Strategic planning is the most important type of managerial activity in an enterprise. The development of large business requires building well-designed plans, effective implementation of the decisions that they provide, as well as an adequate assessment of the results of work. What are the main stages of strategic planning? What factors can affect their content?
What is strategic planning?
Before exploring the stages of strategic planning as an essential element of enterprise management, consider the approaches of researchers to understanding the essence of the corresponding term.
There is a widespread point of view according to which strategic planning can be understood as the process of developing and maintaining mechanisms to ensure a balance between long-term business goals and the possibilities of achieving them in the current market conditions. The main objective of strategic planning is the identification by management of fundamental resources, through which the future development of the enterprise is possible.
Key Planning Steps
The main stages of strategic planning, according to researchers, can be fixed in the following list:
- definition of key business goals;
- analysis of the social environment in which the company operates (in market, legal, political aspects);
- selection of an effective strategy;
- implementation of the provisions of the strategy;
- assessment of the results of solving the tasks.
We now consider the specifics of the noted items in more detail.
Planning Stages: Setting Goals
So, the first stage of strategic planning is the formation of key goals. If we talk about a company that is considered commercial and conducts activities in the free market, then the corresponding plan item may be related to the process of market expansion. Thus, key business development goals can be related:
- with a specific market share,
- with an increase in revenue to specific indicators,
- ensuring the representation of the brand in such a geography of the market.
Goal setting will largely depend on the current stage of business development. So, for a start-up enterprise, capitalization will probably be the priority, accompanied by an increase in revenue or the value of fixed assets. For larger businesses, it is likely that the emphasis in development will be formed on the basis of the need to expand the geography of presence in the market.
The first stage of strategic planning may include activity, involving the use of certain philosophical aspects of the development of the company. That is, the company can set a goal, which consists not only in achieving any economic indicators, but also, for example, designed to solve a significant social, ideological problem. As, for example, the stimulation of science in the region or the growing popularity of any educational specializations by creating jobs that require appropriate qualifications from employees. It can be noted that some businesses, in principle, do not consider aspects related to profitability when setting an appropriate goal. The philosophical, ideological component of business development becomes a priority for them.
However, regardless of what the goal setting methodology is, those should meet a number of criteria.Namely: orientation for a specific period of time, measurability (in units of currency, in the number of specialists in a particular specialization), consistency with other goals, company resources, controllability (there are ways to monitor the processes that accompany the achievement of the goal, as well as intervening if necessary) .
Having determined the goals, the company may begin to implement the following stages of the strategic planning process. In particular, the analysis of the social environment. We study its key characteristics.
Planning stages: analysis of the social environment
The stages of strategic planning include those related, as we noted above, to the analysis of the social environment in which the company operates. The components of this can be: market, legal, socio-economic, as well as the political sphere.
What are the most important characteristics of the first section of the social environment? Among those:
- the level of competition (which can be estimated, for example, based on the number of players operating in this segment);
- current and potential demand intensity;
- infrastructure characteristics (quality of transport communications involved by businesses in the course of interaction with suppliers, as well as in the delivery of goods to the final consumer).
If we talk about the legal component of social infrastructure, then its key characteristics can be called:
- the intensity of taxation, determined by the relevant legal acts - for example, the Tax Code of the Russian Federation, federal laws, regional and municipal sources of law, which fix the criteria for tax collection at one level or another;
- the presence of legal barriers to starting a business (this may be expressed in the need to obtain licenses, certificates, other permits);
- determined by the provisions of various sources of law, the intensity of inspections and supervisory procedures, reporting obligations to the Federal Tax Service and other authorities.
Regarding the socio-economic sphere, as one of the components of the social environment, it is worth saying that its key characteristics can be as follows:
- level of purchasing power of the population (if the target audience is individuals);
- solvency of the target category of clients in the status of legal entities;
- current unemployment rates;
- socio-cultural characteristics of the target group of customers;
- solvency and reliability of suppliers.
Another important component of the social environment in which the company is to work and in relation to which analysis needs to be carried out is the political sphere. In some cases, it is advisable for the companies making up the stages of strategic planning to analyze the noted sphere in priority order. It happens that the state of affairs in politics affects a business to a much more significant degree than certain economic calculations. The main characteristics of the political sphere as an element of the social environment in which the company will develop are considered to be:
- level of openness of borders, accessibility of certain foreign markets;
- level of development of democratic procedures in the country;
- political stability in general (predetermined, for example, by the level of public confidence in the government).
Some analysts believe that this list should contain one more item - the level of political competition, that is, the presence in the system of political institutions of channels through which any interested persons can participate in elections and other political communications. Selective qualifications on any grounds should thus be minimized. However, this point of view has a counterargument, which consists in the fact that the effective development of the economy and business may well be carried out with minimal political competition - as, for example, in China or Singapore.
Methods of analysis of the social environment
The most important nuance that characterizes the stages of strategic planning that we are considering is the methods that company leaders can apply in solving certain problems. The correct management tools are especially significant when analyzing the social environment in which the enterprise operates. We will study the corresponding methods in more detail.
Modern researchers consider one of the most effective SWOT analysis. SWOT is an abbreviation of the English words strenghts - “strengths”, weaknesses - “weaknesses”, opportunities - “opportunities”, and threats - “threats”. Thus, each of the above components of the social environment - the market, legal, socio-economic and political sphere - can be examined for the strengths, weaknesses of the company, opportunities and threats that characterize the communication of the business in interaction: with competitors, if we talk about market analysis , with the state in terms of law enforcement practice, if we talk about the legal sphere, with consumers and suppliers, if we talk about the socio-economic sphere, with political structures.
Another noteworthy method that enterprise managers can use when developing the stages of the strategic planning process is portfolio analysis. It is especially effective in researching the market component of the social environment in which the company will develop. Using portfolio analysis, a company’s management can analyze its business model and identify the most and least promising areas of communication with external players, the most effective investment options, the most attractive ideas and concepts for the development of the company.
So, after solving the problem under consideration, which includes the stages of strategic planning - analysis of the social environment, enterprise managers can move on to the next - choosing an effective business development strategy. Let's consider it in more detail.
Planning Stages: Choosing a Strategy
What can be the strategic plans considered by enterprise managers? The stages of strategic planning considered by us can, as we noted above, be built at different stages of the development of the company.
Thus, the specifics of planning for a company that has just entered the market, and the priorities determined by the managers of a company that has already become a major player, can vary significantly. Therefore, the choice of a company’s development strategy can be largely determined by the stage of building a business. Of course, the results of analytical studies carried out using the SWOT method, portfolio approach or other tools will also be a significant factor.
Modern experts distinguish the following main business development strategies: stability, growth, reduction. Their combination is also possible - in this case, a combined strategy is built. We study their specifics.
Stability strategy
One of the factors determining the choice of priorities in the development of the company may be, as we noted above, analysis of the social environment of the enterprise, which is included in the stages of development of strategic planning. In the event that he shows that the current conditions in which the firm is to work do not contribute to its active growth, then management may decide on the choice of a stability strategy. A similar scenario is possible if, for example, analytical work reveals that the market segment in which the company develops is sufficiently saturated, the level of purchasing power of the target customers is average, and the political situation does not allow to count on the expansion of the brand's presence in foreign markets. The characteristics of the stability strategy, if we talk about a modern commercial enterprise, may be as follows:
- the priority of using the company's own funds;
- limited intensity of raising credit funds and portfolio investment;
- emphasis on reducing costs and increasing, in the end, the profitability of the enterprise;
- ensuring revenue growth - whenever possible, optimization of current production operations.
In general, the characteristics of the strategic planning stages associated with setting development priorities will reflect the company's desire to develop at an average pace, using predominantly conservative approaches to business management, and refusing to invest in concepts that are highly likely to be ineffective for all their external attractiveness.
Growth strategy
An analysis of the social environment in which the enterprise will operate can show, for example, that the level of competition in the current market segment is low, the political situation favors interaction with foreign suppliers, and the purchasing power of target customers is high.
In this case, the approaches by which management builds the stages of the organization’s strategic planning can be characterized by the desire of company managers to provide:
- more intensive revenue, possibly accompanied by higher costs and lower profitability, but in absolute terms, able to give more profit;
- active lending, attracting investors;
- investments in promising innovative concepts.
Reduction strategy
Another possible scenario - the results of analytical work indicate that the social conditions of the company are far from optimal. This can be expressed, for example, in an increase in unemployment and a decrease, as a result, in the purchasing power of the target customers of the company.
In this case, the current scale of the business may be unprofitable. As a result, management, building the stages of strategic planning development, may decide to choose a business reduction strategy. Its main characteristics:
- refusal to invest in any large projects;
- reduction of the geographical presence of the brand in regions where business profitability is low;
- cost reduction in order to increase the profitability of the company at current speeds;
- early repayment of loans.
What can be a combined business development strategy? As a rule, its application means that the involvement of certain approaches is predetermined by the state of affairs in a particular sector of the business or in a particular region where the brand is present.
It may well turn out that in one state where the company operates - the economic crisis, in another there is a steady growth of the national economy. As a result, the management that builds the stages of strategic planning development may decide to apply a growth strategy in the first country, and stability or reduction in the second. The same decision-making principle may apply to different production sites. For example, it may turn out that the production of televisions is less cost-effective than supplying irons to the market. As a result, the management, determining the stages of strategic planning at the enterprise, may decide to make the production of TVs less intensive, thereby reducing investment in this part of the business, and as for the supply of irons, it will send additional financing to this segment.
The next stage of strategic planning is the actual implementation of those scenarios that are conceived by the enterprise management. The main task in this case is to determine the responsible persons and company structures that will directly participate in the practical implementation of the methods and approaches adopted at the level of top managers. We will study it in more detail.
Planning Stages: Strategy Implementation
The sequence of stages of strategic planning includes, therefore, not only the theoretical part, but also the practice of implementing those decisions that are developed by the enterprise management. As we noted above, the key task in this case is the appointment of responsible persons who will directly participate in the activities under consideration. The management of the company will, first of all, competently delegate the necessary authority to the level of subordinate structures. In the course of solving this tasks for managers will need to pay attention:
- identification of mechanisms for financing the necessary activities;
- building internal control and reporting procedures;
- defining criteria for the quality of work of responsible persons and organization structures that are involved in the implementation of the chosen strategy.
After the decisions made by the managers are put into practice, it is necessary to track how effective they are and evaluate the results of the managers' work.
Planning Stages: Evaluating Results
The considered stage has a very simple content. In fact, all that managers or those structures that are responsible for evaluating the results of the practical implementation of approaches to business development need to be done is to compare the results with those goals that were set in the first stage. In some cases, it may also be necessary to correctly interpret the results - if we are talking about reporting to the owners or investors of the company.
So, strategic planning includes stages arranged in a certain logical sequence. The most important thing for managers is to follow the order in the work on each of them. This criterion is one of the key in terms of achieving the desired results in business development.
