Planning may be categorised into several types on the basis of certain variables. Here we will divide the function of planning into four categories on the basis of two variables i.e. degree of comprehensiveness and time span. On the basis of degree of comprehensiveness, planning is divided into strategic planning and tactical planning. On the basis of time span, we may divide planning into long-range planning and short-range planning. Let us have a brief idea of the four types of planning.
Strategic Planning : The term strategic planning refers to the process of determining the integrated organisation-wide courses of action to achieve the major objective of the organisation. The term has a military origin where it is used to describe the process of formulation of military campaigns to achieve military goals of defending the home territory and defeating the enemy forces. In military parlance, strategic planning covers such aspects as how to attack the enemy and from how many fronts, the size and combination of ground forces, air forces and naval forces, the amount of resources to be deployed, the timing of the various moves, the areas to be fortified and defended and so on. The term acquired great significance in non-military situations also. We often hear of strategies to achieve the goals of Five Year Plans at the national and regional levels, strategies for solving rural drinking water problems, strategies to reduce the growth rate of population and so on. In the context of business enterprises, strategic planning consists of formulation of strategies which are in the nature of critical and intelligent courses of action to gain upper hand over competitive and other complex external forces in the environment. It involves tentative chalking out of the major measures and moves necessary to perceive and exploit opportunities and to tackle threats and constraints, in the light of distinctive strengths and inevitable weaknesses of the enterprises.
The kinds of questions that top management of the enterprise asks itself and finds answers in strategic planning include: What are the most significant market and other opportunities and in what way they are relevant to the enterprise? What are the kinds and complexities of external problems, threats and constraints forced by the enterprise? How shared the enterprise take advantage of relevant opportunities and to tackle the threats and constraints (as for example: price cuts, aggressive advertising campaigns, introduction of new or improved products, and so on initiated by rival enterprises) in order to achieve the objectives. In what specific areas and businesses did the enterprise concentrate its efforts to gain or retain its competitive dominance? Into what new businesses should enterprise extend its activities?
Strategic planning is a means of improving the competitive position of the enterprises in relation to other existing and potential rivals in the industry. It is an attempt to design an action plan on how, where and when the strategic resources of the enterprise (investment funds, customer goodwill, and loyalty, distribution network, R & D facilities and so on) have to be deployed, and the combination, sequence and timing of various major decisions and initiatives necessary to achieve the enterprises goals of growth, diversification, high profitability, competitive power, good market share and so on.
Tactical Planning : Tactical Planning refers to the process of formulating more specific, functional, sub-plans to implement the strategies of the enterprise. Tactical Planning is more limited in its scope and consists of detailed decisions and actions initiated at lower managerial levels to exploit situations as and when they arise and to cope with local, operational problems. It is sub-corporate wide in nature. Tactical plans take the form of small, successive steps or moves taken in a concerted manner. Tactical decisions are concerned with what and how activities are to be carried out, what performance criteria are to be established, how scarce resources are to be utilised efficiently and so on.
Tactical Planning is carried out on the basis of more information under less risky conditions and in a more structured manner than strategic planning. Tactical Planning provides the basis for detailed specification of various activities to be carried out by the enterprise in a coordinated and time-bound basis.
To take an example, a major objective set by the top management of an enterprise manufacturing industrial goods is rapid growth by doubling the sales volume within a period of next four years. To achieve this objective, one of the strategies formulated by the enterprise is diversification into manufacture of consumer goods. To implement this strategy the enterprise formulated specific policies on make or buy, internal growth vs acquisitions or mergers, foreign collaboration and so on. Within the framework of the above strategy and policies, tactical plans and decisions on such aspects as size of operations, product types, sizes, quality ranges, customer services, distribution channels and so on are designed.
The distinction between strategic planning and tactical planning is one of scope and impact. In many cases, the two types of planning become indistinguishable. They are, however, inter-dependent.
Long-range Planning : The term long-range planning refers to the process of formulating the long-range objectives of an organisation and of determining the ways and means of achieving such objectives. The term long-range indicates the extent of future time horizon, the fairly long period of time which can be visualised and verbalised into tentative objectives by the organisation. The duration and limit of long-range differs from enterprise to enterprise and from situation to situation. For some enterprises, 3 to 5 years is a fairly long time horizon, while for others, 25 to 30 years and even beyond is the relevant planning time frame. The long-range planning period is determined keeping in view the nature of the enterprise’s business, its size and growth rate, the extent of variability of the environment, the time required for converting major decisions into tangible results and so on.
Long-range planning provides a framework for determination of such critical goals as the desired growth rate of the enterprise’s assets or sales and profitability, new activities in the future, major new investments, areas of development, and disinvestment, and so on. As Peter Drucker stated, every enterprise should ask itself these and similar questions in the context of complex and dynamic nature of external environment. Business and other organisations cannot expect that their present businesses, product lines and activities, technology, profit levels and markets will continue to remain relevant in the future. Long-range planning is intended to induce such awareness and to enable managers to make current major decisions with a fairly good sense of future Outlook.
Short-range Planning : The term short-range planning refers to the process of formulating short-range objectives and of deciding on the courses of action or plans, to achieve them. Short-range planning is done for a time span of one year or less. In general, it is carried out within the framework of long-range planning, and for achieving long-range objectives, in a step-by-step manner. A short-range plan is an attempt to breakdown a long-range plan into compact and actionable programmes. Short-range planning is more action-oriented, more detailed, specific and quantitative. For example, if the long-range goal of an enterprise is to increase its sales volume by 50% during the course of next five years, it has to formulate its short range plan for the next one year to bring about an increase of say 20% in its sales turnover. It has to formulate a detailed budget of short-range goals, targets of performance, activities, and resource requirements in a time-bound manner. Short-range planning provides the basis for a coordinated performance of activities, allocation of resources, assignment of tasks and design of appropriate plan, implementation and programme evaluation system. Long-range plans are implemented by programming, budgeting and scheduling efforts and activities needed to achieve organisations goals.
It may be noted that tactical planning and short-range planning are also referred to as Operational Planning because they represent planning of detailed operations at the lower levels of management at middle and supervisory levels.
