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Developing Strategic Plan in Business (Part 2)


The Vision

The first step in developing a strategic plan is to develop a realistic Vision for the business. This should be presented as a pen picture of the business in three or more years time in terms of its likely physical appearance, size, activities etc. If someone from the Mars visit your business, what would he see (or sense)? Consider its future products, markets, customers, processes, location, staffing etc. Here is a great example of a vision:
I will go to America, which is the country for me. Once there, I will become the greatest bodybuilder in history.......... I will go into movies as an actor, producer and eventually director. By the time I am 35 I would have starred in my first movie and I will be a millionaire...... I will collect houses, art and automobiles. I will marry a glamorous and intelligent wife. By 40, I would have been invited to the White House.

The Mission

The nature of a business is often expressed in terms of its Mission, which indicates the purpose and activities of the business, for example, "to design, develop, manufacture and market specific product lines for sale on the basis of certain features to meet the identified needs of specified customer groups via certain distribution channels in particular geographic areas". A statement along these lines indicates what the business is about and is infinitely clearer than saying, "we're in electronics" or worse still, "we are in business to make money" (assuming that the business is not a mint!). Also, some people confuse mission statements with value statements - the former should be very hard-nosed while the latter can deal with 'softer' issues surrounding the business.
When drafting a mission statement, critically examine every noun, adjective and verb to ensure that they are focused, realistic and justified.

The Values

The next element is to address the Values governing the operation of the business and its conduct or relationships with society at large, customers, suppliers, employees, local community and other stakeholders.

The Objectives

The third key element is to explicitly state the business Objectives in terms of the results it needs/wants to achieve in the medium/long term. Aside from presumably indicating a necessity to achieve regular profits (expressed as return on shareholders' funds), objectives should relate to the expectations and requirements of all the major stakeholders, including employees, and should reflect the underlying reasons for running the business. These objectives could cover growth, profitability, technology, offerings and markets.

The Strategies

Next are the Strategies - the rules and guidelines by which the mission, objectives etc. may be achieved. They can cover the business as a whole including such matters as diversification, organic growth, or acquisition plans, or they can relate to primary matters in key functional areas; for example:
* The company's internal cash flow will fund all future growth.
* New products will progressively replace existing ones over the next 3 years.
* All assembly work will be contracted out to lower the company's break-even point.
Use SWOTs to help identify possible strategies by building on strengths, resolving weaknesses, exploiting opportunities and avoiding threats.

The Goals

Next comes the Goals. These are specific interim or ultimate time-based measurements to be achieved by implementing strategies in pursuit of the company's objectives, for example, to achieve sales of N30m in three years time. Goals should be quantifiable, consistent, realistic and achievable. They can relate to factors like market (sizes and shares), products, finances, profitability, utilization, efficiency.

The Programmes

The final elements in a strategic plan are the Programmes, which set out the implementation plans for the key strategies. These should cover resources, objectives, time-scales, deadlines, budgets and performance targets.
It goes without saying that the mission, objectives, values, strategies and goals must be inter-linked and consistent with each other. This is much easier said than done because many businesses which are set up with the clear objective of making their owners wealthy often lack strategies, realistic goals or concise missions.

 Using Hindsight in Strategic Planning

Statements on vision, mission, objectives, values, strategies and goals are not just elements of future planning. They also provide benchmarks for a historic review. Most managers will find it exceedingly difficult to develop a future strategy for a business without knowing its current strategies and measuring their success to date.

Assess Current Position

The starting point must be to determine a company's existing (implicit or explicit) vision, mission, objectives and strategies. Then judge these against actual performance along the following lines:
·         Is the current vision being realized?
·         How has the company's mission and objectives changed over the past say, three years?
·         Why have the changes occurred or why have no changes occurred? Identify primary reasons and categorize them as either internal or external.
·         Describe the actual strategies followed over the past few years in respect of products/services, operations, finance, marketing, technology, management etc.
·         Critically examine each strategy statement by reference to activities and actions in key functional areas covering such matters as:
o    How has the company been managed?
o    How has the company been funded?
o    How has the company sought to increase sales and market share?
o    How have productivity/costs moved?
Take each element and quantify by reference to actual performance. Ask questions like "why not"?, "why only"?, or "why so"? and locate the reasons for differences between the actual and desired performance.

Drill Down

A useful technique for exploring performance shortfalls is to review the business's financial return and to drill down through the components of this return to locate and assess the key determinants of performance. For example, return on shareholders' funds is a key measure of profitability which can be expressed as:
Net-income
------------
Sales
X
Sales
-----------
Shareholders' funds

Take each item in this formula, explore its contents and derive performance measures or ratios. For example:
Sales break down into sales values, units, prices, discounts, commissions, bad debts and so on. Net income is derived by deducting costs (materials, labour, power etc.), expenses, interest and depreciation from sales revenue. Shareholders' funds are based on the value of fixed assets, current assets, current liabilities, debt etc.
Subject the resultant ratios to critical examination and attempt to compare them with industry norms.

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