STRATEGIC PLANNING: Meaning, Features, Process, and types of Business Strategies, McKinney’s 7s approach

STRATEGIC PLANNING: Meaning, Features, Process, and types of Business Strategies, McKinney’s 7s approach.  

Introduction and Meaning of strategic planning

·         Strategic Planning is related with future.

·         A Strategic Planning process involves different degrees of futurity/ time period.

·         Strategic planning may be defined as the process of determining the objective of the organization and the resources to be used to attain these objectives, as also the policies to govern the acquisition, utilization and disposition of these resources.

·         Every company has different methods of strategic planning. But commonly, every company strategic plan includes:

·          Information about the developments in the marketplace.

·          Long term perspective usually time span from three to ten years in the future.

STRATEGIC PLANNING

Features and Nature of Strategic Planning

1. Strategic Planning is an analytical process which formulates strategic and operational plans for the organization.

2. It performs SWOT Analysis, i.e. during the planning process, the firm’s strengths, weaknesses, opportunities and threats are taken into consideration.

3. It is helpful in selecting the best strategy, among the various strategies taking into account the firm’s interest, personal values and corporate social responsibility.

4. It acts as a guide to reduce the risk involved in the business and also to take the best possible advantage of the opportunities.

 Strategic Planning process

1) Understanding the concept.

2) Mission statement.

3) Environmental analysis.

4) Self-appraisal.

5) Strategy Formulation/ Goals and objective.

 6) Strategy Implementation.

7) Strategy Evaluation.

1) Understanding the concept:

·         The first step in the strategic planning process says that first the entrepreneur and his organization must understand the concept of strategic planning.

·         This will help in addressing various important issues like commitment, readiness and efforts of the organization in order to attain the overall objectives of the organization.

2) Mission statement:

·         The entrepreneur should make the mission statement in clear terms.

·         A mission statement describes the purpose of existence of an organization. Mission statement tells two things of organization.

a) Organization purpose.

b) Organization values.

3) Environmental Analysis:

·         In order to identify the opportunities and threats, the external environment of the organization is analyzed.

·         Strategic planning includes thinking of resources with an eye to the future environment.

1 Competition

2 Economic conditions.

3 Political conditions

 4) Self appraisal:

·         In this step the strengths and weakness of the organization are analyzed. Such an analysis will enable the enterprise to capitalize on its strengths and minimize the weaknesses.

5) Strategy Implementation:

·         After formulation of strategy the next step is to implement these strategies in order to find out the desired outcome of these strategies. The best method to study the implementation is to critically analyze the

McKinney’s 7s approach.

a) Strategy.

b) Structure.

c) Systems.

d) Skills.

e) Shared values.

f) Staff.

g) Style.

6) Strategy Evaluation:

·         This is final step in the strategic planning process that generates the required feedback about the outcomes of the strategy that was implemented.

·         If the required end results are not obtained then this is developed to evaluate performance as the strategy to meet the end results.

Harvest and exit strategies

1)      Harvest Strategies:

·         A harvest strategy or harvesting strategy is a business plan for either cancelling or reducing marketing spending on a product.

·         The management has decided that it would cost too much to boost sales.

·         In other words, they could not justify the expense after considering likely future revenues from the product.

·          The term ‘harvest strategy’ may also refer to a brand or line of business.

·         Companies use a harvesting strategy when a product has reached the cash cow stage. Cash cow refers to a product that makes a profit in a mature market and does not need heavy reinvestment.

Types of harvest strategy

a) Gradual Harvest strategy:

·         In gradual harvest strategy the entrepreneur decides to keep on with the company, product line, or service.

·         The focus of this strategy is more creating profits than expansion. The idea is to lower the expenses as much as possible while keeping the revenue coming in which creates profit.

·         The gradual harvest strategy focuses first on cutting cost associated with business expansion

Exit strategy

·         In entrepreneurial circles exit strategy mean selling the business, product line or company.

·         This is also referred to as selling harvest strategy because the entrepreneur is going to exit the company and be free to run another business.

·         Once the entrepreneur has created a business and gotten it to a certain size and profitability, they sell it to another person or company that can take their idea and grow it further.

Types of exit strategy

1.      Merger & Acquisition (M&A).

·         This normally means merging with a similar company, or being bought by a larger company.

·         This is a win-win situation when bordering companies have complementary skills, and can save resources by combining.

·         For bigger companies, it's a more efficient and quicker way to grow their revenue than creating new products organically.

2.      Sell to a friendly individual:

·         It’s a great way to "cash out" so you can pay investors, pay yourself, take some time off, and get ready to have some fun all over again.

·          The ideal buyer is someone who has more skills and interest on the operational side of the business, and can scale it.

3.       Moving out cash for self:

·         In this strategy the forward thinking entrepreneur simply channels the cash of the company to themselves on a daily basis.

·         This is usually done by paying oneself a huge salary and bonus regardless of the actual company performance.

4.      Liquidation

·         Even lifetime entrepreneurs can decide that enough is enough. One often-overlooked exit strategy is simply to shutdown, close the business doors, and liquidate.

5.      Initial public offer:

·         The Initial public offer refers to a strategy of making available the stock of a privately-owned company to any interested investor.

·         The primary purpose of an IPO is to raise additional equity capital to finance company growth, but it can also serve as an additional strategy for harvesting the investment of owner.

Advantages of IPO:

1.      Signals to investors that firm are a quality business and will likely perform will in future.

2.      Helps in creating ongoing interest in company and continued development.

3.    Stock traded publicly has access to more investors when capital needed to grow the business.