Strategic Planning for Family and Private Business
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First of all it is beneficial to briefly summaries strategy and strategic planning.
Strategy is the longterm direction of the business that:
- achieves a competitive advantage for the business in its chosen market
- positions the business in the market in relation to its competitors
- defines the scope of the businesses functions, capabilities and capacity
- matches the businesses resources and activities to the business environment
Strategic planning is the process (and thinking) that underpins the development and analysis of the options available to the business when choosing its strategy.
For the purposes of this article the focus will be on the higher level strategic planning, or corporate planning, as this is where the company’s direction is set and what drives its operational performance that delivers shareholder value. In addition, it defines the company’s business model, the corporate culture and its reputation from a corporate, social responsibility perspective regardless of its size or structure.
Broadly speaking there are only four types of corporate strategies being:
- Growth or market penetration – Same products / services into same market
- Market development – Same product / service into a new market
- Product / service development – New product / service into the same market
- Diversification – New product / service into a new market
Once we accept this then the planning process can be followed to develop a robust and valuable strategic plan for the business.
We apply a rigorous structured process to strategic planning that incorporates a range of activities and analysis designed to achieve the clear direction for the business, its structure, its employees and all business activities.
The first part of the process includes:
- Core values of the owners – These are critical as they make up the philosophy and ethics of the business and the people
- Goals of the individuals and for the business these are critical as it focuses everyone of the type of strategic direction of the business.
- Core competencies of the business – These may be based on the technical expertise of the owners however it is best to think about what competencies the business will leverage to develop the business model it will adopt
- Development of the businesses VISION and MISSION – These provide the focus for all future activities. A Mission statement should not be any more than two sentences of between 8 and 10 words otherwise they lack focus and are of little value to the business
- Your VISION is an internal statement that drives its direction and performance
- Your MISSION is a statement to internal and external stakeholders of how you conduct your business
The second part of the planning process is where the real power of strategic planning is developed as it consists of a series of analysis – Four in fact, which are all designed to provoke a breath and depth of thought that will have a major impact on the structure and operational performance of the business.
Environmental analysis – this is the business environment you operate in and it includes six elements:
Industry analysis – this analyses the industry environment you are operating in and competing with and is based on Porter’s Five Forces:
- Power of buyers (the buyers of your products / services)
- Power of suppliers (those that supply your business)
- Threat of new entrants into the market (is it easy for another like business to establish)
- Threat of competitive rivalry – How competitive is the market and how do / will competitors react to your business
- Threat of substitutes – What is substituting your product / service in the market
Resource analysis – this is the compartmentalization of your resources and is the critical link between the businesses mission / core values, structure and operational strategies / performance. It includes:
- Physical – Your location and physical assets
- Reputation – The reputation of your business at all levels
- Organisational – Goes to the heart of the operational structures and includes what type of human resources is required for the business
- Financial – The financial requirements for the business now and into the future
- Information – This ranges from your operational information i.e. SOP, policies, T&C of Trade etc to IP that you want to protect / hold separate to the day to day operations of the business
- Technical – The technology utilised within the business and the future technology requirements of the business be it systems or software or the use of media
The good old swot analysis – The strengths, weaknesses (or constraints), opportunities and threats (challenges). The swot analysis is infinitely more valuable to the process after the above three analysis have been completed because the business owner will have a greater understanding of their business and will be able to conduct this analysis with clarity and purpose.
Phase three of the process is the development of the businesses strategies. This pulls together everything done to date and results setting a clear direction for the business. We have a three step process for the development of these higher level strategies, which includes
Matrix for offensive and defensive strategies through the matching of:
- Strengths and Opportunities – Offensive
- Strengths and Challenges (threats) – Offensive
- Opportunities and Constraints (weaknesses) – Defensive
- Constraints (weaknesses) and Challenges (threats) – Defensive
Prioritising the strategies by filtering then through a specific framework to assess their:
- Feasibility (do you have the capacity and capability to implement the strategy)
- Suitability (does the strategy suit the current circumstances of the owners and business environment)
- Acceptability (this is the risk / return assessment, which includes the possible reaction of stakeholders i.e. employees, your financier, suppliers, customers and competitors)
Strategic choice – Based on the above select the most appropriate direction for your business.
While this process appears involved, complex and time consuming it can be tailored to suit the business. However it is important to have a clear focus on the end game, which is to be a strategically focussed business that has a clear direction and purpose that can be measured.
Lloyd Russell commenced his management career in 1986 with the Agri-Services company Primac Limited. During his tenure he successfully navigated the business through a major industry downturn in severe drought conditions by changing the branch’s business model and operating structures.
First of all it is beneficial to briefly summaries strategy and strategic planning. Strategy is the longterm direction of the business that: achieves a competitive advantage for the business in its chosen market positions the business in the market in relation to its competitors defines the scope of the businesses functions, capabilities and capacity matches…