Chapter Three

Strategic Planning and its Application

What is strategy?
Strategy is an action that a managers take to attain one or more of the
organizations’ goals.
Strategy may also be defined as a course of action, including the
specification of resources required to achieve the specific objective.
So the word strategic means something that is done cleverly.
Strategy generally involves setting goals, determining actions to achieve the
goals, & mobilising resources to execute the actions.
A strategy describes how the ends (goals) will be achieved by the means
(resources).
Strategy means consciously choosing to be clear about your company’s
direction in relation to what’s happening in the dynamic environment.
What is strategic planning?
It is the process that begins with the setting of organizational aims, defines
strategies to achieve aims, implementing the strategies, and evaluating the
strategies.
The development and execution of strategic planning are typically viewed as
consisting of being performed in three critical steps:
1. Strategy Formulation
In the process of formulating a strategy, a company will first assess its current
situation by performing an internal and external audit.
The purpose of this is to help identify the organization’s strengths and
weaknesses, as well as opportunities and threats (SWOT Analysis).
As a result of the analysis, managers decide on w/h plans or markets they
should focus on or abandon, how to best allocate the company’s resources.
2. Strategy Implementation
After a strategy is formulated, the company needs to establish specific targets
related to putting the strategy into action, and allocate resources for the
strategy’s execution.
The success of the implementation stage is often determined by how good a
job upper management does in regard to clearly communicating the chosen
strategy throughout the organization and getting all of its employees to “buy
into” the desire to put the strategy into action.
Effective strategy implementation involves developing a solid
structure/framework, maximizing the utilization of relevant resources, and
redirecting efforts in line with the strategy’s goals.
3. Strategy Evaluation
It is the process by w/c the management assesses how well a chosen strategy has been
implemented and how successful or otherwise the strategy is.
Strategy evaluation involves three crucial activities: reviewing the internal and
external factors affecting the implementation of the strategy, measuring performance,
and taking corrective steps to make the strategy more effective. For example, after
implementing a strategy to improve customer service, a company may discover that it
needs to adopt a new customer relationship management software program in
order to attain the desired improvements in customer relations.
• All three steps in strategic planning occur within three hierarchical levels: upper
management, middle management, and operational levels. Thus, it is imperative to
foster communication & interaction among employees and managers at all levels, so as
to help the firm to operate as a more functional and effective team.
 SWOT Analysis
• What is SWOT Analysis?
• A SWOT Analysis is one of the most commonly used tools to assess the internal
and external environments of a company and it is part of a company’s 
strategic planning process.
• A SWOT analysis helps in strategic planning as it introduces opportunities to
the company as a forward-looking bridge to generating strategic alternatives.
• It’s important to point out that strengths and weaknesses are backward-looking,
and opportunities and threats are forward-looking.
• By performing a SWOT analysis, we will be able to build a bridge between
what the company has accomplished to date and the strategic alternatives that
are going to be generated.
A SWOT analysis is divided into two main categories: internal factors and
external factors.
Internal:
Internal factors are the strengths and weaknesses of the company. Strengths
are the characteristics that give the business its competitive advantage, while
weaknesses are characteristics that a company needs to overcome in order to
improve its performance.
Examples of internal factors include:
 Company culture Financial resources
 Key staff Organizational structure
 Company image Operational efficiency
 Brand awareness Market share
External:
External factors are the opportunities and threats to the company.
Opportunities are elements that the company sees in the external environment
that it could pursue in the future to generate value.
Threats are elements in the external environment that could prevent the
company from achieving its goal or its mission or creating value.
Changes in the external environment may be due to:
Customers Government regulations
Competitors Economic environment
Conducting a SWOT Analysis
To conduct a SWOT analysis, identify the strengths, weaknesses, opportunities,
and threats to your company.
Strengths:
Consider strengths from an internal and consumer perspective.
What advantages does your company have?
What unique resources that you have that others do not?
What is your company’s Unique Selling Proposition?
What positive consumer perception does your company have?
What low-cost resources do you have access to that others do not?
Weaknesses:
Consider weaknesses from an internal and consumer perspective.
What does your company not do well?
What weaknesses do consumers see in your company?
What factors contribute to a weaker brand image?
Opportunities:
Consider opportunities from an external perspective.
What good opportunities are available in the marketplace?
What are some trends that your company can capitalize on?
Are there any changes in technology or markets that your company can take advantage of?
Are there any changes in lifestyle, social patterns, etc., that your company can take
advantage of?
Threats:
Consider threats from an external perspective.
What obstacles does your company face? 79865603
What are your competitors doing better than you?
Is a change in technology threatening the position of your company?
What threats do your weaknesses put you at risk of?
Do changes in lifestyle, social patterns, etc., pose a threat to your company?

Students should try to conduct SWOT analysis on the following topics:

1) Dangote Cement SWOT analysis
2) Ethiopian airlines SWOT analysis
3) Commercial bank of Ethiopia SWOT analysis