Organizations normally face both systematic and non-systematic changes in their operations. These changes emanate from within the organization and from its external environment. In order to survive, especially in volatile markets and industries, companies require effective planning to serve as both strategy to mitigate changes occurring in its external environment and a cushioning effect against internal dynamics.
This essay focuses on the role of effective planning in management of changes in an organization’s external environment in the 21st century. It begins with the basics of planning and management then turns to critical discussion of the claims that “effective planning can ensure that organisations can effectively manage the types of changes that occur in the external environment in the 21st Century such as the Global Financial Crisis (GFC)”.
Planning is the function of identifying an organization’s objectives and designing a mechanism with which they can be achieved. It involves organizing a company’s resources, both human and machinery, in alignment with the long and short term goals of the organisation. In the process of planning, various issues arise. For example, a company may realize its limitation in meeting certain objectives due to its inadequate resources.
On the other hand, the company is also in a position to learn its strengths in certain other areas. The main purpose of planning is to ensure proper allocation of the resources an organization has at its disposal over a certain period of time. There are various methods of planning based on the approach of an organization to its target market. Some methods of planning include, spatial planning, SWOT analysis planning and Distribution Resource planning. For planning to be effective, it must be comprehensive to cover a wide range of the organizations goals in different perspectives (Thierauf, 2001)
Effective organizational planning
Effective organizational planning encompasses all strategies used by an organization toward its short term and long term financial and utility targets. It takes into consideration foreseeable changes in its environment regarding its position in the industry. Effective organizational planning uses the best planning method with emphasis on the organization’s competencies and capacity advantage. In so far as the organization is concern, it plays very limited role to contribute such changes that are usually outside its control. However, they do have adverse effects to the company’s operations and may impact greatly on its revenue and optimal returns.
This discussion uses SWOT analysis, spatial planning and Distribution Resource planning methods to intensify the organizations effectiveness in coping with changes in its external environment. The weaknesses of each method are found in the degree to which it is applicable in taking up speculative models of planning in the organization (Phil & Randall, 2003).
Changes in the external environment
In this discussion, changes in an organization’s external environment are viewed according to the triggering factors. In essence, we derive from the basis that external changes in an organization’s environment consisting of its market and sources of inputs are motivated by factors outside the organization’s set up. They occur where the organization’s influence may not reach. Otherwise, if the organization has a role in changes outside its external environment then role may be very minimal that it does not count on the entire effect.
The driving factors include are economic and financial changes, political changes which affect the organization through policies and certain new laws, changes in the organization’s physical environment and changes in technology. Similarly, changes in human capital also contribute to the external changes in the organization’s environment (Abrahams, 2003).
These changes are normally reflected in fluctuating prices of raw materials, changes in prices of rival products and various other costs of advertising and insurance premiums and market demand. Every other change that affects consumers’ spending on the organization’s services also falls under the external environment.
Changes in regional polices governing the operations of the organization may also have adverse effects on the organization. In the physical environment, prolonged changes in weather patterns such as long rains and dry seasons also contribute to external changes in an organization’s environment. Changes in technology are also attributed to the dynamics in an organization’s external environment (Erlandson, Stark, & Ward, 1996).
Depending on the nature and the degree of an external change, the organization may respond in either of the following manner; Quantum change, organization-wide and subsystem change, remedial and developmental change. In order to address the changes occurring in an organization’s external environment, an organizations effective planning may call for transformational and incremental change (Grant, 1991).
Effective planning and changes in external environment
For purposes of effective management of changes in an organization’s external environment, managers develop a strong association between effective planning and both the expected and unexpected changes in the organization’s external environment. Most organizations operate in highly volatile and dynamic markets that effective planning may be the only way to counter major changes in their fields. Therefore, using SWOT analysis planning method for example, the business can use its existing data consisting of output, turnover and revenues of previous financial periods to establish its targets but getting beyond this point to establish a strategy in its plan that focuses on mergers and takeover in case of rival product completion (Timmons, Zacharakis, & Stephen , 2004)
SWOT is the acronym for Strengths, Weakness, Opportunities and Challenges. In organizational set up, the organization may just be one of the very may other similar businesses in the industry. In which case, the industry forms a part of the business’ external environment. All the businesses in the industry may be involved in production of similar products targeting almost the same market. Thus, the product is called a rival product. In this kind of scenario, a combination of economic forces and technology may trigger changes in the external environment thereby precipitating competitive forces al of which may be over whelming to an organization without “effective planning” (Karyn, 2002).
In this respect, effective planning implies using SWOT’s method, defines all the acronym parameters that reaffirms the position of the company in its market and non-market environment. Strengths of the company should be reflected in its present and dynamic capacity to operate in the environment. Besides, the effective planning process allows for changes in the business external environment by keeping a reserve of its stock (resources and products) to act as a buffer in cases of emergency. For example, in the event of financial crises, the company identifies its Opportunities in advance so that it may take over other companies which are unable to survive the new market changes(Stone, Klein, & Leban, 2005)..
Similarly, an intensified SWOT analysis method of effective business planning, show that it helps in identifying the Weaknesses of a company in its environment. Therefore, in the planning processes, the company is justified in its decisions to formulate strategies that will ensure it evades or avoids pitfalls because of its looming limitations. For example, a company that operates with few sales persons while it deals in products that are fast moving in its environment may need to hire more progressively into the future in forecasting for changes driven by heightened completion.
In the 21st century, the scientific disciplines of actuary have experienced tremendous growths and significant improvement that the effective planning of an organization may easily respond to changes in its external environment by analysing its present Threats. Proponents of this theory also claim that the present threats of an organization in its environment may be indications of its future strengths if they countered through adoption new technologies and revised operating policies.
Today, globalization is one of the main motivating factors to changes in most companies’ external environment. According to effective planning method that uses Distribution Resource planning approach, it is evident that companies which employed resource distribution strategies such as multinationals and transnational companies featuring, Coca-Cola, Woolworths, NIKE, Mark & Spenser and Barclays among other leading businesses survived the global financial crisis.
Every method of effective planning has its strengths and weaknesses and distribution planning is never an option. In as much as it scores all the credits of diversified risks and expansive market, it is limited to a narrowed range of changes in the external environment. For example, in the companies that deals with tangible products, this method of effective planning focuses on Quantum change, remedial and developmental changes.
Quantum change involves the alterations of the entire organization’s structure and even culture. In this case, effective planning gears the business for large branches called subsidiaries; the branches then operate like teams. Consequently, when the drive of human capital and political-legal forces stir up changes in the business external environment, affected organization may respond by ensuring a pre-planned Quantum and Organization wide changes are ready in their effective/comprehensive plan to address the occurrences (Abrahams, 2003).
Spatial planning method is yet another effective approach to organizational planning if used intensively and extensively in an organization. It involves the distribution of people and resources over the area where the business has operation. As in effective plan, the business owners must decide to put it into practice immediately after proposing it in the organization’s plan. Other wise it seizes to be effective in mitigating against risks in the external environment. Just like in the last century, this theory of organizational planning becomes effective in this day when combined with planned changes within the organization to counter certain specific changes in the external environment (Erlandson, Stark, & Ward, 1996).
In this case the changes can be identified as triggered by changes in human capital; at one point abundance of labour may deceive managers that input capital is not a major issue. At another time, shortage of labour may hit a particular industry (environment) due to changes in the nation’s demographic structure. The theory postulates that a business organization that notices shortage of its specialised labour in may resort to training of new staff to take over when majority of workers fall into pension and retirement but the market cannot offer it such labour force. The effectiveness of the plan in this respect lies in the strategy of training in advance before shortage hits market (Stone, Klein, & Leban, 2005)..
The comprehensiveness and adequacy of effective organizational planning demands that it creates projections, comprising of propositions based on prevailing trends in its market and particularly in its industry, which enables it to cater for changes in its external environment. Since most of the changes in the external environment are unpredictable or unsystematic, organizations which carry out market research and constantly rely on feedback from customers often succeed in managing various kinds of changes occurring in its external environment.
Such claims have been put forward by theorists of central planning method for organizational management. Centralized method is a strategic plan that emphasizes the importance of a specific organ of the business unit as the controlling centre of the enterprise which may be made up of several branches or chains. In the face of effective planning with potent in countering changes in an organization’s external environment, the method is suitable in addressing changes triggered by competitive forces and political-legal forces. The centralized office constantly monitors the changes in the market and is able to enter in the organization’s plan key strategies, affront of the expected changes prevailing in its environment.
Each time changes of some sort occur in an organization’s external environment, it is followed by a responsive change from within the organization. This may function as a simple rule because in most organizations, the comprehensiveness of the company’s “effective planning” lacks the forecasting skills to put up with unpredictable changes outside its legal operational area. However, rapid developments of in technology now pose a challenge to business to adopt a highly effective planning method as a basis for its long term operation in any environment of the establishment. For example, in the service industry (environment), Businesses that are not well adapted to changes in technology have often found themselves out of balance at the onset of new methods of service delivery. In this case, changes in technology causes shift in consumer demand and due to rationalized preferences in the business’ environment. Ultimately, organizational effective planning becomes as operating the business itself in this day and age.
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