• Technological

• Competitive environment

• Industry characteristics

• Company requirements and goals

• Competitive history

• Present competitive activity

• Competitive planning

—Return on investment —Market share

—Size and variety of product lines

• Competitive resources

Once the environmental variables are defined, the planning process continues with the following:

• Identification of company strengths and weaknesses

• Understanding personal values of top management

• Identification of opportunities

• Definition of product market

• Identification of competitive edge

• Establishment of goals, objectives, and standards

• Identification of resource deployment

Complete identification of all strategic variables is not easily obtainable at the program level. Internal, or operating, variables are readily available to program personnel by virtue of the structure of the organization. The external variables are normally tracked under the perceptive eyes of top management. This presents a challenge for the organization of the system. In most cases, those in the horizontal hierarchy of a program are more interested in the current operational plan than in external factors and tend to become isolated from the environment after the program begins, losing insight into factors influencing the rapidly changing external variables in the process. Proper identification of these strategic variables requires that communication channels be established between top management and the project office.

Top-management support must be available for identification of strategic planning variables so that effective decision making can occur at the program level. The participation of top management in this regard has not been easy to implement. Many top-level officers consider this process a relinquishment of some of their powers and choose to retain strategic variable identification for the top levels of management.

The systems approach to management does not attempt to decrease top management's role in strategic decision making. The maturity, intellect, and wisdom



• Product changes

• Volume (economies of scale)

• Product quality

• Union and safety considerations

• Market indicators

• Division of market

• Production runs (timing)

• Pricing/promotion policy

• Sociopolitical

• Allocation of resources

• Raw material price/availability

• Feasibility of exporting

• Productivity levels


• Customer requirements

• Capacity of plants

• Borrowing expenses

• Technological advances

• OSHA noise levels

• Product liabilities

• DoT requirements

• Forecast of industry

• Inventory (on hand/dealers)

• Steel and chemical output

• Competition

• Sociopolitical

• Produce what is profitable

• Primarily third world

• Threat of imports

• Stability of free market of top management cannot be replaced. Ultimately, decision making will always rest at the upper levels of management, regardless of the organizational structure.

Identification and classification of the strategic variables are necessary to establish relative emphasis, priorities, and selectivity among the alternatives, to anticipate the unexpected, and to determine the restraints and limitations of the program. Universal classification systems are nonexistent because of the varied nature of organizations and projects. However, variables can be roughly categorized as internal and external, as shown in Table 11-1.

A survey of fifty companies was conducted to determine if lower-level and middle management, as well as project managers, knew what variables in their own industry were considered by top management as important planning variables. The following results were obtained:2

• Top management considered fewer variables as being strategic than did middle managers.

• Middle management and top management in project-driven companies had better agreement on strategic variable identification than did managers in non-project-driven companies.

• Top executives within the same industry differed as to the identification of strategic variables, even within companies having almost identical business bases.

• Very little attempt was made by top management to quantify the risks involved with each strategic variable.

2 Harold Kerzner, "Survey of Strategic Planning Variables," unpublished report, Project/Systems Management Research Institute, Baldwin-Wallace College, 1977.

As an example of the differences between the project manager and upper-level management, consider the six strategic variables, listed below, that are characteristic of the machine tool industry:

• Business markets and business cycles

• Product characteristics

• Pricing and promotion policies

• Technology changes

• Labor force and available skills

• Customer organization restructuring

Both project managers and upper-level management agreed on the first four variables. The last two were identified by upper-level management. Since many products are now made of materials other than steel, the question arises as to the availability of qualified workers. This poses a problem in that many customers perform a make-or-buy analysis before contracting with machine tool companies. The machine tool companies surveyed felt that it is the responsibility of upper-level management to communicate continually with all customers to ascertain if they are contemplating developing or enlarging their machine tool capabilities. Obviously, the decision of a prime customer to develop its own machine shop capabilities could have a severe impact on the contractor's growth potential, business base, and strategic planning philosophy.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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