Challenges for Strategic Planning in Developing Countries
The introduction of formal strategic planning programs among firms in developing countries has been slow. The best candidates for planning are those companies that recognize that they are under pressure to improve their performance, either from the government or from their customers and other business partners. Unfortunately, however, the general economic and political environment in many developing countries has often stymied the ongoing development of strategic planning. For example, senior managers in government-owned or controlled firms are hardly secure in their position, with changes anticipated whenever a new administration assumes control. As a result, these managers cannot be blamed if setting long-term goals and objectives, and establishing strategic plans to attain them, is not a high priority in relation to their other day-to-day activities and responsibilities. Moreover, attempts to implement industrial policy are often marked by frequent restructuring of enterprises, thereby destroying the continuity necessary for the planning process to be accepted and successful.
One fundamental area of concern is ensuring that managers in developing countries obtain the necessary skills and training to enable them to successfully conduct the planning process. For example, managers must develop the capacity to identify various alternative options and then select those options that are most suitable for the firm and its resources. This requires training in decision making techniques, including cost-benefit-analysis and computation of risk-adjusted return on investment. Managers in developing countries must also receive training and experience in planning techniques, including opportunities to actually implement their plans in their organizations. The later element is often missing in current training programs, which are largely limited to lectures that are not tied to actual planning projects back at the firms of the participants.
Another factor that often influences the planning process in developing countries is that many locally-owned firms lack experience in formal strategic planning. For example, it has been noted that African enterprises tend to simply produce budgets and forecasts of future revenues and use this information as a basis for requesting the funds thought to be necessary to cover operating expenses. What is lacking in this approach is any detailed research on environmental factors, market trends, or the activities of competitors. Also, efforts to introduce strategic planning in developing countries are often hampered by the traditional cultural beliefs that the future is best left to fate and that planning is just futile. Moreover, the high levels of economic and political instability in developing countries tend to frustrate attempts to create reliable forecasts. Finally, while large foreign firms in developing countries are used to sophisticated planning systems, often extending out for a number of years in the future, parastatals and locally-owned firms are rarely able to move beyond the most basic planning sequence.
A related problem in this area is the historical tendency among firms in developing countries to rely on outside consultants in whatever planning process that may be used. Under this scenario, consultants come to the firm, interview the managers, and return with a completed plan for approval. This approach misses important opportunities for managers to be involved in the planning process and apply knowledge and information they may have collected during training and lectures. Moreover, if the managers are not intimately involved in the process of creating the plan, it is less likely that the plan will be implemented due to a lack of real emotional commitment to a plan that is largely the work of outsiders.
Successful planning in developing countries will also require some changes in the management style and organizational culture. Planning is a collaborative exercise and requires that managers must be open to innovation, change, and new ways of doing business and communicating. Specifically, managers in developing countries must abandon their traditional notions of their relationship with their subordinates and be willing to accept and embrace employee participation and set up a whole set of procedures and practices that support the employee involvement in the planning process. For example, if the plan includes performance targets, appropriate changes in the incentive and reward systems in the firm may be required.
The content in this post has been adapted from material that will appear in Going Global: A Guide to Building an International Business (Fall 2008) and is presented with permission of Thomson/West. Copyright 2008 Thomson/West. For more information or to order call 1-800-762-5272.