Strategic planning occurs at the corporate level; it outlines company objectives and designing methods for reaching those objectives. Whereas, an operational plan is the all-inclusive way in which each department or division can use its resources to achieve company’s objectives and goals. In other words when planning process taking place at the functional level is called operational planning and strategic Planning is concentrated towards attaining the long-term objectives of business – the mission and vision.
BHEL (Bharat Heavy Electricals Ltd) has been facing competition from Chinese power generation equipment manufacturers such as Sepco Plc, Shanghai Electric Group Co. Ltd, Dongfang Electric Corp. Ltd and Harbin Power Equipment Co. Ltd, both in the domestic and overseas markets, it also faces challenges from local JVs between Larsen and Toubro Ltd and Mitsubishi Heavy Industries Ltd; Toshiba Corp. of Japan and the JSW Group; Ansaldo Caldaie SpA of Italy and Gammon India Ltd; Alstom SA of France and Bharat Forge Ltd; BGR Energy Systems Ltd and Hitachi Power Europe GmbH; and Thermax Ltd and Babcock and Wilcox Co.
The sheer giant size of BHEL offers both strengths and weaknesses; they can quote very low rates and absorb the shock due to their size and the number of businesses that they are in. The disadvantage is that due to the very size lots of operational inefficiencies can creep in and add to the cost.
BHEL is a fairly market-oriented company. To face the competition and to add capacity the company is gearing up tremendous technology, to build a practical strategic plan, BHEL hired Mercados EMI Asia which is energy consulting firm to gear up to capture the ever-growing energy market in Asia. This is an example of Strategic Planning.
Operational planning is done to support strategic planning efforts. They are the action plans, so in a perfect world the strategic plan comes first, quickly followed by a robust and measurable operation plan. Operating plans should help run the day-to-day activities in the company as efficiently as possible. Though operating is becoming difficult in over competitive business environment, BHEL is aiming to maintain leadership in existing businesses and focus on diversification by harnessing opportunities in the areas of solar power, transmission, transportation, defence & aerospace and water businesses, to drive the next wave of growth. As part of our efforts to make BHEL lean and agile, various initiatives have been taken including consolidation of three units CSU (Centralised stamping unit), FP (Fabrication plant) & IP (Insulator plant) at Jagdishpur, conversion of EMRP into a service centre for Indian Railways at Mumbai, and closure of RMSG at Bhopal. In the face of continued disruptions in the core business, the company is determined to protect and assert its leadership. Though ordering in the thermal segment has been subdued in the recent years, BHEL has secured 100% of the main plant package orders in the thermal segment since past few years.
When the strategic plan has hundreds of items in it, they become unmanageable. Strategic plans are successful when they have clear objectives and they can be focused on. If they consist of hundreds of items, it is nearly impossible to have organization’s focus on hundreds of strategic items. Instead of cluttering the strategic plan with numerous items, some of the items can be moved on to an ideas parking lot or, if the items are tactical and specific, they can be moved into operational plan.
Strategic objectives are long-term organizational goals that help to convert a mission statement from a broad vision into more specific plans and projects. They set the major benchmarks for success and are designed to be measurable, specific and realistic translations of the mission statement that can be used by management to guide decision-making. Strategic objectives are usually developed as a part of a two- to four-year plan that identifies key strengths and weaknesses and sets out the specific expectations that will allow the company or organization to achieve its more broad-based mission or vision statement.
Operational objectives are daily, weekly or monthly project benchmarks that implement larger strategic objectives. Operational objectives, also called tactical objectives, are set out with strategic objectives in mind and provide a means for management and staff to break down a larger strategic goal into workable tasks.
The competitiveness of ITC’s diverse businesses rest on the strong strategic planning; Its foundations of institutional strengths derived from its deep consumer insights, cutting-edge Research & Development, differentiated product development capacity, brand-building capability, world-class manufacturing infrastructure, extensive rural linkages, efficient trade marketing and distribution network and dedicated human resources. ITC’s ability to leverage internal synergies residing across its diverse businesses lends a unique source of competitive advantage to its products and services.
As for its operational planning in its agri business, ITC Ltd has strengthened its value chains linked to agriculture. The company has derived synergy from ITC’s agri-sourcing capabilities. ITC has empowered plan for the farmer centres around providing Internet kiosks in villages. Farmers use this technology infrastructure to access on-line information from ITC’s farmer-friendly website www.echoupal.com Data accessed by the farmers relate to the weather, crop conditions, best practices in farming, ruling international prices and a host of other relevant information. e-Choupal today is the world’s largest rural digital infrastructure. The unique e-Choupal model has added agri-sourcing efficiencies to ITC’s agri business. ITC’s procurement team supports the e-Choupal network which strengthens ITC’s handling agents and contemporary warehousing facilities across India, enabling its Agri Business to source identity-preserved merchandise even at short notice.
The above example gives an insight that along with strategic objectives, operational objectives also should be measurable and specific and time framed. Do the items in the plan have a definitive end date or are they ongoing? The strategic plans are based on time limits. It can be a three years or five years plan to achieve some long terms goals; whereas operational plans are short term in nature. Both the plans complement each other and cannot be separated. The different time frames of the planning process place the focus on time-sensitive aspects of the company’s structure and environment.
