What is Strategic Planning? Definition, Importance, Model, Process and Examples
By Paul VanZandt
Published on: February 2, 2023
Table of Contents
What is Strategic Planning?
Importance and benefits of strategic planning, strategic planning models, strategic planning process: 6 key steps, what makes an effective strategic plan example, strategic planning example.
Strategic planning is defined as a pivotal organizational endeavor, meticulously charting the mission, goals, and objectives over a strategic timeframe, typically spanning 2-5 years. This comprehensive roadmap takes into meticulous consideration the current organizational landscape, navigating through the intricacies of prevailing legislation, the dynamic business environment, product portfolios, departmental dynamics, and the judicious allocation of budget resources. By weaving together these critical elements, a strategic plan becomes a guiding compass, steering the organization towards its vision with adaptability and foresight.
Strategic planning first entered business environments in the post-war period of the 1950s, and has been so effective that it is still widely used and applied across organizational spectrums, including non-profits.
While a strategic plan is the final outcome of the strategic planning process, here are the key factors and components that feed into creating this plan:
- Profitability and balance sheet management
For any business, profitability and the adjacent balance sheet management is and always should be a key factor to be taken into consideration during strategic planning, depending on the size of the business. Both these factors are in fact co-dependent. For example, one of the key outcomes of a strategic plan is to set the revenue growth percentage to be achieved each year for, say, 3 years. This in turn will require an evaluation of the balance sheet, including any debt payments, dividend payout, shareholder expectations, etc.
Even if the business is a startup and is rich with investor cash to spend in acquiring customers in the short to medium term, it is still aspiring to be profitable and must lay out a larger strategic path to profitability.
- SWOT analysis outcomes
Strength, weaknesses, opportunities, and threats – these are the outcomes and full terms of the abbreviated term, SWOT analysis. Strength refers to the business factors that indicate key factors that are contributing to the achievement of business outcomes. These may be factors related to sales, employee and talent retention, software stack, business efficiency, etc. Similarly, weakness refers to factors that are holding back the growth and achievement of business outcomes, such as poor margins, lack of company data management, employee attrition, etc.
Opportunity refers to areas in the business environment that the business can potentially explore. For example, one of the opportunities identified could be sales in a new market, implementing a better human resources management model, branching into new products and/ or services, etc.
- Operations management
Operations management pertains to the cohesive movement of all moving and communicating parts to produce the company’s products or services. While creating a strategic business plan, management needs to take into account how each department and team will need to interact with each other to produce the results desired as outcomes in the strategic plan. This includes ensuring the right technology stack needed for each team including communication and collaboration technology needed for remote and on-premise task execution.
- Human resource management
Strategic planning involves taking into account all aspects of HR and employee-related spending and policies. One of the key aspects of a strategic plan must be to ensure a harmonious work experience for employees such that it increases employee retention and helps build an environment that enhances employee productivity and workplace satisfaction.
A strategic plan is more than just a business tool, it also plays a key role in defining operational, cultural, and workplace ethics. Here are some of the key aspects of the importance of strategic planning:
1. Provides a unified goal
A strategic plan is like a unified action plan for the whole company in order to achieve common outcomes. For example, a strategic plan to achieve a certain revenue growth each year requires sales, account management, product development, and marketing teams to work together to ensure a seamless lead pipeline, customer upsells and account retention, meet customer expectations, etc.
2. Adds to management transparency
Strategic planning is more than just for direct business growth, it also helps shine clarity to employees and shareholders as to what their mid-to-long-term objectives are and how their actions are derived from these larger goals. Such a plan must always be referenced for citation and justification for key business moves and decisions to make it apparently justified and based on logic and reason. This also encourages team leads and employees to in turn be more transparent with their team members and peers with their plans and goals.
One of the issues most dreaded by investors and employees alike is management that seems to make random decisions without any clear guidance on how they help meet requirements for the final business objectives or tackle the challenges of the day. A strategic plan helps build investor and employee confidence in the management and adds to building a culture of transparency in day-to-day business operations.
3. Identifies hidden strengths and weaknesses
Many strengths and weaknesses in a company may be contributing, yet hidden factors in the path to meeting or hindering the meeting of business goals. A strategic plan’s primary input is a SWOT analysis of the company, which is conducted by auditing the firm to recognize and list strengths and weaknesses within the company. These may be a competitive product, a better monetization model, a weak employee incentive policy, etc.
The important step here is the actual deep analysis and listing down of these strengths and weaknesses and how they can be leveraged or minimized.
4. Leads to better financial health
A company with a clear strategic plan is able to better plan expenses and set the right expectations on return on investment (ROI). It takes into account balance sheets, profitability, accounting and expense management, all of which contribute to better bookkeeping and financial health of the company.
5. Improves management-employee relations
Employees and teams work in silos when the management works in silos. But when a company shares a strategic plan with employees and lays out exactly how each team will be working towards contributing to this larger plan, it gives each team and its members a sense of belonging and importance within the larger company, In today’s environment of hybrid or remote work cultures, it is a key step to ensuring that the company remains cohesive and collaborative in getting work done and meeting final objectives.
Learn more: What is Tactical Planning?
Strategic planning inputs may require one of many of the following business analysis models:
- SWOT analysis
SWOT analysis is the process and visual template for identifying and listing a company’s strengths, weaknesses, opportunities, and threats. These are cornerstone considerations for any leadership team and play a key role in the strategic planning process.
- Business model canvas
A business model canvas is a process used to identify and represent existing business models of an enterprise and develop new models to better meet company goals and objectives. Like SWOT analysis, the business model canvas is also a standard business template.
- PESTEL analysis
PESTEL is an abbreviation for political, economic, social, technological, environmental, and legal, and PESTEL analysis aims to identify the impact of these external factors on a business.
- Cost-benefit analysis
A cost-benefit analysis is a method of evaluating an investment in the business based on the benefits it would bring to the table. This is a good method for ensuring a healthy financial balance sheet where spending and budgeting are carefully analyzed to ensure only those investments bring back reasonable ROI.
Most companies have 2 or more product/service streams or even 2 or more businesses. A BCG matrix is a visual process of managing an enterprise’s portfolio by prioritizing profitable companies with good market share and growth.
An effective strategic planning process requires the following key steps:
1. Identify core business objectives
Strategic planning begins with first identifying your business objectives- what does it produce? What does it do better than the competition? What is the quality-profitability balance? These are examples of the questions that need to be asked to identify core business objectives. The strategic planning tools can be applied at any stage of the planning process to help answer these questions.
2. Identify the objectives of each department
Once the core business objective is ready, it needs to trickle down to an execution plan that involves each department. This in turn will result in breaking down of the core objectives into smaller objectives for the teams. This needs to be laid out with clarity and precision since the team leaders will further use this team goal to assign individual targets for members.
3. Identify potential roadblocks
Before formulating the final strategy, it is important to discuss it with relevant leaders in the company to ensure an error-free process that is achievable with minimal roadblocks. Of course, as the execution work begins, the management should be flexible enough to absorb unforeseen and small issues that are inevitable. The goal here is to avoid any big boulders which may cripple the strategy at a later stage, such as data security, pricing estimations, hiring new employees or expansion to new departments/ teams, investment in new product development, mergers and acquisition plans, etc.
4. Formulate the final strategy
Once the objectives and goals have been scanned for potential roadblocks and alterations/ safeguards have been accommodated, this is the first draft of the final strategic plan for the company. This strategy may be applicable for the foreseeable future or have a specific deadline, it should however be pulled up for revision annually. Small companies or startups who have much to learn on the way, need to keep an active eye on the larger strategy based on changing business realities.
5. Re-evaluate based on feedback
Before you iron out the processes and policies that will enable the execution of the new strategic plan of the company, it is important to hear back from your employees. This doesn’t have to be every single employee, especially if you have a large team, but to the extent possible. You may at first discuss the strategy with team leaders, who if needed, may take it further down the chain to their own team members and absorb their feedback. Complete agreement may not be possible, but it is important that both sides remain flexible while discussions are on but must be prepared to execute once the discussions are over.
6. Set or revise adjacent policies and processes
Now that the strategic plan for the business is complete and sealed, the leadership team needs to start the execution with necessary changes to the processes and policies as the need may be. This may need to include data management process changes, technology stack updates, issue escalation matrix, etc. In some cases, it may not require any change, and the right processes may already be in place with just a new direction based on the strategic plan.
Learn more: What is SWOT Analysis Framework?
Crafting a good example of a strategic plan involves several key elements. Here’s a breakdown of what makes a strategic plan exemplary:
- Clear Mission Statement: A strong strategic plan starts with a clear and concise mission statement that defines the organization’s purpose and the value it aims to provide.
- SMART Objectives: The plan should include specific, measurable, achievable, relevant, and time-bound (SMART) objectives. This ensures that goals are well-defined and actionable.
- Environmental Analysis: A good strategic plan conducts a thorough analysis of the internal and external environment, taking into account strengths, weaknesses, opportunities, and threats (SWOT). This provides a foundation for strategic decision-making.
- Alignment with Vision: The plan should clearly articulate how each objective contributes to the overall vision of the organization. There should be a cohesive alignment between the strategic goals and the long-term vision.
- Resource Allocation: Effective resource allocation is crucial. The plan should outline how financial, human, and other resources will be distributed to support the strategic goals.
- Actionable Steps: Each objective should be broken down into actionable steps or initiatives. This helps in practical implementation and provides a roadmap for achieving the goals.
- Monitoring and Evaluation: A good strategic plan includes mechanisms for ongoing monitoring and evaluation. Key performance indicators (KPIs) should be defined, and regular assessments should be conducted to track progress.
- Flexibility and Adaptability: The plan should acknowledge the dynamic nature of business environments. Flexibility and adaptability are essential to adjust strategies in response to changes in the internal or external landscape.
- Communication Strategy: A strategic plan should include a communication strategy to ensure that stakeholders are well-informed about the goals, progress, and any adjustments made to the plan.
- Inclusivity: Involving key stakeholders in the strategic planning process fosters a sense of ownership and commitment. A good plan considers input from various departments, employees, and external partners.
- Risk Management: Anticipating and addressing potential risks is a vital aspect of a strategic plan. Contingency plans should be in place to mitigate unforeseen challenges.
- Continuous Improvement: A strategic plan should not be static. There should be a commitment to continuous improvement, with regular reviews and updates to ensure its relevance and effectiveness.
By incorporating these elements into your example of a strategic plan, you can demonstrate a comprehensive and thoughtful approach to organizational planning, which may resonate well with both practitioners and those seeking to understand the principles of strategic planning.
A strategic plan is a detailed document that outlines an organization’s goals, objectives, and the actions required to achieve them. While the specific details of a strategic plan will vary depending on the organization, its industry, and its unique circumstances, here’s an example of a strategic plan for a fictional company:
Company: Visionary Tech Solutions (VTS)
Mission Statement: “To empower businesses through innovative technology solutions, fostering growth and sustainability in an ever-evolving digital landscape.”
Strategic Goals: Presented below are ten strategic goals that serve as excellent examples to enhance the functionality of a company.
1. Market Leadership in Tech Solutions:
Objective: Capture a 20% increase in market share within the next three years.
- Launch two new cutting-edge products catering to emerging market demands.
- Strengthen strategic partnerships with key industry players.
- Implement aggressive marketing campaigns highlighting VTS’s technological prowess.
2. Operational Efficiency:
Objective: Improve operational efficiency by 15% over the next two years.
- Streamline internal processes through the implementation of advanced project management tools.
- Invest in employee training programs to enhance skills and productivity.
- Conduct regular process audits for continuous improvement.
3. Customer-Centric Innovation:
Objective: Introduce at least three customer-centric innovations annually.
- Establish a dedicated R&D team focused on anticipating and addressing customer needs.
- Implement customer feedback loops to gather insights for product enhancements.
- Launch a customer loyalty program to foster long-term relationships.
4. Global Expansion:
Objective: Expand operations to two new international markets within the next four years.
- Conduct thorough market research to identify viable expansion opportunities.
- Establish local partnerships to navigate regulatory and cultural nuances.
- Develop customized marketing strategies tailored to each target market.
5. Resource Allocation:
- 30% for research and development.
- 25% for marketing and promotional activities.
- 20% for employee training and development.
- 15% for operational improvements.
- 10% for international expansion initiatives.
6. Monitoring and Evaluation:
- Quarterly performance reviews with key performance indicators (KPIs) tracked against predefined targets.
- Annual comprehensive evaluation of the strategic plan’s effectiveness and adjustments as needed.
7. Communication Strategy:
- Regular updates through internal newsletters, town hall meetings, and an interactive company intranet.
- External communication through press releases, social media updates, and a dedicated section on the company website.
8. Risk Management:
- Identification of potential risks such as technological disruptions, market fluctuations, and geopolitical challenges.
- Development of contingency plans and regular risk assessments.
- Cross-functional teams involved in the strategic planning process, ensuring diverse perspectives and expertise.
10. Continuous Improvement:
- Commitment to regular reviews and updates to the strategic plan based on industry trends, technological advancements, and feedback from stakeholders.
This example of a strategic plan for Visionary Tech Solutions outlines a roadmap that integrates the company’s mission, strategic goals, resource allocation, monitoring mechanisms, and a commitment to adaptability and continuous improvement. Adjustments should be made as needed based on ongoing evaluations and changes in the business environment.
Learn more: What is Enterprise Planning?
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What Is a Business Model?
Understanding business models, evaluating successful business models, how to create a business model.
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Learn to understand a company's profit-making plan
Katrina Ávila Munichiello is an experienced editor, writer, fact-checker, and proofreader with more than fourteen years of experience working with print and online publications.
Investopedia / Laura Porter
The term business model refers to a company's plan for making a profit . It identifies the products or services the business plans to sell, its identified target market , and any anticipated expenses . Business models are important for both new and established businesses. They help new, developing companies attract investment, recruit talent, and motivate management and staff.
Established businesses should regularly update their business model or they'll fail to anticipate trends and challenges ahead. Business models also help investors evaluate companies that interest them and employees understand the future of a company they may aspire to join.
- A business model is a company's core strategy for profitably doing business.
- Models generally include information like products or services the business plans to sell, target markets, and any anticipated expenses.
- There are dozens of types of business models including retailers, manufacturers, fee-for-service, or freemium providers.
- The two levers of a business model are pricing and costs.
- When evaluating a business model as an investor, consider whether the product being offer matches a true need in the market.
A business model is a high-level plan for profitably operating a business in a specific marketplace. A primary component of the business model is the value proposition . This is a description of the goods or services that a company offers and why they are desirable to customers or clients, ideally stated in a way that differentiates the product or service from its competitors.
A new enterprise's business model should also cover projected startup costs and financing sources, the target customer base for the business, marketing strategy , a review of the competition, and projections of revenues and expenses. The plan may also define opportunities in which the business can partner with other established companies. For example, the business model for an advertising business may identify benefits from an arrangement for referrals to and from a printing company.
Successful businesses have business models that allow them to fulfill client needs at a competitive price and a sustainable cost. Over time, many businesses revise their business models from time to time to reflect changing business environments and market demands .
When evaluating a company as a possible investment, the investor should find out exactly how it makes its money. This means looking through the company's business model. Admittedly, the business model may not tell you everything about a company's prospects. But the investor who understands the business model can make better sense of the financial data.
A common mistake many companies make when they create their business models is to underestimate the costs of funding the business until it becomes profitable. Counting costs to the introduction of a product is not enough. A company has to keep the business running until its revenues exceed its expenses.
One way analysts and investors evaluate the success of a business model is by looking at the company's gross profit . Gross profit is a company's total revenue minus the cost of goods sold (COGS). Comparing a company's gross profit to that of its main competitor or its industry sheds light on the efficiency and effectiveness of its business model. Gross profit alone can be misleading, however. Analysts also want to see cash flow or net income . That is gross profit minus operating expenses and is an indication of just how much real profit the business is generating.
The two primary levers of a company's business model are pricing and costs. A company can raise prices, and it can find inventory at reduced costs. Both actions increase gross profit. Many analysts consider gross profit to be more important in evaluating a business plan. A good gross profit suggests a sound business plan. If expenses are out of control, the management team could be at fault, and the problems are correctable. As this suggests, many analysts believe that companies that run on the best business models can run themselves.
When evaluating a company as a possible investment, find out exactly how it makes its money (not just what it sells but how it sells it). That's the company's business model.
Types of Business Models
There are as many types of business models as there are types of business. For instance, direct sales, franchising , advertising-based, and brick-and-mortar stores are all examples of traditional business models. There are hybrid models as well, such as businesses that combine internet retail with brick-and-mortar stores or with sporting organizations like the NBA .
Below are some common types of business models; note that the examples given may fall into multiple categories.
One of the more common business models most people interact with regularly is the retailer model. A retailer is the last entity along a supply chain. They often buy finished goods from manufacturers or distributors and interface directly with customers.
Example: Costco Wholesale
A manufacturer is responsible for sourcing raw materials and producing finished products by leveraging internal labor, machinery, and equipment. A manufacturer may make custom goods or highly replicated, mass produced products. A manufacturer can also sell goods to distributors, retailers, or directly to customers.
Example: Ford Motor Company
Instead of selling products, fee-for-service business models are centered around labor and providing services. A fee-for-service business model may charge by an hourly rate or a fixed cost for a specific agreement. Fee-for-service companies are often specialized, offering insight that may not be common knowledge or may require specific training.
Example: DLA Piper LLP
Subscription-based business models strive to attract clients in the hopes of luring them into long-time, loyal patrons. This is done by offering a product that requires ongoing payment, usually in return for a fixed duration of benefit. Though largely offered by digital companies for access to software, subscription business models are also popular for physical goods such as monthly reoccurring agriculture/produce subscription box deliveries.
Freemium business models attract customers by introducing them to basic, limited-scope products. Then, with the client using their service, the company attempts to convert them to a more premium, advance product that requires payment. Although a customer may theoretically stay on freemium forever, a company tries to show the benefit of what becoming an upgraded member can hold.
Example: LinkedIn/LinkedIn Premium
Some companies can reside within multiple business model types at the same time for the same product. For example, Spotify (a subscription-based model) also offers free version and a premium version.
If a company is concerned about the cost of attracting a single customer, it may attempt to bundle products to sell multiple goods to a single client. Bundling capitalizes on existing customers by attempting to sell them different products. This can be incentivized by offering pricing discounts for buying multiple products.
Marketplaces are somewhat straight-forward: in exchange for hosting a platform for business to be conducted, the marketplace receives compensation. Although transactions could occur without a marketplace, this business models attempts to make transacting easier, safer, and faster.
Affiliate business models are based on marketing and the broad reach of a specific entity or person's platform. Companies pay an entity to promote a good, and that entity often receives compensation in exchange for their promotion. That compensation may be a fixed payment, a percentage of sales derived from their promotion, or both.
Example: social media influencers such as Lele Pons, Zach King, or Chiara Ferragni.
Aptly named after the product that invented the model, this business model aims to sell a durable product below cost to then generate high-margin sales of a disposable component of that product. Also referred to as the "razor and blade model", razor blade companies may give away expensive blade handles with the premise that consumers need to continually buy razor blades in the long run.
Example: HP (printers and ink)
"Tying" is an illegal razor blade model strategy that requires the purchase of an unrelated good prior to being able to buy a different (and often required) good. For example, imagine Gillette released a line of lotion and required all customers to buy three bottles before they were allowed to purchase disposable razor blades.
Reverse Razor Blade
Instead of relying on high-margin companion products, a reverse razor blade business model tries to sell a high-margin product upfront. Then, to use the product, low or free companion products are provided. This model aims to promote that upfront sale, as further use of the product is not highly profitable.
Example: Apple (iPhones + applications)
The franchise business model leverages existing business plans to expand and reproduce a company at a different location. Often food, hardware, or fitness companies, franchisers work with incoming franchisees to finance the business, promote the new location, and oversee operations. In return, the franchisor receives a percentage of earnings from the franchisee.
Example: Domino's Pizza
Instead of charging a fixed fee, some companies may implement a pay-as-you-go business model where the amount charged depends on how much of the product or service was used. The company may charge a fixed fee for offering the service in addition to an amount that changes each month based on what was consumed.
Example: Utility companies
A brokerage business model connects buyers and sellers without directly selling a good themselves. Brokerage companies often receive a percentage of the amount paid when a deal is finalized. Most common in real estate, brokers are also prominent in construction/development or freight.
There is no "one size fits all" when making a business model. Different professionals may suggest taking different steps when creating a business and planning your business model. Here are some broad steps one can take to create their plan:
- Identify your audience. Most business model plans will start with either defining the problem or identifying your audience and target market . A strong business model will understand who you are trying to target so you can craft your product, messaging, and approach to connecting with that audience.
- Define the problem. In addition to understanding your audience, you must know what problem you are trying to solve. A hardware company sells products for home repairs. A restaurant feeds the community. Without a problem or a need, your business may struggle to find its footing if there isn't a demand for your services or products.
- Understand your offerings. With your audience and problem in mind, consider what you are able to offer. What products are you interested in selling, and how does your expertise match that product? In this stage of the business model, the product is tweaked to adapt to what the market needs and what you're able to provide.
- Document your needs. With your product selected, consider the hurdles your company will face. This includes product-specific challenges as well as operational difficulties. Make sure to document each of these needs to assess whether you are ready to launch in the future.
- Find key partners. Most businesses will leverage other partners in driving company success. For example, a wedding planner may forge relationships with venues, caterers, florists, and tailors to enhance their offering. For manufacturers, consider who will provide your materials and how critical your relationship with that provider will be.
- Set monetization solutions. Until now, we haven't talked about how your company will make money. A business model isn't complete until it identifies how it will make money. This includes selecting the strategy or strategies above in determining your business model type. This might have been a type you had in mind but after reviewing your clients needs, a different type might now make more sense.
- Test your model. When your full plan is in place, perform test surveys or soft launches. Ask how people would feel paying your prices for your services. Offer discounts to new customers in exchange for reviews and feedback. You can always adjust your business model, but you should always consider leveraging direct feedback from the market when doing so.
Instead of reinventing the wheel, consider what competing companies are doing and how you can position yourself in the market. You may be able to easily spot gaps in the business model of others.
Criticism of Business Models
Joan Magretta, the former editor of the Harvard Business Review, suggests there are two critical factors in sizing up business models. When business models don't work, she states, it's because the story doesn't make sense and/or the numbers just don't add up to profits. The airline industry is a good place to look to find a business model that stopped making sense. It includes companies that have suffered heavy losses and even bankruptcy .
For years, major carriers such as American Airlines, Delta, and Continental built their businesses around a hub-and-spoke structure , in which all flights were routed through a handful of major airports. By ensuring that most seats were filled most of the time, the business model produced big profits.
However, a competing business model arose that made the strength of the major carriers a burden. Carriers like Southwest and JetBlue shuttled planes between smaller airports at a lower cost. They avoided some of the operational inefficiencies of the hub-and-spoke model while forcing labor costs down. That allowed them to cut prices, increasing demand for short flights between cities.
As these newer competitors drew more customers away, the old carriers were left to support their large, extended networks with fewer passengers. The problem became even worse when traffic fell sharply following the September 11 terrorist attacks in 2001 . To fill seats, these airlines had to offer more discounts at even deeper levels. The hub-and-spoke business model no longer made sense.
Example of Business Models
Consider the vast portfolio of Microsoft. Over the past several decades, the company has expanded its product line across digital services, software, gaming, and more. Various business models, all within Microsoft, include but are not limited to:
- Productivity and Business Processes: Microsoft offers subscriptions to Office products and LinkedIn. These subscriptions may be based off product usage (i.e. the amount of data being uploaded to SharePoint).
- Intelligent Cloud: Microsoft offers server products and cloud services for a subscription. This also provide services and consulting.
- More Personal Computing: Microsoft sells physically manufactured products such as Surface, PC components, and Xbox hardware. Residual Xbox sales include content, services, subscriptions, royalties, and advertising revenue.
A business model is a strategic plan of how a company will make money. The model describes the way a business will take its product, offer it to the market, and drive sales. A business model determines what products make sense for a company to sell, how it wants to promote its products, what type of people it should try to cater to, and what revenue streams it may expect.
What Is an Example of a Business Model?
Best Buy, Target, and Walmart are some of the largest examples of retail companies. These companies acquire goods from manufacturers or distributors to sell directly to the public. Retailers interface with their clients and sell goods, though retails may or may not make the actual goods they sell.
What Are the Main Types of Business Models?
Retailers and manufacturers are among the primary types of business models. Manufacturers product their own goods and may or may not sell them directly to the public. Meanwhile, retails buy goods to later resell to the public.
How Do I Build a Business Model?
There are many steps to building a business model, and there is no single consistent process among business experts. In general, a business model should identify your customers, understand the problem you are trying to solve, select a business model type to determine how your clients will buy your product, and determine the ways your company will make money. It is also important to periodically review your business model; once you've launched, feel free to evaluate your plan and adjust your target audience, product line, or pricing as needed.
A company isn't just an entity that sells goods. It's an ecosystem that must have a plan in plan on who to sell to, what to sell, what to charge, and what value it is creating. A business model describes what an organization does to systematically create long-term value for its customers. After building a business model, a company should have stronger direction on how it wants to operate and what its financial future appears to be.
Harvard Business Review. " Why Business Models Matter ."
Bureau of Transportation Statistics. " Airline Travel Since 9/11 ."
Microsoft. " Annual Report 2021 ."
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Strategic Planning in Business
Table of Contents
What is business strategic planning, the strategic planning process in 3 steps, what is a business strategic plan, key components of a business strategic plan, business strategic plan example, strategic plan vs. business plan.
Strategic planning is key for success in business. By planning strategically for the future, a business can achieve its goals. It’s easier said than done, but the more you know about strategic planning, the better chance you have at succeeding.
Business strategic planning is the process of creating a business strategy and an accompanying business strategic plan to implement a company’s vision and achieve its goals over time. The main goal of strategic planning is to take a company from its current state to its desired state through a series of business actions.
The business strategic planning process usually consists of defining business goals, doing a SWOT analysis to assess the company’s business environment and developing a business strategy. The leadership team is in charge of business strategic planning, as it has a very important impact on the overall direction of a company.
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Strategic planning is very important, but it doesn’t need to be overly complex. Let’s simplify this process by breaking it down into three simple steps.
1. Set Business Goals
A business goal is simply an accomplishment that a company wants to achieve in the short, medium or long term. Business goals can take many forms such as increasing sales, revenue, customer satisfaction levels and brand positioning, among many other things.
2. Conduct a SWOT Analysis
The goal of a business strategy is to leverage the strengths of a business and minimize the impact of its weaknesses. Those two things are internal factors. The strengths of a company can become competitive advantages that can lead to business growth. There are many types of business strengths and weaknesses such as scale, speed, or R&D, just to name a few.
Threats and opportunities refer to external factors such as competitors or an untapped market. A successful business strategy considers all of these factors to define how a product or service will be created, marketed and sold, and a SWOT analysis is a great starting point.
3. Develop a Business Strategy & Strategic Plan
Once you’ve completed your SWOT analysis, you can create a business strategy that’s designed to help position your company in the market. Your business strategy guides how you produce, market and sell your product or service based on internal and external analysis.
Then, you’ll need a strategic plan to explain how you plan to execute that business strategy. To oversee the execution of a business strategic plan, managers need to manage time, costs and tasks. ProjectManager is a project planning tool that allows managers to plan, schedule and manage their team’s work. Plan your work with professional tools such as Gantt charts, kanban boards, task lists and calendars. Then track your progress in real time to stick to your strategic plan. Get started for free.
A business strategic plan is an implementation plan that’s meant to turn a business strategy into action items that can be executed over time. Business strategic plans are usually executed over the course of 3-5 years.
How to Develop a Strategic Plan
To develop a strategic plan, you should ask yourself the following three questions.
- Where Is the Business Now? Gather as much information on your business as possible including internal operations and what drives its profitability. Compare the business to competitors and note the similarities and differences in detail. This isn’t a day-to-day operational study, but a broader look at the business in context to itself and its environment. But don’t go crazy; stay realistic in terms of your business goals. Be detached and critical in your analysis.
- Where Do You Want to Go? Now it’s time to decide what your top-level objectives are for the future. Start with a vision statement , objectives, values, techniques and goals. Look forward to five years or more to forecast where you want the business to be at that time. This means figuring out what the focus of the business will be in the future. Will that focus differ from what it is now, and what competitive advantages do have you in the marketplace? This is where you build the foundation and initiate changes.
- How Can You Get There? Once you know where you are and where you want to go, it’s time to plan. What are the changes to the structure, financing, etc., necessary for the business to get there? Decide on the best way to implement those changes, the timeframe with deadlines and how to finance it. Remember, this is looking at the business at large, so consider major endeavors such as diversification, existing growth, acquisition and other functional matters. A gap analysis can be a big help here.
Once you’ve answered the above questions and have a way to achieve the long-term goals laid out in the strategic plan, the next step is making sure you have the right person to manage all of its moving parts. They must be analytical, a creative thinker and able to grasp operational detail.
That doesn’t mean the strategic plan is led by one person. It’s best to not do it alone; seek other opinions. The people in your organization, from bottom to top, are all great resources to offer perspectives from their standpoints. Don’t forget to take in the advice of stakeholders, including customers, clients, advisors and consultants.
To create a strong strategic plan, one must first have a strong understanding of the business that is to expand. How does the business work? Where does the business stand in relation to competitors in the marketplace? A strategic plan is built on the bones of the following foundational elements:
- Mission Statement: The mission statement describes what your company does.
- Vision Statement: The vision statement explains where your company expects to be in the future.
- Core Values: Guiding principles that shape your company’s organizational culture.
- Business Objectives: Consider using the SMART goal-setting technique . This simply means setting up specific, measurable, attainable, relevant and time-bound objectives that your company wants to achieve.
- SWOT Analysis: External and internal factors that make up your company’s business competitive environment.
- Action Plan: A plan outlining steps that will be taken to achieve the business objectives of your organization.
- Financials: A section that shows the financial performance expectations, the budget and the resources that will be required to implement the action plan.
- Performance Measurements: Performance indicators that will be used to measure the effectiveness of the action plan.
Never forget to check your strategic plan against reality. In addition to being achievable, it must be practical for your business environment, resources and marketplace.
Now let’s look at a simple business strategic plan example. This is a strategic plan for a small construction company.
1. Mission, Vision & Core Values
- Mission Statement: To build residential spaces that provide wellbeing for our clients.
- Vision Statement: To offer the best construction experience for our clients and expand our brand throughout the globe.
- Core Values: Sustainable innovation and respect for the environment.
2. Business Objectives
- Business Objective 1: Grow operating margin from 15% to 20% over the next year.
- Business Objective 2: Reduce operating costs by 5% over the next quarter
- Business Objective 3: Increase the number of new contracts generated by 10% over the next year
3. SWOT Analysis
- Strengths: Available financing, brand visibility and know-how.
- Weaknesses: Lack of PPE, human capital and expertise in construction areas such as plumbing, electrical work and masonry, which requires subcontractors.
- Opportunities: Lack of environmentally-friendly construction companies in the market.
- Threats: Larger construction companies compete for contracts in the area.
4. Action Plan
- Business Objective 1: To grow operating margin, new employees with plumbing, electrical work and masonry experience will be hired to cut down subcontractor costs. This must be done by the end of the first quarter.
- Business Objective 2: To reduce operating costs, the company will acquire property, plant and equipment. By doing this, the company will no longer rent equipment from third parties, which will reduce operating costs significantly in the medium and long term.
- Business Objective 3: To increase the number of new contracts generated, the leadership team will invest more in the PR, marketing and advertising departments. The company will also invest in key positions for the construction bidding process such as contract estimators.
- Financials: This section will explain in detail what are the costs associated with the work items in the action plan as well as the expected financial benefits for the company.
Our free strategic plan template helps leadership teams gather important information about their business strategy, which makes it the perfect tool to start shaping a strategic plan for your business or project.
A strategic plan is a type of business plan, but there are distinctions between the two. Whereas a strategic plan is for implementing and managing the strategic direction of a business, a business plan is more often the document that starts a business.
A business plan is used primarily to get funding for the venture or direct the operation, and the two plans target different timeframes in business history. A strategic plan is used to investigate a future period, usually between three-to-five years. A business plan is more routinely a year out.
A Different Intent
A strategic plan offers a business focus, direction and action to help the business grow from the point it presently resides to a greater market share in the future. A business plan, on the other hand, is more focused on offering a structure to capture and implement ideas that initially define a business.
With a strategic plan, existing resources are prioritized to increase revenue and return on investment. The business plan is different in that it’s seeking funding for a venture that doesn’t yet exist. Where a strategic plan is building a sustainable competitive advantage in the future, a business plan is designed to take advantage of a current business opportunity.
So, a strategic plan is communicating direction to teams and stakeholders in order to achieve future goals. A business plan isn’t talking to staff, which is likely nonexistent or minimal at this point. It’s speaking to banks and other financial supporters.
Strategic planning, like any planning, requires keeping a lot of balls in the air. That means having the right tool to plan, monitor and report on all the various tasks and resources. ProjectManager is online project management software that gives you control over every aspect of creating and implementing a strategic plan. Try it today with this free 30-day trial.
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Strategic planning: the basics
Creating a strategic plan is a key component of planning for growth. It will help prepare a realistic vision for the future of your business and in doing so can maximise your potential for growth.
- The purpose of strategic planning
- The three key elements of strategic planning
- Getting started with strategic planning
- Build your plan on solid strategic analysis
- What a written strategic plan should include
- Strategic planning and ownership
- Implementing a strategic plan
A strategic plan should not be confused with a business plan. A business plan is about setting short or mid-term goals and defining the steps necessary to achieve them. A strategic plan is typically focused on mid to long-term goals and explains the basic strategies for achieving them.
2. The purpose of strategic planning
The purpose of strategic planning is to set overall goals for your business and to develop a plan to achieve them. It involves stepping back from your day-to-day operations and asking where your business is headed and what its priorities should be.
Strategic planning and growing businesses
Taking the decision to grow a business means embracing the risks that come with growth. Spending time on identifying exactly where you want to take your business - and how you will get there - should help you manage those risks and take charge of the growth process.
As your business becomes larger and more complex, strategy formulation will need to become more sophisticated. To do this, you might want to start collecting and analysing a wider range of information about your business - both about how it operates and about how conditions are developing in your current and potential markets.
The difference between strategic planning and writing a business plan
The process of strategic planning is about determining the direction in which you want to take your business. By contrast, the purpose of the business plan is to provide the detailed route map that will take you in your desired direction.
Effective strategy development requires a shift in focus from day-to-day concerns to your broader and longer-term business options.
3. The three key elements of strategic planning
Developing a strategy for business growth requires you to deepen your understanding of the way your business works and its position relative to other businesses in your markets. As a starting point, you need to ask yourself the following three questions:
- Where is your business now? This involves understanding as much about your business as possible, including how it operates internally, what drives its profitability, and how it compares with competitors. Be realistic, detached and critical.
- Where do you want to take it? Here you need to set out your top-level objectives. Work out your vision, mission, objectives, values, techniques and goals. Where do you see your business in five or ten years? What do you want to be the focus of your business and your source of competitive advantage over your rivals in the marketplace?
- What do you need to do to get there? What changes will you need to make to deliver on your strategic objectives? What is the best way of implementing those changes? What changes to the structure and financing of your business will be required and what goals and deadlines will you need to set for yourself and others in the business?
While the second question is at the heart of the strategic planning process, it can only be considered usefully in the context of the other two.
You should balance your vision for the business against the practical realities of your current position. You need to take into account the implications of any changes, such as increased investment in capital and other resources. A strategic plan needs to be realistically achievable.
4. Getting started with strategic planning
As with any business activity, the strategic planning process itself needs to be carefully managed. Responsibilities and resources need to be assigned to the right people and you need to keep on top of the process.
Who to involve
Try to find people who show the kind of analytical skills that successful strategic planning depends upon. Try to find a mix of creative thinkers and those with a solid grasp of operational detail.
Don't try to do it all yourself. Take on board the opinions of other staff - key employees, accountants, department heads, board members - and those of external stakeholders, including customers, clients, advisers and consultants.
How to structure the process
There is no right or wrong way to plan the process of strategic planning, but be clear in advance about how you intend to proceed. Everyone involved should know what is expected of them and when.
Consider holding a series of weekly meetings with a strategy team before delegating the drafting of a strategy document to one of its members. Or you might decide to hold strategy brainstorming sessions - which might involve seeking contributions from a broader range of employees and even key customers.
Getting the planning document right
It's important to get the process right. But don't neglect the outcome - it's also important to make sure you capture the results in a strategic planning document that communicates clearly to everyone in your business what your top-level objectives are. Such a document should:
- reflect the consensus of those involved in drafting it
- be supported by key decision-makers, notably owners and investors
- be acceptable to other stakeholders, such as your employees
5. Build your plan on solid strategic analysis
Strategic planning is about positioning your business as effectively as possible in the marketplace. So you need to make sure that you conduct a thorough analysis of both your business and your market.
There are a range of strategic models that you can use to help you structure your analysis.
A SWOT analysis identifies the internal and external factors that are favourable and unfavourable to achieving a business goal:
- Strengths - attributes of the business that can help achieve the objective
- Weaknesses - attributes of the business that could be obstructive to achieving the objective
- Opportunities - external factors that could be helpful in achieving the objective
- Threats - external factors that could be obstructive to achieving the objective
PESTLE breaks the business environment down into the following components:
- Political - e.g. changes to taxation, trading relationships or grant support for businesses
- Economic - e.g. interest rates, inflation and changes in consumer demand
- Social - e.g. demographic trends or changing lifestyle patterns
- Technological - e.g. the emergence of competing technologies or productivity-improving equipment for your business
- Legal - e.g. changes to employment law or to the way your sector is regulated
- Environmental - e.g. changing expectations of customers, regulators and employees on sustainable development
The Five Forces model aims to help businesses assess how competitive a market is. The model looks at:
- your customers' bargaining power - the higher it is (perhaps because there is a small number of major buyers for your product or service) the more downward pressure on prices and revenue they will be able to exert
- your suppliers' bargaining power - the ability of suppliers to push prices up (for instance if you rely on a single firm) can impact significantly on costs and profitability
- the threat of new competitors entering your market or industry - more businesses competing makes it more difficult to retain market share and maintain price levels
- the threat of customers switching to newer products and services
- the level of competition between businesses in the market - including the number and relative strength of the businesses and the cost to customers of switching between them
6. What a written strategic plan should include
There is no set blueprint for how to structure a strategic plan, but it is good practice to include the following elements:
- Analysis of internal drivers - corresponding to the strengths and weaknesses of a SWOT (strengths, weaknesses, opportunities and threats) analysis.
- Analysis of external drivers - this should cover factors such as market structure, demand levels and cost pressures, all of which correspond to the opportunities and threats element of a SWOT analysis.
- Vision statement - a concise summary of where you see your business in five to ten years' time.
- Top-level objectives - these are the major goals that need to be achieved in order for your vision for the business to be realised. These might include attracting a new type of customer, developing new products and services, or securing new sources of finance.
- Implementation - this involves setting out the key actions (with desired outcomes and deadlines) that will need to be completed to attain your top level objectives.
- Resourcing - a summary of the implications your proposed strategy will have on your business' resources. This will reflect financing requirements, as well as factors such as staffing levels, premises and equipment.
You may also want to consider adding an executive summary . This can be useful for prospective investors and other key external stakeholders.
7. Strategic planning and ownership
Growing a business can pose some considerable personal challenges to the owner or manager, whose role can change dramatically as the business grows.
Effective strategic planning involves challenging the way that business has been done up to this point. It may be that decision-making in some areas will be handed to others, or that processes which have worked well in the past will no longer fit with future plans.
It can be tempting for owners or managers to overlook alternatives that are uncomfortable for them personally. However, utilising the options open to you will underpin the healthy growth of your business.
Examples of issues that tend to get overlooked by growing businesses include:
- The future role of the owner - for example, it may be in the best interests of the business for the owner to focus on a smaller number of responsibilities, or to hand over control to someone with greater experience.
- The location of the busines s - most small businesses are located close to where the owner lives. But as a business grows it may make sense to relocate the business to be closer to greater numbers of customers or skilled employees.
- Ownership structure - growing businesses in particular should ensure that they get this right. The more a business grows, the more sophisticated it needs to be about meeting its financing needs. In many cases, the best option is for the owner to give up a share of the business in return for equity finance - but this can be emotionally difficult to do.
It is the owner of the business who decides the strategic plan. Growing a business is not something done 'at all costs'. However, an honest assessment of the options allows for any decisions made to be as informed as possible.
8. Implementing a strategic plan
The strategic plan needs to be implemented, which is a process that requires careful planning.
The key to implementing objectives identified in the strategic plan is to assign goals and responsibilities with budgets and deadlines to responsible owners - key employees or department heads, for example.
Monitoring the progress of implementation and reviewing it against the strategic plan will be an ongoing process. The fit between implementation and strategy may not be perfect from the outset and you may find it necessary to tweak your plans as you progress.
Monitoring implementation is the key. Using key performance indicators (KPIs) and setting targets and deadlines is a good way of controlling the process of introducing strategic change.
Your business plan is another important tool in the implementation process. The business plan is typically a short-term and more concrete document than the strategic plan and it tends to focus more closely on operational considerations such as sales and cashflow trends. If you can ensure that your strategic plan informs your business plan, you'll go a long way to ensuring its implementation.
Remember that strategic planning can involve making both organisational and cultural changes to the way your business operates.
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