The Strategic Planning Process

The Strategic Planning Process

The Strategic Planning Process

Although specific steps in the formulation of a strategy may vary, the process can be built, at least conceptually, around the key elements shown in Figure 5-1 and elaborated in the following.

1. Inputs to the Organization

The various organizational inputs, including the goal inputs of the claimants, were discussed in Chapter 1 and need no elaboration,

2. Industry Analysis

As will he pointed out later in this chapter, Michael Porter suggests that the formulation of a strategy requires the evaluation of the attractiveness of an industry by analyzing the external environment. The focus should be on the kind of competition within an industry, the possibility of new firms entering the market, the availability of substitute products or services, and the bargaining positions of the suppliers as well as the buyers or customers,

3. Enterprise Profile

The enterprise profile is usually the starting point for determining where the company is and where it should go. Thus, top managers determine the enterprise’s mission and clarify its geographic orientation, such as whether it should operate in selected regions, throughout the home country, or even in different countries. In addition, managers assess the competitive position of their firm.

One can also often infer from company advertisements what is important for a company in terms of geographic orientation, product emphasis, and strategies in cooperating with partner and even competitors.

Here are examples:’

• For Komatsu, it is “Going global in a big, big way.”

• For Ricoh, it is “Embracing the potential of a digital future.”

• For Konica, it is “Giving the customer a voice in product design.”

• For Amway. it is “Made in America, sold around the world.”

• For Canon, it is “Working both with partners and competitors.”

4. Orientation, Values, and Vision of Executives

The enterprise profile is shaped by people, especially executives; and their orientation and values are important for formulating the strategy. They set the organizational climate, and they determine the direction of the firm through their vision that answers the question “What do we want to become?? Consequently their values, their preferences, and their attitudes towards risks have to be carefully examined because they have an impact on the strategy. For example, even if the alternative of distributing spirits may appear profitable, executives may decide against such a strategy because of top management’s value system that condemns alcoholic beverages.

5. Mission (Purpose), Major Objectives, and Strategic intent

The mission, also sometimes called the purpose, is the answer to the question “What is our business?” The major objectives are the end points toward which the activities of the enterprise are directed. These topics were discussed in the previous chapter.

Strategic intent is the commitment to win in the competitive environment. Professors Gary Hamel and C. K. Prahalad analyzed companies that had achieved global leadership.9 They found that those firms had an obsession with winning, not only at the top level but also throughout the organization. This obsession is called strategic intent and is illustrated by Komatsu’s intent to “encircle Caterpillar,” its main rival, or Canon’s idea to beat Xerox,” or Honda’s intent to become an automotive pioneer, “a second ford.” The authors point out that strategic intent requires personal effort and commitment. The intent statement is stable over time and focuses on the essence of winning.

6. Present and Future External Environment

The present and future external environment must be assessed in terms of threats and opportunities. The evaluation focuses on the competitive situation as well as on economic, social, political, legal demographic and geographic factors, In addition, the environment is scanned for technological developments, for products and services on the market, and for other pertinent factors in determining the competitive situation of the enterprise.

7. Internal Environment

Similarly, the