- Writing a Business Plan
- Financial Statements
- Business Forecasting
- Business Checklist
STRATEGIC PLANNING and STRATEGIC PLANNING PROCESS:
In previous sections of the strategic planning process, we discussed the mission statement and corporate objectives. To date, however, we did not address the relationship each have on one another as it relates to strategic planning. Nor did we elaborate on how each might be achieved. We will discuss this now by introducing you to a process called strategic planning.
Simply stated, short-term objectives are developed to achieve long-term objectives, while long-term objectives are designed to achieve the company's mission. Therefore, your business must set a series of short-term objectives that will achieve each long-term objective. And your business must set a series of long-term objectives which will achieve your company's mission. Lets summarize by saying:
In the strategic planning process, the question remains: HOW DO YOU ACHIEVE SHORT-TERM OBJECTIVES? The answer to this question is through the development of various strategies. A strategy is plan or a series of tactics designed to achieve a short-term objective. If, for example, the objective of the Los Angeles Kings hockey team is to win "tonight's" hockey game against the Toronto Maple Leafs, then the LA Kings' head coach and assistance coach would develop a series of strategies in order to do so. It's important to define whether winning tonight's game is a long-term or short-term objective. Obviously it's a short-term objective since the team will play 84 games over the regular season. Thus, on each game night, the LA Kings' short-term objective is to win.
Let's now assume, the LA Kings set the following longer-term objective - "to be ranked first in their division after all 84 games have been played". This would mean the Kings would have to win more games during the regular season than any other team within their division. Stated another way, the Kings must achieve more short-term objectives (to win on a nightly basis) than any other team in their division. As you can see, by achieving the team's short-term objective, they inevitably edge closer to achieving their long-term objective. As a result, the LA Kings would develop various strategies in order to achieve their short-term objectives, which ultimately achieves their long term objective. Below summarizes the major components of strategic planning.
Strategies -> Short-term Objectives -> Long-term Objectives -> Corporate Mission
The process of strategy planning, itself, is rather quite simple. The tough part, however, is designing strategies that will produce the intended results (i.e. achieve short & long-term objectives and hence the company's mission). Furthermore, it is easy for the Kings to set an objective to win each game, but it is rather difficult to establish all the strategies necessary to actually do so. However, the owners, the coach, the assistant coach, the trainers and the hockey players must all work together to develop and implement a variety of solid strategies. To develop effective strategies, the Kings would be required to fully understand their competitive strengths, their competition, and the key factors important to winning each game. The same can be said within a business enterprise. The company's entrepreneur (owner), the company's key management team (coach, assistant coach, and trainer), and the company's staff (hockey players) must all work together to develop and implement a variety of solid strategies that will ultimately lead to the achievement of the corporate objectives and hence the organization's mission. To develop effective strategies, a company is required to fully understand their competitive strengths, their competition, and the key success factors within the industry. Below briefly discusses each of these areas, beginning with competitive strengths.
Identifying competitive strengths is extremely important in the Strategic Planning process. A strength is something a business does well. It can also be a characteristic that provides a business with a unique capability. Skills in creative woodworking or the ability to create and implement effective marketing campaigns are examples of strengths. An exceptional management team or selling staff are other examples. Resources can also be considered strengths. For example, having or being able to acquire sufficient financial resources is certainly a strength. Another example of a resource strength would be having modern and efficient capital assets. Below lists a variety of strengths an aspiring entrepreneur or an existing business may possess.
Examples of Personal & Corporate Strengths:
The foregoing list illustrates only a portion of possible strengths an individual or business may have. In essence, the number of possibilities are endless. Recognizing a strength is important, but not as important as isolating one or several COMPETITIVE STRENGTHS. A competitive strength is something that gives a company an edge over all other rivals. In other words, a competitive strength makes a company more appealing and compelling than others within the industry. A business having a proven management team is certainly a strength, but it is not considered a competitive strength if all competitors have an equally proven management team. A high-tech production facility might be viewed as a strength, however, it is not a competitive strength if all other competitors have a similar facility. A superior product, the lowest price on the market, superior technology, strong distribution channels, the ability to quickly develop "needed" consumer products and superior customer service are only some examples of possible competitive strengths.
Identifying competitive strengths is extremely important in the strategic planning process. Strategy formation and development is based on competitive strengths. In other words, a business strategy must corresponded to the things it is able to do especially well; relative to its competitors.
KEY SUCCESS FACTORS
Key Success Factors are equally important in the Strategic Planning Process. Key Success Factors or KSF are major variables that lead to the success of businesses within an industry. In other words, they are the characteristics, resources and attitude a business must have in order to be successful in the industry. For instance, a key success factor in the food industry would be "great tasting food". A key success factor in the fast food industry would be "quick delivery of food". A key success factor in the discount clothing industry would be "inexpensively priced, quality clothing".
It is extremely important to identify the key success factors of the industry you intend to enter. When attempting to isolate such factors, many inexperienced managers and entrepreneurs tend to create a lengthy list; consisting of between 10 and 15 items. Most industries, however, only have between three and five factors that ensure business success. Therefore, you are required to have a great knowledge of the industry before you can clearly pinpoint its key success factors (do your research).
Key success factors are important to the development of strategies. Moreover, a business can gain an advantage by focusing on being better than competitors in one or more of the industry's key success factors. A business not possessing the ability or skill to take advantage of an industry's key success factor generally struggles in the marketplace (I.E. the chance for success lessens). Below lists some examples of possible key success factors.
Key Success Factors for the Marketing Industry
Possible Key Success Factors for the Manufacturing Industry
Possible Key Success Factors for the Technology Industry
Possible Key Success Factors for the Distribution Industry:
Other Possible Key Success Factors.
What are the Key Success Factors of your industry? Remember: most industries have between one and five factors and will use them to develop their Strategic Plan.
OTHER IMPORTANT ITEMS OF STRATEGIC PLANNING:
Personal & Corporate Weaknesses:
As indicated above, a strength is something a business does extremely well and a competitive strength is something that gives a company an edge over all other competitors. A weakness, on the other hand, is something a business does poorly, while a competitive weakness is something that places a business at a major disadvantage (in relation to competitors).
Like strengths, weaknesses do not play as large a role in the competitive or strategic environment. Competitive strengths and competitive weakness, however, do play an important role since they are used to gauge performance, competitive ability and strategic position. In addition, competitive strengths and competitive weaknesses generally can determine the success or failure of your business.
In terms of strategic planning, a company must build its strategies around the things it is capable of doing especially well and not around the areas that it lacks. By identifying competitive weaknesses and taking the necessary action to remedy each weakness, a firm can become stronger and more competitive. In other words, you want to convert competitive weaknesses into competitive strengths so that your business can expand its strategy base. The importance of going through this process heightens when a company's competitive weaknesses match the industry's key success factors. Below lists several weaknesses many aspiring entrepreneurs and existing businesses possess. Your task is to first identify your weaknesses and take the action needed to turn these weaknesses into strengths and/or competitive strengths.
Examples of Various Personal and Corporate Weaknesses:
DRIVING FORCES OF THE INDUSTRY
All industries change over time as a result of one or several variables. Some variables play a vital role in changing an industry, while others tend to contribute to the change; but to a lesser extent. Driving forces are defined as those variables that affect an industry so much that the industry changes. The change may occur over a long period of time or over a short period of time. Whatever the time frame might be, it is important for you, first of all, to identify the MAJOR force(s) driving the change and secondly, estimate the frequency of each force(s). By going through this process, a business can better respond to or prepare for any expected industry changes.
Identifying and prioritizing driving forces is an important process in strategy planning and development. Furthermore, if you can determine the major reason(s) for an industry change, than you can better prepare your business for the change. In many cases, a single business can actually lead or expedite the industry change. For instance, in industries where product innovation is considered a driving force, a single company can introduce a new or superior technology. On the other hand, businesses operating in industries heavily regulated by government, usually have less power in directing change. In such circumstances, government policies and regulations dictate how businesses operate within the industry.
Below lists some possible forces that may lead an industry to change. Please note: some or all of the following driving forces may contribute to changes in your particular industry, however, the task is to identify the MAJOR ones that drive or lead to the change.
Examples of possible Driving Forces:
As you might suspect, Competitors play a vital role in the strategic planning process. The more you know about your opponents and how they operate, the better equipped you'll be to develop offensive and defensive moves. In essence, such information can be used to "win the game". Aspiring entrepreneurs and existing business owners must collect and continue to collect information on their competitors. Below provides a list of some areas your should consider when analyzing your competitors and when creating a Strategic Plan.
Analyzing your competitors can reveal many issues relating to how the industry currently operates. It can also trigger areas for improvement within the industry. In addition, a competitive analysis can uncover how rivals view the industry in terms of driving forces and key success factors. And finally, a competitive analysis can reveal each rival's competitive strengths, competitive weaknesses, and use of strategies.
STRATEGIC PLANNING PROCESS Summary:
Determining your competitive strengths & weaknesses, the key success of the industry, the driving forces of the industry, and conducting a competitive analysis will generally provide you with sufficient information to develop effective strategies for your strategic plan. In other words, upon gathering the above information, an aspiring entrepreneur or existing business owner will better understand the "rules of the game", their abilities & limitations, and who their opponents are or will be. When this information is known, the process of establishing a mission, realistic objectives (short & long-term), and strategies to achieve the forgoing, becomes a much easier task. Furthermore, the entrepreneur can more effectively establish strategies to achieve the following objectives; Please note, these objectives are samples - you will develop your own objectives.
Test your skills and try to create several strategies (way) to achieve the above objectives. As you might suspect, strategy development and strategic planning is left up to the entrepreneur. Remember, having in-depth knowledge of the industry you plan to enter or currently operate in, is vital for proper development of your strategic plan.