STRATEGIC PLANNING 1

PLANNING


A robust business plan depends on careful thinking up-front around the strategic context of the company

Ultimately your business plan must answer these questions:

 Where are we now?

 Where do we want to be?

 How do we get our business there?


STRATEGY IS ALL ABOUT…

 DIRECTION: Where the business is trying to get in the long term

 MARKET/SCOPE: Which markets a business should compete in and the types of activities involved in such markets

 COMPETITIVE ADVANTAGE: How the business can perform better than it’s competitors

 RESOURCES: The assets (skills, finance, relationships, facilities) required to compete in this market

 ENVIRONMENT: The external environmental factors that affect the business’s ability to compete (economy, trade policies)

 STAKEHOLDERS: The value and expectations of those who have power in and around the business (financiers)

STRATEGY AND PLANNING

Strategic planning is a method of positioning an organization to take advantage of its future by

 Capitalizing on it’s opportunities

 Addressing it’s challenges

 Providing the kind of leadership that can effectively guide change

 Assumes that an organization must be responsive to a dynamic (changing ) environment

 Stresses the importance of making decisions that will enable an organization to successfully respond to these changes

 Is useful only if it supports strategic thinking and leads to strategic management (the basis for an effective organization)

STRATEGIC THINKING

This is asking the question ‘are we doing the right thing’ in the context of three key requirements about strategic thinking

1. A specific purpose or objective

2. A deep understanding of the external environment (factors that will hinder or facilitate achievement of the purpose)

3. Creativity in developing responses to the external factors

PLANNING

A sound plan should:

 Serve as a framework for decision making

 Provide a foundation for detailed planning (e.g. a business plan)

 Describe the business to others in order to inform, motivate, and involve

 Support benchmarking (comparison to best practice in the industry) and performance assessment

 Stimulate change and serve as the starting point for the next plan

PLANNING & STRATEGIC MANAGEMENT

 The process of specifying an organization’s objectives, developing policies and plans to achieve these objectives, and allocating the resources required to implement the plans

 It is the highest level of management activity, usually performed by the company’s Chief Executive Officer (CEO) and the executive team

 It provides overall direction to the whole enterprise

 Strategic management can be seen as a combination of strategy formulation and strategy implementation

 The application of strategic thinking to the job of leading an organization

 Entails attention to the “big picture” and a willingness to adapt to changing circumstances

 Consists of the following 3 elements:

• Formulation of a future mission which takes into account changes in the external environment (e.g. technology, regulation, competition, customers)

• Development of a competitive strategy to achieve the mission

• Creation of an organizational structure and processes to successfully carry out the competitive strategy

PLANNING: STRATEGIC ANALYSIS

Assessing the strength of a business’s position and thoroughly understanding the important environmental factors that may affect that position

Tools:

 SWOT analysis-Scenario planning

 Five Forces Analysis-Market segmentation

 PEST Analysis-Directional policy matrix

 Competitor Analysis-Critical success factor analysis

PLANNING: STRATEGIC CHOICE

 Understanding the nature of stakeholder expectations

 Identifying the range of strategic options

 And then evaluating and selecting the most appropriate strategy

PLANNING: STRATEGY IMPLEMENTATION

 Allocation of resources (financial, personnel, time, computer system support)

 Establishment of a chain of command or some alternative structure (such as cross-functional teams)

 Assignment of responsibility for specific tasks or processes to specific individuals or groups

 Managing the process:

- Monitoring results

- Comparison to benchmarks and best practices

- Evaluating efficiency and effectiveness

- Making adjustments as necessary

LEVELS OF STRATEGY

Corporate Strategy

The overall purpose and scope of the firm to meet stakeholder expectations

This is a crucial level since it is heavily influenced by investors in the business and acts to guide strategic decision-making throughout the business.

Corporate strategy is often stated explicitly in a “mission statement”

Business Unit Strategy

How a business competes successfully in a particular market.

It concerns decisions about choice of products, meeting needs of customers, gaining advantage over customers, gaining advantage over competitors, exploiting or creating new opportunities, etc

Operational Strategy

How each part of the business is organized to deliver the corporate and business-unit level strategic direction

Operational strategy therefore focuses on issues of resources, processes, people, etc

WHY PLANS FAIL

Inappropriate Strategy:

 Failure to appropriately define objectives

 Incomplete SWOT analysis with respect to objectives

 Lack of creativity in identifying possible strategies

 Strategies not capable of achieving desired results

 Poor fit between the external environment and organization resources

Poor Implementation

 Overestimation of resources and abilities

 Failure to effectively coordinate

 Ineffective attempts to gain support of others or unexpected resistance

 Under-estimation of time, personnel, or financial resources

 Failure to follow the plan