Strategic planningis a thorough analysis and planning process which addresses the strategic issues facing a business as well as within its operating environment and industry. It is a corporate strategy analysis process which involves members from senior management and business analysts with data collected from its own business operations and external data sources.
The strategic planning process evaluates the current state of the business in its market place by first collecting data on sales, available capacity, profit margins, operations, supply and demand, industry players and the ability of these to supply different geographic and consumer markets.Then usually a number of different analyses take place which are usually done with the aid of operational and financial models to extrapolate different business cases for a time period into the future, usually five years but can be performed up to ten or more years into the future. The data collected is used as input into the operational and financial models. This process is usually done for competitor businesses as well to compare business performance and financial position relative to peers.
In some cases businesses will engage operations and management consultants to help with the strategic planning process where businesses do not have the analytical capacity or seek a different depth of knowledge on the economy, industry or competitors which they may not possess. Smaller business may only go through a strategic planning process once every two or three years as their operations aren't as complex and not a large enough to potentially cause a major impact to the market or industry.
Strategic planning analysis components
The strategic planning process for a business may cover several different issues the business may be facing and is composed by all or some of the following analysis or studies:
-Market and Industry analysis, industry players market share, volumes and product offerings
-General Operational and Production planning to estimate and meet market demand
-Import Parity Analysiswhich looks at potential pricing limits for locally produced products
-Cost curve analysiswhich examines production costs for different producers and sites
- Inventory managementand working capital analysis
-Operations Strategy : Capacity planning, choice of in-house manufacturing or outsource production, capital expenditure and current capacity utilization
-Raw material supplies and supply chain issues
-Competitor operational and profitability analysis including cost curve analysis and
-Production unit costs and delivered costs to different regions.
-Capital management and financing arrangements for the business
-Potential new entrants and Five strategic forces analysisto place the business in the best position to withstand and succeed against any business and industry threats
-Analysis of current and potential Joint venture and business partnerships
-Corporate finance such as analysing potential business acquisitions, mergers, and takeover defence strategies if the business is a possible target
Strategic planning is usually considered an important part of business management and strategy when these strategic issues are addressed the business is set up to succeed and achieve a competitive advantage in the marketplace and achieve sustainable superior operating profit margins.
Strategy plan presentation and use
The result of the analyses above shape the future of a business and will usually be compiled and presented to members of the executive management team, board of directors or even to investors. The results of these analyses present to management a picture or a view on how the business may perform under current market and industry conditions and what decisions need to be made to place the business in a competitive position.
These decisions and the reasoning behind them are presented in a series of reports and graphical representations such as a variety of graphs to show items like market share, import parity pricing, production costs and profit margins, geographical maps with capacity and cost among other representations required to show the overall business strategy being pursued.
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