THE STRATEGIC PLANNING PROCESS

In today's highly competitive business environment, budget-oriented planning or forecast-based planning
methods are insufficient for a large corporation to survive and prosper. The firm must engage in strategic
planning that clearly defines objectives and assesses both the internal and external situation to formulate
strategy, implement the strategy, evaluate the progress, and make adjustments as necessary to stay on track.
The following diagram shows a simplified view of the strategic planning process:
The Strategic Planning Process

Mission and Objectives
The mission statement describes the company's business vision, including the unchanging values and
purpose of the firm and forward-looking visionary goals that guide the pursuit of future opportunities.

Guided by the business vision, the firm's leaders can define measurable financial and strategic objectives.
Financial objectives involve measures such as sales targets and earnings growth. Strategic objectives are
related to the firm's business position, and may include measures such as market share and reputation.

Environmental Scan
The environmental scan includes the following components:

· Internal analysis of the firm
· Analysis of the firm's industry (task environment)
· External microenvironment (PEST analysis)

The internal analysis can identify the firm's strengths and weaknesses and the external analysis reveals
opportunities and threats. A profile of the strengths, weaknesses, opportunities, and threats is generated by
means of a SWOT analysis An industry analysis can be performed using a framework developed by Michael Porter known as

Porter's five forces. This framework evaluates entry barriers, suppliers, customers, substitute products, and industry
rivalry.

Strategy Formulation
Given the information from the environmental scan, the firm should match its strengths to the opportunities
that it has identified, while addressing its weaknesses and external threats.

To attain superior profitability, the firm seeks to develop a competitive advantage over its rivals. A
competitive advantage can be based on cost or differentiation. Michael Porter identified three industryindependent
generic strategies from which the firm can choose.

Strategy Implementation
The selected strategy is implemented by means of programs, budgets, and procedures. Implementation
involves organization of the firm's resources and motivation of the staff to achieve objectives.

The way in which the strategy is implemented can have a significant impact on whether it will be successful.
In a large company, those who implement the strategy likely will be different people from those who
formulated it. For this reason, care must be taken to communicate the strategy and the reasoning behind it.
Otherwise, the implementation might not succeed if the strategy is misunderstood or if lower-level
managers resist its implementation because they do not understand why the particular strategy was
selected.

Evaluation & Control
The implementation of the strategy must be monitored and adjustments made as needed.
Evaluation and control consists of the following steps:
1. Define parameters to be measured
2. Define target values for those parameters
3. Perform measurements
4. Compare measured results to the pre-defined standard
5. Make necessary changes