Chapter 2

Planning: Foundation
of Strategy
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Reporter: Chiara Mari S. Manalo

Subject: BA 108 - Business Policy

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Elements of the Planning Stage

1. Scanning

2. Monitoring

3. Forecasting

4. Assessing
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1. Scanning

 Scanning allows decision makers to have an overview of the

organization and its relationship to its immediate environment. It
is the stage that significant data gathered to enable the
organization to arrive at holistic strategies.

Environmental Scanning is the evaluation of the general economic

and industrial environment in which the organization operates. This
includes a review of the organization’s competitive situation that
covers the events and trends that pose either opportunities or threats,
or present either strengths or weaknesses of the organization.
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1. Internal Environmental Scanning

Environmental scanning stage analyzes the performance of the

organization. It is imperative to identify the degree of gap that
persists between the actual scenario and the desired objective and
vison of the organization.

A closer scrutiny of the environment will bring to light if the

present businesses have been remiss in their avowed duty or
functions as stated in their vision-mission-objectives (VMO).
Therefore, the need for change is precipitated to meet the
challenges of the future, for to remain stagnant would not be
conductive to continued survival.
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Assessment on internal environment in terms of strengths includes:

 High competency level

 Availability of company’s resources

 Efficient system

 High level of professionalism in the work place.

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While weaknesses includes:

 Office politics

 Low benefits

 Personal problems

 Working condition

 Insufficient number of the staff

 Use of capital and weak cash position

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2. External Environmental Scanning

The external environmental analysis process should be

conducted on continuous basis to stay attuned with the times.
Furthermore, the analysis can develop strategies that would exploit
the most attractive opportunities and mitigate or lessen the impact of
the threats.
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 Economic forces

Economic factor determine the competitiveness of the

environment in which the firm operates. This factors include:
GDP trends, unemployment level, inflation rates, money supply,
fiscal policies, wage/price controls, devaluation/revaluation,
market maturity, market structure, switching cost of customers,
disposable and discretionary income, and government economic
policies.
 Socio-Cultural-Demographic forces Scanning
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Changes in demographics are likewise an important factor in
business world. These socio-cultural-demographic factors
influence businesses and business decisions vis-à-vis impact on
products, services, markets, and customers given the following
developments:
 More educated consumers

 Growing number of Christians/Muslims, ethnic or racial

 World population approaching 7 billion; Philippines is around

92M
 Escalating gap between rich and poor

 Increasing percentage or working parents

 Decimation and degradation of the natural environment

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 Political-legal forces

Factors that pertain to political principles, beliefs, opinions,

views, and legal framework that either support or dissuade the
performance of a firm.

 Technological forces

Factors that have influence on the technological aspect of

business such as government and total industry spending for R&D,
focus on technological efforts, patent protection, new products, new
developments in technology transfer from laboratory to marketplace,
and productivity improvements through automation.
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3. Competitive Environmental Scanning

The market and economic environment would not be

encouraging for the growth and sustainability of businesses without
their competitors. An organization should be equipped and armed
with the right attitude and information towards change coupled with
speed, flexibility, and forward thinking.

Strategic management is an assessment of the strengths and

weaknesses of current and potential competitors. This analysis
provides both and offensive and defensive strategic context to
identify opportunities and threats.
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3. Industry Scanning Analysis

Means uncovering major market trends, key success factors,

and the identification of opportunities and threats through analysis of
competitive and change forces.

Michael Porter’s Five Forces Model

 Threats of potential entrants. This force determines the extent

of influence of new comers to the industry. The factors to assess
the attractiveness of the industry are economies of scale,
resource requirements, access to distribution channels, brand
and customer loyalty.
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 Buyer’s bargaining power. This force establishes the extent of

the power of the buyer to a certain industry. The factors to assess
the attractiveness of the industry are economies of scale,
resource requirements, access to distribution channels, brand
and customer loyalty.

 Supplier’s bargaining power. This force ascertains the extent of

power of suppliers in a certain industry. Such industry is
dominated by the suppliers that have control or influence on the
products to be produced and offered to the market in connection
with the price, volume and quantity.
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 Threat of substitute products. This factor influences the

intensity of the competition through having substitute or
alternative products in the market.

 Intensity of rivalry among the products. This factor reasons

out that competitors are the ones creating the battlefield which
intensify the competition within the industry
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2. Monitoring

 Monitoring allows the decision makers to keep track of the

progress of their organization in relation to the goals set to ensure
that the current strategies are still aligned to the developments.

Furthermore, consistent monitoring will prevent drastic changes

from happening late into the evaluation stage. Corrective and
preventive measures can be considered in this stage so that
resources will not be wasted when in the formulation stage,
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3. Forecasting

 Forecasting is more than just an intelligent guess. It makes use

of valid data that would have been tested or observed over a
period of time. However, the development of strategies is not
meant to address current issues.
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4. Assessing

 In assessing, it is best to determine how the current performance

of the organization compares to desired targets it had previously
set out such as sales, profits, customer satisfaction, system and
procedures among others.

 Next, there is a need to determine what other assets a firm has.

 Lastly, it is through these identified resources that a company’s

capabilities are established.

For a strategic capability to be a core competency, a firm should

possess the following characteristics also known as VRaCoN.
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VRaCoN
 Valuable – refers to capabilities that help a firm neutralize threat
or exploit opportunities

 Rare – unique capabilities that are not possessed by others

 Costly to imitate – capabilities that other firms cannot develop

easily

 Non-substitutability – pertains to capabilities that do not have

strategic replacements or equivalents.
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Firm’s Value Chain

 The value chain is another concept of Michael Porter. It shows

the systematic process of products as they move through all
value generating activities from initial development to final sale
and service.

 The ultimate purpose of the value chain is the same as the

general objective of a for profit business – to make money.
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Firm’s Value Chain
 Five Phases  4 Important Supporting Activities

1. Inbound logistics That Help Drive Value

2. Outbound logistics 1. Firm infrastructure

3. Marketing 2. HR management

4. Sales 3. Technology development

5. Service 4. Procurement
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Firm’s Value Chain

 Supply Side  Demand Side

1. Inbound logistics 1. Marketing

2. Operations 2. Sales

3. Outbound logistics 3. Service activities

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Tools in Planning
The key to a successful planning is that the firm should have a
good and potent strategic vision to cope with or even thrive on
changes in the business environment.

 Tool 1: SWOT Identification

SWOT stands for Strengths, Weaknesses, Opportunities, Threats. It

is a potent tool to identify the firm’s business environment. The
SWOT analysis provides information helpful in matching the
company’s resources and capabilities to the competitive
environment in which it operates.
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Tools in Planning

 Tool 2: Top-down / Bottom up Planning

Morato (2006) encourages the use together of the top-down and

bottom-up approaches. Furthermore, he said that the top-down
approach is employed to set high aspirations and to dream of
challenging possibilities. In contrast, the bottom-up approach is
used to anchor the organization on the realities of the marketplace
and the existing capabilities and constraints of the company.
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Tools in Planning
 Tool 3: Basic Planning

Basic planning is a strategic planning tool usually used by firms that

are yet familiar to the planning process and expound their
knowledge in the future as they go through the planning process.
This tool answers the three basic queries: Where is the firm now
(current situation)? Where is the firm going (desired situation)? And,
how does the firm get there (strategic initiatives)?
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The basic strategic planning process includes:

1. Identify the firm’s purpose (mission statement)

2. Create general goals to accomplish the mission

3. Identify specific action plans to implement each strategy

4. Evaluate and evaluate the plan over time

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Tools in Planning

 Tool 4: Vision-based Strategic Planning

It is a strategic planning tool that is centered on the set vision and

mission of the firm. In using this tool, an important question that
needs to be answered during the planning is, “Are the proposed
goals and strategy aligned with the direction of the owner’s desire
(vision)?
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This strategic planning requires the following:

a. Establish mission-vision

b. Establish goals in line with mission and vision

c. Craft strategies

d. Develop actions plan for each strategy

e. Develop roadmap showing mission, vision, goals,

strategies, and action plans.

f. Monitor and evaluate implementation

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Tools in Planning
 Tool 5: Issued-based (Goal-based) Planning

It is a strategic planning that starts with the current major issues

besetting the organization and then, works toward the future.

Issued-based planning specifies the following steps to be taken:

1. Identify major issues confronting an organization

2. Develop appropriate solution

3. Develop summary of issues with matching

solution/s

4. Monitor implementation and review the roadmap

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Tools in Planning
 Tool 6: Scenario Planning

- It is a strategic planning tool that is based on “what if” scenarios

about the future.

 The essence of this kind of planning is to encourage managers to

think the unthinkable and be sensitive with regard to the
dynamics of business environment.

 Also known as scenario thinking, this

can be used in concurrence with other
tool as part of strategic planning
exercise, particularly in identifying
strategic issues and goals.
The steps in scenario planning are:
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1. Identify possible future scenarios brought about by external forces

which might influence the organization, e.g., change in regulation,
demographic changes , etc.

2. Develop hedge plans to address each change in force. Hedge

plans covers three different future organizational scenarios (best
case, worst case and OK/reasonable case), which might arise with
the organization as a result of each change the organization.

3. Choose and implement the best course of action taken into

consideration on three scenarios to respond to each change.

4. Employ alternative strategy of the likelihood of chosen strategy is

futile based on the signposts or indicators.
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Tools in Planning
 Tool 7: Organic (Self-organizing) Planning

- It is a strategic planning tool that focuses on determining the best

practices, processes and methods go achieve the tasks. This tool
encourages the planners to concentrate on what is doable and what
the firm does best, instead of the constraints and figment of model
set up.
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THANK YOU 