Defining a strategic plan of the organization is an important activity of every manager and director.
Each company goal can be achieved differently. The manager must choose the one that best suits the capabilities of the organization and the characteristics of the environment and carries minimal risk of failure.
Therefore, he must carefully assess the past actions and the current state of the organization, the state of the elements of the environment, and choose the path to achieve the goals. When formulating the strategic plan, it is necessary to answer four strategic questions:
- 1. How to take advantage of favorable opportunities, reduce adverse effects and environmental hazards?
- 2. How to distribute the resources between the individual units, activities of the organization?
- 3. How to compete with other organizations for the respective user groups and their needs?
- 4. How to most effectively manage the activities in the individual units, departments, and the organization as a whole?
The SWOT analysis diagnoses the internal state of the organization and analyzes the external influences.
It is assumed that through the use of SWOT analysis the organization will achieve strategic success by increasing its strengths to take advantage of minimizing its weaknesses and external threats.
The strengths of the organization are positive internal conditions under which it has an advantage over its competitors. These advantages can be related to the provision of high-quality materials, good financial condition, favorable image, competent management, etc.
Weaknesses, Favorable opportunities, and threats
The weaknesses of the organization are those negative internal features that hinder its activities and reduce its competitiveness. These are lack of finances, raw materials, materials, qualified personnel, poor location of branches, and others.
Favorable opportunities are current or future conditions in the environment that are favorable for achieving current and future success. Favorable opportunities must be identified in time and not only the current but also the long-term effect of their utilization must be assessed.
Threats to the external environment are its current or future conditions that adversely affect the activities of the organization. Threats can arise from a reduction in customers, the emergence of a weak competitor, a jump in prices, and more. Threats, as well as opportunities, need to be identified and assessed in the long term.
Different strategies can be used to achieve company goals. 12 comprehensive strategic alternatives are known. In each case, one or another of them can be chosen, and in large organizations, several can be used simultaneously. Reference: “The strategic planning process in the organization”, https://newia.info/strategic-planning-process-organization/
The main strategic alternatives are:
- 1. Concentration strategy
- 2. Market development strategy
- 3. Product development strategy
- 4. Innovation strategy
- 5. Horizontal integration strategy
- 6. Vertical integration strategy
- 7. Strategy for setting up joint ventures
- 8. Concentric diversification strategy
- 9. Strategy of conglomerate diversification
- 10. Savings strategy
- 11. Separation strategy
- 12. Liquidation strategy
Porter’s Competitive Model-According to Porter, the analysis of the competitive structure of the industry should take into account the following 5 main forces:
- competition between companies in the industry
- the danger of entering new competitors
- the danger of substitute products
- increasing the strength of suppliers
- increase in customer strength
After studying the factors of competition, threats, and opportunities for the organization, as well as its strengths and weaknesses, management must choose one of three competitive strategies.
1. Full cost leadership – ensuring lower costs than competitors, which allows the company to ensure a high return on investment at low prices. Achieving cost leadership requires the company to have a high transparent share, cheap access to raw materials, modern technologies, and more.
2. Strategy of dictated differentiation. With it, the company relies its success on a product that is unique and of higher quality than others. Here, too, cost reduction is important, but it is a secondary issue. This strategy applies to companies with good opportunities in the research field, who have a good image, traditions, markets, etc. An example of a company that successfully implements this strategy is Mercedes.
3. Focusing strategy. It chooses either cost leadership or product uniqueness but in combination with focusing the company’s efforts on a narrow consumer group or geographic market. The company provides the product or service for a specific market segment or niche.
More on the topic: Planning the activities of the organization
Implementation of the strategic plan
Once a strategic plan has been drawn up, it must be put into practice. This requires distribution of activities, determination of those responsible for their implementation, selection of methods for evaluation of results, etc.
When implementing the strategic plan, the compliance of the chosen strategy with various aspects of the organization’s activity must be ensured. This requires many changes to ensure coordination and simultaneous matching between:
- the strategy and the organizational structure;
- the strategy, experience, and capabilities of the organization
- strategy and resource allocation
- the strategy and the system for motivation and simulation
strategy and internal policies and procedures
- the strategy and value system of the team members
- strategy and budgets and programs
- strategy and company culture
The practical implementation of the strategic plan is carried out by developing a tactical plan, which specifies in a shorter time the goals, activities, deadlines for implementation. It has two varieties – current plan and single-purpose plan
Evaluation and adjustment of the strategic plan
The assessment of the expediency and effectiveness of the governmental decisions taken during the development of the strategic plan is made at each of the above stages. Such assessment and permanent control are also carried out in the process of implementation of the plan.
The aim is to reveal in time the deviations from the desired conditions and results, the reasons that led to this. Evaluation criteria are the set goals and objectives. In case of deviations from them, measures are taken to correct the actions for implementation or even the strategic plan of the organization.