The famous Winston Churchill’s quote that states, “He who fails to plan is planning to fail” demonstrates the magnitude of planning ("11. Strategic planning", 2014). Planning is integral in the realization of any objective since it planning entails the determination of the current situation, the inputs and the expected outputs of even the simplest tasks both in the personal and business life. Business plans have been in used by companies to illustrate and understand the risks, opportunities and other issues that may affect the company both internally and externally. These issues help to set achievable goals.
Businesses have used Porters five forces, and SWOT analysis in determining external and internal risks but understanding the risks does not mean that the company can effectively plan to mitigate the loss of the known and unknown risks (Karim, 2011). Planning is a fundamental process of setting objectives in a company. Effective planning enhances and influences decision-making process that is fundamental in the performance of the employees and growth of an organization. Therefore, plans must be efficient and applicable to enhance the realization of the set goals. This study aims at understanding the concept of planning, approaches, and their applicability in the banking sector. The study understands the essence of planning in a dynamic and unpredictable banking industry due to the multiple risks the sector faces. Therefore, the paper analysis tactical and strategic planning in the banking sector and their application in different situations.
Delegate your assignment to our experts and they will do the rest.
Types of Planning
Strategic Planning
The concept of strategic planning is under the functions of strategic management. The manager or leader's main organization function is to formulate and implement the organization’s goals and visions. Therefore, they use strategic planning to formulate these achievable objectives. Strategic planning is termed as the systematic and flexible efforts by the management to establish the underlying vision, mission, objectives, policies, and strategies which are detailed and understandable, easy to implement and measure their efficiency. Therefore, strategic planning is a process of creating and upholding consistency between possessions, established goals and the shifting prospects.
Critical understanding of the current situation of the business and the long-term vision of the company is a complicated issue that must focus on determining the risks in the uncertain future which can be difficult. Therefore, companies must be willing to collect data, analyze it and engage in discussions when interpreting the data to develop an effective plan ("11. Strategic planning", 2014). Strategic planning is a long-term plan that has been used for decades due to its success in enhancing the performance and enhancing growth and development of companies that have employed the method.
The critical aspects and setting smart goals have been the primary factor of the success of this technique. The broad aspects of this approach which entails factoring in all the departments, employees productivity, and other performance issues to succeed in the current situation without losing insight of the vision and long-term objectives make strategic planning a fundamental process in organizations. Strategic planning has been termed as a transformative goal but is dependent on the trust and abilities of the leader to play the role of leadership and management (Karim, 2011). It influences the entire business hence the need for the management or leaders in the executive, middle and lower-level to ensure the plan is understood by the employees to ensure that they are motivated to work towards the attainment of the company’s goals.
The most significant challenge of strategic planning is its complexity and process that is time-consuming and expensive. The long-term aspects of strategic planning which are or over five years and three years in large and small companies respectively may hinder their success due to the uncertainty involved both in the internal and external environments. The focus of realizing the long-term goals set can hinder the urgency to solve current problems ("11. Strategic planning", 2014). However, the flexibility of strategic planning ensures the involvement of everyone in the company and a need to be innovative in the bid to achieve the company’s objectives. Lastly, it is essential to understand that strategic planning offers a guideline for managers and employees to use, but it is less engaging in the daily activities or individual worker performance in the short-term.
Tactical Planning
This type of planning is an extension of strategic planning and entails setting specific steps to implement the strategic plan. Tactical plans are short-term that entails determining the changes needed to ensure that the company’s productivity and performance are high in the present which will boost future trends. A tactical plan establishes the personal performance, responsibilities of every worker and department while also detailing the tools that would enhance the present performance and that of the near future (Karim, 2011). Its broad aspects of addressing performance make it different from operational planning that is used in formulating strategic plans. Effective implementation of the strategic plan is dependent on implementing the policies and changes thus require a logical leader who can understand the situation and make changes on a daily basis if the need arises. Therefore tactical planning requires an individual to be a manager rather than a leader as the specific steps must be utilized to succeed. The method helps enhance urgent responses to emergencies but may deter the realization of long-term goals.
Application of Strategic and Tactical Planning in the Banking Sector
The essence that the financial sector is influenced by many factors such as currency and stock fluctuations, competition, inflation and consumer behaviors and the fast-moving business means that making the wrong decisions is fatal for any bank (Sanjeepan, 2017). The competitive environment and the changing and dynamic socio-cultural, political, economic and technological advancement mean that a wrong decision made result in increased costs and client loss that is likely to tarnish the goodwill of the company and its public image. In times of depression such as the past economic decline, a bank must know the risks of engaging in increased or reduced interest loans to the consumers. During such a time the bank needs to employ a tactical plan that focuses on the short-term risks and benefits to ensure they do not engage in unnecessary risks. Undertaking such risks can cripple the bank due to the inability of the clients to repay the loans or the length of the economic downturn. When the economy is good, and there is a boom of any given product for instance investment in housing among other expensive products, it is easy for tactical leaders to seize the opportunity to purchase and resell them when the prices appreciate (Sanjeepan, 2017). The move can result in losses if the house prices decline in the future after the purchase. Therefore, employing the strategic plan, the bank will not make the unplanned purchase and will not suffer from low liquidity and other risks that were potentially enticing under a short-term outlook.
References
11. Strategic planning. (2014). Scandinavian Journal of Public Health , 42 (14_suppl), 106-112.
Karim, A. (2011). The Significance of Management Information Systems for Enhancing Strategic and Tactical Planning. JISTEM Journal of Information Systems and Technology Management , 8 (2), 459-470.
Sanjeepan, N. (2017). Strategic Analysis and Strategic Planning for Commercial Banking (An Analysis based a Commercial Bank operating in Sri Lanka). International Journal of Economics & Management Sciences , 6 (3), 1-11.
