Strategic planning tools

Strategic planning tools
See also
SWOT analysis TOWS analysis Factors affecting business Distinctive competencies Internationalization Strategic foresight Relevant information Economic feasibility Strategic fit

There are many known strategic planning tools such as PEST analysis, STEEPLE analysis, SWOT and TOWS analysis, benchmarking, business plan, key success factors, Porter's five forces concept, strategy wheel, ADL matrix, BCG matrix, GE matrix and Hofer's matrix. There are exist also map of strategic groups, map of intensity of goals, strategic scenarios method, technological portfolio, economic profile of a sector, simulation scenarios and strategic trajectory method .

PEST analysis

PEST analysis (Political, Economic, Social, Technological) is a planning tool based on analyzing political, economic, social and technological factors. The essence of this tool is to define the basic spheres of the environment that can have impact on the functioning of the organization and its future strategy of operation.

• Political factors affecting business can be for example: power structure, form of government, safety and security, government stability or level of corruption.
• Economic factors affecting business, for example: monetary policy, level of government debt, inflation rate, exchange rates or phase of economic cycle.
• Social factors affecting business, for example: economic inequalities, wealth of people, level of education, reputation of company in the society, level and access to health-care, social classes.
• Technological factors connected to information revolution: global reach of information, new IT security challenges, internet banking and shopping, rapid development of fact communication networks and capabilities of CRM systems .
  
  

STEEPLE analysis

• Socio-cultural
• Technological
• Economic
• Environmental
• Political
• Legal
• Ethical

STEEPLE analysis has been frequently compared with and paired with SWOT analysis.

SWOT analysis

SWOT analysis is an action used to estimation an assessing the competitive position of the corporations. It is the method of analysis which contains four categories of crucial factors: Strengths, Weaknesses, Opportunities and Threats. Strengths determines everything is an asset, advantage, dominance. Weaknesses mean barriers, defects and disadvantages. Opportunities are everything that creates an influence on positive change. Threats are all that makes the danger of adverse change. All components of SWOT analysis create a method which allow to use the collected information to develop a strategy based on abilities and opportunities, while eliminating deficiency and risk. In the most popular microeconomic terms, the first two areas (Strengths and Weaknesses) usually refer to the internal environment and include the most important elements in actual enterprise. For example, strong brand (S) and weak capital base (W). Opportunities and Threats apply to external environment, to illustrate the opening of the common international market (O) or the emergence of competitive products of the new generation (T).

Internal factors within an organization could be human and physical resources, budgetary, operations and processes, past experiences such as your status in the community and improvement in learning.

External factors steaming from collectivity might be future trends, local, national or international thrift, bankrolling sources (donors), demographics changes (based on age, race or gender), accessibility (the environment around the building-in the city centre or periphery), legislation (Do exist laws make your work harder or easier?), available events.

This is a very widespread analysis system. It is often used in a very simplified form- it takes the form of four lists of initiators (commonly presented in tabular form). The usefulness of the SWOT technique, however, becomes apparent only when subjecting four seemingly independent groups of factors to the analysis of mutual connections. In practice, this exercise leads to prepare a few questions and answers that are helpful in diagnosis of the problem. The next step contain creating solution of actual difficulty.

The SWOT analysis is mostly used to examine new solutions, detect obstacles to achieve the goals, choose the best way of development or uncover possibilities and restrictions for change.

TOWS analysis

The TOWS analysis is based on the simple classification scheme. All components affecting the organizations actual and future situation are divided into: external and internal conditions and also having negative or positive impact on the organization. At the intersection of these two divisions, four categories of factors arise: external positive (Opportunities), external negative (Threats), internal positive (Strengths), internal negative (Weaknesses). There are three phases of TOWS technique. First of all detecting the opportunities and threats. Secondly identification of the good and bad sides of the company. Lastly defining the strategic position and development directions of the company.

There are four possible situations in TOWS matrix of strategic alternatives. Firstly, SO situation (maxi-maxi strategy)- “this is where governments utilize and reinforce its internal strength factors for exploiting available opportunities in external environment” . Secondly, WO situation (mini-maxi strategy)- “this is where governments reduce internal weaknesses that act as obstacles and barriers for external opportunities implementation or diffusion” . Next is ST situation (maxi-mini strategy)- “this is where governments use internal strength factors to minimize external factors threatening affects in performance or competitiveness” (Hasnan N. 2015, p. 20). Lastly, WT situation (mini-mini strategy)- “this is where governments eliminate internal weaknesses for avoiding any breakthrough or prevalence of external threats” .

Benchmarking

It is analysis based on comparing. Benchmarking should focus on:

• indicate which of the parties to the transaction is subject to analysis, characteristics of the compared goods and services, the size of the delivery, the form and type of transaction, and with respect to intangible assets - a description of the expected benefits from their use,
• refer to the economic situation in the industry in which the company operates,
• provide justifications for the use of comparative data for many years (if a taxpayer uses data on economic transactions with an independent entity to calculate prices, such data should be included in the analysis),
• include financial ratios that were used in the income calculation method (loss) in a transaction with a related entity and with independent entities,
• indicate corrections that eliminate any differences between the transactions and bring the analyzed transactions to comparability.
  
  

Business plan

Business plan is a planning document included an assessment of the profitability of an economic venture. Elements of a business plan are:

• Summary
• Company characteristics
• Description of a product or /and service offered by company
• Description of the marketing strategy
• Financial plan
• SWOT analysis
  
  

Key success factors

The most important features of the organization, determining the competitive advantage and development opportunities. Boynton A.C. and Zmud R.W. (1984) said: "Critical success factors are those few things that must go well to ensure success for a manager or an organization and, therefore, they represent those managerial or enterprise areas that must be given special and continual attention to bring about high performance. CSFs include issues vital to an organization's current operating activities and to its future success."

Porter’s five forces concept

Method of analyzing and assessing the intensity of competitive forces in the economic sector or market segment, developed and described by Michael Porter in 1979.

Analysis as one of the sectoral analysis methods is part of the strategic analysis used in the process of formulating the organization's strategy. According to its assumptions, the attractiveness of the sector results from the different shaping of the five competitive forces that exist in each sector:

• competition in the sector between existing competitors,
• the threat of entry of new competitors,
• bargaining power of buyers,
• bargaining power of suppliers,
• threat from substitutes.
  
  

Strategy wheel

Method that included following purposes:

• finance
• products and target markets
• marketing and service
• sales and distribution
• manufacturing
• procurement
• human resources
• info system
• R&D
  
  

ADL matrix

Arthur D. Little is an international management consulting company originally headquartered in Boston, Massachusetts, United States, and formally incorporated by that name in 1909 by Arthur Dehon Little, an MIT chemist who had discovered acetate (Scatter Acorns That Oaks May Grow: An Arthur D. Little Exhibit, Massachusetts Institute of Technology, The Institute Archives and Special Collections, 2009-08-25). Arthur D. Little pioneered the concept of contracted professional services. The company played key roles in the development of business strategy, operations research, the word processor, the first synthetic penicillin, LexisNexis, SABRE and NASDAQ.

This is twenty, and in some versions even a thirty-field matrix. On the measuring axis, we mark the level of competitiveness in the sector. On the abscissa, the maturity of the sector concerned. In the fields of the matrix in the form of wheels are placed products from the same sector or homogeneous assortment groups. According to this method, product innovations are the source of the market success of the company, as they focus on the development of the company as a whole.

BCG matrix

The oldest, the most well-known, and also the simplest and still very useful method of portfolio analysis, and the instrument of strategic controlling. The name of the method comes from the American consulting company Boston Consulting Group, which was the first to use this tool in 1969.

It is a four-field matrix that allows to distinguish four basic categories of products: "Question Marks", "Milk cows", "Stars", "Dogs".
The BCG portfolio analysis should be made from two points of view - development and the level of portfolio balance. The development portfolio means that the company has provided itself with "rejuvenation" and future income by gradually replacing old products. A balanced portfolio means that the revenues generated by pension and mature products will allow you to invest in young products that do not yet have a large market share.

GE matrix

This is a nine-field matrix whose design is based on the assumptions:

• activities in the most attractive sectors, and liquidate products from less attractive sectors.
• focusing on investing in products with a strong competitive position and withdrawing from those whose competitive position is weak.
  
  

Hofer’s matrix

It is a fifteen-a-kind matrix in which individual strategic organizational units are placed in the form of wheels. The size of the circles depicting individual units is proportional to their share in the company's revenues.

The axis of ordinates means the phase of industrial development. The axis of the cut-off position on the market (competitiveness).

Mother Ch. Hofer gives an image of the product portfolio at various stages of the product life cycle. On its basis, you can forecast the future of individual sectors and take measures to balance the production portfolio.

Map of strategic groups

The strategic group according to Porter's competitive struggle concentrates inside the so-called strategic groups. These are competing companies that have a similar approach to conducting a competitive battle. The fight consists in the production of comparable products, the use of similar distribution channels, conducting similar advertising campaigns, or the use of similar prices and technologies. For example: Microsoft, Google's Android, Apple. Map of strategic groups is a graphical interpretation of the concept of strategic groups, which is one of the ways to analyze the sector.

Strategic scenarios planning

Method based on predicting long-term plans. This planning could prepare for many occurred scenarios in the future. “The methods combine known facts about the future, such as demographics, geography, military, political, industrial information, and mineral reserves, with key driving forces identified by considering social, technical, economic, environmental, and political (STEEP) trends” .

Examples of Strategic planning tools

• PEST Analysis: This tool is used to analyze the macro-environmental factors that can affect a business. It looks at Political, Economic, Social and Technological factors that can impact the success of a business.
• SWOT Analysis: This tool is used to analyze the Strengths, Weaknesses, Opportunities and Threats of a business. It helps businesses to identify their internal and external factors that can help or hinder their success.
• Benchmarking: This tool is used to compare the performance of a business with its competitors. It is used to identify areas where the business can improve and to help set goals for improvement.
• Business Plan: This tool is used to develop a comprehensive strategy for a business. It is used to set goals, define strategies and create action plans for achieving those goals.
• Key Success Factors: This tool is used to identify the elements that are critical for a business to be successful. It helps businesses to identify their competitive advantages and set goals for improvement.
• Porter’s Five Forces Concept: This tool is used to identify the competitive landscape of an industry. It looks at the bargaining power of buyers, suppliers, competitors, new entrants, and substitutes to determine the competitive environment of an industry.
• Strategy Wheel: This tool is used to analyze the strategies of a business. It looks at the company’s mission, objectives, strategies and tactics to help develop an action plan for achieving the desired outcome.
• ADL Matrix: This tool is used to analyze the strategies of a business. It looks at the company’s objectives and resources in order to identify opportunities and threats.
• BCG Matrix: This tool is used to analyze the portfolio of a company. It looks at the company’s products or services and evaluates them based on relative market share and growth rate.
• GE Matrix: This tool is used to evaluate the strategies of a business. It looks at the company’s strategies and resources in order to determine which strategies should be implemented.
• Hofers Matrix: This tool is used to analyze the strategies of a business. It looks at the company’s objectives, strategies, and resources in order to identify opportunities and threats.

Advantages of Strategic planning tools

Strategic planning tools provide a variety of advantages, including:

• Improved decision-making: Strategic planning tools such as SWOT and TOWS analysis help business owners and managers to evaluate the current situation and make informed decisions. By analyzing internal and external factors, organizations can identify potential problems and develop strategies to overcome them.
• Greater efficiency: Strategic planning tools can help organizations to become more efficient by identifying weaknesses and areas for improvement. By focusing on areas that need improvement, organizations can reduce costs and increase productivity.
• Improved competitiveness: Strategic planning tools can help organizations to gain a competitive edge by analyzing their competitors and developing strategies to gain a competitive advantage. By understanding the competitive environment, organizations can anticipate changes and develop strategies to stay ahead of the competition.
• Improved communication: Strategic planning tools help organizations to communicate their goals, objectives and strategies more effectively. By using these tools, organizations can ensure that all stakeholders are on the same page and understand the organization's vision and direction.

Limitations of Strategic planning tools

Strategic planning tools are powerful tools for helping businesses to identify their goals and develop an action plan for achieving them. However, these tools also have some limitations. Some of the main limitations of strategic planning tools include: * Lack of flexibility: Strategic planning tools are designed to adhere to a specific set of rules and assumptions, which may not always accurately reflect the complexity of the real world. * Time consuming: Strategic planning tools can be time consuming and require intensive data gathering and analysis. * Lack of creativity: Strategic planning tools may not allow for creative solutions to problems, as they are designed to provide a set of predetermined solutions. * Limited input: Strategic planning tools typically require limited input from stakeholders, which may result in a lack of diversity in ideas and solutions. * Cost: Strategic planning tools can be expensive to implement and maintain.

Other approaches related to Strategic planning tools

In addition to the known strategic planning tools, there are several other approaches that are related to the development of effective strategies. These include:

• Balanced Scorecard (BSC) – this is a method of performance management that helps organizations align their activities to the vision and strategy of the organization. It does this by combining financial and non-financial measures into a single system to measure performance.
• Strategic Mapping – this is a process of visualization of the relationships between key elements of a company or industry. It helps to identify strengths, weaknesses, opportunities and threats that are not immediately obvious.
• Scenario Planning – this is a process of creating different possible future scenarios for a company or industry. This helps to identify possible opportunities and risks that could be encountered in the future.
• Visioning – this is a process of creating a vision for the future of a company or industry. It helps to set the direction of the organization and identify the steps that need to be taken to reach the desired outcome.

In summary, there are many other approaches related to Strategic Planning Tools, such as Balanced Scorecard, Strategic Mapping, Scenario Planning and Visioning, which can help organizations to develop effective strategies.

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Footnotes

Author: Daniel Żołna