What is strategic planning?
Strategic planning is a process of developing strategies, policies and actions for achieving an objective or set of objectives. In other words, strategic planning is the process of determining what you want to do and how you will get it done. It involves looking at your organization’s current situation and future possibilities. The goal is to determine the best action based on the needs of the organization.
Before you start to carry out a strategic planning process, it is important to note that your business or organization should already have its mission and vision clearly defined. For example, “our mission is to provide our customers with quality products; our vision is to be the market leader in this industry.”
External strengths and weaknesses:
The next step is to identify the external and internal factors that will influence your business or organization. These factors include:
– Demographics: – The population’s characteristics such as age, gender, income level, etc.
– Economics – Economic trends and policies such as economic growth, inflation rates, interest rates etc.
– Political climate – Laws and government regulations that can affect your business or organization.
– Competition – Competitors and the strategies they use to attack your market share.
– Technology – New technologies and how they can be used in the products and services of your business or organization.
– Social trends – The lifestyles, habits and activities of people such as what they buy, where they go, what TV programs they watch etc.
– The physical environment – The state of the natural environment such as weather patterns and climate change.
Once you have determined all the external factors that will affect your business or organization, then you can determine your internal strengths and weaknesses compared to those external factors. This will help you determine where your business or organization is currently positioned in the marketplace.
Internal strengths and weaknesses
Your internal strengths are the things that you do better than competitors. You will use these skills to develop strategies, policies and actions to take advantage of an opportunity. For example, imagine your company makes office furniture. Your strengths could be quality products at competitive prices. The weakness could be short product life cycle. These strengths and weaknesses will influence the types of strategies you use to take advantage of opportunities or respond to threats.
Your internal weaknesses are the things that your competitors do better than you. You will use these skills to develop strategies, policies and actions to minimize an anticipated problem related to an opportunity or threat. For example, imagine you make office furniture. A competitor develops a new product that could affect your market share. Your weakness is not having enough capital to develop the new product. You will use this weakness to determine how you can improve productivity or pricing to overcome it and achieve your goal of maintaining market share.
Please note that external factors are beyond your control. They will affect your business or organization whether you want them to or not. The internal factors are within your control and can be changed through good strategic planning.
Develop strategies, policies and actions:
The next step is to develop strategies, policies and actions for achieving your objectives and goals based on the information collected during the first two steps of the planning process. You may need to develop several strategies to achieve your objective. You can group the strategies under headings such as:
– Differentiation – How you are different from competitors.
– Cost Leadership – How you can be more efficient than your competitors and pass on the savings to customers.
– Focus – A limited range of products or services with low cost and high quality.
Differentiation strategies and the examples of strategies under this heading:
Product Strategy :
– You offer a wider range of products or services than competitors to appeal to a large market segment that is willing to pay more for choice and convenience. For example, McDonald’s has differentiated itself from its competitors by selling quick, affordable meals as opposed to the more expensive restaurants like Ruth’s Chris.
Geographic Strategy :
– You sell your products or services in different geographical locations than competitors, such as throughout the world instead of only in one country. For example, Coca-Cola sells its soft drinks throughout the world rather than just in one country.
Channel Strategy :
– You focus on selling your products or services through a particular channel of distribution, such as direct sales on the Internet instead of just through retail outlets. For example, Cisco Systems sells its networking equipment directly to companies rather than just through resellers.
Service Strategy :
– You focus on selling higher quality services at higher prices compared to competitors. For example, USAA provides insurance to military personnel at a price that is comparable to what civilians pay for the same coverage.
Brand Strategy :
– You focus on selling your products or services under well-known, highly recognized brands known for quality and performance. For example, Rolex has developed a reputation for high quality watches. Customers have increased confidence in buying this brand.
Technology Strategy :
– You use advanced technologies to differentiate your products or services from those of competitors. For example, Nike uses advanced technology for its sports shoes and apparel as a means of differentiating itself from competitors.
Cost Leadership strategies and the examples of strategies under this heading:
Business Process Strategy :
– You have efficient business operations with low operating costs compared to competitors. For example, Walmart has organized its operations in order to keep costs low and pass on the savings to customers.
Low-cost Market Strategy :
– You maintain low prices for your products or services by focusing on under served markets where prices are not effectively controlled (for example, illegal DVD sales). For example, Primark sells a wide range of clothing for low prices in under served markets such as Eastern Europe and Asia compared with other European retailers.
Multi-product Strategy :
– You have a diversified product portfolio that is sold at lower cost than competitors. For example, Disney has developed a multi-product strategy based on the creative characters such as Mickey Mouse and the company’s theme parks.
Product Line Strategy :
– You focus on smaller product lines that can be produced or serviced at lower cost compared to competitors.For example, Microsoft has a limited number of products which it develops and services at much lower costs than rival companies such as Apple.
Vertical Integration Strategy :
– You maintain low costs by producing your own intermediate inputs or components needed to produce your products. For example Premier Farnell manufactures its own electronic components used in the production of its electrical goods and passes on the cost savings to customers.
Supply Chain Strategy :
– You focus on efficient, coordinated supply chains with a high degree of vertical integration for greater control of costs. For example, Apple has developed an efficient supply chain for the production of its iPods and iPhones. It controls the whole value chain from developing software and applications to manufacturing components and final products.
Process Oriented Strategy :
– You focus on having highly efficient processes with low costs compared to competitors. For example, Amazon has developed a process-oriented strategy for delivering its products as quickly as possible and at low cost.
Market Based strategies and the examples of strategies under this heading:
Market Segmentation Strategy :
– You focus on highly profitable segments of a market where there is a greater potential for growth. For example, a pharmaceutical company may focus on developing new drugs to treat certain diseases which have the largest patient basis.
Niche Strategy :
– You focus on small but highly profitable markets with few suppliers which offer good growth prospects. For example, Apple has created a niche in the global MP3 player market with its iPod.
Niche Marketing Strategy :
– You focus on developing customised, highly specialized products or services for small markets which do not appeal to mass markets. For example, 3M (Minnesota Mining and Manufacturing Company) has developed a niche marketing strategy in selling its Post-it notes to consumers and office workers. It has positioned its products as tools used to temporarily stick notes and other items on walls, tables and other surfaces:
Product Development Strategy :
– You focus on developing new products with high growth potential and lower costs than your competitors. For example, Microsoft has developed a product development strategy for maintaining market leadership in the software industry by designing new products that have higher functionality than rival companies.
Vertical Integration Strategy :
– You focus on producing your own inputs or components needed to produce your products in order to keep costs low and pass on the savings to customers. For example, Primark manufactures its own clothing which reduces the costs of production compared with other European retailers.
Product Based Strategies and the examples of strategies under this heading:
Customisation Strategy :
– You focus on customising your products to meet customers exact requirements. For example, BMW has developed a customer-focused product strategy by providing options for customers to design their own cars. Customers can choose from an array of colour choices, trim levels, seating arrangements and other options.
Quality Based Strategy :
– You focus on developing high quality products to meet customers’ product expectations accordingly. For example, Apple’s iPod digital music player was designed with superior audio and video playback capacity compared to other MP3 players available at that time.
Production Process Management Strategy :
– You develop a process-oriented strategy for the production of your products, with a high degree of vertical integration for greater control of costs. For example, Apple has developed an efficient production process management strategy for the production of its iPods and iPhones. It controls the whole value chain from developing software and applications to manufacturing components and final products.
Service Based Strategy :
– You focus on offering high-quality service to meet customers’ needs. For example, The Ritz-Carlton Hotel Company has built its brand on offering high quality service to all its guests.
Product Quality Strategy :
– You focus on improving the quality of your existing products or services through innovation and process improvements. For example, Toyota has developed a product quality strategy for maintaining global leadership in the automotive industry and reducing production and development costs through the use of innovative, high quality products.
Product Quality & Process Improvement Strategy :
– You focus on quality as well as process improvements for your existing product. For example, Wells Fargo has developed a product quality and process improvement strategy to deliver complete customer satisfaction by focusing on efficient banking processes such as loan applications and repayment.
Strategic Planning Processes and the examples of strategies under this heading:
Business Growth Strategy :
– You focus on building your business by increasing its size and scale through mergers & acquisitions, product development and geographical expansion. This strategy often involves a change in the corporate culture and structure. For example, Google has focused on building its brand worldwide by acquiring other companies that provide products and services to its users. It also focuses on product development and geographical expansion such as acquisitions of Motorola Mobility, through which Google is able to offer mobile communication products and services to its users.
Business Model Innovation Strategy :
– You focus on creating new business models where innovative processes or technologies can be applied to meet customer needs and deliver high value and profits. For example, Nike’s business model innovation strategy involves the design and development of innovative products such as its FuelBand.
Business Process Re-engineering Strategy :
– You focus on improving your existing business processes to deliver better results. For example, Dell has developed a re-engineering strategy for increasing customer service by reducing the time from order placement to shipment and improving customer service by reducing the time from order placement to shipment and improving product availability.
Business Growth & Process Re-engineering Strategy :
– You focus on business growth and process re-engineering simultaneously. For example, IBM has focused on business growth through its acquisitions of consulting companies such as PricewaterhouseCoopers Consulting LLC while at the same time assimilating these companies’ human capital and expertise to improve IBM’s business processes.
Business Growth, Process Re-engineering & Innovation Strategy :
– You focus on building your business through mergers & acquisitions, process re-engineering and innovating your products or services. For example, SAP has focused on building its business by acquiring companies that provide industry specific IT software and then applying its own expertise to convert acquired products into industry-wide standards over time.
Market Development Strategy :
– You focus on targeting new market segments through product development and geographical expansion. For example, McDonald’s has focused on targeting the quick service restaurant (QSR) segment by opening different restaurants such as express outlets at airports, kiosks and even a McCafé.
Business Model Innovation, Market Development & Process Re-engineering Strategy :
– You focus on building your business through the development of new products and services, targeting different market segments and process re-engineering. For example, Amazon has focused on product innovation by developing Kindle Tablets to attract users who want a portable device for reading. It has also focused on market development by offering its Kindle Tablets at a relatively low price to attract customers who do not want high-end products, but still want to use the same technology. In addition, it focuses on process re-engineering through its huge network of warehouses and delivery channels that allow it to provide free next day shipping to Amazon Prime customers.
Business Model Innovation, Market Development & Growth Strategy :
– You focus on building your business through the development of new products and services, targeting different market segments and growing your existing business. For example, Apple has focused on product innovation by developing its iPhone and iPad series to attract customers who want portable devices for work and play.
What are the three steps involved in the planning phase of the strategic marketing process:
- Market Analysis
- Strategy Formulation
- Implementation/Control
What are the five steps involved in strategy formulation?
- Define the Situation
- Identify Opportunities & Threats (OT)
- Develop Alternative Strategies
- Evaluate Alternative Strategies
- Select Strategy
What are the five steps involved in implementation/control?
- Take corrective action when performance deviates from target
- Monitor organization’s performance relative to the chosen strategy
- Evaluate changes in the environment
- Assess how well each element of your marketing mix is working together
- Revise strategies as needed.
How does a market-oriented company differ from a product-oriented company?
A market-oriented company focuses on consumer needs and wants, while a product-oriented company is focused on the actual product.
What are some benefits of using an outside consultant to help with strategy formulation?
An outside consultant can provide objectivity because they have no stake in the process.
Outside consultants can offer unbiased recommendations, which can be useful when strategies are being evaluated.
What are some benefits of using internal resources to help with strategy formulation?
Internal resources have a greater understanding of the company’s strengths and weaknesses because they are involved in day-to-day activities.
They have a better understanding of the company’s culture.
Internal resources can be more likely to buy into the decision since they helped in its development.
How is low risk associated with an incremental strategy?
Incremental strategies are focused on competing by doing only what competitors are currently doing, thus avoiding any major investments or risks.
What are some benefits of a differentiation strategy?
The company can choose a limited number of market segments to target and differentiate its product from competitors’ in those areas.
The product is not competing on price, thus allowing the company to set higher prices.
What are some challenges associated with a differentiation strategy?
Customers can be more willing to try competitor products which may offer lower prices and better features.
It is difficult for the company to compete on price with competitors who are mass producing their product.
A growth strategy focuses on increasing the size of the total market, thus creating more customers who can potentially purchase the company’s products.
A market share strategy focuses on increasing the percentage of current customers who buy a company’s products.
What are some benefits associated with a niche marketing strategy?
The market is typically smaller and easier to access than large markets.
What are some challenges associated with a niche marketing strategy?
The company cannot take advantage of economies of scale.
What are the two types of market structures in terms of number of competitors?
- Monopolistic – one dominant competitor that controls sales and prices
- Oligopolistic – several large competitors that control sales and prices
What is a market penetration strategy?
A market penetration strategy focuses on increasing the number of current customers who buy a company’s products.
What is a market development strategy and how does it differ from a market penetration strategy?
A market development strategy focuses on growing total sales by appealing to new markets or segments.
This differs from a market penetration strategy because the company is targeting a new customer base rather than merely increasing sales among its current customers.
What are some benefits associated with a diversification strategy?
Diversification allows companies to pursue growth opportunities in different markets that may or may not be related.
In the long run, the company’s stock prices may increase due to diversification.
What are some challenges associated with a diversification strategy?
Diversification can be costly and capital-intensive because the company needs to invest in new products, facilities, management teams, etc.
What is an international expansion strategy?
An international expansion strategy focuses on expanding into foreign markets.
It is also known as a global strategy
What are some challenges associated with an international expansion strategy?
The company needs to adapt its products and services to fit different cultural norms.
Entering a new market could be costly if the business does not maintain a competitive advantage.
What is a market development strategy?
A market development strategy focuses on growing total sales by appealing to new markets or segments.
What is a structuralist economic viewpoint?
Under this view, companies invest in order to increase their profits over the long run.
The key assumption of this approach is that success in business comes from having a sustainable competitive advantage.
What is an institutionalist economic viewpoint?
Under this view, companies invest in order to increase their profits in the short term.
The key assumption of this approach is that success comes from being able to adapt quickly to changes in market conditions.
What are some benefits associated with globalization?
- It enables companies to take advantage of lower labor prices in foreign markets.
- It allows companies to take advantage of lower production costs in foreign countries.
- It increases the pool of customers worldwide for a company’s products or services.
What are some challenges associated with globalization?
Globalization can be costly because it requires substantial investments in research and development to develop new products that have a quality level equivalent to those produced by competitors.
Globalization can be risky because it exposes a company’s business operations to unpredictable external factors such as changes in government policies, economic conditions, etc.
What is the difference between mass production and craft production?
In mass production, a company’s products are standardized and identical.
In craft production, a company’s goods are customized and differentiated.
What is the difference between a linear business unit and a decentralized business unit?
A linear business unit has its own resources, such as management teams, product development, production facilities, etc.
A decentralized business unit does not have its own resources and is reliant on a larger company for these services.
What is the difference between a primary and secondary market?
The primary market is where investors trade securities such as stocks and bonds.
The secondary market is where existing investors sell these securities to other potential buyers such as a brokerage firm.
What is the difference between a stock price and a share price?
The stock price pertains to a company’s overall value.
A share price refers to the cost of one single share in a company for a particular investor. What is an initial public offering (IPO)?
An IPO is the first time a company makes its stock available for sale to the general public.
What are some benefits associated with an IPO?
It can generate substantial returns on investment for existing shareholders.
It provides valuable funding to companies that do not have enough capital to finance their own operations.
What is the correct sequence of the steps in the strategic planning process:
Define the problem or opportunity, develop alternative solutions, select a solution and implement it.
Select a solution, define the problem or opportunity, develop alternative solutions and implement it.
Define the problem or opportunity, identify strategic options, select a strategy and implement it.
Select a strategy, identify strategic options, define the problem or opportunity and develop alternative solutions.
What are some benefits associated with proactive behavior?
Proactive behaviors allow companies to detect competitive threats more readily than companies that adopt a reactive approach.
They increase profits because they allow companies to shape markets in their favor.
What are some challenges associated with proactive behavior?
Proactive behavior requires a company to divulge information about its products, markets and operations that could potentially put it at a disadvantage relative to other organizations.
It is more resource-intensive than reactive approaches because proactive companies need to monitor their competitors continually. What is the difference between an internal and external stakeholder?
Why strategic planning fails:
It can be a time-consuming process.
It can require employees to work collaboratively, which is difficult for some companies because of cultural differences.
There is no guarantee that what worked in the past will continue to work going forward.
What are some benefits associated with a global mindset?
A global mindset allows organizations to adapt more quickly to changing environments.
It can help companies take advantage of growth opportunities in emerging markets.
What are some challenges associated with a global mindset?
It can be difficult for employees living in different countries to work collaboratively because they might have different ways of doing things.
It can be difficult for employees to adjust to working with people from different cultures.
What are the three main types of strategic planning models?
The BCG matrix, Boston Consulting Group model.
The GE-McKinsey 7S Framework, General Electric and McKinsey & Company model.
The Four P’s Framework
How to facilitate a strategic planning workshop:
Encourage participants to be creative and innovative.
You can employ brainstorming techniques such as brainwriting or clustering to generate lots of ideas.
Discuss the advantages and disadvantages of each idea to help narrow down the list.
Come up with a set of viable strategic options that will guide future action.
What is a SWOT analysis?
The SWOT Analysis involves using 2×2 matrix to assess the Strengths and Weaknesses of an organization as well as the Opportunities and Threats it faces.
It can help organizations identify high-priority opportunities and threats to address over a given time horizon. What are some benefits associated with long-range planning?
Long-range planning allows companies to allocate resources over a longer timeframe.
It can help organizations anticipate current and future problems, which enables them to develop more robust strategic options.
What are some challenges associated with long-range planning?
Long-range planning requires organizations to make predictions about the future, which can be difficult.
It requires organizations to allocate resources over a long timeframe, which they might not have. Name three types of strategies that Google has employed over time.
Some common types of strategy include: globalization, new market entry modes, diversification and divestiture.
How does Google compete?
Google competes by operating in multiple market segments.
It offers search services to consumers worldwide, as well as targeted ads to advertisers.
It also provides enterprise products and services to businesses through its Google for Work program, which includes the G Suite applications suite, productivity apps like Docs and Sheets, and G Suite APIs for integration.
What is the role of hr manager in strategic planning?
The role of the HR manager in strategic planning is to ensure that the organization’s human resources are aligned with its future strategy.
This can include training employees, hiring people who have the appropriate skill sets, and getting rid of those who do not.
- Provide an example of how an HR manager might align the organization’s human resources to the future strategy.
- The HR manager might hire someone with a background in marketing instead of finance, since the organization’s new strategy is to focus on developing its marketing division.
What are the three levels of strategic financial planning?
The three levels of strategic financial planning are:
1) Short-term, 2) Medium-Term and 3) Long-term.
Short-term financial planning strategies typically include actions that try to increase revenue or decrease costs for the current fiscal year.
Medium-term strategies focus on creating more operational effectiveness within an organization over a two- to five-year period.
Long-term strategies involve creating a vision for the future and making investments that support it, which can often take anywhere from five years to a few decades.
What is the role of research and development in strategic planning:
Research and development, or R&D, is a common element of many strategic planning frameworks because it helps organizations gain a better understanding of the marketplace.
By conducting market research, companies can gather information about their customers’ needs and preferences. This helps them determine how they might innovate to gain competitive advantage over other businesses in the future. Provide an example of how R&D might support strategic planning. If a company found that there is a great deal of consumer demand for products made from sustainable materials, its research and development team might focus on creating new eco-friendly options in the hopes of gaining a competitive advantage.
Conclusion:
Strategic planning is a process in which an organization develops action plans to achieve its goals. It helps companies allocate resources over a long timeframe, determine their competitive advantage, develop strategies that support it and predict future problems that might arise.
There are several benefits associated with this type of planning, including the ability to anticipate issues before they arise. However, it can be difficult to make predictions about the future, which might lead to difficulties in planning.
