1.1 STRATEGIC PLANING:
Strategic Planning is systematic process of envisioning a desired future, and translating this vision into broadly defined goals or objectives and a sequence of steps to achieve them.
As a company grows and as the business environment becomes more complex the need for strategic planning becomes greater. There is a need for all people in the corporation to understand the direction and mission of the business. Companies consistently applying a disciplined approach to strategic planning are better prepared to evolve as the market changes and as different market segments require different needs for the products or services of the company.
Strategic planning is a process that brings to life the mission and vision of the enterprise. A strategic plan, well-crafted and of value, is driven from the top down; considers the internal and external environment around the business; is the work of the managers of the business; and is communicated to all the business stakeholders, both inside and outside of the company.
The benefit of the discipline that develops from the process of strategic planning, leads to improved communication. It facilitates effective decision-making, better selection of tactical options and leads to a higher probability of achieving the owners’ or stakeholders’ goals and objectives. There is no one formula or process for strategic planning. There are however, principles and required steps that optimize the value of strategic planning. The steps in the process described in this series of articles on strategic planning are presented below:
‘ Current Situation Analysis
‘ Segmentation Analysis
‘ Strength, Weakness, Opportunities, and Threat Analysis
‘ Core Competencies Analysis
‘ Key Success Factors
‘ Business Unit Strategy / Business Plan
‘ Balanced Score Card
The principles and steps of this process will be discussed in a series of articles following this introduction to strategic planning. The choice, of the planning process that works best, should be driven by the culture of the organization, and by the comfort level of the participants.
Use of an outside, independent facilitator can help in the process and in the development of a strategic plan. An outside resource can provide objectivity and serve as a ‘devil’s advocate’ as well as a sounding board for the management charged with plan development. In the final analysis the plan must have the authorship and ownership of the owner and the managers who must execute and follow the strategic plan. It must be their plan.
The strategic plan, to be of real long-term value, must be treated as an ongoing business process. It must be reflective of the owners’ mission and vision. It must evolve and change to reflect changing market and economic conditions. It must be proactive to competitive, market and economic conditions. If those steps are followed, the strategic plan will institutionalize a culture of continuous improvement and disciplined change.
Strategic planning, when treated as a work in progress, rather than as a binder on a shelf, or a file in a computer, provides business with a real and lasting competitive advantage. It will help determine and direct the quality of relationships with suppliers, employees, unions, customers, and bankers.
1.2 THE PROCESS OF STRATEGIC PLANNING
SEGMENTATION ANALYSIS: MATCHING MARKET POTENTIAL AND
Strategic Planning pays dividends to companies when approached in a disciplined process with top to down support and bottom to up participation. The following is the third in a series of ten articles describing one proven, tested process for effective strategic planning.
Step three in the Strategic Planning Process is to conduct a market segmentation analysis. The purpose of this process is to match the company’s current or prospective products and services with the market’s potential. The alignment of the company’s products with the market potential helps focus the strategic planning activities of the company in areas of highest volume potential and highest financial return.
The framework for segmentation analysis suggested in this article has been used successfully by a number of companies. First, before any consideration of the products and services that the company produces, identify the market segments from the customers’ needs perspective.
Market segments are groups of customers who exhibit similar buying decision processes.
For example, a common method of market segmentation in consumer markets is to use demographic variables such as age, sex, income, and location to describe segments. The needs of a 25 to 35 year old college graduate recently married are very different from the needs of an empty nesting couple aged 60 to 65. The process of segmentation breaks the market into groups who exercise similar purchase patterns and implies how marketers should reach these groups.
There are many ways to segment markets. In addition to demographics, many marketers of consumer products use buying behaviour patterns, psychographic segmentation variables, and lifestyle variables. There is no exact way to segment a market; it is a combination of science and art in understanding the buying behaviour of your current and potential customers.
In business-to-business markets, the type of customer or customer channel, is a common segmentation variable. For example, retail automobile customer segments, such as 8 automobile dealers, and retailers of automotive parts exhibit very different buying patterns for automobile repair products and services. The differences between these segments buying behaviour patterns create unique segments.
The third step is to match or fit the products and services of the company to the various market segments. For example, consumer food products such as single servings fit older aged market segments; other food products fit a family with young children. This matching process provides a way of identifying where the company is strong or weak and where the greatest market potential lies. This process may also have implications for new product development or market growth of the company.
From this last step in the process, management has a framework that allows analysis of:
‘ Market Segments and Market Potential (without company bias)
‘ Matching of Existing Products and Services to Segments
‘ Implications of where the company needs to focus product or market development
‘ Penetration or market share of various market segments
‘ Implications for functional tasks such as the sales planning and advertising
‘ Identification of products, services or market segments to be emphasized, diminished or discontinued
At the conclusion of this step management has a completed current situation analysis, and an outside analysis of market segments and their potential. An important point is that the segmentation scheme and the identification of market segments have come from the unique behaviour of the market or customer. It is not an internally generated definition of market and product potential. The company products and services are now objectively matched to the market segments.
1.3 SWOT ANALYSIS
Strategic Planning pays dividends to companies when approached in a disciplined process with top-down support and bottom-up participation. The following is the fourth in a series of ten articles describing one proven, tested process for effective strategic planning.
SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis is a valuable, proven, effective tool to use evaluation stage of strategic planning. It is an audit of the organization and the environment around the company. The SWOT analysis is most productive when it involves the input of a cross section of key managers in the process. Since SWOT analysis is an exercise dependent on the input from multiple sources provides an opportunity to assure all of the points of view and important issues are considered. Thinking of and using the SWOT analysis as a team sport, in contrast to an individual sport, will add value while expanding the horizon of the SWOT ‘thinking’ exercise.
STRENGTHS / WEAKNESSES, and OPPORTUNITIES / THREATS are a convenient, easy way to identify the relative position of your company to the market, the customer and to the competition. The SWOT analysis tool lends itself to the evaluation of the business overall as well as to specific functional areas within the business.
1.3.1 SWOT: Strengths
‘ Well Established Reputation
‘ Financial Resources
‘ Certain Market Segments are Served Profitably
‘ Geographic Location to Customers
‘ Geographic Location to Suppliers
‘ Management Experience in the Industry
‘ Marketing Support Levels
‘ Management Information Systems
Weaknesses are the attributes and activities that, if improved, it would be provide the company additional probability for success. In this area it is important to obtain two distinct views of the current situation. First, get multiple views from key functional managers within the company. Multiple points of view will help to assure that differing points of view are aired and all key weaknesses are surfaced. Second, get the perspective outside the company by bringing customers and suppliers into the discussion. Often weaknesses are seen differently from outside the company. The key questions are: What do we do not so well? What should be improved? Are there mistakes we need to avoid?
Do others see our weaknesses as we do, or differently? Remember, it is important to be honest and realistic in your evaluation. Following are some examples of company weaknesses:
1.3.2 SWOT: Weaknesses
‘ Lack of Expertise in Certain Growing Markets
‘ Lack of Clear Strategy
‘ High outside Sales Turnover
‘ Out of Touch with Marketplace
‘ No Marketing/Advertising
‘ No Focus on Margin Management
‘ Sales/Price Controls Lapsed Since 1997
‘ Lack of Technological Expertise
‘ Too Much Inventory
‘ Too Many Products and Market Segments
‘ Serving Unprofitable Markets
‘ Did Not Invest in Technology
‘ Did Not Exploit Product and Market Opportunities
Seeing or recognizing the development of trends or changes comes from number of important activities that are expected of the key leaders, managers and owners of the business. Two suggested activities include reading industry and general interest publications and constantly benchmarking inside and outside your own company and industry to identify and evaluate potential opportunities. Following are examples of company opportunities:
1.3.3 SWOT: Opportunities
‘ Growth through Market Segmentation
‘ Regional Growth Trends
‘ Inside Sales Optimization through Training
‘ Realign Key Management Responsibilities
‘ New Distribution Model Needed
‘ Master Technology Strategy
Threats are the obstacles that the company faces in trying to achieve its Mission, Vision and Strategic Goals. Threats may include items such as competitor first mover advantage on new technology or new products. Threats may come from changes in government regulation, or lender covenants. Recognition of real or perceived threats is important in the development of a strategic plan and critical to avoiding surprises that hinder goal achievement.
Following are examples of threats:
1.3.4 SWOT: Threats
‘ Distribution Channel is Maturing
‘ Consolidation and Strength of Competition
‘ Misreading Trends in Market Segmentation
‘ Gas Prices and Consumer Market Changes
‘ Maturing/Dying Markets in Areas of Core Competency
‘ Banking Covenants
A thorough SWOT analysis, with participation across the company and across key external relationships will provide an important building block for the Strategic Plan. It will be a joint exercise that yields consensus and a map for predictable performance.
Along each step of the SWOT process prioritize and value each of the items. This will focus the organization’s attention and set financial parameters or values that the SWOT analysis represent.
1.4 STEPS IN A STRATEGIC PLANNING PROCESS
Although every strategic planning process is uniquely designed to fit the specific needs of a particular university, every successful “model” includes most of these steps.
The university begins by identifying its vision and mission. Once these are
clearly defined, it moves on to a series of analyses, including external, internal, gap, and benchmarking, which provide a context for developing organization’s strategic issues. Strategic programming follows and the organization develops specific strategies including strategic goals, action plans, and tactics. Emergent strategies evolve, challenging the intended tactics, and altering the realized strategy. Periodically, the organization evaluates its strategies and reviews its strategic plan, considering emergent strategies and evolving changes. It usually takes several years before strategic planning becomes institutionalized and organizations learn to think strategically.
1.4.1 Vision and Mission
Identification of the organization’s vision and mission is the first step of any strategic planning process. The university’s vision sets out the reasons for organization’s existence and the “ideal” state that the organization aims to achieve; the mission identifies major goals and performance objectives. Both are defined within the framework of the university’s philosophy, and are used as a context for development and evaluation of intended and emergent strategies. One cannot overemphasize the importance of a clear vision and mission; none of the subsequent steps will matter if the organization is not certain where it is headed.
1.4.2 Environmental Scan
Once the vision and mission are clearly identified, the university must analyse its external and internal environment. The environmental scan, performed within the frameworks of the Five Forces Model and SWOT, analyses information about organization’s external environment (economic, social, demographic, political, legal, technological, and international factors), the industry, and internal organizational factors. The labour market projections provided on this site are most valuable for the environmental scan. Please refer to the brief description of the Basic Models.
1.4.3 Gap Analysis
Organizations evaluate the difference between their current position and desired future through gap analysis. As a result, a university can develop specific strategies and allocate resources to close the gap (CSUN strategic planning leadership retreat, April 1997), and achieve its desired state.
Measuring and comparing the university’s operations, practices, and performance against others is useful for identifying “best” practices. Through an ongoing systematic benchmarking process campuses find a reference point for setting their own goals and targets.
1.4.5 Strategic Issues
University determines its strategic issues based on (and consistent with) its vision and mission within the framework of environmental and other analyses. Strategic issues are the fundamental issues the organization has to address to achieve its mission and move towards its desired future.
1.4.6 Strategic Programming
To address strategic issues and develop deliberate strategies for achieving their mission, universities set strategic goals, action plans, and tactics during the strategic programming stage. Strategic goals are the milestones the campus aims to achieve that evolve from the strategic issues. The SMART goals model is essential to setting meaningful goals. Smart goals are specific, measurable, agreed upon, realistic, and time/cost bound. “Action plans … define how we get to where we want to go,” the steps required to reach our strategic goals. Tactics are specific actions used to achieve the strategic goals and implement the strategic plans.
1.4.7 Emergent Strategies
Unpredicted and unintended events frequently occur that differ from the university’s intended strategies, and the university must respond. Emergent strategy is “a pattern, a consistency of behaviour over time,” “a realized pattern [that] was not expressly intended” in the original planning of strategy. It results from a series of actions converging into a consistent pattern
1.4.8 Evaluation of Strategy
Periodic evaluations of strategies, tactics, and action programs are essential to assessing success of the strategic planning process. It is important to measure performance at least annually (but preferably more often), to evaluate the effect of specific actions on long-term results and on the organization’s vision and mission. The organization should measure current performance against previously set expectations, and consider any changes or events that may have impacted the desired course of actions.
1.4.9 Review of the Strategic Plan
After assessing the progress of the strategic planning process, the university needs to review the strategic plan, make necessary changes, and adjust its course based on these evaluations. The revised plan must take into consideration emergent strategies, and changes affecting the organization’s intended course.
1.4.10 Strategic Thinking
With time, people in the university routinely make their decisions within the framework of the organization’s strategic vision and mission. Strategic planning becomes an organizational norm, deeply embedded within the organization’s decision-making process, and participants learn to think strategically as part of their regular daily activities Strategic thinking involves “arraying options through a process of opening up institutional thinking to a range of alternatives and decisions that identify the best fit between the institution, its resources, and the environment”
1. A note regarding factors or drivers that may be important to an organization’s master plan process from Caruthers, J. Kent and Daniel T. Layzell.1999:
2. John F. Dix and H. Lee ‘Buck’ Mathews Business Development Index, Ltd. and The Ohio State University Columbus, Ohio August 2002