inputs into the plan were generated by the activity in the organization. But the basic inputs into the plan were generated by the various units. Each division prepared its long term plans keeping in view its relevant environment. Each division also developed product plans, which included an analysis of technological gaps and action required for bridging the gaps. Based on these technology plans of the units, a corporate technology plan was prepared which provided direction for technology acquisition and/or development. Product plans and divisional plans were reviewed, evaluated coordinated and integrated into sectoral plans.
PLANNING APPROACHES AND CHARACTERISTICS:
The short description of the corporate planning process at BHEL provided some glimpses into its complexities. The experience of BHEL is not typical because organizations of the nature and experience of BHEL is not typical because organizations of the nature and complexity of BHEL are not too many in the country. Corporate planning systems vary from organization to organization depending on a variety of factors: environmental conditions, organizational size and complexity, age, top management values and styles, initial trigger for the commencement of planning, etc. Variations in the corporate planning systems across organizations may be found first the top doing corporate planning. These approaches may be any of the four types: top-down approach, bottom-up approach, hybrid between top-down and bottom-up approaches, team approach.
Top-down Approach: Firms adopting this approach plan at the top and the various departments are supposed to do what they are told to do by the top management.
Bottom-up Approach: In firms adopting this approach the top management asks the departments or divisions to submit their plains are then reviewed by the top management and accepted or sent back to the organizing departments or divisions for modification. The consolidated divisional plans in the case of a decentralized company may not add up to the management's targets. Additional plans are then required to be prepared which might necessitate planning for acquisitions or diversification into highly unrelated business areas.
Hybrid Approach: A combination of top-down and bottom-up approaches is the approach which is generally used in decentralized companies. In firms using this approach the top management provides certain guidelines to the divisions or strategic business units (SBU). The SBUs are distinct business with their own set of resources that can be managed in a manner reasonably independently of other business within a firm. The top management guidelines are sufficiently broad to permit flexibility to the SBUs in developing their plans. There is a vertical communication between the top management and the divisions or SBUs at different phases of the planning process. Broad objectives, policies and strategies may be arrived at through a dialogue and negotiation between the top management and the divisional or SBUs managers.
Team approach: In small centralized firms where lateral communication between the top managers is easier than in large decentralized firms, the chief executive may himself, in collaboration with the senior managers, prepare corporate plans. In some very large firms also this practice has been found to exist.
Differences, in the planning systems in organizations may be in term of the approaches adopted, as noted earlier, and also the dimensions given below:
Completeness of planning Cycle
Depth of Analysis
Degree of Formality
Use of staff and Corporate Planning Specialists
Linkage among Plans
Methods of introducing planning
Degree of documentation
Participation of people
Role of the CEO
SUMMARY:
Strategic planning involves an extended time-frame, the development of a large percentage of the resources of an organization, a wide spectrum of activities and a major eventual impact. By merging the two models of planning, long-range planning and environmental scanning to form an interrelated model- the Strategic Planning Model was formed. The Strategic Planning Model is a tool that helps an organization in setting up goals or objectives; the analysis of the environment and the resources of the organization; the generation of strategic options and their evaluation; and the planning, design and implementation of control systems or monitoring mechanisms. Three dimensional structure of organization requires strategic planning, operational planning and tactical planning at respective levels. Many organizations develop strategies at three different levels; corporate- level strategic planning, business- level strategic planning and functional- level strategic planning.
Several enterprises in India, both in the private and public sectors, have introduced strategic planning in their organizations. With increasing liberalization of government policies and consequently the enhancement role of competition, corporate planning in India is likely to pick up greater momentum in the future. BHEL is one of the earliest enterprises to adopt strategic planning. Engaged in diversified business sectors like energy, industry and transportation, the company, with the help of strategic planning, has been able to come to grips with problems of uncertainties created by changing technological and socio-economic environment. In the initial phases, strategic planning in BHEL had short-term orientation. However, in recent times this had changed into quite a long-term one. Besides, strategic plans are comprehensively prepared. The company views itself note merely a manufacturing company but an engineering company with emphasis on marketing. The corporate planning and development division, which is organized around various functions, is responsible for total corporate planning activity in the organization.
STRATEGIC PLANNING IN INDIA
By: P.S.Rao., NVS.Suryanarayana
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