What is Global Strategic Planning?

Global strategic planning is a process adopted by multi national organizations in order to formulate an effective global strategy. GSP is a process of evaluating the internal and external environment by multinational organizations, through which they set their long-term and short-term goals and then they implement a specific plan of action in order to achieve those objectives.

GSP is different from normal domestic strategic planning, because, in this case, organizations consider internal as well as external environments. In fact, the external environment is more crucial to consider when you are operating at a global level because at a domestic level competition is very directional and optimized, but at international level the competition is crucially important to be considered; otherwise survival is not at all possible at global level.

The Ignorance
Global Strategic PlanningUsually organizations don’t bother to analyse external environments, but it is really detrimental for their healthy business operations. For example — Harley Davidson, an American automaker faced huge problems due to their ignorance. Actually, Harley ignored the importance of external environment in strategy formulation. Their strategy for sales in US and other leading markets of world was highly rigid and conservative; they ignored their competitors including the Japanese automobile companies. As a result, the Japanese created and provided better automobiles in the potential markets of Harley Davidson. Japanese automobiles were better in looks as well as performance, but Harley ignored the efforts of Japanese competitors; as a result, its market share started falling and the company incurred huge losses. Learning from the mistake, Harley also adopted the protocol of global strategic planning. Harley Davidson restructured its international strategy in the light of external environment provide by various international competitors, and, as a result, after some time, Harley Davidson started regaining its customers.

Strategy formulation
The GSP of a company depends upon the internationalization approach followed by the company itself i.e. an ethnocentric organization will always formulate their GSP as an extension strategy, on the other hand a polycentric organization will formulate a more complex GSP.

For strategic planning the first step is the evaluation of external and internal environment. For external environment evaluation, organizations scan the environment for the presence of various competitors. For an internal environment evaluation, organizations analyse their total physical resources and the skills of the employees working in the organization. MNCs also conduct VCA (value chain analysis) in order to integrate various primary and supportive activities of the organization.

After environment evaluation, organizations decide their long-term and short-term goals. And then to achieve these goals, organizations implement their plan of action. Implementation of the plan involves three activities — location, selection, ownership decision and finally functional decisions i.e. arrangement of finance etc.

Control and evaluation
Implementation is not the complete story; after implementing the plan of action organizations are also required to control it. Controlling is an effort under which organizations compare the planned performance with actual behavior of the plan, and check for any deviations. If there are any deviations, the organizations take corrective actions to control the plan. In this way Global Strategic Planning helps the multinational organizations to achieve their goals in the global business environment.

Category: Business, Business & Finance

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