Strategic Planning Process and Models

Strategic Planning Process

• Strategy-making starts with an idea; no direction without one.
• A good strategic plan frames decisions, secures support, and provides a basis for detailed planning.
• Plans should explain the business, motivate others, assist with benchmarking and performance monitoring, and stimulate future planning.
• Plan development depends on organizational leadership, culture, environment complexity, size, and planning expertise.

Strategic Planning Models

• Rational: Formal approach to strategic planning (top-down).
• Upside: Risk identification, decision-making, more control.
• Downside: Limits innovation, past repeat, dependent on assumptions
• Free-wheeling: Seizes opportunities as they arise (bottom-up).
• Upside: Flexibility, adaptability.
• Downside: Continuously reactive, may take too long, leading to strategic drift.
• Incremental: Emphasizes small changes
• Upside: That which worked in the past. No drastic control.
• Downside: Can take too long, leading to strategic drift.
• Emergent: Behavior patterns determine strategic plan.
• Upside: Context for idea generation, promotes innovation, no conscious enforcing of process, experience, etc.

Strategic Planning Process (2)

• Strategic planning involves establishing goals and deciding what the business is good at, how the market will change, how to deliver customer satisfaction, mitigate risks, and put actions in place.
• The entire cycle of planning includes analysis, choice, implementation, and review/control at the strategic level.

Corporate Strategy vs. Business Strategy

• Corporate Strategy: Decisions about the overall direction and scope of the organization (long-term goals and objectives).
• Business Strategy: Focuses on how individual business units or product lines compete in their respective markets, dealing with shorter-term goals and objectives, prioritizing market competition at the business unit level.

Strategic Planning Process Model

• The model includes internal and external environmental assessment, position appraisal and analysis establishing the strategic position, business strategy selection, strategy implementation, monitoring and evaluation, and modification.

Benefits of Strategic Planning

• Clearly defines the company's purpose, setting realistic and achievable goals and objectives aligned with the company's capacity.
• Promotes communication between management and stakeholders, building stronger teams, with consistent objectives, plans, and controls.
• Enhances resource use by prioritizing key factors, leading to increased productivity, effectiveness, and efficiency.
• Provides a foundation for measuring progress and managing change.

Problems with Strategic Planning

• Planning models often assume future similarity to the past.
• Strategic plans may not be translated into daily tasks.
• Plans often fail to address leadership commitment and discipline.
• Lack of flexibility to adapt to change.
• Plans (often 3-5 year plans) struggle to make accurate predictions in dynamic environments.

Strategic Analysis Tools/Models: Stakeholders

• This section details tools and models for strategic analysis, focusing on stakeholders.

Strategic Analysis (Stages):

• Mission/vision: Defines values, rationale for existence, and future intent.
• Goals: Quantified representations of the mission.
• Objectives: Measurable, practical, and time-bound steps to achieve goals.
• Environmental analysis: Identifies possible opportunities and threats.
• Position audit/situation analysis: Assesses strengths, weaknesses, and competitive position.
• Corporate appraisal: Brings together earlier steps to clarify the company's state.
• Gap analysis: Compares the actual status to planned objectives.

Stakeholder Engagement

• Stakeholder engagement involves understanding different parties and responding appropriately to diverse interests.
• Effective engagement fosters a stronger sense of connection and enthusiasm within stakeholders.
• Proper stakeholder management can build relationships and avoid reputational damage or resource issues.

3 Types of Stakeholders

• Internal: Managers, employees, focusing on job security, compensation and benefits.
• Connected: Shareholders, focusing on financial performance (e.g., market capitalization, profitability dividends).
• External: Banks, suppliers, customers, NGOs and the government, focusing on different factors such as security of loans, profitable sales, and good promise regarding products or services. Different stakeholders may have differing interests, and organizations must address those with a diverse approach.

Mendlow's Stakeholder Mapping

• A technique for identifying and prioritizing stakeholders, considering power and interest levels to develop effective communication strategies.
• The tool creates quadrants for categorizing stakeholders.

Porter's Five Forces

• Competitive position is an organization's place in terms of market share, costs, prices, and experience compared to the competition.
• Porter's Five Forces examines the following aspects that impact competitive positions:
• Supplier Power
• Buyer Power
• Threat of New Entrants
• Threat of Substitutes
• Competitive Rivalry

Porter's Generic Competitive Strategies

• Cost Leadership: Aiming to be the lowest-cost producer in the industry (e.g., standardization, economies of scale, aggressive cost reduction).
• Differentiation: Focusing on creating a unique product or service that customers perceive as superior (e.g., innovative features, branding).
• Focus: Concentrating on a specific market segment, offering specialized products/services to that segment.

Red vs. Blue Ocean Strategy

• Red Ocean: Compete in existing markets, often characterized by intense competition, short-term focus, fighting for market share in existing markets.
• Blue Ocean: Creating new markets, focusing on innovation, pursuing new opportunities and longer-term, and creating new uncontested markets.