The planning strategy is the process through which the vision is declared, the mission and values of a company, its external and internal situation are analyzed, its long – term objectives are established and strategies are formulated that to achieve these objectives.
Strategic planning is done at the organizational level, i.e. considered a comprehensive approach to the company, why is based on objective and strategies that seem simple and generic, but that affect a variety of activities.
Also because of its organizational character, this is done by the leadership of the company and long-term projected theoretically for a period of 5 to 10 years, although today in practice, due to the constant changes that occur in the market, for a period of 3 to a maximum of 5 years.
Other features of strategic planning are that it is mobile and flexible, requiring be revised from time to time to make adjustments or changes that are necessary and, despite being made by the leadership of the company, is an interactive process involving all members of the company.
Let’s look at what are the steps in the strategic planning process are:
1. Statement of vision, mission and values
The strategic planning process begins with the development of statements of vision, mission and values of the company.
The vision indicates where a company is headed or what is what they intended to become the long term. The vision answers the question: “what do we get?” A simple example of a vision statement is: “To be the leading car brand in the world”.
The mission indicates the object, purpose or reason for a company. The mission answers the question: “What is our purpose?” A simple example of a mission statement is: “Delighting our customers.”
While values are qualities, principles or beliefs that own a business, examples of values that companies often declare as their own are innovation, honesty, development workers, social responsibility, and teamwork.
Develop statements of vision, mission and values can establish a basis on which to set goals and formulate strategies, as for example allow you to set goals and formulate strategies to achieve the vision, consistent with the mission and does not go against values.
2. External Analysis
An external analysis is to analyze the different forces or factors that may exist in the environment of a company, in order to know the developments, changes, and trends that happen in it.
Some of these forces or factors are:
- Economic forces: the growth rate of the gross domestic product, inflation rate, interest rate, etc.
- Social forces: fertility, mortality, migration, etc.
- Government forces: government regulations, patent laws, antitrust laws, etc.
- Technological forces: new machinery, new production processes, new communication systems, etc.
- Consumers: needs, tastes, preferences, desires, habits, purchasing behavior, etc.
- Competition: resources, capabilities, strategies, competitive advantages, strengths, weaknesses, etc.
Perform an external analysis is further intended to detect opportunities that could benefit the company, and threats that could harm it, so you can set goals and then develop strategies to harness these opportunities or to cope with such threats.
3. Internal analysis
An internal analysis is to analyze the different elements or factors that may exist within a company, in order to know the resources and capabilities with which it has.
Some of these elements or factors are:
- In the administrative area: objectives, strategies, policies, values, culture, structure, planning, organization, management, control, etc.
- In the area of marketing: sales, product, price, distribution, promotion, advertising, customer service, etc.
- In the area of finance: liquidity, profitability, working capital, assets, liabilities, equity, cash flow, etc.
- In the area of human resources: recruitment, training, compensation, incentives, leadership, motivation, performance, etc.
- In the production area: plant layout, input procurement, inventory control, outsourcing, efficiency, technology, etc.
Perform an internal analysis is further aimed at identifying the strengths and weaknesses of the company, so you can set goals and then develop strategies that allow capitalize on those strengths or overcome these weaknesses, but at the same time take into account the resources and capabilities of the company.
4. Establishing long-term goals
The objectives long-term objectives are formulated for a period of 3 to 5 years, which are often based on generic terms, and that once achieved often define the direction of the company.
Examples of long-term goals are:
- Be the market leader.
- Increase sales.
- Generate higher profits.
- Achieve greater profitability.
- Achieve greater market share.
- Be a leading brand in the market.
- Be a recognized brand in the market.
They must be set long-term goals that take advantage of opportunities or to cope with the threats and capitalize on the strengths and overcome weaknesses, but that also help achieve the vision of the company, and take into account the mission and securities of the same, and the situation of the environment and resources and capabilities are there.
5. Formulation, evaluation, and selection of strategies
Once you have established long – term goals, the next step in the process of strategic planning is to formulate, evaluate and select strategies that achieve those objectives.
The process of formulating, evaluating and selecting strategies is usually as follows:
- The results of the external analysis (situation of the environment) and internal analysis (resources and capabilities), the statement of vision, mission and values, long-term goals, and strategies used above are evaluated, have had or not good results.
- A manageable set of feasible strategies formulated, taking into account the information analyzed in the previous point, especially in regard to resources and capabilities that the company has.
- The proposed strategies are evaluated, determining the advantages, disadvantages, costs and benefits of each.
- Strategies to implement or execute are selected and are classified according to their priority or appeal.
Examples of strategies include:
- The acquisition of one of the distributors or retailers working with the company (forward integration).
- The acquisition of one of the company’s suppliers (backward integration).
- The acquisition of one of the competitors (horizontal integration).
- The quest for greater market share (market penetration).
- Entering new geographic markets (market development).
- The improvement of products (product development).
- The launch of new products (diversification).
- Cost reduction (shrinkage).
- The sale of a division or parts of the company (disinvestment).
- The sale of all assets of the company (liquidation).
- Forming a partnership with another company (joint venture).
In general, they should be formulated and select strategies to achieve the best possible vision and long-term goals of the company, but just as the latter, take into account the situation of the environment and resources and capabilities which the company has.
6. Design of strategic plans
Strategic plans are documents where you specify how they are to implement or execute the strategies formulated and selected.
Some of the aspects that are usually specified in the strategic plans are:
- Short and medium term: what are the short- and medium-term will be (which are objectives formulated for a period of up to 3 years and usually more specific than long-term) that will achieve long-term goals.
- Specific strategies or courses of action: what specific strategies or courses of action to be performed in order to achieve the objectives to be short and medium term.
- Allocation of resources: what financial, human, physical and technological resources are to be used, and how they will be distributed.
- Makers and managers: who will be responsible and responsible for implementation or execution of strategies?
- Deadlines for implementation or execution: when to implement or execute the strategies, and how long the results will be obtained.
- Investment or budget: how much investment amount or budget for implementation or execution of strategies.
In general, strategic plans are guiding the implementation or execution of strategies help to have better coordination of the activities necessary for this, and allow better monitoring and evaluation of results.
7. Implementation of strategies
The strategic planning process usually ends with the design stage of strategic plans; however, sometimes also it considered the stage of implementation of the strategies as part of this, as useless formulate strategies if they are not implemented.
The implementation of the strategies is to implement strategic plans previously designed (for example, make the effective distribution of resources and the appointment of managers and responsible for implementing the strategies) and perform other necessary for implementation activities.
But besides this, the implementation of strategies usually also means:
- The motivation of workers: much of the success of the implementation of the strategies is the ability to motivate workers in meeting it. One way to achieve this is by engaging them in the greatest possible number of steps in the strategic planning process, and not only in the implementation stage.
- Conflict management: the implementation of strategies often generate conflicts because, for example, the dispute over limited resources or inconsistencies between the objectives of two areas. One way to manage conflicts is bringing together the parties involved to expose and discuss their differences.
- Reducing resistance to change: this stage usually also involve a change, especially when it includes strategies that seek to change the course of the business, and like any major change often generates anxiety and therefore resistance to it in workers. One way to reduce resistance to change is making sure workers know well what is happening and why.
Unlike other stages of strategic planning, the stage of implementation of strategies requires the participation of as many members of the company, which previously they should engage with the whole, process, and motivate compliance the objectives.
8. Monitoring and evaluation of strategies
Finally, the stage of monitoring and evaluation strategies often also corresponds to the strategic management rather than planning; however, sometimes also it considered as part of this.
The control is to monitor the implementation of strategies, in order to ensure that activities are being conducted in accordance with the provisions of the strategic plans or, in any event, that really help with this.
While the evaluation is to assess the results of the implementation of strategies, in order to ensure that the objectives are being met by comparing the results with the expected results.
Both the control and evaluation involve also take measures and corrective actions necessary when errors are detected in the implementation or deviations from planned (for control), or when the results do not match the expected results (in the case of evaluation).
Measures or corrective actions may involve corrections in the formulation or implementation of strategies, reviews the vision, mission or objectives, changes in the personnel responsible for implementation or further training thereof, a new distribution of resources, increased investment and, ultimately, the development of new strategies.