Strategic planning

In organizational development, strategic management, and marketing, organizations employ strategic planning as a way to move toward their desired future states. It is the process of developing and implementing plans to reach goals and objectives. Strategic planning, more than anything else, is what gives direction to an organization.

Process

Most strategic planning methodologies are based on the STP process:

• Situation - Where are we right now? How did we get here?
• Target - Where do we want to be?
• Path - How can we get there?

General Approaches

In general terms, there are two approaches to strategic planning:

• The Industrial Organization Approach
  • based on economic theory - deals with issues like competitive rivalry, resource allocation, economies of scale
  • assumptions - rationality, self interested behaviour, profit maximization
  • examples - M. Porter's 5 forces model, J. Barney's resource model
• The Sociological Approach
  • deals primarily with human interactions
  • assumptions - bounded rationality, satisficing behaviour, profit sub-optimality
  • examples - the Peter Principle

Methodologies

There are two ways of doing strategic planning:

• Strategy as logical incremental steps
  • formal approach
  • 4 steps:
    • situation analysis including environmental scanning, internal resource assessment, industry or market research, competitor analysis, and customer marketing research
    • strategy development including determining vision, mission, objectives, and strategum generation
    • strategic plan including strategy specification and resource allocation
    • implementation, monitoring, adjustment, and control
• Strategy as revolution
  • more a mind-set than a formal technique
  • not rule or ritual oriented, not reductionist, not reactive, not autocratic
  • identify the unquestioned beliefs in your industry and challenge them - Look for opportunities to re-write the rules of the industry
  • look for major discontinuities in technology, lifestyle, habits, and geopolitics, and embrace the change wholeheartedly - Do not waste time making small incremental adjustments - Be prepared to create a completely new business model at any time

Elements

While there are many variations, most strategic planning processes include:

• Environmental scanning
• SWOT (Strengths, Weaknesses, Opportunities, Threats)
• GTSM (Goals, Targets, Strategies, Measures)

A good strategy should be:

• a good fit between the business environment and a companies resources and core competency - It must be feasible and appropriate
• capable of providing the company with a sustainable competitive advantage - It should be unique and sustainable
• dynamic, flexible, and able to adapt to changing situations and value migrations
• sufficient on its own - ie.: profitable without cross-subsidization

Reasons Strategic Plans Fail

There are many reasons why strategic plans fail, especially:

• Failure to understand the customer
  • why do they buy
  • is there a real need for the product
  • inadequate or incorrect marketing research
• Inability to predict environmental reaction
  • what will competitors do
    • fighting brands
    • price wars
  • will government intervene
• Over-estimation of resource competence
  • can the staff, equipment, and processes handle the new strategy
  • failure to develop new employee and management skills
• Failure to coordinate
  • reporting and control relationships not adequate
  • organizational structure not flexible enough
• Failure to obtain senior management commitment
  • failure to get management involved right from the start
  • failure to obtain sufficient company resources to accomplish task
• Failure to obtain employee commitment
  • new strategy not well explained to employees
  • no incentives given to workers to embrace the new strategy
• Under-estimation of time requirements
  • no critical path analysis done
• Failure to follow the plan
  • no follow through after initial planning
  • no tracking of progress against plan
  • no consequences for above

Figures in Strategic Planning

• Michael Porter
• J Barney

See also

• strategic management
• marketing
• marketing plan
• Porter 5 forces analysis
• Porter generic strategies
• scenario planning
• marketing strategies
• business plan

Finding related topics

• list of management topics
• list of marketing topics
• list of human resource management topics
• list of economics topics
• list of finance topics
• list of accounting topics
• list of information technology management topics
• list of production topics
• list of business law topics
• list of business ethics, political economy, and philosophy of business topics
• list of business theorists
• list of economists
• list of corporate leaders
• list of companies

For more info

• http://home.att.net/~nickols/strategy.htm