Dev't PPA (Chap-Three)

Chapter Three
3. Strategic Planning and its Application

3.1. Introduction
Strategy is a “military” term. It was Peter Drucker who pointed out the importance of
strategic decision in 1955 in his book, “The Practice of Management”. Here he defined
strategic decision as “all decision on business objectives and on the means to reach
them.”
However the importance of the concept was fully realized when pioneers like Alfred
Chandler and Michael Porter have developed the work strategic, which is regarded as
the Classical Approach. It involved the use of formal and systematic design techniques.
It concentrated on long-term plans and not concerned with implementation.
More or less it ignores the human element. It is also based on quantitative aspect and
focused externally. On the other hand, later writers emphasized on human and
qualitative aspect of strategy. They saw “strategy” as evolutionary. It showed that
“organizational behavior” as part of organizational processes.
3.1.1. Strategic planning-Meaning
Strategic planning means planning for strategies and implementing them to achieve
organizational goals. It starts by asking oneself simple questions like- What are we
doing? Should we continue to do it or change our product line or the way of working?
What is the impact of social, political, technological and other environmental factors on
our operations? Are we prepared to accept these changes etc.?
Strategic planning helps in knowing what we are and where we want to go so that
environmental threats and opportunities can be exploited, given the strengths
and weaknesses of the organization. Strategic planning is “a thorough self- examination
regarding the goals and means of their accomplishment so that the enterprise is given
both direction and cohesion.”
1 | AMU: Dev’t Planning & Project Analysis I BY: Mihretu T & Mirikat D.
It is “a process through which managers formulate and implement strategies geared
to optimizing strategic goal achievement, given available environmental and internal
conditions.” Strategic planning is formalization of planning where plans are made for
long periods of time for effective and efficient attainment of organizational goals.
Strategic planning is based on extensive environmental scanning. It is a projection into
environmental threats and opportunities and an effort to match them with
organization's strengths and weaknesses.
Planning is something we do in advance of taking action; that is, it is anticipatory

decision making. It is a process of deciding what to do and how to do it before action is
required.
Strategic planning can be defined as a managerial process of developing and

maintaining a viable fit between organization’s objectives, skills and resources and its
changing environment.
The company’s strategic plan is the starting point for planning. It serves as a guide to
the development of sound sub-plans to accomplish the organizational objectives. The
aim of strategic planning is to help a company select and organize its businesses in a
way that would keep the company healthy in spite of unexpected changes in the
environment. It purports to shape or reshape the company’s businesses and products so
that they yield target profits and growth.
Strategic Planning – Definition
Strategic planning is the process of determining a company’s long-term goals and then
identifying the best approach for achieving those goals. It is an organization’s process
of defining its strategy or direction and making decisions on allocating its resources to
pursue this strategy, including its capital and people.
Strategic planning is a process to determine or re-assess the vision, mission and goals of
an organization and then map out objective (measurable) ways to accomplish the
identified goals. It is systematic, formally documented process for deciding what are
the handfuls of key decisions that an organization, viewed as a corporate whole must
get right in order to thrive over the next few years.
Strategic planning is a continuous and systematic process where people make decisions
about intended future outcomes, how outcomes are to be accomplished, and how
success is measured and evaluated.
Strategic planning is systematic process of determining goals to be achieved in the

foreseeable future. It consists of – (i) Management’s fundamental assumptions about the
future economic, technological, and competitive environments. (ii) Setting of goals to be
achieved within a specified timeframe. (iii) Performance of SWOT analysis. (iv)
Selecting main and alternative strategies to achieve the goals. (v) Formulating,
implementing, and monitoring the operational or tactical plans to achieve interim
objectives.
Effective strategic planning articulates not only where an organization is going and the
actions needed to make progress, but also how it will know if it is successful.
There are many different frameworks and methodologies for strategic planning and
management, however one should note that there is no fixed rules regarding the right
framework most follow a similar pattern and have common attributes. Many
frameworks cycle through some variation on some very basic phases:
 Analysis or assessment, where an understanding of the current internal and

external environments is developed.
 Strategy formulation: where high level strategy is developed and a basic
organization level strategic plan is documented.
 Strategy execution: where the high level plan is translated into more
operational planning and action items.
 Evaluation or sustainment/ management phase: where ongoing refinement
and evaluation of performance, culture, communications, data reporting, and
other strategic management issues occurs.
3.1.2. Categories of strategic planning
There are three types of strategic planning that are essential to every organization:
corporate, business and functional. The word strategy is ambiguous in many ways, not
the least which is the distinction of corporate-level strategy, contrasted to business-level
strategy, and functional strategy.
 When you are leading a strategic initiative for executing a corporate-level

strategy, you are creating a new business model
 When you are leading a strategic initiative for executing a business-level

strategy, you are improving several or all of the elements of a business model
 When you are leading a strategic initiative for executing a functional level
strategy, you are optimizing one or more of the elements of a business model.
Corporate strategy- Corporate strategy deals with the overall firm. This kind of strategy
is concerned with market definition: what businesses and markets do we want to be in?
A strategic initiative might be launched to answer that question, or more likely to
realize the strategic intent of a new chosen business or market.
These strategic decisions cannot be made at a lower level without risking sub-
optimization of resources. The first task is to conduct an environmental scan (study the
business environment) in order to identify strengths and weaknesses. Next would be to
scrutinize the firm's mission, the segmentation of its businesses and the integration of
those businesses. Completion of these tasks yields answers to the questions corporate
strategy must answer: What are the corporate performance objectives? How should the firm's
resources be allocated to satisfy corporate, business and functional requirements? Should the
design of the managerial infrastructure and the selection, promotion and motivation of key
personnel change? The Red-Ocean-Blue-Ocean metaphor(way of expression) has been
popular over the last few years. A red ocean is a market where competitors bloody each
other up fighting for market share. A blue ocean is an emerging, growing business
arena; potential competitors have not yet identified it and the opportunity for success is
large.
An example of corporate-level strategy: The February 2011 announcement an alliance

between Microsoft and Nokia Corp. The alliance involve Nokia will produce phones
running Windows Phone 7, a recognition that Nokia’s investment in its own operating
system has failed. The alliance gives Microsoft access to the world’s largest phone
maker and its huge mindshare - in many developing nations a mobile phone is known
as a Nokia. The deal with Microsoft gives both Nokia and Microsoft a route to the
future in the smart-phone market.
There are four key aspects of corporate strategy. The first has to do with the strategic
management of the current set of businesses in the company’s portfolio and the allocation of
resources among them. The second related aspect is the creation of shareholder value
through corporate strategy. The third aspect has to do with the realization of synergies
across businesses and the identification and management of direct linkages between
businesses. The fourth aspect is the strategy of diversification, whether through
acquisition or internal development.
Business strategy - This kind of strategy is concerned with succeeding in chosen

markets, focuses on competitive positioning (where to compete and how) in order to
create an advantage over competitors. An example of a business-level strategy was
Domino’s Pizza Turnaround which required all areas of the organization to pull
together to achieve a simple understandable business goal: have a clear win against
competitor in a taste test.
Business managers should run the business in a way that is in alignment with overall
corporate strategy. The framework for building a business strategy includes developing
the mission of the business, once again conducting an environmental scan and
examining the key activities of the value chain. The action plan that results directs the
business strategy, programs and budget.
Functional strategy- This kind of strategy is concerned with making improvements to

business functions that support business and corporate strategy. Functional strategy
include IT strategy, marketing strategy, IT strategy, human resources strategy, and
operations. Typically, documents portraying functional strategy will list estimates and
plans for operating expenses, headcount, and continuous improvement. It carries out
the objectives and mission set at the corporate and business strategy levels. This is
achieved by creating action plans and setting budgets.
An example of functional-level strategy: In 2008, Swiss Life Group, a Zurich-based

insurance company announced a change in its Information Technology functional
strategy priorities. The implications of this was a decision to considerably scale back the
number of IT projects in order to reduce costs through re-prioritization. This was
successful as shown in this November 2010 announcement.
The Diagramme below illustrate the different kinds of strategy
Figure.3.1. Categories of Strategies
3.2. Strategic planning and management process
3.2.1. The strategic planning Process
Strategic planning is one of the most important responsibilities of the senior

management of an organization. It is the vehicle that senior management should use to
set the organizational vision, determine the strategies required to achieve that vision,
make the resource deployment decisions to achieve the selected strategies, and build
alignment to the vision and strategic direction throughout all levels of the organization.
Unfortunately, strategic planning is also one of the most misunderstood and poorly
used tools in many organizations. Strategic plans are often large documents with
detailed plans created arduously over months at great effort...only to gather dust and
languish after they have been duly acknowledged and then filed away.
There are several reasons why strategic plans are not developed properly, or not
implemented properly. Among the most common are:
 Senior management does not follow a defined process to accomplish this task.
As a consequence, months of effort are wasted in creating reams of paper that
do not have strategic import.
 The process is delegated to a planning group, or assigned to the various

functional leaders to complete for their respective areas. If completed in
individual functional areas, the plan may work for individual departments, but
is likely to sub-optimize the whole organization. If assigned to a planning
group, the result is often not truly embraced and endorsed by senior
leadership.
 Senior management does not set aside the time to develop the strategic plan as
a collective team work product.
 The organization does not understand what a strategic plan is actually

designed to provide. Therefore, the strategic plan is a tactical business plan
with multiple year extrapolations. There is very little about it that addresses
actual strategic direction.
 Senior management does to follow a defined process or methodology that will

result in a strategic plan in a timely and efficient yet comprehensive manner.
 The plan is developed but there is no process to communicate it throughout
the organization and build organization-wide alignment to its implementation.
 The plan is developed with no implementation guidelines at all. At best, it is

implemented in pieces. At worst, it is unfunded and ignored.
Strategic plans can be developed in an efficient and timely manner as long as the senior
management team of an organization is committed to meeting and working together
over a period of several months to develop it.
The general scope of work is a series of dedicated sessions for one day each conducted
with the senior management team once a month for 3-5 months. The number of work
sessions may vary, depending on the complexity of the organization and the shifts in
the business environment. The process can also be conducted in a series of half day
sessions once every two weeks. In either case, once the process has begun it must be
applied with consistency and dedication by the senior team...as a team. In addition,
members of the senor team should be prepared to spend an amount of time equal to the
length of each session for follow-up work from each session. Members of their
individual organizations may be required to provide some staff input as well.
3.2.1.1. The strategic plan (Work Product)
The work product (the strategic plan) is a tightly developed, concise document that can
then be shared with the employees of an organization. This work product (without the
high level implementation plan) should generally consist of the following:
 SWOT analysis (Assessment of current business environment)
 Vision
 Mission (may also include core values)
 Critical success factors
 Overall organisational performance measures
 Core Strategies – External and Internal
 Performance measures for each strategy
 Major resource deployment decisions
 Assignment of strategic responsibilities
 High level macro implementation schedule
 Monitoring and control system
In addition to the Strategic Plan described above, the following additional supplemental
work products may be developed:
• Communications plan to build organizational alignment
High level tactical implementation plan for each strategy – to include major tasks, high
level schedule, resource requirements, and responsible personnel
Figure 3.3. Elements of Strategic Plan
3.2.1.2. Elements of a compelling Vision
Visions are not created by the masses. They are not created by a committee. They are
created by the leadership of an organization.
A single statement is typically inadequate as a functioning vision. Such a statement may

contain emotional appeal, but it does not have sufficient clarity to be translated into
meaningful action.
A comprehensive vision that is also compelling MUST include the following:
 The vision statement itself – short, clear, compelling and distinct
 The core strategies that the organization will follow to achieve that vision
3.2.1.3. Translating the Vision into strategic direction
Once the vision has been articulated and agreed by the senior team, it must be
converted into the core strategies that will be deployed to turn the vision into reality.
This step is often omitted by leadership teams. Instead, the vision is converted into
specific goals which are divided into functional areas and assigned to the different
members of the senior team for implementation. Unfortunately, different members of
this team – even though they agree on the vision – may have profoundly different
perspectives regarding the best ways to achieve that vision. The result is disagreement,
conflict and organizational confusion as the organization attempts to execute to its
vision.
The vision process is not complete until senior management- as a cross-functional

integrated team – has worked together to define and agree on the core overall business
strategies that will be used to achieve this vision
The process of developing this strategy document must include the articulation of the
core strategies. It may also include the measures to use as the benchmark of
performance and progress against this strategy. It may even include the assignment of
specific members of the senior leadership team as champions of specific strategies. This
step is especially useful if the strategies require cross-functional integration and
implementation.
The following questions can help guide the strategy development process.
 How will this vision be achieved? What must we do differently?
o What are the key things we must start doing?
o What are the key things we must stop doing?
o What are the key things we must continue doing?
 What does this mean for:
o Our product/service mix

10 | AMU: Dev’t Planning & Project Analysis I BY: Mihretu T & Mirikat
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o Our target marketplace(s)
o Our customer base
o Our employees – our talent base
o Our core work processes
o Our infrastructure (locations, facilities, equipment, etc).
o Our business partners – alliances, suppliers, etc.
o Possible acquisitions or divestitures
o Capital requirements
The Discipline of Execution
In order for a strategic plan to achieve its potential, it must be translated into
determined execution. For this reason the final session(s) of the work with the senior
team include the construction of the execution plan.
The six core execution drivers are:
 Clarity – employees must clearly know the strategic direction, goals and
priorities
 Commitment – employees must buy into the goals
 Translation – employees must know what they must individually do to achieve

the strategic goals
 Enabling – Employees must have the proper structure, tools, resources and
freedom to do their job well
 Synergy – Employees must work well together to create results greater than
the sum of their individual contributions
 Accountability – Employees and managers must regularly hold themselves

and each other accountable to their commitments
D.
The drivers are satisfied through four key disciplines of execution. The four disciplines
are:
 Focus on the wildly important
o The 20% of the activities that will generate the 80% of the results
o Acknowledging and responding to the concept that people are naturally

hard wired to focus only on one (or at most a few) things at one time
o Distinguish between what is merely important and what is wildly

important
o Wildly important requirements are discovered by filtering through the

stakeholder screen, the strategic screen, and the economic screen
 Create a compelling scoreboard

o People play differently when they are keeping score
o Compelling, visible, accessibly scoreboard for the strategic plan and its
crucial goals
o The scoreboard makes clear from what-to-what – by whom – by when – for
how much
 Translate lofty goals into specific actions
o Establish the difference between the stated strategy and the reality of
today’s work environment. The stated strategy is what is communicated
and expected. The current reality is what people are doing every day. Build
the bridge through a specific action plan that moves the organization from
today’s reality to tomorrow’s strategic future.
o Everyone must know exactly what they are supposed to do to implement
the strategy and achieve the results being measured on the scoreboard.
 Hold one another accountable all the time
o Collective, shared and individual responsibilities and accountability
o Triage reporting in a team environment
o Finding third alternatives to overcome obstacles
o Clearing the path – removing roadblocks to success
D.
3.2.2. Strategic management
Strategic management is the process in which an organization develops and

implements plans that espouse the goals and objectives of that organization. Strategic
management process is continuous and evolves as the organizational goals and
objectives change. Organizations engage in strategic management to ensure that they
adapt to trends and external changes such as globalization. Several key concepts
characterize strategic management and the development of organizational goals (Wicks,
2014:02).
Strategic Management can be defined as an ongoing the process Dess, Lumpkin and
Taylor, (2005) Indicates that strategic management of an organization entails three
ongoing processes: analysis, decisions, and actions. That is, strategic management is
concerned with the analysis of strategic goals (vision, mission, and strategic
objectives) along with the analysis of the internal and external environment of the
organization. In essence strategic management consists of the analysis, decisions, and
actions an organization undertakes in order to create and sustain competitive
advantages. In essence strategic management is centered around businesses world
and respond to the questions of “where do you want your business to go” (goals), “how is
your business going to get there” (strategy) and “how will you know when you get there”
(evaluation) (Hofstrand, 2007:1)
Furthermore according to Johnson, Scholes and Whittington (2008: 11-12) point out that
Strategic management includes understanding the strategic position of an organization,
making strategic choices for the future and managing strategy in action. Strategic
management therefore defined as the process by which organization analyze the
internal and external environments for the purpose of formulating strategies and
allocating resources to develop a competitive advantage in an industry that allows for
the successful achievement of organizational goals (Cox, Daspit, McLaughlin. and Jones
III, 2012: 27-28). Most importantly to be noted that strategic management is not about
predicting the future, but about preparing for it and knowing what exact steps the
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organization will have to take to implement its strategic plan and achieve a competitive
advantage (Blatstein, 2012: 32).
The following figure presents the relevant key concepts for strategic management
process.
Figure. 3.2. Key concepts for strategic management process
Goal Setting: At the core of the strategic management process is the creation of goals, a
mission statement, values and organizational objectives. Organizational goals, the
mission statement, values and objectives guide the organization in its pursuit of
strategic opportunities. It is also through goal setting that managers make strategic
decisions such as how to meet targets and higher revenue generation. Through goal
setting, organizations plan how to compete in an increasingly competitive and global
business arena.
Analysis Strategy Formation: Analysis of an organization’s strengths and weaknesses

is a key concept of strategic management. Other than the internal analysis, an
organization also undertakes external analysis of factors such as emerging technology
and new competition. Through internal and external analysis, the organization creates
goals and objectives that will turn weaknesses to strengths. The analyses also facilitate
in strategizing ways of adapting to changing technology and emerging markets.
Strategy Formation: it is a concept that entails developing specific actions that will
enable an organization to meet its goals. Strategy formation entails using the
information from the analyses, prioritizing and making decisions on how to address
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key issues facing the organization. Additionally, through strategy formulation an
organization seeks to find ways of maximizing profitability and maintaining a
competitive advantage.
Strategy implementation: it is putting the actual strategy into practice to meet

organizational goals. The idea behind this concept is to gather all the available and
necessary resources required to bring the strategic plan to life. Organizations implement
strategies through creating budgets, programs and policies to meet financial,
management, human resources and operational goals. For the successful
implementation of a strategic plan, cooperation between management and other
personnel is absolutely necessary.
Strategy Monitoring: A final concept is monitoring of the strategy after its

implementation. Strategy monitoring entails evaluating the strategy to determine if it
yields the anticipated results as espoused in the organizational goals. Here, an
organization determines what areas of the plan to measure and the methods of
measuring these areas, and then compares the anticipated results with the actual ones.
Through monitoring, an organization is able to understand when and how to adjust the
plan to adapt to changing trends.
3.2.3. External Analysis
External analysis is the study of the environment of a company, including

macroeconomic, global, political, social, demographic, and technological analysis. To
begin the discussion on external analysis, we must define two terms: industry and
market segment.
 Industry is a group of companies offering products or services that are close

substitutes for each other. Examples of an industry include soft drinks, mobile
phones, and sportswear.
 Market segments are distinct groups of customers within a market that can be
differentiated from each other based on individual attributes and specific
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demands. Market segments can be separated by characteristics such as
geography, demography, and behavior.
The external analysis examines opportunities and that exist in the environment. Both
opportunities and threats exist independently of the firm. The way to differentiate
between a strength and weakness from an opportunity or threat is to ask: Would this
issue exist if the company did not exist? If the answer is yes, it should be considered
external to the firm. Opportunities refer to favorable conditions in the environment that
could produce rewards for the organization if acted upon properly. That is,
opportunities are situations that exist but must be acted on if the firm is to benefit from
them. Threats refer to conditions or barriers that may prevent the firm from reaching its
objectives.
The following area analyses are used to look at all external factors affecting a company:
o Customer analysis: segments, motivations, unmet needs

o Competitive analysis Identify completely, put in strategic groups, evaluate
performance, image, their objectives, strategies culture, cost structure, strengths,
weakness.
o Market analysis: Overall size, projected growth, profitability, entry barriers, cost
structure, distribution system, trends, key success factors.
o Environmental analysis: Technological, governmental, economic, cultural,
demographic, scenarios, information-need areas goal.
3.2.4. Internal analysis
Internal analysis focuses on evaluating the inherent traits of the organization at hand,
without taking into account the performance of external organizations. Here’s another
way to think about internal analysis: if your organization was the only one that existed
— meaning your organization had no competition — and your business environment
was entirely neutral — meaning it didn’t in any way affect your organization — then
what factors would you consider when analyzing your organization?
D.
The Internal Analysis of strengths and weaknesses focuses on internal factors that give
an organization certain advantages and disadvantages in meeting the needs of its target
market. Strengths refer to core competencies that give the firm an advantage in meeting
the needs of its target markets. Any analysis of company strengths should be market
oriented/customer focused because strengths are only meaningful when they assist the
firm in meeting customer needs. Weaknesses refer to any limitations a company faces in
developing or implementing a strategy (?). Weaknesses should also be examined from a
customer perspective because customers often perceive weaknesses that a company
cannot see. Being market focused when analyzing strengths and weaknesses does not
mean that non-market oriented strengths and weaknesses should be forgotten. Rather,
it suggests that all firms should tie their strengths and weaknesses to customer
requirements. Only those strengths that relate to satisfying a customer need should be
considered true core competencies.
 The following area analyses are used to look at all internal factors affecting a
company:
Resources: Profitability, sales, product quality brand associations, existing overall
brand, relative cost of this new product, employee capability, product portfolio
analysis
 Capabilities: Goal: To identify internal strategic strengths, weaknesses, problems,
constraints and uncertainties.
3.2.5. SWOT Analysis
SWOT is an acronym used to describe the particular Strengths, Weaknesses,

Opportunities, and Threats that are strategic factors for a specific company. A SWOT
analysis should not only result in the identification of a corporation’s core
competencies, but also in the identification of opportunities that the firm is not
currently able to take advantage of due to a lack of appropriate resources.
So a SWOT analysis is a technique for assessing these four aspects of your business.
SWOT Analysis is a tool that can help you to analyze what your company does best
now, and to devise a successful strategy for the future.
D.
The SWOT analysis framework has gained widespread acceptance because it is both
simple and powerful for strategy development. However, like any planning tool, SWOT
is only as good as the information it contains. Thorough market research and accurate
information systems are essential for the SWOT analysis to identify key issues in the
environment.
Assess your market:
 What is happening externally and internally that will affect our company?
 Who are our customers?
 What are the strengths and weaknesses of each competitor? (Think Competitive
Advantage)
 What are the driving forces behind sales trends?
 What are important and potentially important markets?
 What is happening in the world that might affect our company?
 What does it take to be successful in this market? (List the strengths all
companies need to compete successfully in this market.)
 Assess your company:
 What do we do best?
 What are our company resources – assets, intellectual property, and people?
 What are our company capabilities (functions)?
Assess your competition:
 How are we different from the competition?

 What are the general market conditions of our business?
 What needs are there for our products and services?
 What are the customer-market-technology opportunities?
 What are the customer’s problems and complains with the current products
and services in the industry?
 What “If only….” Statements do a customer make?
Opportunity an area of “need” in which a company can perform profitably.
Threat
o A challenge posed by an unfavorable trend or development that would lead

(in absence of a defensive marketing action) to deterioration in profits/sales.
D.
o An evaluation needs to be completed drawing conclusions about how the
opportunities and threats may affect the firm.
3.3. Implementing and Evaluating Strategy
3.3.1. Strategy Implementation
Karami (2005) defines strategy implementation as the manner in which organizations

should develop, utilize, and amalgamate organizational structure, control systems, and
culture to follow strategies that lead to competitive advantage and a better
performance.
On the other hand, strategy implementation is defined as the process that turns
strategies and plans into actions in order to accomplish strategic objectives (John 2005).
According to Kaplan (2005) the concept of successful strategy implementation requires
the input and cooperation of all players in the company. Pearce and Robinson (2007)
describe five critical variables that are usually considered for the successful
implementation of strategy. These are: tasks, people, structures, technologies and
reward systems. Successful strategy implementation calls for effective design and
management in order for these factors to be integrated.
3.3.2. Evaluating Strategy
There are a number of different criteria for evaluating strategic alternatives. It would be
very difficult to use all these criteria to get a satisfactory result simultaneously.
However, to make the evaluation practically possible, all the criteria can be classified
into three groups; these are criteria of suitability, criteria of feasibility, and criteria of
acceptability.
I. Criteria of Suitability: these criteria attempt to measure the extent to which the
proposed strategies fit the situation identified in the strategic analysis. The
situation should indicate the list of important opportunities and the threats that
the firm faces and the particular strength and weaknesses of the firm.
D.
The evaluation of suitability also called the criteria of consistency. The strategy to be
selected should meet the following criteria:
 To what extent, the strategy can overcome the difficulties identified in the
strategic analysis? For example , can the strategy increase the market share of the
company?
 To what extent the strategy can exploit the environmental opportunities by using
company’s strength?. For example, can the strategy provide the status of leader
in introducing the new product, under stable market condition?
 Does the strategy fit in with company’s objectives and values?. For example,
would the strategy fir in the recently signed agreement with the members of the
chamber of Commerce and Industry in the country?
II. Criteria of feasibility: these criteria assess the practical implementation and
working of the strategy. For example, will the strategy of price-cut result in hike
in profits under the competitive environment?
The following questions need to be assessed at the evaluation stage:
 Can the company provide enough financial resources to implement the strategy?.
This can be examined by analyzing future cash flows, company’s commitments,
ability and willingness of the management to budget the funds.
 Is the company capable of performing the required level?
 Can the necessary market position be achieved? Will the necessary marketing
skills be available?
 Can competitive reactions be coped with?
 How will the company ensure that the required managerial and operative skills
be available?
 Will the technology be available to compete effectively?
 Can the necessary materials and services be procured?
III. Criteria of acceptability: the firm should assess the strategy to decide whether
the consequences of proceeding with a strategy acceptable. The strategy should
be acceptable to the strategy decision maker in the company. Therefore,
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acceptability involves not only the consequences of the strategy, but also the
personal considerations like values of the strategy decision maker.
The following factors will help to identify the likely consequences of the strategy
after its implementation:
 What will be the financial performance of the firm in terms of

profitability?
 How will the financial problems (like liquidity) be solved?
 What will be the effect on capital structure?
 Will any proposed changes be acceptable to the general cultural
expectations within the organization?
 Will the function of any department, group or individual change
significantly?
 Will the company’s relationship with outside stakeholders (like suppliers,
bankers, customers) need to change?
 Will the strategy be acceptable to the company’s environment (like local
community)?
 Will the proposed strategy fit existing systems or will it require major
changes?
III.3.3.Framework for Evaluating Strategic Alternatives
After developing a number of strategic alternatives, they should be evaluated against

the criteria, in order to select the best strategy. The process of evaluation is discussed
below. Fig. 3.3 depicts the proposed framework for undertaking a strategic evaluation.
The steps in the process of strategic evaluation are:
(i) The first step is a strategic analysis in order to gain a clear understanding of
the circumstances affecting the organization’s strategic situation.
(ii) The second step is to produce a range of strategic options.
(iii) The third step is to develop a basis of comparison. This may be available from
the strategic analysis or may need to be specially developed.
(iv) Preliminary Analysis: It is helpful to establish the underlying rationale for
each strategy by explaining why the strategy might succeed. This is often
done in qualitative terms and by using techniques like scenario building
product portfolio analysis and the assessment of synergy.
D.
Figure.3.3. Framework for evaluating strategic options.
(v) At this stage, the large number of strategic alternatives may be narrowed
down, before a more detailed analysis is undertaken. Strategic alternatives
may be ranked, based on their relative merits and demerits.
(vi) Suitability of each alternative should be tested. There are a number of
techniques for testing. The specific choice of technique will depend upon the
circumstances.
(vii) The next stage is assessing the feasibility and acceptability of strategies which
appear reasonably suitable based on the analysis. The choice of the technique
should be based on the circumstances of the company.
(viii) Finally, the company will need some system for selecting future strategies as
a result of these evaluations.
D.

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Chapter Three

3. Strategic Planning and its Application

3.1.1. Strategic planning-Meaning

Planning is something we do in advance of taking action; that is, it is anticipatory

Strategic planning can be defined as a managerial process of developing and

Strategic Planning – Definition

Strategic planning is systematic process of determining goals to be achieved in the

 Analysis or assessment, where an understanding of the current internal and

 When you are leading a strategic initiative for executing a corporate-level

 When you are leading a strategic initiative for executing a business-level

An example of corporate-level strategy: The February 2011 announcement an alliance

Business strategy - This kind of strategy is concerned with succeeding in chosen

Functional strategy- This kind of strategy is concerned with making improvements to

An example of functional-level strategy: In 2008, Swiss Life Group, a Zurich-based

The Diagramme below illustrate the different kinds of strategy

Figure.3.1. Categories of Strategies

Strategic planning is one of the most important responsibilities of the senior

 The process is delegated to a planning group, or assigned to the various

 The organization does not understand what a strategic plan is actually

 Senior management does to follow a defined process or methodology that will

 The plan is developed with no implementation guidelines at all. At best, it is

3.2.1.1. The strategic plan (Work Product)

 SWOT analysis (Assessment of current business environment)

 Mission (may also include core values)

 Critical success factors

 Overall organisational performance measures

 Core Strategies – External and Internal

 Performance measures for each strategy

 Major resource deployment decisions

 High level macro implementation schedule

 Monitoring and control system

• Communications plan to build organizational alignment

Figure 3.3. Elements of Strategic Plan

3.2.1.2. Elements of a compelling Vision

A single statement is typically inadequate as a functioning vision. Such a statement may

A comprehensive vision that is also compelling MUST include the following:

 The vision statement itself – short, clear, compelling and distinct

The vision process is not complete until senior management- as a cross-functional

 How will this vision be achieved? What must we do differently?

o What are the key things we must start doing?

o What are the key things we must stop doing?

o What are the key things we must continue doing?

 What does this mean for:

o Our product/service mix

o Our customer base

o Our employees – our talent base

o Our core work processes

o Our infrastructure (locations, facilities, equipment, etc).

o Our business partners – alliances, suppliers, etc.

o Possible acquisitions or divestitures

The Discipline of Execution

The six core execution drivers are:

 Commitment – employees must buy into the goals

 Translation – employees must know what they must individually do to achieve

 Accountability – Employees and managers must regularly hold themselves

 Focus on the wildly important

o Acknowledging and responding to the concept that people are naturally

o Distinguish between what is merely important and what is wildly

o Wildly important requirements are discovered by filtering through the

 Create a compelling scoreboard

Strategic management is the process in which an organization develops and

Figure. 3.2. Key concepts for strategic management process

Analysis Strategy Formation: Analysis of an organization’s strengths and weaknesses