Translating strategy into long-term plans, mid-term budgets, short-term forecasts

Now that you understand the key elements of PBF and the process let’s see how organisations can translate strategy into planning, forecasting, and budgeting.

What is strategic planning?

Strategic planning is a long-term process (one plan can span five to ten years). It’s a continuous process that focuses on the overall organisational direction. It enables organisations to implement policies and strategies.

What are the benefits of strategic planning?

Strategic planning:

• defines the scope of activities required to achieve organisational goals and objectives within a timeframe
• enables organisations to assess their strengths, weaknesses, opportunities, and threats
• supports medium-term and short-term strategy formulation
• helps to implement strategies by assessing resources and feasibility
• aligns the hierarchies in the organisation to achieve common objectives
• increases productivity.

What are the key elements of a strategic plan?

The strategic plan comprises several templates and components but typically includes the following elements.

Market, competitor, and customer analysis

The first step in strategic planning is to understand the overall industry and market and the organisation’s competitors. Ask the following questions to evaluate external market trends that affect your organisation.

• How big is the industry? Establish the level of competition or monopoly, and understand the possible barriers to entering the market. This will also help the organisation to gain competitive advantage, either by differentiating products or altering the brand proposition.
• Which phase is the industry in? Is it in a growth, maturity, or decline phase? If the industry is still in its infancy or maturity, it might be possible to increase revenue. It’s more challenging to enter the market when the industry is in decline because the chances for growth are low.
• What products/services are customers looking for? What regulatory and governance structures are in place? This information helps to determine the level of product or service adoption and the ease of entry into the market if there are regulatory or governance restrictions.

SWOT analysis

The next step in creating a strategic plan is to conduct a strength, weakness, opportunity, and threat (SWOT) analysis.

A SWOT analysis can be applied to an entire company or organisation, or individual projects within an organisation.

There’s an important distinction to be made: strengths and weaknesses are internal; threats and opportunities are external to the organisation. Understanding this distinction and being able to determine the four elements helps organisations to take advantage of their strengths and opportunities, improve their weaknesses, and mitigate risks.

Strengths: Evaluate market position, financial resources, staff, products, profitability, and sales channels.

Weaknesses: Assess limited financial resources, thin margins, staff issues, and missing sales channels.

Opportunities: Identify market entry, launch new products, form alliances, and Exploit merger and acquisition opportunities.

Threats: Address economic downturns, policy and regulatory changes, competitor threats, price wars and so on.

How is a SWOT analysis conducted?

Watch the following video by Mindtools, which provides an overview of how to complete a SWOT analysis. Take notes while you watch the video. They’ll be useful as you complete the task that follows [1].

Use the worksheet below to plot a SWOT for a company of your choice.

Download: [Worksheet: SWOT analysis] 2

Now that you’ve reviewed and drafted a SWOT analysis let’s see how the mission and vision of the business can help us to translate the strategy.

Mission, vision, and strategic objectives

Most organisations have an established mission, vision, and strategic objectives. The strategic objectives are developed from and aligned with the vision and are written to ensure that the business achieves its mission in the long term. The mission, vision, and strategic objectives are key inputs for strategic planning.

How is this used in strategic planning?

The mission and vision are often drafted after external and internal evaluation. The mission statement defines why an organisation exists; the vision statement is about what the organisation offers and where it’s heading.

Stating the corporate goals is next. Corporate goals identify the specific outcomes the organisation aims to achieve.

Next, we cascade the corporate goals into the specific objectives and initiatives that the organisation needs to implement to achieve the business goals.

Examples of mission statements

• Uber: We ignite opportunity by setting the world in motion.
• Google: To organise the world’s information and make it universally accessible and useful.
• Kickstarter: To help bring creative projects to life.
• Tesla: To accelerate the world’s transition to sustainable energy.
• Life is Good: To spread the power of optimism. [3]

Examples of vision statements

Stephanie Ray from Project Manager outlines the importance of vision statements:

“IKEA’s vision statement is:

To create a better everyday life for many people. [4]

Bring inspiration and innovation to every athlete* in the world. *If you have a body, you are an athlete. [5]

Nobody cared much for sneakers in the past. They were just another piece of sports equipment. But Nike saw a future in which they would deliver products that inspire and motivate people. See how they include everyone as an athlete? It’s clever.”[6]

Next, we’ll consider the strategy map and the balanced scorecard as key elements of the strategic plan.

References

1. How to use SWOT analysis [Video]. Mindtools; 2018 Sep 19. Available from: https://youtu.be/EJ4uVsSqQ9k

2. Worksheet: SWOT analysis [PDF]. Mindtools; [date unknown]. Available from: https://www.mindtools.com/pages/article/newTMC_05.htm?download=1

3. Cherry B. 18 captivating mission statement examples you need to read [Blog]. Bluleadz; 2019 Sep 20. Available from: https://www.bluleadz.com/blog/15-of-the-very-best-mission-statement-examples

4. Ikea [Internet]. Available from: https://www.ikea.com/ms/en_JP/about_ikea/the_ikea_way/our_business_idea/index.html

5. Nike [Internet]. Available from: https://about.nike.com/

6. Ray S. A Guide to Writing the Perfect Vision Statement (with Examples)[Blog]. Project Manager; 2018 May 16. Available from: https://www.projectmanager.com/blog/guide-writing-perfect-vision-statement-examples