“Strategic planning is an organisation’s process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy”
The strategic planning model implemented will depend upon an organisations’ goals, situation and aspect of strategic change.
Goal Based Strategic Planning
Goal based strategic planning is perhaps the most obvious model that is frequently employed. After an organisation’s goals have been defined, the strategic planning process sets out how the goal(s) will be achieved, the timeframe for which the goals to be completed and the necessary resources required.
Goal based strategic planning is best suited to stable organisations with a small number of headline goals, defined by their mission statement. This is opposed to issue based strategic planning which is explained in the next section of this essay. An example of goal based strategic planning could be in relation to a mission statement such as ‘To give customers the highest level of customer service in our industry’. The organisation will likely exist in a stable environment with no stand out issues which would hypothetically need to be addressed before attempting to drive the business towards its goal, defined by its mission statement or leader’s vision.
The model first requires assessment of current internal and external environments, this can be aided by employing a SWOT and PESTLE analysis to help define and concentrate the organisation’s goals into specific political, economical, social, technological, legal or environmental aspects. Next, the strategic planning sets out how the goal will be achieved before ongoing evaluation as the strategy is implemented.
In my example, a SWOT and PESTLE may reveal that the organisation already has good customer service as a strength however, a main competitor (threat) has better customer service satisfaction due to a technological advancement with their CRM software. A strategy to meet the same customer satisfaction goal is demanded and a plan is set out to achieve this.
The planning process (which in essence is the same for all of the planning models) includes;
- A step by step breakdown or schedule of the different elements needed to achieve the goal
- Budgeting & cost/benefit analysis
- Stakeholder analysis
- Resource planning and allocation
- Evaluation
In goal based strategic planning, it is important to specify a timeframe for changes and processes to occur. Using specific and measurable KPIs, the project is evaluated and re-evaluated to ensure that the organisation is moving towards the correct goals within the initial specified time frame and continuing after said time frame. In the example, this could be by using a customer feedback questionnaire to deliver KPIs.
Issue Based Strategic Planning
Issue based strategic planning arises from a known issue/problem/downfall of a business. The issue may be long running or in response to business critical turmoil. SWOT analysis is not necessary as the goal has already been defined by the problem. It can still be useful to apply SWOT & PESTLE analysis if it is not clear how the issue can be rectified but more often than not, strategic planning under these conditions has clear objectives. As in goal based strategic planning, the process includes budget, scheduling and evaluational steps.
Unlike goal based strategic planning, it is unlikely that a long-term timeframe is chosen and instead of KPI analysis, the outcome of the implemented plan will likely culminate with a clear conclusion as to whether the issue has been rectified or not.
Scenario Based Strategic Planning
Scenario based strategic planning is a model applied to organisations with an unclear or uncertain future. The model is based upon forecasting future conditions, events or other external factors (PESTLE) and formulating strategies based upon these predictions. Scenario based strategic planning is useful for preparing an organisation for hypothetical future conditions, for example, It is unclear how Brexit will affect our industry and scenario planning can help prepare an organisation for a multitude of hypothetical future conditions.
The inherent issue with scenario based strategic planning is that not all events can be planned for. Often,
A prediction can be made but an entirely unplanned outcome will arise. This is commonly seen with financial aspects of planning where ‘chickens are counted before the eggs are hatched’ and the economic climate of an industry changes drastically after major investments have been made, resulting in financial hardship upon the organisation.
In conclusion, depending on an organisation’s circumstances, culture and goals, the strategic planning model implemented will differ considerably albeit with some common fundamental planning techniques.
Most organisations will use a combination of different planning models dependent on the aspect of change necessary. At Mon Timber, we have some pressing difficulties which would benefit from an issue based strategic planning model but also some long term objectives where goal based strategy planning should be employed. By forecasting future changes or considering difficulties within our industry, we can prepare ourselves by planning for different scenarios.
1.2 Evaluate the advantages and limitations of a range of analytical techniques
The toolkit for strategic planning contains a set of analytical techniques to aid the formulation of strategies. A strategy plan will most likely use a combination of these different tools in order to compile clear objectives within a plan.
Stakeholder Analysis
Stakeholder analysis aims to uncover the interests, needs, concerns and objectives of key stakeholders within an organisation.
Stakeholder analysis usually separates the individuals into categories based on importance/power and interest within a matrix and suggests how the strategy should be tailored to the individual. The analysis should reveal the key members who will influence a strategy, associated risks and potential mechanisms that can be used to get stakeholders onboard with a strategy.
Stakeholders are likely the leaders or visionaries of an organisation, it is important to consider their interests, needs and concerns in order to adhere and work towards their objectives. Stakeholders of a business have the final say on the approval of any investment involved in a strategy and therefore strategic plans should be formulated with the stakeholders. Finding out what makes each stakeholder tick and incorporating these elements into a plan will ensure stakeholder satisfaction during and upon completion of a project.
The downside of stakeholder analysis may reveal conflict of interest between key members or stakeholders views may differ from headline mission statements or objectives politically, economically, socially, technologically, legally or environmentally. By employing stakeholder analysis, appropriate compromises can be developed within the plan. Stakeholder analysis may be unsuitable for small organisations where there is a primary stakeholder who is developing a strategic plan solo.
Unlike some analytical techniques, Stakeholder analysis can give a quantitive assessment of needs as stakeholders are ranked by importance, power and interest.
Porter Five Forces Analysis
Porter Five Forces analysis seeks to investigate competitive rivalry in an industry or environment.
The five forces analysed are Industry competition, ease of entering market, supplier power, customer power and threat of substitution. The five elements combined give a clear indication of where an organisation is within a marketplace and may reveal opportunities or threats that will have a bearing upon strategy formulation.
The advantages of PFFA are obvious when strategy planning when there are clear competitors within a market place but also when a company has a monopoly on a product or service. In this case, aspects such as ease of entering a marketplace and threat of substitution are quite relevant. For example, early internet users will remember the search engine ‘AskJeeves’ which was the go-to search engine at the turn of the millennia. Failure to evolve the service, possibly because of strategic negligence when considering an emerging organisation (at the time) Google, who consequently became the industry leaders – substituting AskJeeves with a better product entirely.
PFFA is less effective a tool where organisations exist in a flooded market place, supplied by the same suppliers, with the same customer base, Customers will primarily be motivated by price and service alone an the tool does not reveal specific strategy targets, however, used in conjunction with a tool such as SWOT and PESTLE Porter Five Force Analysis can still be useful.
SWOT Analysis
SWOT is an abbreviation of ‘Strengths, Weaknesses, Opportunities and Threats’ and is helpful for determining internal and external strategic aspects of a project. SWOT
SWOT alone cannot deliver specific strategies but combined with PESTLE (Policital, Economical, Social, Technological, Legal and Environmental) factors, this analytical technique is perhaps the most widely used tool in strategic planning. SWOT has no mechanism for quantitive ranking of which factors are most important but can certainly drive a strategy to essential points of investigation which can be later assessed by using cost/benefit analysis etc.
Personally, at Mon Timber, I have found SWOT & PESTLE combined with Stakeholder and Porter Five Force analysis to be invaluable tools for drawing conclusions on which strategies will be most beneficial for our business. Careful evaluation of employed strategies shape future projects as political, economical, social, technological, legal and environmental conditions evolve.
1.3 Analyse a range of perspectives of and approaches to business strategy
Mon Timber is a small to medium sized family run business that operates within a single region of the UK. Within our region, there are a multitude of smaller, similar sized and larger competitors that when taken into consideration, influence our headline business strategy.
Our approach, unlike many of our larger competitors is to offer a multifaceted service which appeals to large and small customer accounts alike. We are highly specialised yet highly diversified within the timber industry and incorporate merchant trading alongside manufacturing of key product lines which are specific to our customer base. Other larger competitors focus on only merchant or manufacturing services or have diversified product ranges to the extent of sacrificing essential specialist product and industry knowledge.
B&Q’s approach to supplying building materials focuses primarily on the DIY customer base. B&Q have used e-commerce to their advantage in offering their customers a simple and easy way to browse and compare products which does not require specific staff knowledge. This model has influenced my own strategies at Mon Timber and as such we implemented the first web-shop of any independent timber merchants in the South Wales region back in 2012. Other similar sized competitors in our area quickly followed suit and we have since been evolving our e-commerce platforms to stay ahead of the game.
Smaller timber outlets rarely have the resources to implement e-commerce platforms and rely on direct customer contact for their sales strategy, whilst there are now a whole host of web-only merchants who solely rely upon indirect sales techniques.
Most of our accounts need a reliable service with a consistent product for which they are happy to pay fair market price for, however, there are now outlets for timber whose perspective is primarily to promote the re-use and sale of recycled timber products. Reseiclo Wood Recycling based in Newport, uses their environmentally friendly business operations as a strategy to appeal to other customer bases.
In conclusion, different businesses operate with obdurate strategies which are specific to their market place or customer base. It is essential to evaluate other organisational strategies in order to remain competitive and drive emerging business based on new external perspectives.
Be Able to understand the factors affecting the development of strategic plans
2.1 Evaluate political, economic, social, technological, legal and ethical factors affecting the development of strategic plans.
PESTLE analysis reveals the political, economic, social, technological, legal and ethical factors which have an impact upon a business function or strategy. Projects will always need to be considered in relation one or more (if not all) of these factors.
Political
Political factors can have an influence upon strategic planning in the private sector as well as the public sector. This can be inter-industry politics (for example, the war between forestry regulatory bodies, PEFC and FSC, which also has ethical and environmental apsects) Or can be public with opposing national or international political party opinions (for example Brexit, it’s pros and cons, potential risks etc).
Economic
Economic factors will have a drastic effect upon organisational strategising as some elements of a strategy may be simply out of reach financially. One strategy may be favoured over another purely on the grounds of profitability, potentially at the peril of other PESTLE factors.
Social
The public perception of an organisation will be important for consideration especially for public relation strategies. How the organisation is seen by others will have a bearing on the organisation’s actions and choices with regard to other PESTLE factors. Other social aspects of a strategy will focus on the internal work culture of an organisation. Strategies which aim to improve staff productivity will take careful consideration of social factors within a working environment.
Technological
Advancements in technology can prompt new strategies but strategies can also prompt the development of new technology. Other PESTLE factors can give rise to new technological strategies. For example political and environmental pressures have encouraged the emergence of renewable energy technology which in turn have their own economic & social considerations.
Legal
Organisations need to comply within the legal boundaries of their operations and this will influence strategic planning. A strategy to increase profitability couldn’t revolve around evading tax because this would be illegal (and would also have ethical and social impacts).
Ethical/Environmental
Businesses have a responsibility to carry out their operations in an ethical and environmental manner. Even if a business strategy plan is legal, is it also ethical to operate in a given way? There is no law against the purchase of some un-certified timber but without certification and regulation, we do not know that the timber has come from sustainably managed forests that seek to reduce environmental impact.
In practise, PESLTE aspects are very much linked, for example, political decisions affect economic, social, technological, legal and ethical factors of business strategy. A prime example of this would be introduction of the General Data Protection Regulation in 2018. Under EU law, the GDPR changed the way in which organisations could handle personal data. Marketing strategies were particularly influenced by the change in legislation in terms of; The economy (the cost of implementing organisational GDPR policies), Social factors (How social media platforms reacted and revised policies to improve their public relations), technological factors (how personal data is harvested and stored), legal factors (passing of new legislation and the consequent regulation of GDPR law) and ethical factors (questioning whether it is ethically acceptable to use personal data in advertising etc). Indeed, following the introduction of GDPR the majority of marketing and advertising strategies needed to be reconsidered.
2.2 Evaluate the market factors that may influence strategic planning decisions
Market factors will be some of the most influential factors when planning an organisational strategy. These can include (but aren’t limited to) Skills availability, Resource availability, International experience, Competitor activity, Government intervention and Commodity availability.
Two important market factors when strategising at Mon Timber are, commodity availability and skills availability.
Commodity Availability
For organisations that deal in physical goods (as opposed to businesses in the services industry), ensuring a consistent supply of stock is essential. Without procurement of essential commodities, trading will cease and the business will fail. In January of 2018, the was a log crisis within the homegrown (UK) forestry industry and due to poor weather conditions and the high demand for biofuels, log commodity availability destined for the carcassing timber trade was severely disrupted. Prices for sawn homegrown timber rocketed and the quality of timber fell as forestry contractors harvested lower quality areas of woodland to keep up with demand.
In reaction to this crisis, we planned a strategy to diminish the poor quality homegrown stocks and replenish with imported Scandinavian carcassing timber instead. Due to the price increases of homegrown timber, it became economical to import the Scandinavian timber which was of a much higher quality. This in turn allowed us to continue supplying a consistently high quality product to our customers at a competitive price.
Skills Availability
The roof truss manufacturing element of our business requires skilled operators to produce products to meet an ever increasing demand. Without finding more skilled operators, production will plateau and we will not be able to realise the full potential of our marketplace. Initially, our strategy plan was to encourage overtime with our current staff and introduce a dual shift system with double the workforce to work on our three manufacturing lines. We soon realised it was difficult to recruit staff with the correct skills and willingness to work a late shift in our region so needed to revisit our strategy plan. It became apparent that we could recruit unskilled staff and under the supervision of senior operators, train new recruits to work on the manufacturing lines, this still posed a problem as our manufacturing lines were already working at capacity during our working hours of 7am – 4.30pm. Our strategy plan now is to invest in an additional manufacturing line and redistribute the skilled staff evenly across the four lines, then, under the supervision of these operators, new un-skilled recruits could be trained on the job and increase our production.
As market pressures arise, it is crucial to revisit strategy plans to ensure business remains undisrupted. A strategy should be dynamic and evaluated regularly in order keep up with the changing environment.
2.3 Evaluate the application of scanning tools to strategy development
Scanning tools should provide a quantitative and qualitative measure of external factors relating to a strategy to monitor effectiveness over a given timeframe. The outcomes should allow an organisation to develop strategy plans in a dynamic manner to adapt to external changes.
Current / Best Practise Reviews
Especially for our e-commerce element of business at Mon Timber, regular cyber security best practise reviews are necessary to ensure cyber security measures are kept up to date. Since our website handles personal information and credit and debit card payments It is a target for cyber crime. UK legislation requires organisations to be PCI DSS compliant (Payment Card Industry Data Security Standard ) if they accept any type of card payment. PCI DSS compliance demands websites to meet a minimum level of security on e-commerce server front-ends. In addition to this, search engine ranking for websites has some criteria for website security. We review our sever security every quarter and ensure that we meet current best practises as defined by the NCSC (a subsidiary of GCHQ). These reviews are important for our marketing strategy as if the criteria are not met, our SEO (search engine optimisation) rankings are lowered.
Customer Surveys
Customer surveys are a useful scanning tool to measure current customer satisfaction conditions before, during and after planning a strategy which aims to improve customer service. Customer surveys often reveal needs and suggestions for a business which can be incorporated into a strategy. Positive feedback can act as a qualitative and quantitative measure for a strategy’s effectiveness.
3.1 Analyse the relationship between strategic intentions, strategic choice and strategy formulation
Strategic Intention
Strategic intention embodies the reasoning for the strategic plan, the objectives it is required to meet and conditions that accompany it. An example of strategic intention might be to raise brand awareness towards a specific demographic of people though a marketing campaign.
Strategic Choice
Strategic choice is the process of preparing feasible options which will allow the strategy objectives to be met. The choices are evaluated and analysed with respect to PESTLE, Cost / Benefit and stakeholder ranking etc. For the advertising campaign to raise brand awareness, strategic choices might be; A Social media campaign, a radio advert or sponsoring a sports team. It may be decided that social media marketing would yield the best cost/benefit but one of the stakeholders were keen to sponsor a local football team with a pitch side banner.
Strategy Formation
The strategy formation stage of strategic planning take the outcomes of strategic intention and strategic choice process and culminate in a comprehensive strategic plan.
Strategic intentions, strategic choice and the final formulation of a strategic plan are in my own opinion, organic stages of a strategic planning process which does not need to be formally considered. I think these steps are an integral foundation of strategic planning which do not need to be given their own process terminology.
20.5.2019