Phases of Strategic Planning
Goal setting is the first phase of strategic planning. It is the clarification of the vision for the business and consists of definition of short and long-term goals, identification of processes for accomplishing the objectives and customization of the process
Analysis defines gathering of information and data relevant to the accomplishment of organizational vision.
The third stage is the strategy formulation stage. It is the process of developing strategy and involves reviewing information gleaned from completion of the analysis.
The fourth stage is strategy implementation. This is the process of putting plans into action for the achievement of company goals.
Strategy evaluation and control is the last stage of strategic planning. This defines the process of determining whether the strategy is successful in achieving organizational objectives. It involves a review of internal and external factors for measurement of performance and eventual taking of corrective measures.
All the phase of strategic planning are equally important. None of the stages is more important than the other as they are integral in the strategic planning and management process.
Corporate Vision and Mission Statement
Mission and vision statements are a summary of organizational goals and objectives. The two are however different as the mission statement states organizational objectives in the present. Mission statements therefore define the organization’s customers, and critical processes in addition to informing the desired level of performance. Vision statements on the other hand lay emphasis on the future. Vision statements therefore act as an inspirational source. Vision statements therefore go beyond organizational future to the future of the industry and the society within which the organization operates.
External Environment Elements
External environment elements are factors out of the company, which affect the ability of the company to function. Customers and the government are among the external elements that affect organizational strategy. Customers, also called sociological factors, constantly change and therefore affect an organization’s strategy. Issues such as gender, ethnic origin and religion greatly influence an organization’s strategy. Social expectations, religious norms and lifestyle changes among people can influence change in an organization’s strategy. The organization therefore has to align its strategy to fit within the realm of societal expectations or risk failure.
Government regulations, also called political factors greatly affect organizational strategy. Most government put regulations on product development, product packaging and shipping, most of which have an impact on the cost of production. Moreover, such regulations may either aid or deter the expansion of the business to new regions or markets. Organizations must therefore align their strategy to meet these regulations.
Generic Strategies in Gaining Market Share
Generic strategies are means through which companies hope to gain market share and competitive advantage. Developed by Michael Porter, companies have a choice of five strategies, which allow them to gain market share and competitive advantage. The generic strategies include:
- Low cost provider
- Broad differentiation
- Focused low-cost
- Focused differentiation
- Best cost provider
Broad differentiation is the company’s current generic strategy towards gaining market share. Using broad differentiation,it is possible to introduce to the market products that appeal to a broad spectrum of consumers even as the products remain unique to the plethora of similar products in the market. Moreover, through differentiation, the company has been able to command premium prices from customers, in addition to having increased sales of the products due to the attractive differentiation. Even more important is that differentiation creates brand loyalty increasing the buyer’s bond to the company’s products.
Financial and Business Goals
Businesses have both business and financial goals. Financial goals are largely concerned with organizational finances. They are targets mostly driven by future financial needs. Financial goals have a specific period in which the goals need to be achieved. They can be long-term, medium-term or long-term and all guide a business in either making or saving money towards the achievement of the set goals. Business goals on the other hand, are an integral part of the planning process. Business goals customarily define an enterprise’s expectations within a particular period. Business goals can cut across the board to include the company as a whole or focus on specific departments, employees, customers or marketing feats. Organizations customarily set specific metrics as trackers of the achievement of the goals.
Goals, both business and financial are important for businesses as they enable companies to make progress. Thus, after accomplishing specific goals, most business set even higher goals, which in essence help enterprises in reaching different milestones. Moreover, by relaying the goals to the employees, they all work in together towards the achievement of the set goals. Important to note is that apart from being measurable, achievable, realistic and specific, they must also have a time frame within which they should be achieved. This allows pooling together in concerted efforts towards the achievement of the set goals.
An alliance is a concession between two or more entities towards the pursuance of a set of mutual objectives, which none of the entities can achieve by themselves. The entities that form an alliance remain independent, retaining their individual identities and internal control. The parties in an alliance are therefore partners and provide each other with resources including products, channels of distribution, proficiency and intellectual property among others. In alliances therefore, organization benefit from the synergies, which would otherwise be impossible to achieve as individual entities.
Organizations may decide to enter into alliances to take advantage of shared resources, provide access to new markets and technologies as well as to add their strength and reduce weaknesses. Alliances additionally allow companies to acquire new customers as well as distribute risk among the partners.
Pros and Cons of Merger
Mergers allow companies network economies by giving the newly merged company economies of scale. Small businesses in this case benefit from an already functional market base, making it the best growth strategy. The small business additionally gains access to a large customer base.
Mergers aid in research and development especially in industries that require a lot of capital and efforts in research and development. By joining forces therefore, the merging companies get greater access to funds for the discovery and release of new products into the market. Even more is that merging eliminates duplication where two companies compete for the same customers. By merging, the companies consolidate their resources, giving consumers better services at reduced costs.
Mergers however create monopolies. By merging two big companies, it is possible to create a monopoly, where the large entity controls a larger industry market share giving it power to influence product and service prices. Additionally, mergers mean less number of producers and less choice for consumers. Mergers are also likely to lead to job losses especially when merging company’sasset strip by getting rid of underperforming sectors.
This is an expression of the level to which an entity matches its resources and capabilities with the opportunities available in the external environment. The leveraging is undertaken through the organization’s strategy, and it is the responsibility of the company to ensure that it has enough resources and capabilities to execute the strategy