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How to Create a Strategic Plan
Looking for a way to take your company in a new and profitable direction? It starts with strategic planning. Keep reading to learn what a strategic plan is, why you need it and how you can strategically create one.
What Is a Strategic Plan?
When it comes to business and finance, strategic planning will help you allocate your resources, energy and assets. When implemented, a strategic plan will begin to move your operations in a more profitable direction. The primary goal of the plan is to ensure you and any other stakeholders are on the same page and striving to reach the same goal.
Creating a strategic plan requires a disciplined effort. Once you put the plan into action, it will influence the segment of customers that you target, how you serve those customers and the experience those customers have.
Assess the Current Infrastructure and Operations
The first step in creating a strategic plan is to carefully assess your existing infrastructure and operations. You can do this through a SWOT analysis, which is an analysis of the company’s strengths, weaknesses, opportunities and threats. The goal here is to pinpoint the resources that you use to carry out your day-to-day operations, to look at your monthly revenue patterns, to list any company challenges related to the customer experience and, most importantly, to look at your marketing methods and ways to improve the overall customer experience.
Creation of Mission Statement and Objectives
The next step is to create a mission statement. You may already have one, but it’s important to note your mission at the top of the strategic plan document you create. This ensures everyone is focused on the same goal. Your mission statement should cover why you started the company and what you intend to accomplish through the products and services that you offer.
In addition to the mission statement, make sure to outline both short- and long-term objectives. List the objectives according to their priority and designate certain managers or employees to be responsible for each one. Also, jot down the resources that will be used to achieve each objective.
Now that you know what you’re trying to achieve and who is responsible for each goal, it’s time to deploy the plan and measure its progress. A weekly meeting is extremely important for all managers and stakeholders provide feedback. Your goal is to determine if the company is headed in the right direction. If not, you’ll need to revise the strategic plan accordingly.
Strategic Plans Are Ongoing
Once your strategic plan helps you achieve several objectives, it’s smart to regroup and set new objectives. As your company grows, you can set new goals to ensure the company keeps moving forward. You can share the success of your strategic plan with potential investors as a way to tap into new capital funding.
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6 Elements of Effective Strategic Planning
While the business operations framework is a continuous cycle in which each stage informs the next, developing a strategic plan is the best place to start.
During the strategic planning process, an organization performs three steps:
- Builds or modifies the foundational strategic vision and mission
- Commits to goals that drive overall health
- Develops a long-term plan to achieve the goals
A strong strategic plan positions the organization for success and clearly defines it at every level.
A common mistake we see businesses make is starting tactical initiative execution without first communicating and aligning on the goal. Skipping these important steps can leave your organization without direction.
Read ahead to learn more about the six vital elements of strategic planning: vision , mission , objectives , strategy , approach , and tactics .
1. Define your vision
An organization’s vision statement is an aspirational description of what it wants to achieve in the future..
A vision statement serves as a clear guide for choosing current and future courses of action — a definition of where you want your organization to be in the long term. It sets the tone and provides a North Star on the horizon.
One example of a company with a strong vision statement is Warby Parker, the online prescription glasses retailer founded in 2010 that is now worth an estimated $3 billion.
Warby Parker’s vision statement has two parts: “We believe that buying glasses should be easy and fun. It should leave you happy and good-looking, with money in your pocket. We also believe that everyone has a right to see.”
With just three sentences, the vision statement tells you exactly what the company aims to achieve. Namely, to make the process for buying prescription glasses and sunglasses fun and straightforward (unlike the traditional method). The vision also aims for customers to have fashionable frames, but at a lower cost than existing options.
The last sentence of the vision statement adds in a purpose statement (aka why the company exists): “We also believe that everyone has a right to see.” Since the beginning, Warby Parker has touted its “Buy a Pair, Give a Pair” program that donates glasses to people who can’t otherwise afford them. According to the CEO, this purpose is what motivates employees to join and stay with the company. Not all leaders include a social impact focus in their company’s vision and purpose statement, but it’s becoming increasingly popular with the growing buying power of Millennial and Gen Z consumers.
A powerful vision statement helps company employees focus their work in the right direction — and a strong vision statement will do the same for your organization.
2. Create your mission
While your vision is an organization-wide goal, your mission how you plan to achieve the vision..
Without a mission, your organization lacks the why and how. If everyone in your organization has their own interpretation of the vision, it can lead to conflicting strategies and initiatives.
For Warby Parker, there are many possible routes to achieve the company vision that states “buying glasses should be easy and fun. It should leave you happy and good-looking, with money in your pocket.”
The company’s mission statement is: “By circumventing traditional channels, designing glasses in-house, and engaging with customers directly, we’re able to provide higher-quality, better-looking prescription eyewear at a fraction of the going price.”
After the founding team realized early on that one large company dominated the eyewear industry with inflated prices, they decided to find a way to lower prices and increase quality, while also turning a profit. The resulting actions included bringing many traditionally outsourced services in-house, such as design and consumer marketing/sales.
3. Set your objectives
Objectives are specific results that a person or system aims to achieve within a time frame..
Defining success early lets you know if you are on the path to achieve your mission and vision. Clearly articulating your objectives creates goal posts by which your organization can measure its overall health and the impact of strategic initiatives.
In general, good objectives should be clear, measurable and be supported by multiple strategic initiatives across the organization.
While Warby Parker isn’t a public company and is not legally required to release annual financial statements, the organization does voluntary release an annual impact report. The report provides a window into the company’s strategic objectives with the inclusion of priority issues relevant to both stakeholders and the company. For the most recent 2019 report , the top issues cited are the Buy a Pair, Give a Pair program, customer experience, innovation, product safety, and responsible sourcing.
For the Buy a Pair, Give a Pair program, Warby Parker’s relevant objective might be aimed at growing the program, while the innovation priority may be tied to the objective of innovating to meet the strategic vision and mission. The issue of responsible sourcing could lead to an objective of using all recycled packaging or becoming carbon neutral. While the listed issues are presented through an impact lens, they also have a financial purpose.
4. Develop your strategy
Your strategy is a long-term plan that enables you to achieve your organization’s objectives..
An effective strategy brings together vision and execution. Strategies are much more specific than an organization’s vision, mission, and objectives. They are typically only shared within an organization and ideally built around an organization’s needs and market context. Strategies should map long-term plans to objectives and actionable steps, foster innovative thinking, as well as anticipate and mitigate potential pitfalls.
Strategic plans often look out 3-5 years, and there may be a separate plan for each individual objective within the organization. In the Warby Parker annual impact report, we have insight into the strategy for each of the objectives identified above. We’ll highlight potential strategies for two areas: the Buy a Pair, Give a Pair program and innovation.
By the end of 2019 Warby Parker had distributed seven million pairs of glasses to 23 countries through the Buy a Pair, Give a Pair Program and will be likely focus on expanding those numbers in 2021 and beyond. According to the impact report, 2.5 billion people around the world lack access to affordable glasses to learn and work. In order to make a positive impact, Warby Parker needed to develop strategies to continue chipping away at that need, as well as meet company objectives, mission and vision. An example strategy for this program could be expanding the US-based Pupils Project, which gives school children access to free vision services and glasses. In the 2019-2020 school year, Warby Parker expanded the program from New York City and Baltimore to Philadelphia, providing vision services to an estimated 25,000 students in the School District of Philadelphia.
In addition, Warby Parker has traditionally been focused on eyewear and reimagining the customer experience for glasses wearers, so naturally the company’s leadership identified an innovation opportunity to add daily contact lenses in November 2019, which was likely the result of a multi-year strategic plan. Like Warby Parker’s eyeglasses process, the company allows a trial period for contact wearers, who can request 6 days of contacts in their prescription before committing to a full 90-day supply.
5. Outline your approach
An approach provides a methodology for executing your strategy..
The approach is a framework for answering key questions that will later determine tactics. Plus, it guides an organization on how to execute the strategic plan.
Within our Warby Parker example, each strategic plan included an approach that guided the leadership team in their analysis and plan execution. While we won’t cover each decision the company made in 2019, we’d like to focus on two big ones: the Pupils Project expansion and the launch of the contact lens brand Scout.
When it came to expanding the Pupils Project, the Warby Parker leadership team needed an approach for addressing each key decision for the program. There were likely more decisions than we can cover in one whitepaper, but will focus on two: whether to partner with existing non-profits or create its own program and how to make the greatest impact with the funds available.
Leading up to the decision points, like whether to expand the Pupils Program to Philadelphia, the leadership’s approach probably included a consideration of whether to develop the program infrastructure and manage it internally or partner with existing non-profits. The approach also likely included a cost-benefit analysis of that question, evaluating the financial ROI and social impact of each option. The company ultimately choose to work with two local Philadelphia nonprofits.
Another key decision requiring a strong approach within the Pupils Program was how to have the greatest impact with the funds available. The company needed an approach that would help them answer and inform key decisions. Those decisions could have included an analysis of whether to contribute the glasses directly or make a cash equivalent donation to the nonprofits, how to identify schools for the project (for example considering the greatest overall need or the number of glasses Warby Parker can provide), as well as who should manage the logistics of the screenings and eyeglasses deliveries.
On the innovation side, Warby Parker needed a quality approach to ensure the contact lens brand launch (called Scout) was aligned with the existing mission, vision, objectives and strategies. In order to create a contact lens that was high quality, affordable, and with lower waste packaging, the company needed a multi-pronged approach. Two crucial areas of planning for the Scout contact lenses were undoubtedly the design of the product and choosing the right manufacturer.
Because contact lenses were completely new to the company, Warby Parker needed to either design them in house or hire an outside design team that would meet the high standards the leadership outlined in the 2019 impact report , “On top of creating a great shopping experience for our customers, we have high expectations for what a daily contact lens should be—high quality, moist, breathable, comfortable, innovative, and affordable. It’s a lot to ask of one product, but we were relentless in our search for a contact lens that checked all of those boxes.”
While the company does not say in the report which route it chose for design, the leadership likely did a cost benefit analysis of designing it in-house vs. working with an outside design company or freelance designers. The key considerations were likely the cost to design, the strategic importance of certain attributes (like breathability, moisture content, shape), the cost to manufacture, and the sustainability considerations.
In terms of the approach to find the right manufacturer, Warby Parker needed to find a partner that met the company’s quality, cost, and environmental standards. The sustainability standards included finding packaging with significant less waste and incorporating recycled materials from the manufacturing process. The company’s approach to finding a manufacturer probably included research and a ranking of multiple companies with the above criteria in mind, then doing a comparison across the top choices and additional due diligence before choosing a partner.
Through these examples, you can see how an approach ladders up to strategies, outcomes and eventually the company’s mission.
6. Get down to tactics
Tactics are focused initiatives, projects, or programs that allow organizations to execute a strategic plan..
Tactics are the key to execution. They are the actions you take to make it all happen.
Within each decision Warby Parker made, the company used different tactics to move it from an idea to actual product or program. While each decision could have dozens of tactics, we’ve highlighted one or two examples for each.
For the Pupils Project at Warby Parker, the decision for how to have the largest impact possible required several tactics or initiatives to make that happen. The company choose to have the nonprofit partners run the screenings while Warby Parker provided the glasses and had the students choose their styles from 40 options in a truck show. One necessary tactic was bringing together the design and logistics teams to narrow down the style options that would be appealing to kids, cost effective, and easy to produce in large numbers.
Another important tactic was likely determining how to produce and deliver the glasses to the students, whether the glasses should deliver to their homes or the schools, and how to ensure the glasses fit correctly after they arrived. The Pupils Project’s overall goal is for children to have glasses to enable their ability to learn, and in order to do that, they need to actually use the glasses for the long-term, so it’s important to have styles that appeal to children, as well as well-fitting frames.
In terms of tactics for the Scout contact lens launch, once the company made the decision on a design team, the project leaders determined tactics to make the contacts idea a reality. The designers had specific research guidelines to find material and construction that fit the criteria of “high quality, moist, breathable, comfortable, innovative, and affordable.” The final product is made with a material that resists drying and constructed using new technology to increase eye comfort during wear.
The company design team also created flat pack packaging that is more hygienic, uses less raw materials, and takes up less space compared to traditional contact lens packaging. Even the placement of the contact (upside down) was intentional to reduce the chance of contamination from dirt or bacteria when the wearer puts them in their eye. Each of these items were likely framed as tactics and initiatives used to create the Scout lenses. Each was directly related to Warby Parker’s approach to the decision, the overall strategy, and aligned with the larger mission and vision.
On the surface, each tactic might not seem connected, but as you dig deeper, you’ll find that effective tactics should always tie back to the strategy, objectives, mission, and vision of the company.
This is the second in a 5-part blog series defining Spur Reply’s unique perspective on the often overlooked, but incredibly valuable world of business operations.
Part 1: Overall business operations
Part 2: this blog focuses on strategic planning, part 3: operations design, part 4: initiative execution, part 5: business intelligence.
What is Strategic Planning? The Key Components, Process & Role Leaders Play in Ensuring a Strategy's Success
What is Strategic Planning? The Key Components, Process & Role Leaders Play in Ensuring a Strategy's Success by SkylineG
Strategic planning is a process that is essential for companies to ensure successful and sustainable growth.
An intelligent and actionable strategic plan is a vital part of competing within the marketplace. It directs businesses to take meaningful action to help them reach their organization's goals by mapping out a clear direction, creating measurable goals, and allocating resources to pursue these specific objectives.
What is Strategic Planning?
A strategic plan is an essential process and strategy execution document for any company looking to make the most of its resources and reach long-term organizational goals.
This vital and continually evolving document outlines a clear direction, sets objectives that must be achieved, and provides an actionable roadmap for success; it also helps organizations stand out from competitors by allowing them to differentiate themselves in the marketplace with their unique approach.
A well-crafted strategic plan will help companies stay focused on their mission while making decisions based on core values guiding them toward achieving desired results by ensuring everyone is moving in the same direction.
What are the Key Components of a Strategic Plan?
Several key components make up a well-developed strategic plan. These key components include:
A Mission Statement
An organization's mission statement states the company's purpose and the reasons why it exists. Although you might be already clear on the mission, reiterating your mission statement and connection to the plan acts as a foundation for the strategic plan and your strategy.
A Vision Statement
The company vision is the bigger objective that the company aspires to achieve. This may be as broad as making the world a better place through your product or service or ridding bathrooms of mildew. Whatever your vision, it should be connected to your strategic plan
Aligning the company mission and vision statements is the first crucial step to strategic planning.
An overall evaluation of the company's strengths, weaknesses, opportunities, and threats. Knowing these points will help you leverage your resources, shore up gaps, and realistically plan your path and the potential risks. Your SWOT analysis will help ensure that your strategic plan is based upon reality and play an important part in your strategic management process.
Goals & Objectives
Goals and objectives need specific, measurable, achievable, and time-bound targets the company wants to achieve. Ensure your goals are achievable, measurable, and can be clearly communicated as part of your strategic planning. High-level company objectives should cascade and align with the objectives of various divisions and teams. The Strategic plans of each division and team should map directly to broader company goals and methods.
The specific courses of action that the company will take to achieve its measurable goals and specific strategic issues.
Detailed project plans outlining the specific steps that will be taken to implement the strategies.
The allocation of financial, human, and other resources to implement the action plans.
Evaluation and Control
Evaluation and control are based on measures and systems to monitor the company's progress toward achieving its organization's goals, objectives, and financial plan and to make adjustments as necessary.
Who is Responsible for Creating a Strategic Plan?
In general, creating a strategic plan is the responsibility of the company's top management team - the CEO, CFO, other executives, etc.
However, though the top management will do the strategic thinking, it’s essential for key members throughout the entire organization to be involved in the strategic planning process as different departments, employees, and human resources will have valuable insights and perspectives to contribute to the strategy formation. Also, when various constituents are a part of and the planning process a sense of ownership and commitment to the strategic plan's success is reinforced.
It’s also common for companies to seek input from external stakeholders, customers, suppliers, and industry experts as part of the strategic planning process. As part of your planning process make sure to identify any critical stakeholders outside of your company.
What Makes the Strategic Planning Process Effective?
Below are some key factors that contribute to the overall effectiveness of a successful strategic plan and the strategic planning process. Understanding these points will help make your strategic planning process more effective:
The plan needs to be clear & concise, with specific strategic goals & objectives that are easy for everyone to understand. Senior leadership plays a critical role in ensuring that each objective is clear and how objectives will be achieved is understood.
The strategic plan needs to take the company's resources & capabilities into account, and the goals need to be realistic & achievable based on the market data.
The plan needs to be flexible enough to allow for adjustments to be made in response to changes in the external environment after deployment.
The plan must be aligned with the company's mission, vision & values and should support the organization's overall direction in terms of business plan and annual budgets.
The plan needs to be communicated effectively to all stakeholders & investors, including employees & customers.
The plan needs clear & actionable steps and a timeline for implementation. It must be followed consistently to ensure progress toward business goals like increasing sales and maximizing profit.
The plan needs to measure & evaluate progress, collect feedback, and be reviewed and updated regularly to ensure continuous progress toward company goals and that the plan remains relevant and practical and targets logical key performance indicators.
An effective strategic plan identifies potential factors that might derail the plan and, at a minimum, provides high-level alternatives should the plan become derailed.
When Do Strategic Plans Fail?
Listed below are a few potential reasons why strategic planning might fail. Understanding why strategic plans fail will help create more effective strategic planning outcomes:
Plans need to be clear and specific. If not, it may be difficult to understand and challenging to implement. When a strategic plan is ambitious it is tough for people to feel connected and motivated to take action.
Lack of Realistic Options and Objectives
Plans need to be realistic. If the plan cannot really be achieved, it'll be difficult to implement and lead to frustration, disappointment, and potential failure.
Lack of Flexibility
The plan needs to be flexible; if it's not is not flexible and doesn’t allow for adjustments in response to changes in the environment (internal and external) or from evaluation or measurement, it may become irrelevant or ineffective.
Lack of Alignment
The plan needs to be aligned with the company's mission, vision, and values; if not consistent with the organization's overall direction, it can quickly become out of sync with its underlying purpose and be ineffective in helping to reach desired goals.
Lack of Understanding
The plan needs to be communicated effectively to all key stakeholders and take feedback from all stakeholders; otherwise, it may be misunderstood or, worse - ignored or seen as not valuable.
Lack Actionable Steps
The strategic plan needs to be implemented swiftly and consistently; if the action steps are not clear or too hard to implement, they may not be implemented effectively.
Lack of Measurable Outcomes
The strategic plan needs to be reviewed and updated regularly, and its performance evaluated after implementation; otherwise, it may become ineffective or outdated, therefore ineffective at achieving desired outcomes.
Changes in the external environment can have a huge effect. Changes like shifts in the economy or customer preferences, if not accounted for, can seriously impact the effectiveness of a once brilliant strategic plan.
However, as in life and business, things change, and every business must be able to adapt quickly to changing circumstances. This is why an effective plan includes contingencies.
What is a Company Leader's Role in Ensuring the Strategic Plan is Implemented Successfully?
Company leaders are responsible for ensuring that the strategic plan is implemented successfully.
Some specific ways business leaders can ensure the plan is implemented properly are:
Clearly Communicate the Plan
Business leaders need to communicate the strategic plan effectively to all key stakeholders, including employees, customers, and investors. Any questions need to be answered and clarified, so everyone is aligned. The strategic plan should be shared in a way that you (the leader) demonstrate ownership and enthusiasm and can share with your team how each role is vital to achieving the plan's objectives.
Leaders need to ensure that resources, such as funding, personnel, and technology, are available to everyone needed in order to implement the plan successfully.
Leaders need to set clear expectations for implementing the plan and hold the designated employees accountable for meeting those expectations. Clear and achievable timelines need to be established and committed to by each stakeholder.
Leading by Example
Leaders need to model the behaviors and values outlined in the plan and encourage others to do the same.
Leaders need to provide support and guidance to employees as they work through problems toward achieving the strategic goals and objectives of the plan.
Leaders need to monitor the progress towards achieving the goals and objectives outlined in the plan and make adjustments in the operational plans as they see fit, as needed.
Leaders need to recognize and celebrate wins along the way to help keep morale high and encourage continued progress toward the ultimate goals.
What's the Role of Each Individual Employee in Implementing & Supporting the Strategic Plans Success?
Employees are the driving force and critical in implementing and supporting the strategic plan's success. Your employees will be the eyes and ears of how the strategic plan works. This is why it is vital for leaders to create a business environment where there is open communication and all types of information can be shared and reviewed in relation to its impact on the long-term strategy. Leaders must foster an open environment where questions can be asked and bad and good news shared. Leaders can help employees play their part by ensuring employees are supported and are clear on their ability to do the following:
Understand the Plan
Employees need to understand the strategic plan, how it aligns with the company's mission, the steps to take, and most importantly, the goals.
Aligning Work and Job Goals with the Plan
Leaders, managers, and employees need to align their work with the strategic plan and prioritize tasks that support achieving the plan's goals & strategic objectives.
Employees must consistently follow through on their assigned tasks and responsibilities to implement the plans, steps, and processes.
During the initial review of the organization's current status, employees must provide feedback and suggestions to improve the plan. During its implementation, employees need to provide feedback based on performance and potentially adjust the plan if needed for better performance and goals.
Communicate Laterally and Up
Employees need to communicate with coworkers to ensure everyone is working towards the same goals & objectives and, most importantly, employees need to communicate to their manager on how their contribution is proceeding.
Seek Support and Guidance
Employees need to seek support and guidance from leaders if they need help implementing any steps of the plan or achieving goals.
Do Some Companies Believe that Strategic Planning is a Waste of Time?
Sure. It's possible some companies may view strategic planning as a waste of time. This could be due to a variety of reasons: resources required upfront, lack of understanding of the benefits of strategic planning, a lack of buy-in from senior management, or a lack of resources to dedicate to the process.
However, for massively successful companies, strategic planning is recognized as an invaluable tool to help organizations achieve their long-term goals and be outstanding in a competitive marketplace.
Strategic planning can also help companies be more agile and adapt to changes in the external environment. For these reasons, it's generally recommended that companies engage in strategic planning and review results on a regular basis.
What Makes a Great Strategy?
What makes a great competitive strategy? Several characteristics are often considered to be key elements of great strategy execution:
A great strategy is clear & easy to understand, with specific goals & strategic objectives that are well-defined.
A great strategy is a focused strategy. A great strategy is focused on a specific area of the business and doesn't try to do too many things at once.
A great strategy is aligned with the company's overall mission, vision for the future, and values, supporting the organization's overall direction.
A great strategy is flexible and allows for adjustments to be made in response to results and changes in the external environment.
A great strategy is realistic & achievable, taking into account the company's resources & capabilities and what can actually get done.
The great strategy sets the company apart from its competitors in the marketplace and helps it to differentiate itself from competitors to customers.
A great strategy can be executed effectively, with clear action steps, a timeline for implementation, and who is responsible for each action step.
Evaluation & Feedback
The great strategy includes measures for evaluating progress and collecting feedback, and it needs to be reviewed regularly & potentially updated to ensure it remains relevant & effective.
When is a Great Strategy Not Enough to Ensure Company Success?
While a great strategy can certainly be a key factor in a company's success, it's not the only factor needed to be successful. There are a number of other internal and external factors that can impact a company's success, including:
Even the best strategy will not be a successful strategy if executed poorly.
A company needs resources, period. Resources like funding, personnel, and technology, are essential to implement strategy effectively.
Changes in external factors are equally important as the internal environment. For example, economic shifts or customer preferences can impact a company's success.
A company's success can also be impacted by its competitors' actions and even competitors' reactions to strategy implementation.
A company's success will depend partly on the market demand for its products or services. Demand should absolutely be a part of the strategy formulation.
A company's success will highly depend on the quality of its products or services and its ability for its products to meet customer needs.
The senior leadership of a company can play a key role in its success, or failure, as they set the vision & direction of the organization.
How Does Company Leadership Play a Critical Part in a Company's Strategic Success?
Without involved leadership, a strategic plan will more than likely fail. A company's leadership plays a critical role in strategic success in several ways:
Setting the Direction
A company's leadership is responsible for setting the organization's vision and direction and creating a strategic management plan that aligns with that direction.
A company's Leadership is responsible for ensuring that the necessary resources, such as funding, personnel, and technology, are available to implement the strategic plan.
Communicating the Plan
A company's leadership communicates the strategic management plan effectively and consistently to all stakeholders, including employees, customers, and investors.
A company's leadership needs to model the behaviors and values aligned with the plan and encourage others to do the same.
A company's leadership needs to provide support & guidance to employees as they work towards achieving the goals and objectives of the strategic plan. This will help in employee retention and strategic success.
A company's leadership needs to monitor progress toward achieving the goals & objectives of the plan and make necessary adjustments as needed.
A company's leadership needs to recognize and celebrate successes along the way to help keep team morale high and encourage continued progress to achieve goals.
How Can Companies Prepare & Support their Leaders to Implement & Ensure Strategic Planning Success?
There are many ways in which companies can prepare and support their leaders to implement and ensure the success of their strategic planning initiative.
Provide Proper Training
Companies need to provide training & strategy development opportunities to help their leaders acquire the knowledge and skills they need to implement & support the strategic vision effectively.
Encourage Open Communication
Companies need to foster an environment of open, clear communication and encourage leaders to seek input & feedback from their teams within the strategic framework - even when the strategy map is not positive.
Align Leadership with Company Values
Companies must ensure that their leadership's values align with the company's values and culture and that their leaders are committed to the mission and vision of the organization.
Companies need to encourage collaboration & cross-functional teamwork as a part of project management to ensure that all departments work towards the same goals & objectives.
As part of the strategic planning process, companies need to ensure their leadership has the necessary resources, such as funding, personnel, & technology, to implement the strategic plan effectively for the entire duration.
Establish Clear Expectations
Companies must set clear expectations for how strategic planning should be activated and implemented and hold leadership accountable for meeting expectations as per the strategic plan document.
Company leaders need to monitor the progress toward achieving the goals and objectives of the strategic plan and provide their support and guidance as needed. Strategic planning is essential for business success, and the key to achieving successful results lies in the hands of leadership. For leaders to ensure a strategy's success, they must become strategic planners and the details of the business's strategic plan must be organized and understood by each person responsible.
Leaders and managers need to communicate the strategic plan through consistent discussions that foster collaborative decision-making. Responsibilities for the planning process and success also extend beyond the leader and onto each individual employee to help realize the steps of an effective strategic plan. Companies must set clear strategic objectives that align with their mission and strategic goals while preparing business leaders to carry out those plans. When done correctly, with careful attention paid to all levels of the organization, successful strategic planning can lead a company in the right direction toward long-term sustainability and future opportunities.
Having a clear strategic plan is one of those obvious items that every company should have in place yet many companies don't.
Although the effort of investing the time and resources into creating a strategic planning template can be demanding, the value and impact of your investment can return a healthy multiple.
Once your mission and vision statements and strategic plan are in place they become a touchstone to focus your business, align teams, and what makes your way of navigating your market and competition unique.
We hope that this resource provides a road map and helps facilitate the development of your strategic plan if you don't have one yet. For those that do have strategic plans, we hope this resource helps act as a checklist to fortify the strategy development you've already created.
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The 5 Key Elements of Strategic Planning
All great strategies have goals, actions, and metrics. No matter the strategy’s scope and complexity or even the company’s size, great strategies include these elements. So, successful strategic planning accounts for all three.
\When a strategic planning process incorporates these elements, strategies become simple and guide decisions. If you want to kick start your strategy development, use this strategic planning template that thousands of organizations apply at the start of their strategy formulation.
Effective strategic planning elements overview:
- Defining your Vision
- Crafting your Values
- Determining desired Outcomes
- Declaring explicit Accountability
- Establishing leading KPIs
4 critical components of a strategic plan:
- Where do I want to take my business? The destination
- Where are we right now? The starting point
- How will we get there? The journey
- How will I know if I'm succeeding? The checkpoints
Everyone reading the strategic plan should be able to answer these questions. This includes employees, business partners, investors, or other stakeholders.
5 Key Elements of Strategic Planning
1. defining your vision.
Start by defining your organization’s vision (its destination). In the words of Thibault Mesqui, Managing Director at Heineken in the state of strategy report , "make your strategy based on a vision".
This is an expression of the unique Point Of View you bring to the market. Make it simple, different, inspiring, and positive.
People who read your vision should be able to understand exactly what you stand for. Take a look at our guide on how to write a good vision statement to help you in the process.
Your vision will help you to:
- Bring alignment to your organization. People will unify their efforts towards a common goal, driving increased efficiency.
- Create strategies that are cohesive and focused.
- Inspire employees, investors, and other stakeholders to invest emotionally and commercially in your business.
Knowing your vision isn’t enough. Create a vision statement to articulate it and explicitly define it.
Mission statement vs Vision statement
You may also want to create a mission statement. A mission statement differs from a vision statement . A vision statement defines where you want to be in the future. A mission statement defines broadly how you will get there (part of your journey).
Many organizations are moving away from separate vision and mission statements due to the confusion surrounding their differences. Instead, you might want to try converting your mission statement into a series of focus areas.
For example, Patagonia's vision statement is:
"To share our love for the outdoors and create a diverse range of products for all facets of outdoor life."
And their focus areas are:
- "Best product"
- "Reduce environmental harm"
- "Encourage discussion on the environmental crisis”
Their focus areas essentially describe how they will achieve their vision and act as the bedrock for most of their strategic goals and KPIs.
2. Crafting your core Values
Values really don't get the credit they deserve. People often see them as a throw-away and vacuous - more aimed at marketing the organization than guiding its true internal behaviors. But a well-crafted set of values can be the difference between success and failure in the execution of your strategic plan.
Follow this guide to craft your company’s values , so they help you to:
- Assess your current state (the starting point) as an honest reflection of what you do well and are proud of doing.
- Make better decisions by ruling out courses of action that are not appropriate for your company
- Recruit better people who share your beliefs and passions
The values that go into your strategic plan shape your culture and are not aimed at customers.
Instead, they are a frank self-assessment of how your organization’s people behave as they deliver against your vision and Focus Areas.
They should reflect the values of your very best people and the values that have helped you to succeed the most in your journey to date.
If your strategy clashes with your company’s culture or values, it will fail. Identifying your core values is a critical component towards defining your starting point and your journey.
3. Defining desired Outcomes
A strategic plan leads nowhere without a set of clearly defined outcomes. Visions, missions, and focus areas are a great starting point - but no one will take your plan seriously unless you can clearly articulate what steps you are going to take to get there - and what success looks like for each of those steps.
Not all of your outcomes will be immediately quantifiable - and that's ok (your KPIs below will help you in those cases). But when you define your outcomes, make sure they look like this:
Action + Detail + Metric + Unit + Deadline
Expand our international operations into 3 new markets by 21st December 2022
Starting with a verb forces you to be specific about what you’re trying to do. If you can include a metric and a unit – do so.
It will keep you focused and honest when tracking your progress. Having a deadline works in much the same way.
Our guide on how to create strategic objectives walks you through the process of creating achievable and executable outcomes.
4. Declaring explicit Accountability
This is such a small detail, but it is also one of the key elements of a strategic plan that so many organizations fail to implement.
A lack of accountability will absolutely destroy your strategy execution . Lacking or confusing accountability results in:
- Outcomes not being delivered because no one knew who was in charge
- Conflicting interpretations of what the business should be working on
- Increased “finger pointing” and hearsay when things don't go to plan
- No one taking any satisfaction or pride in the outcomes delivered by their team
Define accountability in the initial strategic plan as part of defining your journey. Ideally, the people responsible for a particular segment of your plan should also have been critical contributors to the plan itself.
Contribution drives engagement. Engagement enforces self-accountability. Accountability enables execution.
For each of your outcomes, simply state ONE single person who will have primary accountability for that outcome. Avoid defining yourself accountable for every single outcome.
It's fine for the owner to invite other people to work on the outcome (either by cascading the goal or inviting collaborators), but it needs to be clear that the PRIMARY accountability sits with the one individual initially assigned to the outcome and no one else.
5. Establishing leading KPIs
Creating KPIs is probably the hardest of all the key elements of a strategic plan. But without KPIs, you won't know until it's too late whether or not you're succeeding towards your vision.
Note that KPIs are not the metrics you set to create your outcomes from step 3. Rather, KPIs should relate to how well you're delivering against the components of your mission or focus areas.
Let's take a look at some examples:
Patagonia's first Focus Area was “Best product.” A KPI for this focus area could be their Net Promoter Score - i.e., how many customers would recommend Patagonia's products and services to others.
Patagonia's second Focus Area was “Reduce Environmental Harm.” They could have a KPI for maintaining their carbon footprint at 0 (i.e., being carbon neutral).
Patagonia's third Focus Area was “Encourage discussion on the environmental crisis.” Probably the hardest to set an effective KPI. They could measure the number of mentions of the company on social media that also reference the environmental crisis.
Don't let establishing leading KPIs become harder than it needs to be. Follow this easy 4 step formula on how to write KPIs to be effective. Make sure that your KPIs accurately reflect what success looks like for each Focus Area and that you can accurately measure the KPI regularly.
Selecting the right KPIs is, therefore, one of the key elements of a strategic plan.
Crucial elements for a strategy's success
Companies that incorporate all five elements in their strategic planning process build easier-to-execute strategies.
People understand them and make consistent decisions throughout the organization. Pair them with regular reviewing organizational habits and you have highly adaptive companies that go beyond reacting to market changes. They anticipate and lead them.
Check out the features of the world's #1 strategic planning software!
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Your toolkit for strategy success.
Key components of a strategic plan
Reading time: about 6 min
It’s no secret that many businesses fail within their first 10 years. Poor planning is often cited as a top reason for that failure. To improve your chances of thriving as a business, you need a well-designed plan that includes the elements of a strategic plan that have proven to be successful for other businesses.
Your strategic plan should be the result of extensive research of the current market, industry trends, and competitor analysis. It can help you establish your company vision and mission and determine where your organization needs to go and what you need to do to get there.
Why is strategic planning important?
If you build it, they will come.
That’s a nice line from a movie, but it rarely leads to real life success in the business world. Having an idea and opening a shop doesn’t mean that crowds will line up outside your door clamoring to buy your product.
A well-designed strategic plan communicates a clear idea of what you want to do with your business. This clarity will have a positive impact across your organization including helping your employees understand how to perform their jobs and, even more importantly, why their jobs matter to the success of the business as a whole.
Strategic planning is essential to understanding where your business fits in a particular market, and how your product or service adds value to that market. It helps you stay focused on your target audience and determine what needs your products can satisfy.
Understanding the strategic planning process
The strategic planning process is simply the method your company uses to determine how you will achieve your goals and grow your business. The process helps you to determine which strategic goals you should focus on to move your business forward.
How you go about working through the process will depend on the size of your business, how much time you have, and your personal preferences. No matter how you approach strategic planning, your process should include the following steps:
- Determine your strategic position— Perform a SWOT (Strengths, Weaknesses, Opportunities, and Threats) or a PEST (Political, Economic, Sociological, and Technological) analysis to get a better idea of where your company currently is so you can figure out where it needs to go.
- Prioritize your objectives— Determine which objectives you should pursue that align with your vision and mission and that will help you reach your goals.
- Develop a plan— Identify what you need to do to achieve your goals. Include a timeline and clearly communicate roles and responsibilities.
- Execute and manage the plan— Executing on a plan is what transforms ideas into meaningful action. Implement your plan and monitor your progress.
- Review and revise— Strategic planning isn’t a one-time thing. If you want to stay ahead, you always want to be looking for ways to improve and streamline processes. Review your plan so you can reevaluate priorities and make course corrections as necessary to stay on track.
Key elements of strategic planning
Your strategic plan is a living document that you will need to review and update from time to time. Whether you are creating a plan for the first time or revising an existing one, there are a number of elements that you include in your plan.
Here are some of the basic elements of a strategic plan to get you started:
Create a vision statement
This is an aspirational description of what you want to do with your organization. It’s probably the goal that inspired the creation of your business in the first place.
The vision is meant to give your business direction by describing the long-term goal that the company wants to achieve. In other words, it’s what you want your business to be recognized for or associated with in the future.
Your vision statement should be short and simple. You don’t need to use a lot of business jargon or big words to state where you would like your company to go. For example, look at Google’s vision statement: “To provide access to the world’s information in one click.”
This vision statement is concise, easy to read, and simple to understand. And there is no denying that the company has been successful.
Write your mission statement
The mission statement describes why the business exists. The mission statement is used to back up your vision and explains the company’s purpose in simple terms. It can define the company culture, its values and ethics, and agenda.
A mission statement should be easy to understand so that employees can stay focused on what they need to do to reach stated goals. For example, Google’s mission statement uses simple language to back up it’s vision: “Organize the world’s information and make it universally accessible and useful.”
This mission statement clearly indicates that providing access to information is not enough. The information needs to be organized so it is more useful to users and it needs to be accessible to the entire world.
Your mission statement helps your employees understand their roles and why they are assigned specific tasks. Without a mission statement, your employees are left to interpret the “why” of the company’s vision, which could lead to conflicting strategies and ideas for future development.
A business objective is the specific result that your company is aiming to achieve. While a goal describes a broad outcome, a business objective is a measurable step that needs to be taken to reach that goal.
For example, one of your goals might be to keep employees productive. Your objectives to reach that goal might include employee training, equipment maintenance, and purchasing new equipment to ensure that you have the resources needed to get the job done.
Objectives are typically set for long-term goals that may take several years to achieve.
Your strategies define your long-term plan or plans that you will follow so you can achieve your prioritized objectives. Your strategies might also describe the projects, programs, and specific steps your company and employees will take to execute your objectives.
It’s possible that you will need a separate strategy for each objective, depending on scope and complexity. Strategies are specific and usually only shared within an organization. After all, you don’t want to give away your game plan to the competition.
Here are some other key components of a strategic plan that you might want to include:
- Measurements : Define how you will track your company’s output and progress.
- Funding streams : Include a financial analysis that looks at past performance and projected performance. This will give you and investors an overview of your company's current and potential financial health.
- Core values : A set of principles that define how a company interacts with employees, customers, and stakeholders.
Now it’s your turn! Conduct your own strategic planning session using Lucidspark.
What’s an adaptive strategy?
In this post, we’ll explain the key components of an adaptive strategy, its relation to Agile methodology, and how adaptive strategies can help prepare businesses to keep up with technological advancements.
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2.2 Components of the Strategic Planning Process
- Explain how a mission statement helps a company with its strategic planning.
- Describe how a firm analyzes its internal environment.
- Describe the external environment a firm may face and how it is analyzed.
Strategic planning is a process that helps an organization allocate its resources to capitalize on opportunities in the marketplace. Typically, it is a long-term process. The strategic planning process includes conducting a situation analysis and developing the organization’s mission statement, objectives, value proposition, and strategies. Figure 2.2 “The Strategic Planning Process” shows the components of the strategic planning process. Let’s now look at each of these components.
Figure 2.2 The Strategic Planning Process
Conducting a Situation Analysis
As part of the strategic planning process, a situation analysis must be conducted before a company can decide on specific actions. A situation analysis involves analyzing both the external (macro and micro factors outside the organization) and the internal (company) environments. Figure 2.2 “The Strategic Planning Process” and Figure 2.3 “Elements of a SWOT Analysis” show examples of internal and external factors and in a SWOT analysis. The firm’s internal environment—such as its financial resources, technological resources, and the capabilities of its personnel and their performance—has to be examined. It is also critical to examine the external macro and micro environments the firm faces, such as the economy and its competitors. The external environment significantly affects the decisions a firm makes, and thus must be continuously evaluated. For example, during the economic downturn in 2008–2009, businesses found that many competitors cut the prices of their products drastically. Other companies reduced package sizes or the amount of product in packages. Firms also offered customers incentives (free shipping, free gift cards with purchase, rebates, etc.) to purchase their goods and services online, which allowed businesses to cut back on the personnel needed to staff their brick-and-mortar stores. While a business cannot control things such as the economy, changes in demographic trends, or what competitors do, it must decide what actions to take to remain competitive—actions that depend in part on their internal environment.
Conducting a SWOT Analysis
Based on the situation analysis, organizations analyze their s trengths, w eaknesses, o pportunities, and t hreats, or conduct what’s called a SWOT analysis . Strengths and weaknesses are internal factors and are somewhat controllable. For example, an organization’s strengths might include its brand name, efficient distribution network, reputation for great service, and strong financial position. A firm’s weaknesses might include lack of awareness of its products in the marketplace, a lack of human resources talent, and a poor location. Opportunities and threats are factors that are external to the firm and largely uncontrollable. Opportunities might entail the international demand for the type of products the firm makes, few competitors, and favorable social trends such as people living longer. Threats might include a bad economy, high interest rates that increase a firm’s borrowing costs, and an aging population that makes it hard for the business to find workers.
You can conduct a SWOT analysis of yourself to help determine your competitive advantage. Perhaps your strengths include strong leadership abilities and communication skills, whereas your weaknesses include a lack of organization. Opportunities for you might exist in specific careers and industries; however, the economy and other people competing for the same position might be threats. Moreover, a factor that is a strength for one person (say, strong accounting skills) might be a weakness for another person (poor accounting skills). The same is true for businesses. See Figure 2.3 “Elements of a SWOT Analysis” for an illustration of some of the factors examined in a SWOT analysis.
Figure 2.3 Elements of a SWOT Analysis
The easiest way to determine if a factor is external or internal is to take away the company, organization, or individual and see if the factor still exists. Internal factors such as strengths and weaknesses are specific to a company or individual, whereas external factors such as opportunities and threats affect multiple individuals and organizations in the marketplace. For example, if you are doing a situation analysis on PepsiCo and are looking at the weak economy, take PepsiCo out of the picture and see what factors remain. If the factor—the weak economy—is still there, it is an external factor. Even if PepsiCo hadn’t been around in 2008–2009, the weak economy reduced consumer spending and affected a lot of companies.
Assessing the Internal Environment
As we have indicated, when an organization evaluates which factors are its strengths and weaknesses, it is assessing its internal environment. Once companies determine their strengths, they can use those strengths to capitalize on opportunities and develop their competitive advantage. For example, strengths for PepsiCo are what are called “mega” brands, or brands that individually generate over $1 billion in sales 1 . These brands are also designed to contribute to PepsiCo’s environmental and social responsibilities.
PepsiCo’s brand awareness, profitability, and strong presence in global markets are also strengths. Especially in foreign markets, the loyalty of a firm’s employees can be a major strength, which can provide it with a competitive advantage. Loyal and knowledgeable employees are easier to train and tend to develop better relationships with customers. This helps organizations pursue more opportunities.
Although the brand awareness for PepsiCo’s products is strong, smaller companies often struggle with weaknesses such as low brand awareness, low financial reserves, and poor locations. When organizations assess their internal environments, they must look at factors such as performance and costs as well as brand awareness and location. Managers need to examine both the past and current strategies of their firms and determine what strategies succeeded and which ones failed. This helps a company plan its future actions and improves the odds they will be successful. For example, a company might look at packaging that worked very well for a product and use the same type of packaging for new products. Firms may also look at customers’ reactions to changes in products, including packaging, to see what works and doesn’t work. When PepsiCo changed the packaging of major brands in 2008, customers had mixed responses. Tropicana switched from the familiar orange with the straw in it to a new package and customers did not like it. As a result, Tropicana changed back to their familiar orange with a straw after spending $35 million for the new package design.
Tropicana’s Recent Ad
(click to see video)
Tropicana’s recent ad left out the familiar orange with a straw.
Individuals are also wise to look at the strategies they have tried in the past to see which ones failed and which ones succeeded. Have you ever done poorly on an exam? Was it the instructor’s fault, the strategy you used to study, or did you decide not to study? See which strategies work best for you and perhaps try the same type of strategies for future exams. If a strategy did not work, see what went wrong and change it. Doing so is similar to what organizations do when they analyze their internal environments.
Assessing the External Environment
Analyzing the external environment involves tracking conditions in the macro and micro marketplace that, although largely uncontrollable, affect the way an organization does business. The macro environment includes economic factors, demographic trends, cultural and social trends, political and legal regulations, technological changes, and the price and availability of natural resources. Each factor in the macro environment is discussed separately in the next section. The micro environment includes competition, suppliers, marketing intermediaries (retailers, wholesalers), the public, the company, and customers. We focus on competition in our discussion of the external environment in the chapter. Customers, including the public will be the focus of Chapter 3 “Consumer Behavior: How People Make Buying Decisions” and marketing intermediaries and suppliers will be discussed in Chapter 8 “Using Marketing Channels to Create Value for Customers” and Chapter 9 “Using Supply Chains to Create Value for Customers” .
When firms globalize, analyzing the environment becomes more complex because they must examine the external environment in each country in which they do business. Regulations, competitors, technological development, and the economy may be different in each country and will affect how firms do business. To see how factors in the external environment such as technology may change education and lives of people around the world, watch the videos “Did You Know 2.0?” and “Did You Know 3.0?” which provide information on social media sites compared to populations in the world. Originally created in 2006 and revised in 2007, the video has been updated and translated into other languages. Another edition of “Did You Know?” (4.0) focused on changing media and technology and showed how information may change the world as well as the way people communicate and conduct business.
Did You Know 2.0?
To see how the external environment and world are changing and in turn affecting marketing strategies, check out “Did You Know 2.0?”
Did You Know 4.0?
To see how fast things change and the impact of technology and social media, visit “Did You Know 4.0?”
Although the external environment affects all organizations, companies must focus on factors that are relevant for their operations. For example, government regulations on food packaging will affect PepsiCo but not Goodyear. Similarly, students getting a business degree don’t need to focus on job opportunities for registered nurses.
The Competitive Environment
All organizations must consider their competition, whether it is direct or indirect competition vying for the consumer’s dollar. Both nonprofit and for-profit organizations compete for customers’ resources. Coke and Pepsi are direct competitors in the soft drink industry, Hilton and Sheraton are competitors in the hospitality industry, and organizations such as United Way and the American Cancer Society compete for resources in the nonprofit sector. However, hotels must also consider other options that people have when selecting a place to stay, such as hostels, dorms, bed and breakfasts, or rental homes.
A group of competitors that provide similar products or services form an industry. Michael Porter, a professor at Harvard University and a leading authority on competitive strategy, developed an approach for analyzing industries. Called the five forces model (Porter, 1980) and shown in Figure 2.5 “Five Forces Model” , the framework helps organizations understand their current competitors as well as organizations that could become competitors in the future. As such, firms can find the best way to defend their position in the industry.
Figure 2.5 Five Forces Model (Porter, 1980)
When a firm conducts a competitive analysis, they tend to focus on direct competitors and try to determine a firm’s strengths and weaknesses, its image, and its resources. Doing so helps the firm figure out how much money a competitor may be able to spend on things such as research, new product development, promotion, and new locations. Competitive analysis involves looking at any information (annual reports, financial statements, news stories, observation details obtained on visits, etc.) available on competitors. Another means of collecting competitive information utilizes mystery shoppers , or people who act like customers. Mystery shoppers might visit competitors to learn about their customer service and their products. Imagine going to a competitor’s restaurant and studying the menu and the prices and watching customers to see what items are popular and then changing your menu to better compete. Competitors battle for the customer’s dollar and they must know what other firms are doing. Individuals and teams also compete for jobs, titles, and prizes and must figure out the competitors’ weaknesses and plans in order to take advantage of their strengths and have a better chance of winning.
According to Porter, in addition to their direct competitors (competitive rivals), organizations must consider the strength and impact the following could have (Porter, 1980):
- Substitute products
- Potential entrants (new competitors) in the marketplace
- The bargaining power of suppliers
- The bargaining power of buyers
When any of these factors change, companies may have to respond by changing their strategies. For example, because buyers are consuming fewer soft drinks these days, companies such as Coke and Pepsi have had to develop new, substitute offerings such as vitamin water and sports drinks. However, other companies such as Dannon or Nestlé may also be potential entrants in the flavored water market. When you select a hamburger fast-food chain, you also had the option of substitutes such as getting food at the grocery or going to a pizza place. When computers entered the market, they were a substitute for typewriters. Most students may not have ever used a typewriter, but some consumers still use typewriters for forms and letters.
When personal computers were first invented, they were a serious threat to typewriter makers such as Smith Corona.
mpclemens – Smith-Corona Classic 12 – CC BY 2.0.
Suppliers, the companies that supply ingredients as well as packaging materials to other companies, must also be considered. If a company cannot get the supplies it needs, it’s in trouble. Also, sometimes suppliers see how lucrative their customers’ markets are and decide to enter them. Buyers, who are the focus of marketing and strategic plans, must also be considered because they have bargaining power and must be satisfied. If a buyer is large enough, and doesn’t purchase a product or service, it can affect a selling company’s performance. Walmart, for instance, is a buyer with a great deal of bargaining power. Firms that do business with Walmart must be prepared to make concessions to them if they want their products on the company’s store shelves.
Lastly, the world is becoming “smaller” and a more of a global marketplace. Companies everywhere are finding that no matter what they make, numerous firms around the world are producing the same “widget” or a similar offering (substitute) and are eager to compete with them. Employees are in the same position. The Internet has made it easier than ever for customers to find products and services and for workers to find the best jobs available, even if they are abroad. Companies are also acquiring foreign firms. These factors all have an effect on the strategic decisions companies make.
The Political and Legal Environment
All organizations must comply with government regulations and understand the political and legal environments in which they do business. Different government agencies enforce the numerous regulations that have been established to protect both consumers and businesses. For example, the Sherman Act (1890) prohibits U.S. firms from restraining trade by creating monopolies and cartels. The regulations related to the act are enforced by the Federal Trade Commission (FTC), which also regulates deceptive advertising. The U.S. Food and Drug Administration (FDA) regulates the labeling of consumable products, such as food and medicine. One organization that has been extremely busy is the Consumer Product Safety Commission, the group that sets safety standards for consumer products. Unsafe baby formula and toys with lead paint caused a big scare among consumers in 2008 and 2009.
The U.S. Food and Drug Administration prohibits companies from using unacceptable levels of lead in toys and other household objects, such as utensils and furniture. Mattel voluntarily recalled Sarge cars made in mid-2000.
U.S. Consumer Product Safety Commission – public domain.
As we have explained, when organizations conduct business in multiple markets, they must understand that regulations vary across countries and across states. Many states and countries have different laws that affect strategy. For example, suppose you are opening up a new factory because you cannot keep up with the demand for your products. If you are considering opening the factory in France (perhaps because the demand in Europe for your product is strong), you need to know that it is illegal for employees in that country to work more than thirty-five hours per week.
The Economic Environment
The economy has a major impact on spending by both consumers and businesses, which, in turn, affects the goals and strategies of organizations. Economic factors include variables such as inflation, unemployment, interest rates, and whether the economy is in a growth period or a recession. Inflation occurs when the cost of living continues to rise, eroding the purchasing power of money. When this happens, you and other consumers and businesses need more money to purchase goods and services. Interest rates often rise when inflation rises. Recessions can also occur when inflation rises because higher prices sometimes cause low or negative growth in the economy.
During a recessionary period, it is possible for both high-end and low-end products to sell well. Consumers who can afford luxury goods may continue to buy them, while consumers with lower incomes tend to become more value conscious. Other goods and services, such as products sold in traditional department stores, may suffer. In the face of a severe economic downturn, even the sales of luxury goods can suffer. The economic downturn that began in 2008 affected consumers and businesses at all levels worldwide. Consumers reduced their spending, holiday sales dropped, financial institutions went bankrupt, the mortgage industry collapsed, and the “Big Three” U.S. auto manufacturers (Ford, Chrysler, and General Motors) asked for emergency loans.
The demographic and social and cultural environments—including social trends, such as people’s attitudes toward fitness and nutrition; demographic characteristics, such as people’s age, income, marital status, education, and occupation; and culture, which relates to people’s beliefs and values—are constantly changing in the global marketplace. Fitness, nutrition, and health trends affect the product offerings of many firms. For example, PepsiCo produces vitamin water and sports drinks. More women are working, which has led to a rise in the demand for services such as house cleaning and daycare. U.S. baby boomers are reaching retirement age, sending their children to college, and trying to care of their elderly parents all at the same time. Firms are responding to the time constraints their buyers face by creating products that are more convenient, such as frozen meals and nutritious snacks.
The composition of the population is also constantly changing. Hispanics are the fastest-growing minority in the United States. Consumers in this group and other diverse groups prefer different types of products and brands. In many cities, stores cater specifically to Hispanic customers.
The technology available in the world is changing the way people communicate and the way firms do business. Everyone is affected by technological changes. Self-scanners and video displays at stores, ATMs, the Internet, and mobile phones are a few examples of how technology is affecting businesses and consumers. Many consumers get information, read the news, use text messaging, and shop online. As a result, marketers have begun allocating more of their promotion budgets to online ads and mobile marketing and not just to traditional print media such as newspapers and magazines. Applications for telephones and electronic devices are changing the way people obtain information and shop, allowing customers to comparison shop without having to visit multiple stores. As you saw in “Did You Know 4.0?” technology and social media are changing people’s lives. Many young people may rely more on electronic books, magazines, and newspapers and depend on mobile devices for most of their information needs. Organizations must adapt to new technologies in order to succeed.
Technology changes the way we do business. Banking on a cell phone adds convenience for customers. Bar codes on merchandise speed the checkout process.
first direct – first direct Banking ‘on the go’ iPhone App – front – CC BY-NC-ND 2.0; Paul Domenick – Lasered – CC BY-NC-ND 2.0.
Natural resources are scarce commodities, and consumers are becoming increasingly aware of this fact. Today, many firms are doing more to engage in “sustainable” practices that help protect the environment and conserve natural resources. Green marketing involves marketing environmentally safe products and services in a way that is good for the environment. Water shortages often occur in the summer months, so many restaurants now only serve patrons water upon request. Hotels voluntarily conserve water by not washing guests’ sheets and towels every day unless they request it. Reusing packages (refillable containers) and reducing the amount of packaging, paper, energy, and water in the production of goods and services are becoming key considerations for many organizations, whether they sell their products to other businesses or to final users (consumers). Construction companies are using more energy efficient materials and often have to comply with green building solutions. Green marketing not only helps the environment but also saves the company, and ultimately the consumer, money. Sustainability, ethics (doing the right things), and social responsibility (helping society, communities, and other people) influence an organization’s planning process and the strategies they implement.
Although environmental conditions change and must be monitored continuously, the situation analysis is a critical input to an organization’s or an individual’s strategic plan. Let’s look at the other components of the strategic planning process.
The Mission Statement
The firm’s mission statement states the purpose of the organization and why it exists. Both profit and nonprofit organizations have mission statements, which they often publicize. The following are examples of mission statements:
PepsiCo’s Mission Statement “Our mission is to be the world’s premier consumer products company focused on convenient foods and beverages. We seek to produce financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity 2 .” The United Way’s Mission Statement “To improve lives by mobilizing the caring power of communities 3 .”
Sometimes SBUs develop separate mission statements. For example, PepsiCo Americas Beverages, PepsiCo Americas Foods, and PepsiCo International might each develop a different mission statement.
A firm must analyze factors in the external and internal environments it faces throughout the strategic planning process. These factors are inputs to the planning process. As they change, the company must be prepared to adjust its plans. Different factors are relevant for different companies. Once a company has analyzed its internal and external environments, managers can begin to decide which strategies are best, given the firm’s mission statement.
- What factors in the external environment are affecting the “Big Three” U.S. automobile manufacturers?
- What are some examples of Walmart’s strengths?
- Suppose you work for a major hotel chain. Using Porter’s five forces model, explain what you need to consider with regard to each force.
1 PepsiCo, Inc., “PepsiCo Brands,” http://www.pepsico.com/Company/Our-Brands.html (accessed December 7, 2009).
2 PepsiCo, Inc., “Our Mission and Vision,” http://www.pepsico.com/Company/Our-Mission-and-Vision.html (accessed December 7, 2009).
3 United Way Worldwide, “Mission and Vision,” http://www.liveunited.org/about/missvis.cfm (accessed December 7, 2009).
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What Are the Components of a Strategic Plan?
Making a strategic plan is resource-consuming. after all, a lot of research and effort from the whole team goes into it. a company has to take care of multiple components while making a strategic plan that propels it towards growth..
Is it worth it? Yes, even if your business is highly successful or at the starting phase. History has shown that even giants make critical mistakes when they lack vision. On the flip side, having a strategic plan has accelerated the growth of startups.
Key Components of a Powerful Strategic Plan
1. Mission and Vision
The mission statement is first on the list. It defines the business, and guides employees on their journey, as well defines how the organization is different from the competitors.
The mission statement summarizes what the organization hopes to achieve.
A 2016 survey revealed that 64.7% of job-seekers say that not knowing or disagreeing with a company’s vision and mission is a deal-breaker.
Let’s review LinkedIn’s mission statement: “Connect the world’s professionals to make them more productive and successful.” It’s self-explanatory; LinkedIn wants to make professionals productive and successful.
The strategic vision also outlines where the company sees itself in the long run. Take LinkedIn’s example: “Create economic opportunity for every member of the global workforce.”
Achievement of the vision is directly dependent on the mission.
Check out our article that will help you ask the right questions while forming your vision and mission statements.
2. Core Values
Core values are the standards your company will stick to while performing its day-to-day activities.
These are the beliefs that guide your company’s growth. In practical terms, the core values are principles that your team adheres to in conjunction with:
- Making decisions
- Serving customers
- Communicating externally and internally
- Solving operational problems
Core values play a part in your company branding by attracting clients, talent, and shareholders with the same values.
A 2018 Jobvite study found that 46% of job-seekers consider company culture very important, while 88% consider company culture of relative importance. Another report by 5WPR stated that “83% of Millennials find it important for the companies they buy from to align with their values.”
Some examples of core values:
- Evolve and adapt
- Honesty and integrity
- Deliver outstanding results
- Build for durability
- Equal opportunity for all
- Work-life balance
- Build relationships
A company value can be an action sentence like “communicate transparently, share and set expectations” or one word like “collaborate.”
Every company has core values, even if they’re not written on paper.
For inspiration, look at the culture of your organization. Your colleagues form one community that shares common values. You can start by jotting down those values and building on them as you find values that define your organization better.
3. Strengths, Weaknesses, Opportunities, and Threats
A SWOT analysis gives a realistic view of your standing in the market. You make short-term and long-term strategic decisions based on this analysis.
The four elements of swot analysis – strengths, weaknesses, opportunities and threats – help you find the right ways to grow your business and avoid the wrong ones. For example, if an eCommerce business finds that its employees are not trained for face-to-face communication with customers, it should not invest in a bricks-and-mortar store unless this weakness is addressed.
To create a SWOT analysis chart, you can record input from personnel in all your departments. Compile the data in a format that makes sense, and then make it available to your employees. Strengths and weaknesses are internal factors that can be controlled.
Examples of Strengths:
- Employees with diverse skill sets.
- A strong collaborative workplace culture.
Examples of Weaknesses:
- Products updates too technical for the customer base
- High employee turnover
On the other hand, opportunities and threats are external factors that affect your business directly but can’t be controlled.
Examples of Opportunities:
- Customers are leaning towards environmentally sustainable products.
- The government has lenient tax policies.
Examples of Threats:
- An increase in the cost of raw materials.
- A competitor launching an innovative product
4. Business Goals
Business goals state what your organization wants to achieve. Goals can be set for both the short-term and long-term, and they are intended for the organization as a whole or individual departments
Goals also aid the planning process but don’t have many actionable elements. The achievement of measurable goals is further dependent upon business objectives and strategies.
However, being short and concise, business goals are memorable and help the leadership team easily determine the top priorities. This is a much-needed tool. A survey found that only one-third of leaders who participated in a study of 400 companies were able to name their firm’s top three priorities.
Examples of Goals:
- Improve the customer experience
- Increase sales in the next quarter
- Enhance the lives of patients suffering from Alzheimer’s disease
5. Objectives, Strategies, and Operational Tactics
Objectives can be considered an even more specific version of the vision statement. An organization can have multiple business objectives at the same time, and branches of the same organization can have different ones.
Objectives are SMART (specific, measurable, achievable, realistic, and timely).
Examples of Objectives:
- Improve customer satisfaction, and dedicate 4 hours to resolving customer complaints every day.
- Achieve sales of $50K worth of dairy products
- Treat a thousand Alzheimer’s patients in the next 4 months
Strategies define how you’re going to achieve your objectives. Simply put, these are actionable steps that guide the organization.
Examples of Strategies:
- Hire 4 customer representatives and provide them with the training and tools they need to respond to 100 emails every day
- Buy enough raw materials to increase the number of dairy products your company offers and expand into new markets by approaching more retail stores to sell products
- Invest in equipment, research and training of doctors to make the treatment of Alzheimer’s disease more feasible
Operational tactics are the methods your team will use on a day-to-day basis to achieve the business objectives
Examples of Operational Tactics:
- Use a customer-service training tool for 2 hours per day
- Produce 40 pounds of cheese per week
- Conduct physical and neurological exams of patients
Create a Strategic Planning Template
Before you start working on the effective plan , make sure you have a way to record all this information in one place.
Use a word-processing application or spreadsheet, and start a document from scratch or download a template .
The template should contain:
- Mission statement
- Vision statement
- Elevator pitch
- SWOT analysis
- Short-term goals and long-term goals
- Strategic Objectives
- Marketing Strategies
- Branding guidelines
- Target market
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According to an Organization Synergies report , only 42% of managers and 27% of employees have access to the strategic plan.
A strategic planning platform like Frictionless can give you a headstart with the strategic planning process.
It offers market research and competitive analysis tools you can use to build a strategic plan based on solid data. It also allows you to revise the plan as the market shifts and gather feedback from your team.
Frictionless also acts as a consultant. It gives you a step-by-step framework for strategic growth at a fraction of the cost of high-priced consultancy.
Using this platform, you can build and share your tactical plan while collaborating with your team and business partners.
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- Management & Leadership
- Human Resources
- Employee Benefits
Mission statement, core values.
- SWOT Analysis
Yearly objectives, action plans.
Dan McCarthy is a management and leadership expert who's spoken, written, and taught on management topics for more than 20 years.
A strategic plan is a document that establishes the direction of an organization. It can be a single page or fill up a binder, depending on the size and complexity of the business and work.
Most managers can benefit from having a strategic plan. The process of developing a plan helps the manager (and the team) step back and examine where they are, where they want to go, and how they are most likely to get there. In the absence of a plan, work still gets done on a day-to-day basis but often lacks a sense of purpose and priority.
There are seven basic elements of a strategic plan. While much more is often included in the plan, these seven elements will help you get started.
A vision statement describes the way you envision your business. As such, it should communicate that dream to your employees and customers in an inspirational manner.
A vision statement should be reviewed continuously to ensure it is still aligned with the way you see your company.
Harley-Davidson's vision statement focuses on keeping its brand internationally known and valued, using the combined power of its stakeholders and employees to drive value and innovation:
Harley-Davidson, Inc. is an action-oriented, international company, a leader in its commitment to continuously improve our mutually beneficial relationships with stakeholders (customers, suppliers, employees, shareholders, government, and society). Harley-Davidson believes the key to success is to balance stakeholders’ interests through the empowerment of all employees to focus on value-added activities.
While a vision describes how you view your business to your customers and stakeholders, a mission statement describes what you do currently. It often describes what you do, for who, and how. Focusing on your mission each day should enable you to reach your vision. A mission statement could broaden your choices, and/or narrow them.
RedHat has been a provider of Linux operating systems for over 25 years. It has a simple mission statement:
To be the catalyst in communities of customers, contributors, and partners creating better technology the open source way.
A vision and mission can also be combined in the same statement. The Walt Disney Company does this:
The mission of The Walt Disney Company is to entertain, inform and inspire people around the globe through the power of unparalleled storytelling, reflecting the iconic brands, creative minds and innovative technologies that make ours the world’s premier entertainment company.
Note that the statement is both aspirational (“is to…”) and descriptive of what they do and how they do it ("through the...").
Core values describe your beliefs and behaviors. They are the beliefs you have that will enable you to achieve your vision and mission.
The Coca-Cola Company lists it's core values as:
Leadership: The courage to shape a better future
Collaboration: Leverage collective genius
Integrity: Be real
Accountability: If it is to be, it's up to me
Passion: Committed in heart and mind
Diversity: As inclusive as our brands
Quality: What we do, we do well
SWOT is an acronym for strengths, weaknesses, opportunities, and threats. A SWOT analysis provides businesses a situational investigation into their position in the market. It allows you to spot and name the important aspects, happenings, and adversaries of your business.
A business's strength could be its ability to attract local customers, while its weakness might be an inability to break into a non-local consumer base. A local competitor with ties to non-local customers could be facing a financial situation, giving this business an opportunity.
However, the other business remains a threat if it pulls out of the crises. If another competitor is trying to expand its customer base, it is a threat as well.
Long-term goals are statements that drill down a level below the vision and describe how you plan to achieve it. This set of goals usually starts three years out and extends to around five years into the future, directly aligning with the mission and vision statements.
Long-term goals are the milestones a company sets to guide operations toward their far-reaching objectives. Some examples of long-term goals could be for a business to strengthen its hold on the local market, increasing profits, or expanding its operations and sales.
Each long-term goal should have a few one-year objectives that advance your goals. Each objective should be as SMART as possible: Specific, Measurable, Achievable, Realistic, and Time-based.
After you make your yearly objectives, you might break each one down further into short-term goals, which define the actions and objectives for the next three months to get you to your yearly goals. The plans for achieving your short-term goals are your action plans.
Each objective should have a plan that details how it will be achieved. The amount of detail depends on the amount of flexibility you want your managers and team to have. The more detail provided the less flexibility exists for those that follow the plan.
It’s been said that “A vision without a plan is just a dream. A plan without a vision is just drudgery. But a vision with a plan can change the world.” Creating a plan to achieve your business objectives may not change the world—but it is possible. Some of the most successful corporations started in garages, and through planning became industry giants.
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