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In todays highly competitive business environment,

budget-oriented planning or forecast based planningmethods are insufficient for a large corporation tosurvive and prosper:

The firm must engage in Strategic Planning that

clearly defines objectives and assesses both theinternal and external situation to formulate strategy,implement the strategy, the progress, and makeadjustments as necessary to stay on track.

A simplified view of the strategic planning process isshown the following diagram:

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The Strategic Planning Process

Environmental

ScanningStrategy

Formulation

StrategyImplementation

Evaluation

& Control

Mission &Objectives

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Mission and Objectives

The mission statement describes the companysbusiness vision, including the unchanging valuesand purpose of the firm and forward-lookingvisionary goals that guide the pursuit of future

opportunities.Guided by the business vision, the firms leaderscan define measurable financial and strategicobjectives. Financial objectives involve measures

such as sales targets and earnings growth. Strategicobjectives are related to the firms businessposition, and may include measures such as marketshare and reputation.

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Environmental ScanThe environmental scan includes the followingcomponents:

Internal analysis of the firm Analysis of the firms industry(task environment) External macro environment (PEST analysis)

The internal analysis can identify the firms strengthsand weaknesses and the external analysis revealsopportunities and threats. A profile of the strengths,weaknesses, opportunities, and threats is generated bymeans of a SWOT analysis

An industry analysis can be performed using aframework developed by Michael Porter known asPorters five forces. This framework evaluates entrybarriers, suppliers, customers, substitute products, andindustry rivalry.

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Strategy Formulation

Given the information from the environmentalscan, the firm should match its strengths to theopportunities that it has identified, whileaddressing its weaknesses and external threats.

To attain superior profitability, the firm seeks todevelop a competitive advantage over its rivals. Acompetitive advantage can be based on cost ordifferentiation. Michael Porter identified three

industry-independent generic strategies fromwhich the firm can choose.

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Strategy Implementation

The selected strategy is implemented by means ofprograms,budges,and procedures. Implementationinvolves organization of the firms resources andmotivation of the staff to achieve objectives.

The way in which the strategy is implemented can havea significant impact on whether it will be successful. Ina large company, those who implement the strategylikely will be different people from those whoformulated it. For this reason, care must be taken to

communicate the strategy and the reasoning behind it.Otherwise, the implementation might not succeed if thestrategy is misunderstood or if lower-level managersresist its implementation because they do not

understand why the particular strategy was selected.

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Evaluation & Control

The implementation of the strategy must bemonitored and adjustments made as needed.

Evaluation and control consists of the followingsteps:

1. Define parameters to be measured2. Define target values for those parameters

3. Perform measurements

4. Compare measured results to the per-defined standard

5.Make necessary changes