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A Small firm’s use of formal strategic planning
Liberty Industries, a firm founded in 1984 specialized in wooden
packaging products, such as pallets, and was a tiny three person organization
for nearly a decade. By 1987, however, the firm’s sales grew by a factor of 20,
approaching $20 million a year. The planning system that had always been
effective was no longer adequate to meet the challenges facing the
organization:
With the help of a consultant, the firm developed a nine step planning
process:
- define the organization’s purpose and reason for
being;
- monitor the environment in which the organization
operates;
- make a realistic assessment of strengths and
weaknesses;
- make assumptions about unpredictable future events;
- develop specific and measurable objectives in areas
contributing to the organization’s purpose;
- formulate strategies on how to use available
organizational resources in addressing environmental conditions and
meeting strategic objectives;
- develop long and short range plans to meet objectives;
- constantly appraise performance and evaluate gaps
between performance and objectives and purpose;
- Reevaluate purpose, environment, strengths, and
weaknesses before setting objectives for next year.
In identifying Liberty’s purpose,
managers developed a mission statement that included the following- Liberty is
in the business of marketing industrial packaging products and services
worldwide in order to realize a profit for the benefit of stockholders,
employees, customers, and suppliers. Any industry that transports and or
warehouses its products is a potential recipient of Liberty industries services.
With this short statement,
mangers identified the firm’s product / market domain and its obligations to
key stakeholders.
In their environmental analysis of opportunities and threats, the
managers identified the following key issues:
i. The annual growth in demand or wood pallets was
expected to be only 3% to 5% per
year;
ii. Plastic
packaging was expected to grow at a slightly higher rate than wood in the short
run and to represent substantially greater growth opportunities in the future;
Analysis of internal strengths
and weaknesses revealed that –
-The firm had a strong reputation
for providing quality products and services;
-new manufacturing capabilities
were opening up in the plastics market thanks to a joint venture with a leading
German Packaging firm;
-the existing in-house design and
engineering capabilities were inadequate to provide a continued high level of
service, given the company’s recent growth;
-operating efficiencies related
to weak information transfers between the corporate and regional offices were
limiting profits.
Based on this three part strategic
analysis, the firm formulated a strategy that included plans to complete product
/market research on plastic packaging and begin marketing and manufacturing programs,
further diversify out of wood packaging through additional joint ventures, hire
a new engineering coordinator, and computerize its facilities to improve
information flow. Although the planning process involved was simple, mangers
felt the firm was better positioned for the future than it had ever been.