In today’s highly competitive business world, companies cannot survive merely with budget oriented or forecast- based planning alone.
Companies must engage in Strategic Planning by clearly defining objectives, analyze both internal and external environment to arrive at a strategy, implement the strategy, evaluate the progress and constantly make adjustments as necessary to stay on course.
A simple Strategy Planning Process is given below:-
Mission Statement > Objectives > Environmental Scanning > Strategy Formulation > Strategy Implementation > Evaluation and Control.
A Mission Statement is the Business Vision of the organization. It describes the unchanging values and performance of the company and forward looking visionary goals that guide the pursuit of future opportunities and excellence.
From the business vision, the leaders can define realistic financial and strategy objectives. Financial objectives involve sales targets, revenues, and growth.
Internal analysis of the company; analysis of the company industry; external macro environment (PEST analysis); internal and external analysis through SWOT (strengths, weaknesses, opportunities and threats) analysis.
The industry analysis can be done using the Porters Five Forces developed by Michael Porter. This evaluates entry barriers, supplies, customers, substitute products, and industry rivalry.
To achieve higher profitability and leadership role, the company must develop competitive edge. It can be even cost differentiation, for instance.
The company should match its strengths and opportunities, while taking care of weaknesses and external threats. (SWOT).
Strategy Implementation: - Implementation depends upon proper resource allocation and motivation of the staff to achieve the objectives. Success also depends upon strategy implementation. Strategy must get communicated to the different groups in the company for effective implementation. If the lower level managers do not understand why a particular strategy is selected, implementation will suffer, and the strategy will fail to the peril of the company.
Evaluation and Control: - The strategy implementation must be monitored and adjustments made as needed.
Strategy Planning is interwoven into the entire gamut of management. It is not something separate and distinct from the process of management.