The starting point of strategic planning lies in defining the mission of the enterprise—an expression of its philosophy and reason for existence.
The mission is a conceptual intention to move in a certain direction. It usually details the company’s status, core principles of operation, genuine intentions of leadership, and the most critical characteristics of the enterprise.
The mission is forward-looking, reflecting what the organization will focus its efforts on and what values will be prioritized. It should not depend on the company’s current state or financial difficulties. Importantly, profit generation is not considered the primary purpose of an organization’s existence in the mission statement, although it remains essential to its operation.
Goals are the concretization of the mission—expressed in a form suitable for managing their execution.
Key attributes of a goal:
- Clearly time-bound
- Specific and measurable
- Non-contradictory and aligned with resources and other missions
- Assigned and controllable
Based on the mission and goals, development strategies are built, and organizational policies are defined.
Strategic Analysis
Strategic or portfolio analysis is a core element of strategic planning. It serves as a management tool through which leadership evaluates business activities to invest in the most promising and profitable areas.
Strategic analysis emerged in the late 1960s when large and many mid-sized companies had become diversified complexes entering various markets with heterogeneous products. But growth wasn’t uniform—some markets were stagnating or in decline due to shifting demand, economic conditions, politics, social changes, and technology.
It became evident that entering new industries wouldn’t necessarily solve a company’s strategic challenges or utilize its potential. This led to the evolution from simple extrapolation to strategic planning and portfolio analysis.
The unit of portfolio analysis is the Strategic Business Area (SBA)—a market the firm operates in or intends to enter, characterized by specific demand and technology.
When technology shifts, choosing between them becomes a strategic decision. Portfolio analysis evaluates the viability of each business line.
The main method is the use of two-dimensional matrices, which allow comparison across units, processes, or products.
Three matrix design approaches:
- Tabular approach: parameter values increase from the top-left to bottom-right corner.
- Coordinate approach: values increase from the center outward, analyzed from bottom-left to top-right.
- Logical approach: analysis flows from bottom-right to top-left—common in international practice.
Environmental Analysis in Strategic Planning
Environmental analysis informs strategic planning by assessing the company’s current market position and future trajectory.
Three components are assessed:
- External environment
- Immediate environment
- Internal environment
External environment includes:
- Economic, legal, and political conditions
- Natural resources, infrastructure, scientific and technological development
- Social and cultural trends
This analysis helps the organization identify opportunities and threats and take timely action.
Key questions:
- Where is the organization now?
- Where should it be in the future?
- What must be done to get there?
Threats and opportunities often emerge in seven areas: economy, politics, markets, technology, competition, international affairs, and social behavior.
Example: Economic Factors
Understanding macroeconomic indicators is essential. This includes:
- GDP, inflation, unemployment, interest rates, labor productivity
- Taxation, trade balance, investment rates
What matters is how these indicators create or limit business opportunities.
A proper economic analysis should be comprehensive:
- Assessing risk
- Market competitiveness
- Business attractiveness
Other Environmental Factors
- Market factors: Volatile and need constant attention
- International factors: Raw material access, global politics, exchange rates, foreign market conditions
A well-done external analysis leads to a list of key risks and opportunities.
Immediate environment includes: customers, suppliers, competitors, labor market
Internal environment includes:
- Staff capabilities, qualifications, and motivation
- Management systems
- Production capacity and R&D
- Financial condition
- Marketing strategy
- Corporate culture
Choosing a Strategy Based on Strategic Analysis
Strategy is a long-term, qualitative direction that defines the company’s scope, means, and form of operations, its internal structure, and its market position—all aimed at achieving its goals.
Strategy must consider:
- The firm’s competitive position in the Strategic Business Area
- Growth prospects of that area
- Technological assets (especially in fast-changing industries)
Four Main Types of Strategies
- Concentrated Growth Strategies
- Market penetration
- Market development
- Product development
- Integrated Growth Strategies
- Backward vertical integration
- Forward vertical integration
- Diversification Strategies
- Concentric diversification
- Horizontal diversification
- Reduction Strategies
- Liquidation
- Harvesting (maximize short-term gains)
- Downsizing
- Cost-cutting
Evaluating a Chosen Strategy
The main question: Will the chosen strategy help the company achieve its goals?
If the answer is yes, evaluate further:
- Alignment with external environment
- Fit with internal resources and potential
- Risk tolerance
Strategy Execution and Control
According to Igor Ansoff in Strategic Management, strategy control involves:
- Focus on ROI, not just budget – Given the uncertainty in strategic planning, returns must be monitored carefully.
- Evaluate ROI at control points – Continue the project as long as ROI exceeds a minimum threshold; stop or reevaluate if it doesn’t.
Executive Responsibilities
- Deeply assess environment, goals, and strategies
- Communicate strategies and goals clearly to staff
- Decide on resource allocation and organizational structure
- Implement necessary organizational changes
- Revise plans when unforeseen events occur
Changes made during strategy execution are called strategic changes, and may take the form of:
- Radical transformation
- Moderate transformation
- Routine changes
- Minor adjustments
Organizational Structures
Structures include:
- Simple (elementary)
- Functional
- Divisional
- Strategic Business Unit (SBU)
- Matrix
Choice depends on:
- Company size and diversity
- Geography
- Technology
- Leadership and staff attitudes
- Environmental volatility
- Strategic goals
Managing Change
To implement change:
- Identify potential resistance
- Analyze and minimize it
- Establish the new status quo
Change management styles:
- Competitive
- Withdrawal
- Compromise
- Accommodation
- Cooperation
The goal of control is to assess whether strategy execution leads to goal achievement.
