4.6: Strategic Planning Processes Flashcards
Explain the purpose of the strategic planning process
( how )
- the strategic planning process guides managers when they are making decisions regarding the allocation of resources
- involves stepping back from your day-to-day operations and asking where your business is headed and what its priorities should be
( why )
- the purpose could be to analyse the external and internal environments, to develop a mission statement, identify goals and objectives and to come up with strategies.
Describe how a mission and objectives are a feature of a strategic plan
( how )
- a mission statement tends to be a simple declaration underlying the purpose of an organization’s existence and its core values
- what it wants to achieve and how it is different to its competitors
- whereas, objectives provide the basis for measuring and controlling the performance of the business.
( why )
- the mission statement should serve to unify all people and corporate cultures within the workforce in their attempt to achieve the organization’s vision
- objectives help to measure and control, they set boundaries for business activity and without having clear objectives, organisations have no sense of direction and purpose.
Explain how an environmental scan is a feature of a strategic plan
( how )
- an environmental scan is a tool to research and analyse a firm’s environment to identify and anticipate internal and external factors which will affect long-term growth and success
- a PEST analysis, SWOT analysis and Porter’s Five Forces are all considered in an environmental scan
- in conducting an environmental scan, you must consider the positioning view and the resources view
( why )
- it seeks for opportunities and threats within the industry and helps determine the future direction of the organisation
Explain how a business would utilise a PEST analysis
( how )
- these factors are defined as a framework of external factors which are used in environmentally scanning strategic management and a firm’s external business environment
- includes the analysing of political, economic, social and technological factors
( why )
- helps businesses and their leadership determine the feasibility and viability of existing or new products
- identifies and helps firms insulate against threats and limitations that impact business growth
- identifies and helps to capitalise upon USPs, new opportunities or gain a competitive advantage
Explain how a business would utilise a SWOT analysis
( how )
- A method of analysing a firm’s competitive situation through analysing four relevant internal and external factors (Strengths, Weaknesses, Opportunities, Threats)
( why )
- developing a SWOT analysis can help you look at your business in a new way and from different directions
- it can also help you to create or fine tune your business strategy
Explain the purpose of using Porter’s five forces model
( how )
- a framework to analyse the competitiveness within an industry and assess the profitable opportunities a market has in developing its business strategy
- five forces are: threat of new entrants to an industry, threat of substitutes, bargaining power of suppliers, bargaining power of buyers, extent of rivalry among existing competitors
( why )
- helps determine an industry’s weakness and strengths
- used to identify an industry’s structure to influence a firm’s strategy
Explain Porter’s force “Threat of new entrants to an industry”
( cause )
- profitable markets attract new entrants
- for a business already existing in that market, it can weaken their position within it
( effect )
- unless the business has strong and durable barriers to entry and a strong competitive advantage, then profitability will decline to a competitive rate
Explain Porter’s force “Threat of substitutes”
( cause )
- in markets where close substitute products exist, it increases the likelihood of customers switching to alternatives in response to resulting price increases
( effect )
- this reduces both the power of suppliers and the attractiveness of the market
- firms that produce goods and services that target a niche, or lack competitors/close substitution can increase their power
Explain Porter’s force “Bargaining power of suppliers”
( cause )
- an assessment of how easy it is for suppliers to drive up prices.
- driven by the: number of suppliers of each essential input; uniqueness of their product or service; relative size and strength of the supplier; and cost of switching from one supplier to another
( effect )
- more suppliers in industry = suppliers have less power = reduced cost of inputs = opportunity to improve profits for firms
- less suppliers in industry = suppliers have more power = increased cost of inputs = negatively impacts firms’ profit margins
Explain Porter’s force “Bargaining power of buyers”
( cause )
- an assessment of how easy it is for buyers to drive prices down
- driven by the: number of buyers in the market; importance of each individual buyer to the organisation; and cost to the buyer of switching from one supplier to another
( effect )
- amount of buyers are low = higher consumer power = better prices / offerings for consumers = decreased profitability
- amount of buyers are high / minimal competition = lower power = worse pricing for consumers = better profitability for firms
- if a business has just a few powerful buyers, they are often able to dictate terms
Explain Porter’s force “Extent of rivalry among existing competitors”
( cause )
- the importance of this force is the number and strength of competitors and their ability to threaten a company
( effect )
- less competition = firms have more power = higher prices, greater profits
- more competition = firms have less power = reduced prices, aggressive marketing
Explain how strategic formulation is a feature of a strategic plan
( how )
- the process by which firms choose the most appropriate course of action to achieve its mission and objectives is known as strategic formulation
- information gained from environmental scans help formalise the course of action (includes PEST, SWOT as well as Porter’s 5 Forces)
- articulation and communication of the strategy must be done to all stakeholders
- all levels must cooperate in order for effective coordination of the strategy
( why )
- a business’ formulation is aimed at improving competitive advantage(s) and profitability
- by having an effective strategic formulation, a business can achieve its mission and objectives quicker and more efficiently
Explain how strategic implementation is a feature of a strategic plan
( how )
- strategic implementation refers to the decisions that enact or apply a certain business strategy
- it involves breaking down the plan into specific objectives, allocating resources and responsibilities across departments and developing detailed action plans
- misunderstandings that arise from the action plan(s) can risk the success of a strategy or may alienate employees
( why )
- effective strategic implementation, regular monitoring and effective communication are necessary in order for a business to achieve its strategic plan
Explain how evaluation and control are a feature of a strategic plan
( how )
- process of controlling and evaluating the operations/implementation of the actions developed from the strategic plan
- evaluation is the process of evaluating the performance and feeding back information into decision-making for the next strategic planning cycle
- control is measuring and comparing performance and taking corrective action to further improve the processes
( why )
- it builds on strategic formulation or broadly strategic planning, as it allows performance monitoring and adjustments so plans can be executed to meet goals
