Do you have familiar strategic planning?

Identify your strengths and weaknesses by scientific planning to find economic opportunities and solve threats to your business (Strategic Management & Strategic Planning).

• Strategic planning is a plan to achieve the set goals, based on the analysis of the current state of your business and its environment and making decisions about future of your business.
• Using strategic planning, your organization, company or business will re-modify the goals according to its strengths and weaknesses by the use of the opportunities in the market and potential threats.
• Strategic planning will help organizations to know where it is exactly. And according to the possibilities and conditions that it has, by implementing what guidelines in the current situation can achieve their goals and missions.

The purpose of strategic planning is to analyze the situation to reach the ideal situation.

According to our vision and mission set for a business, we examine and analyze the strengths, weaknesses, opportunities and threats to its business and by analyzing internal conditions and external environment of business we can develop different strategies for achieving the goals and implementation of trade missions and business.

After collecting and analyzing the data and information, strengths, weaknesses, opportunities and threats are prioritized and weighted based on the importance and are ranked based on the amount and intensity and then we developed different strategies by combination of internal conditions of business and external factors affecting it.

In other words, based on the strengths of the business, we develop a plan to use market opportunities and counter threats and we develop a plan to improve weaknesses using the opportunities and we plan to prevent threats to the market considering the weaknesses.

To choose the best strategic plans, we assign an attraction coefficient to each of the strategies resulting in Quantitative Strategic Planning (QSPM). These coefficients are determined based on experts’ views and experiences of employer and finally the best strategies are determined. The other analytical method for implementing the strategic planning is PEST analysis. PEST stands for political, economic, social and technological. Some call the analysis step.

As it was previously stated, in the analysis of environmental factors, the business is divided into two categories; internal and external factors. External factors themselves are divided into two categories: micro and macro variables and macro analysis of the external environment is pest. External factors are divided into two categories: micro and macro variables and pest is macro analysis of the external environment.

Some political factors of PEST analysis include: Tax policy, labor laws, trade laws, political stability, the rules related to contracts, policies and laws related to intellectual property, pricing policies.

Some economic factors of PEST analysis include: Economic growth, inflation rate, unemployment rate, economic boom or recession or improvement of economic activities.

Some social factors of PEST analysis include: The age distribution of the population, social spirit, culture of society.

Some of the factors of analysis of technological variables include: The rate of technological changes, the impact of technology on providing automation services. Today, two other factors of environment and legal have been also added to the analysis so that it is known as PESTEL analysis.

Planning based on forecasts of different topics (Scenario planning): It is a planning method that the necessary planning is done on any topic based on the probability of occurrence of different situations in the future.

Scenario planning is a method of strategic planning to predict the distant future and find the required flexibility in dealing with different situations while there are several uncertainties in the system.

In the scenario planning, various analyses in the labor market concerning demographics and tastes and culture and economic situation are considered and future conditions are simulated based on predicted information. The process of scenario planning is done in five steps. The first step is structured interviews with key members of organization; the second step is finding factors and external forces that have unexpected impact on the organization; the third step is combining external factors that affect the organization and layout of them in matrix, respectively, based on the degree of importance and the degree of uncertainty (or probability of occurrence); the fourth step is implementation; at this step it is checked if any of the scenarios happens what will happen to the company and what should we do to deal with this scenario? The fifth step is controlling and monitoring the external factors affecting business.

In strategic planning internal and external factors are examined; one of the external factors are competitors. Michael Porter believes that the 5 factors are effective on each other in the intensity of competition in an industry (Porter five forces analysis). Porter believes that all companies are looking for profit and the factor that determines the rate of profit is the intensity of competition and if the intensity of competition is specified, profitability is also specified. With this method, by analyzing the competition intensity in a business or industry, we can decide to enter the business or leave it. Porter’s 5 forces include:

1. Buyers: In analyzing the impact of buyers on the competition, the following are effective.

• The more the number of buyers is, their bargaining power is reduced because if they do not buy, someone else buys.
• If the buyer can buy the raw materials from the supplier or can make the same commodity that he needs, the bargaining power will go up and if raising the price may be done by the manufacturer, he should supply the raw materials he needs.
• The more important and more vital is a product for the buyer, the buyer’s bargaining power is reduced.
• The more the purchase of the buyers is, the bargaining power of them gets higher and the less the purchase of the buyers is, the bargaining power of them is reduced.
• The more the information of buyers of the product he wants to buy is, the bargaining power gets higher.

2. Suppliers: In analyzing the impact of suppliers on the competitive situation, the factors that influence include the number of providers, the number of substitute products of supplier, wholesale of supplier, differentiation between the supplied products, the amount of fixed costs of suppliers and leading vertical integration; each of these factors will be effective on the bargaining power by their increase or decrease.

Three other forces that Porter considers them effective on competition are:

3. Substitute commodity, the easier a commodity can be replaced by another commodity, so the more competition in the industry will be. The cost of a commodity that is replaced by another commodity and the performance or efficiency of the substitute commodity is effective on its selection.
4. Threat of New Entrants: new competitors that have recently come to completion in a business want to gain a market share. The severity of the threat posed by the entry of new competitors depends on the following factors:

The required capital (the more the capital required to enter a business is, the fewer people are entering the business industry), access to distribution channels (the easier the access to distribution channels for new entrants is, the threat power of new entrants increases), special privileges (the more the number of the privileged people in the industry is, such as reputable brand, a good experience and so, the less the threat power of new entrants is), differentiation, learning or experience curve (according to the curve, the more time passes, the more our costs in the industry gets, because the more time passes, the more experience we have in the industry and we can reduce our costs in the industry. The higher learning curve is, i.e. the longer it gets so that we can take ourselves to the lowest cost in the industry, the less the power of threat gets. ), government policies to be strict or not strict for new entrants in the industry are of the factors affecting the arrival of new entrants and thus the intensity of competition in an industry.

5. Competition of available competitors is the fifth force affecting competition and the intensity and weakness of the measure depends on factors such as competitors at the same level (the more similar the competitors are in the industry in terms of capital and human resources, technology and quality of service, etc. the more competition is in the industry), the number of competitors (the more number of competitors is in an industry, the higher the intensity of competition is), fixed costs, and barriers to get out (the more strict the conditions is for getting out of a business because of government policies and regulations, high costs, etc., the higher competition is in the industry) and the cost of converting is one of the things that affect competition of available competitors. The other method of evaluating the business situation is BCG (Boston Consulting Group) matrix or market Growth-share matrix. In this matrix the life cycle of a product or service in a business is evaluated. This matrix has two axes and its horizontal axis indicates the share of a company from product or service market and the vertical axis is the rate of (speed) of growth of the market (industry) and this matrix specifies that in what position our product or service is according to the market situation. There are four positions in this axis and each position has a symbol or a name.

If a product or service in a business is at a situation that has a large share of the market and market growth in the industry is also low, this product or service is in the area as “dairy cow”. These units or products require less investment and since a  high share of these markets belongs to the company, these units enter a lot of money to the company and the money from these units spends on the units that are in other sectors.

If a product or service in a business is at a situation that has a low share of the market and market growth in the industry is also low, this product or service is in the area as “dog”. This product or service has a very little profit or is in break-even point of cost and revenue. The best strategy for these units or of services and products is that reduce the amount of activity should be reduced. The company should try to dissolve or modify these units, unless it has a compelling reason to keep them.

If a product or service in a business is at a situation that has a large share of the market and market growth in the industry is also high, this product or service is in the area as “star”. Stars consume high level of liquidity and that’s why they usually result in good selling for the company, but that it does not mean that high level of the positive liquidity flow of these units is coming to the company, the company must invest a lot to deal with competitors. The parent company should substantially invest on it and reinforce it so that it can maintain its leading position. In case of success, these units become dairy cows and will become profitable.

If a product or service in a business is at a situation that has a low share of the market and market growth in the industry is also high, this product or service is in the area as “question mark”. There are often units or services new products that companies should invest a lot to increase the market share of them against competitors and finally the company should decide that what strategy it will have to keep on the activity of these units or production of products or providing these services; does it want to develop the market of these products and services that in this case, it should seek to strengthen them or it should decide to sell them.

To display products, services or units of a company in BCG matrix, the circles are used that the magnitude of them depends on the financial size of the product. Strategic planning requires implementation, monitoring and control over how it is implemented. Balanced Scorecard (BSC) is a management tool for implementation and controlling strategy and by the structured report that it provides, the managers can easily monitor implementing of the activities by all resources (including staff) and control the activities results. Strategic planning and thinking without supervision and control over how it is implemented is incomplete. Balanced Scorecard (BSC) makes the implementation of strategic planning measurable.

Balanced Scorecard (BSC) links strategy of organization with performance measures in business processes and is a tool for measuring the performance of the organization to implement strategic planning.

Balanced Scorecard divides strategy of organization into four categories of financial, customer, internal processes, growth and learning, and specifies the relationship between the four aspects that are not independent in the strategy of organization.

Strategy map is a tool for visually showing the connection between the different sections and categories in strategy, and thus makes examining how strategy is implemented easier.