Chapter 3

STRATEGIC PLANNING AND ITS

APPLICATION
 3.1. Strategic Planning: Definitions Frameworks,

• Strategic planning means planning for strategies

and implementing them to achieve organisational
goals.?
• It starts by asking oneself simple questions like
What are we doing?
• Should we continue to do it or change our product
line or the way of working?
• What is the impact of social, political, technological
and other environmental factors on our operations?
• Are we prepared to accept these changes etc.?
• Strategic planning helps in knowing what we are
and where we want to go so that environmental
threats and opportunities can be exploited, given
the strengths and weaknesses of the organisation.
• Strategic planning is “a thorough self-examination
regarding the goals and means of their
accomplishment so that the enterprise is given both
direction and cohesion.”
• Strategic planning is the process of determining a
company’s long-term goals and then identifying the best
approach for achieving those goals.
• Strategic planning is an organization’s process of defining
its strategy or direction and making decisions on allocating
its resources to pursue this strategy, including its capital and
people.
• Strategic planning is a process to determine or re-assess the
vision, mission and goals of an organization and then map
out objective (measurable) ways to accomplish the identified
goals.
 Major components of a strategic plan
 Mission statement: The mission statement is an overarching
expression of your purpose and aspiration, addressing both
what you seek to accomplish and how. It’s a declaration of
why you exist as an organization.
 Vision statement: This short, concise statement of the
organization’s future answers the question of what the
company will look like in three, five or more years.
 Values statement: These statements are enduring and
distinctive core beliefs. They’re guiding principles that
never change and are part of your strategic foundation.
 SWOT: A SWOT is a summarized view of your current
position, specifically your strengths, weaknesses,
opportunities and threats
 • Long-term strategic objectives: These long-term
strategic focus areas span a three-year (or more) time
horizon. They answer the question of what you must
focus on to achieve your vision.
• Short-term goals/priorities: These items convert
the strategic objectives into specific performance
targets that fall within the one-to-two years time
horizon.
• Action plans: These specific statements explain how
a goal will be accomplished. They’re the areas that
move the strategy to operations.
 Scorecard: You use a scorecard to report the data of
your key performance indicators (KPIs) and track
your performance against the monthly/yearly
targets.
 Financial assessment: Based on historical record
and future projections, this assessment helps plan
the future of your organizations, allowing you to
gain much better control over your financial
performance.
 EXAMPLE Mission OF WCU

• To deliver proficient Graduates equipped with

knowledge, skill and attitude by providing relevant
and quality education; produce new knowledge and
technology by conducting problem solving research;
transform community livelihoods by strengthening
community-industry partnership, technology transfer
and advisory, training healthy services; enhance
sustainable institutional capacity and integrated
leadership. In doing so, the University endeavors to
contribute to the fulfillment of sector goals and
attainment.
• One of the functions of strategic planning is to inspire
people in the organization to work towards the creation
of a new state of affairs.
• The vision is a means of describing this desired future, but
it works best to inspire and motivate if it’s vivid — in other
words, a vision should be a “picture” of the future.
• The visioning process is usually the very first step in the
strategic planning process.
• Vision OF WCU
• Aspires to become one of the ten first universities in
Ethiopia and home of brilliants by 2017 E.C
 Strategic Planning – Features
• The following are the salient features of strategic
planning:
• 1. Process of Questioning: It answers questions
like where we are and where we want to go, what
we are and what we should be.
• 2. Time Horizon: It aims at long-term planning,
keeping in view the present and future
environmental opportunities. It helps organisations
analyse their strengths and weaknesses and adapt to
the environment. Managers should be farsighted to
make strategic planning meaningful.
3. Pervasive Process: It is done for all organisations, at a
levels; nevertheless, it involves top executives more tha
middle or lower-level managers since top executives envisio
the future better than others.
4. Focus of Attention: It focuses organisation’s strengths an
resources on important and high-priority activities rathe
than routine and day-to-day activities. It reallocates resource
from non-priority to priority sectors.
5. Continuous Process: Strategic planning is a continuou
process that enables organisations to adapt to the ever
changing, dynamic environment.
6. Co-Ordination: It coordinates organisations interna
environment with the external environment, financia
resources with non- financial resources and short-term plan
 STRATEGIC PLANNING –
IMPORTANCE
• Strategic planning offers the following benefits:
1. Financial Benefits: Firms that make strategic plans
have better sales, lower costs, higher EPS (earnings
per share) and higher profits. Firms have financial
benefits if they make strategic plans.
2. Guide to Organisational Activities: Strategic
planning guides members towards organisational
goals. It unifies organisational activities and efforts
towards the long-terms goals. It guides members to
become what they want to become and do what
• 3. Competitive Advantage: In the world of
globalisation, firms which have competitive
advantage (capacity to deal with competitive
forces) capture the market and excel in financial
performance. This is possible if they foresee the
future; future can be predicted through strategic
planning. It enables managers to anticipate
problems before they arise and solve them before
they become worse.
• 4. Minimises Risk: Strategic planning provides
information to assess risk and frame strategies to
minimise risk and invest in safe business
opportunities. Chances of making mistakes and
choosing wrong objectives and strategies, thus, get
5. Beneficial for Companies with Long Gestation
Gap: The time gap between investment decisions
and income generation from those investments is
called gestation period. During this period, changes
in technological or political forces can disrupt
implementation of decisions and plans may,
therefore, fail. Strategic planning discounts future
and enables managers to face threats and
opportunities.
 6. Promotes Motivation and Innovation: Strategic
planning involves managers at top levels. They are
not only committed to objectives and strategies but
also think of new ideas for implementation of
• 7. Optimum Utilisation of Resources:
Strategic planning makes best use of resources
to achieve maximum output.
 Strategic Planning – Limitations
• Strategic Planning in management is essential but there are
practical limitations to its use. The reasons why people fall
in strategic planning emphasise the practical difficulties
encountered in planning. A number of limits within which
planning has to operate make this undertaking difficult.
• 1) Problems of Change:
• 2) Failure of People:
• (3) Lack of Accurate Information:
• (4) Inflexibilities:
• (5) Time and Cost:
• 6) Rigidity:
 LEVELS OF STRATEGY
• The Three Levels
• 1. Corporate 2. Business 3. Functional
 Corporate
• This is the top layer of strategic planning, and is often
associated with the organisation's mission and values,
though it is developed in much more significant depth.
• Corporate strategy is defined by those at the very top of
the organisation - managing directors and executive
boards - and is an outline of the overall direction and
course of the business. In effect, it defines:
 General, overall strategy and direction
 Which markets the organisation will operate in
 How the markets will be entered and the general
activities of the organisation
 BUSINESS STRATEGY

• Business strategy generally emerges and evolves from the

overarching corporate strategy which has been set by those
at the helm(WHEEL).
• They are usually far more specific than corporate strategy
and will likely be unique to different departments or
subdivisions within the broader organisation. In general,
they use corporate strategy as an outline to:
1. Define specific tactics and strategies for each market the
organisation is involved in
2. Define how each business unit will deliver the planned
tactics
 Types of Business Level Strategies
• 1. Cost Leadership
• 2. Porter’s Generic Strategies
• 3. Differentiation Strategy
• 4. Focus and Niche Strategies
• 5. Tactical Strategies.
 Functional
• This (also known as Market-Level Strategy) refers to
the day-to-day operation of the company, which will
keep it functioning and moving in the correct direction.
• Overall, they define:
 Day-to-day actions which are required to deliver
corporate and business strategies
 Relationships needed between units, departments and
teams
 How operational goals will be met, and how they will
be monitored
 SWOT ANALYSIS

• SWOT analysis for the first time in 1950 by two

Harvard Business School graduates, namely George
Albert Smith and Roland Christensen was raised
• SWOT is an acronym used to describe the particular
Strengths, Weaknesses, Opportunities, and Threats that are
strategic factors for a specific company.
• A SWOT analysis should not only result in the identification
of a corporation’s core competencies, but also in the
identification of opportunities that the firm is not currently
able to take advantage of due to a lack of appropriate
resources.
 SWOT ANALYSIS--
• The SWOT analysis framework has gained
widespread acceptance because it is both simple
and powerful for strategy development. However,
like any planning tool, SWOT is only as good as
the information it contains.

• Thorough market research and accurate

information systems are essential for the SWOT
analysis to identify key issues in the environment.
 Assess your market:
 What is happening externally and internally that will affect our
company?
 Who are our customers?
 What are the strengths and weaknesses of each competitor? (Think
Competitive Advantage)
 What are the driving forces behind sales trends?
 What are important and potentially important markets?
 What is happening in the world that might affect our company?
 What does it take to be successful in this market? (List the strengths all
companies need to compete successfully in this market.)
 Assess your company:
 What do we do best
 Assess your competition:
 How are we different from the competition?
 What are the general market conditions of our
business?
 What needs are there for our products and services?
 What are the customer-market-technology
opportunities?
 What are the customer’s problems and complains
with the current products and services in the industry?
 What “If only….” Statements do a customer make?
 Threat
• A challenge posed by an unfavourable trend or
development that would lead (in absence of a
defensive marketing action) to deterioration in
profits/sales.

• An evaluation needs to be completed drawing

conclusions about how the opportunities and threats
may affect the firm.
• The Internal Analysis of strengths and weaknesses focuses on
internal factors that give an organization certain advantages and
disadvantages in meeting the needs of its target market.

• Strengths refer to core competencies that give the firm an

advantage in meeting the needs of its target markets.

• Any analysis of company strengths should be market

oriented/customer focused because strengths are only meaningful
when they assist the firm in meeting customer needs. Weaknesses
refer to any limitations a company faces in developing or
implementing a strategy
• Weaknesses should also be examined from a customer
perspective because customers often perceive
weaknesses that a company cannot see. Being market
focused when analyzing strengths and weaknesses does
not mean that non-market oriented strengths and
weaknesses should be forgotten.
• Rather, it suggests that all firms should tie their
strengths and weaknesses to customer requirements.
Only those strengths that relate to satisfying a customer
need should be considered true core competencie
• The following area analyses are used to look at
all internal factors affecting a company:
• Resources: Profitability, sales, product quality
brand associations, existing overall brand,
relative cost of this new product, employee
capability, product portfolio analysis
• Capabilities: Goal: To identify internal
strategic strengths, weaknesses, problems,
constraints and uncertainties
• The External Analysis examines opportunities and threats that exist in
the environment. Both opportunities and threats exist independently of
the firm. The way to differentiate between a strength and weakness
from an opportunity or threat is to ask: Would this issue exist if the
company did not exist?
• If the answer is yes, it should be considered external to the firm.
Opportunities refer to favorable conditions in the environment that
could produce rewards for the organization if acted upon properly.
That is, opportunities are situations that exist but must be acted on if
the firm is to benefit from them.
• Threats refer to conditions or barriers that may prevent the firms from
reaching its objectives.
• The following area analyses are used to look at all external
factors affecting a company:
•  Customer analysis: Segments, motivations, unmet needs
• Competitive analysis: Identify completely, put in strategic
groups, evaluate performance, image, their objectives,
strategies, culture, cost structure, strengths, weakness
•  Market analysis: Overall size, projected growth,
profitability, entry barriers, cost structure, distribution
system, trends, key success factors

•  Environmental analysis: Technological, governmental,

economic, cultural, demographic, scenarios, information-
need areas Goal: To identify external opportunities, threats,
• The SWOT Matrix helps visualize the analysis.
Also, when executing this analysis it is important
to understand how these elements work
together. When an organization matched
internal strengths to external opportunities, it
creates core competencies in meeting the needs
of its customers. In addition, an organization
should act to convert internal weaknesses into
strengths and external threats into opportunities
• End