In
today's highly competitive business environment, budget-oriented planning or
forecast-based planning methods are insufficient for a large corporation to
survive and prosper. The firm must engage in strategic planning that
clearly defines objectives and assesses both the internal and external
situation to formulate strategy, implement the strategy, evaluate the progress,
and make adjustments as necessary to stay on track. A simplified view of the
strategic planning process is shown by the following diagram:
The
Strategic Planning Process
Strategy Implementation -> Evaluation & Control
Mission
and Objectives: The mission statement describes
the company's business
vision, including the unchanging values and purpose of the firm and
forward-looking visionary goals that guide the pursuit of future
opportunities. Environmental Scan: The environmental scan includes the following
components:
- Internal
analysis of the firm
- Analysis
of the firm's industry (task environment)
- External
macroenvironment (PEST
analysis)
The
internal analysis can identify the firm's strengths and weaknesses and the
external analysis reveals opportunities and threats. A profile of the
strengths, weaknesses, opportunities, and threats is generated by means of a SWOT analysis
An
industry analysis can be performed using a framework developed by Michael
Porter known as Porter's
five forces. This framework evaluates entry barriers, suppliers, customers,
substitute products, and industry rivalry.
Strategy
Formulation: Given the information from the
environmental scan, the firm should match its strengths to the opportunities
that it has identified, while addressing its weaknesses and external threats.
Strategy
Implementation:
The selected strategy is implemented by means of programs, budgets, and
procedures. Implementation involves organization of the firm's resources and
motivation of the staff to achieve objectives.
Evaluation
& Control: The implementation of the
strategy must be monitored and adjustments made as needed.
Evaluation
and control consists of the following steps:
- Define
parameters to be measured
- Define target
values for those parameters
- Perform
measurements
- Compare measured
results to the pre-defined standard
- Make necessary
changes