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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.

A simplified view of the strategic planning process is shown by the following diagram:

The Strategic Planning Process

Mission &
      Objectives      

  Environmental  
Scanning

Strategy
    Formulation     

Strategy
 Implementation  

      Evaluation      
& Control
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 macroenvironment (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 industry-independent 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

What is strategic management

Strategic management is a field that deals with the major intended and emergent initiatives
taken by general managers on behalf of owners, involving utilization of resources, to enhance the
performance of firms in their external environments.[1] It entails specifying the organization's
mission, vision and objectives, developing policies and plans, often in terms of projects and
programs, which are designed to achieve these objectives, and then allocating resources to
implement the policies and plans, projects and programs. A balanced scorecard is often used to
evaluate the overall performance of the business and its progress towards objectives. Recent
studies and leading management theorists have advocated that strategy needs to start with
stakeholders expectations and use a modified balanced scorecard which includes all stakeholders.

Strategic management is a level of managerial activity under setting goals and over Tactics.
Strategic management provides overall direction to the enterprise and is closely related to the
field of Organization Studies. In the field of business administration it is useful to talk about
"strategic alignment" between the organization and its environment or "strategic consistency."
According to Arieu (2007), "there is strategic consistency when the actions of an organization
are consistent with the expectations of management, and these in turn are with the market and the
context." Strategic management includes not only the management team but can also include the
Board of Directors and other stakeholders of the organization. It depends on the organizational
structure.

“Strategic management is an ongoing process that evaluates and controls the business and the
industries in which the company is involved; assesses its competitors and sets goals and
strategies to meet all existing and potential competitors; and then reassesses each strategy
annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it
has succeeded or needs replacement by a new strategy to meet changed circumstances, new
technology, new competitors, a new economic environment., or a new social, financial, or
political environment.” (Lamb, 1984:ix)[2]

Rule 3: the Importance of Strategic Management

We cannot emphasise strongly enough the importance of strategic management in good

corporate governance (remember good governance = good management). In fact, we believe
corporate governance should be an integral part of the strategy process.

So our Third Golden Rule of corporate governance is that good corporate governance requires
an effective strategic management process to be in place.

By this we mean that the company is organised and run according to rules which

 set a goal which matches the duly considered expectations of the stakeholders
 work out a feasible strategy to achieve that goal
 put in place an organisation which can carry out the strategy and attain the goal
 set up a control and reporting function to permit management to drive the organisation
effectively and make necessary adjustments to the strategy or even the goal

Anything less rigorous than the above strategic management definition will only achieve success
by accident and will be vulnerable to all kinds of unexpected events. As we discussed on our best
corporate governance practice page, good corporate governance is, or should not just be about
compliance and risk management, but - more positively - good management. So let us explore
for a moment the critical importance of strategic management to overall good management.

As Harvey MacKay said, "Failures don't plan to fail; they fail to plan" (based on an old
military proverb). And Thomas Edison famously said "Good fortune is what happens when
opportunity meets with planning." Examine any successful business and you will observe the
high and disciplined level of planning which incontrovertibly led to that success - and the world
is full of failures who failed to plan. Even many that have subsequently failed often did so
because the importance of strategic management within the organisation diminished and with it
the essential structure and visibility required to achieve goals and avoid pitfalls.

We planned this website itself for weeks before we even wrote a word and while content varies
and is continuously added, we are very clear about what we want to achieve from it, how we will
get there and regularly check progress towards those goals. Because of this, although at the time
of writing we have completed less than a third of the initial sitemap, we are already being picked
up by the search engines and receiving modest traffic (all for less than no marketing or
promotion, even to friends and family).

This once again proves the importance of strategic management even on a small scale. Without
this process the site, like so many websites and businesses, would still be on the drawing board
or worse, in our heads while we think about all the good we know we can do with our applied
corporate governance approach. Permit us to go into a bit more detail to illustrate, we sat down
and did a mini strategy consisting of:

 Setting detailed goals for content generation, new seminar bookings from the site, etc as well as
deciding on an initial long term goal (subject to change following the Position Analysis)
 Analysing all our internal and external resources (the Position Analysis - where we are now) -
the books, articles, seminar and workshop materials, etc, that we have written over the years,
plus contacts, suitable locations, etc.
 Analysing our external envirnoment - the marketplace for corporate governance services,
keyword research to identify what people search for (and how many) corporate governance and
related terms, current developments and debate by the like of the UK's Institute of Directors
Institute of Chartered Accountants, etc
 Analysing stakeholder views - while very limited at this stage, this included gauging the views of
actual and prospective partners to ensure our suggested approach would be well received (and
indeed we made a few changes as a result to ensure buy-in and co-operation with our plans
 Formulating a strategy - involving generating options - for example we looked at fund managers
as a possible angle, as well as the area of Non-Executive Directors/the Senior Independent
Director - and making a choice
 Implementing the strategy - this website is one of the embodiments of this process
 Set up monitoring and reporting - at this stage this is limited to website analytics and (crucially)
use of time management tools to ensure enough time is spent developing the website/content;
you, the visitor, can also monitor this progress, of course, and as key stakeholders, we welcome
your feedback!
This is a small example of the strategic management process in action to illustrate the importance
of strategic management and detailed planning in any area (including personal goals) to ensure
the best chance of success.

The importance of strategic management in the financial crisis

At the other end completely of the scale, we would argue that there was a major failure in
strategic planning by almost all the major global financial institutions, as well as in the
governance of these organisations as there was clearly not enough knowledge or information in
key places which would have signalled - via the direct, or more often indirect connection to it -
the risk that the sub-prime lending market was running. An almost blinkered attitude persisted
that said "We don't do sub-prime", when due to the globalised nature of the financial system this
risk affected them anyway, whether or not they had direct relationships with players or
(re-)insurers in the sub-prime space. So we place a major part of the blame on those financial
institutions, not just the sub-prime lenders themselves and the lending policy and bonus culture
that actually provoked the credit crunch.

As we argue elsewhere on this site, had there been proper, regular and direct dialogue between
the various stakeholders and especially trading partners of these institutions, and detailed
analysis of the strategic positioning in relation to the sub-prime market, the greater part of the
credit crunch could have been avoided. The resulting recession could therefore have been much
less severe. We find it inconceivable that using our approach and independent market research
(which would have picked up on affordability issues, for example), such risks would not have
been picked up and acted upon. For us, therefore, what happened was a failure both of corporate
governance and of strategic management.

In the current economic climate, whatever the size of your business or organisation, the
importance of strategic management is particularly great. To avoid drifting into an iceberg flow,
or if already there, to plan a way out and minimise the risk of actually hitting one, you need the
visibility good strategic planning gives you. You may will suffer the same fate as the Titanic, but
you stand a much better chance with it. And that you owe to ALL your stakeholders, so consider
strategic management as vitally important to good corporate governance too.

This is the third in our series on Best Corporate Governance Practice - the Golden Rules of
corporate governance:
Rule 1: The Ethical Approach - Corporate Ethics in Governance
Rule 2: Towards a Common Goal - Align Business Goals
Rule 3: The Importance of Strategic Management
Rule 4: Organisational Effectiveness for Good Corporate Governance
Rule 5: The Importance of Corporate Communication