When a company is ready to operate, it will need a business roadmap that can show what and how to sell, how to produce, how to organize staff and improve productivity and increase profitability. To develop a corporate strategy, firm plans activities for medium or long terms, e.g. 3-5 years, and it includes objectives, initiatives, actions plan and KPIs. A business plan is typically derived from a corporate strategy, and it covers a one-year operation. In this article, I discuss the corporate planning- strategic and business plan, and why it is essential to any enterprise.
Any strategy outlines the enterprise activities for a term of 3-5 years and includes sales and marketing, manpower, operation and finance. To develop a corporate strategy, you begin by evaluating internal and external influencers to identify opportunities. Internal assessment includes enterprise financial and non-financial performances, and SWOT is applied to study the internal environment. The SWOT tool helps to check the strengths, weaknesses, opportunities and threats of a firm. The financial evaluation includes financial records, and non-financial evaluation involves sales and marketing, HR and operation. This SWOT analysis can result in strengths and opportunities, e.g. competitive advantages, and weaknesses and threats, e.g. risks.
Every business operates in an external environment, that is dynamic. To check the external factors, a company applies the PESTLE tool. It provides the basis for evaluating external influencers namely, changes in politics, economics, social, technology, environment and legislation. This model provides a reasonable basis for studying any changes that have occurred or may occur to the external factors, and how they influence the performance of their business. Internal and external evaluation reveals outcomes- opportunities and competitive advantages- that are used to define or align the enterprise mission and vision to better suit the market, customer needs and the enterprise itself. Competitive advantages are superior assets that an enterprise holds to overcome competitors, win the market and better meet the customer needs. Any competitive advantage is attributed for being rare, valuable and difficult to be copied or imitated. For example, a company holds competitive advantages like knowledgeable staff, rare know-how, excessive money, expensive labs and facilities, strong brands, valuable patent or IPOs.
Analyze strategic choices and market positioning
After you assess influences and competitive advantages, you then explore and evaluate strategic directions and market positioning. Strategic direction defines the way a business makes and sells products, and it shows how to achieve the company mission, vision and goals. It is a combination of intent, analysis and options, and it is strongly influenced by the outcomes of the internal and external environment and the firm core competencies. For examples, the strategic choices of a commercial business include defining the product offering, customer segment and market to launch, pricing strategies, focusing on local or international markets, merging options, partnering with IT or PR companies or investing in breakthrough technology. After defining the strategic direction, a company maps and identifies its market positioning. The market position shows how a business competes in the market, and it typically positions the company in the market in comparison with competitors. It reveals how the customers view the firm’s offer in comparison with competitors.
Develop a strategy
A strategy consists of objectives, initiatives, action plan, KPIs and resources. The following is a brief description of the steps to develop a corporate strategy.
Set strategic objectives
This is the process of defining strategic goals that the firm plans to achieve by the end of the term, and they must be SMART, which means specific, measurable, attainable, realistic and achievable within the time limit. Strategic objectives cover the firm’s business activities, including sales and marketing, operations, finance and human resources. for example, reaching $ one-million sales or 20% growth in sales.
This involves deciding on the most suitable way or approach to delivering the objectives. For example, the possible strategies to grow sales by 20% could entail investing in promotion, growing customers, market penetration, product development or market development through diversification. And conducting internal and external training of staff to improve productivities, or growing sales to increase capacity utilization and efficiency, or reaching economy of scale to reduce costs and discount prices.
Prepare an action plan
An action plan describes the short-term targets, activities, schedules and resources needed to conduct operations, and it usually answers specific questions about what, how, who and when to do activities. It typically covers a one-year term and focuses on breaking down strategic deliverables into particular tasks and targets.
This involves estimating the resources required to carry out the activities in the strategy namely, people, capital, assets and intangible assets. Resources are assigned to execute the action plan effectively.
Set key performance indicators- KPIs
This involves establishing industry benchmarks to check the performance of the strategy. These benchmarks are standards or points of reference acceptable by industry and are used to compare achievements against targets set in an action plan and to set threshold levels of success to monitor progress.
Implement a strategy
Firms develop plans to reach objectives. Implementing a strategy involves allocating resources, assigning duties, reporting performance, communicating with stakeholders and controlling performance. Any strategy requires teams and capital to implement and reach targets. Management distributes strategy action plans to teams for implementation, and it monitors and controls performances by reporting and discussion. Besides, it communicates the strategy internally and externally for awareness and updating. Also, management involves building the capacity of teams to increase ability and ensure full implementation of the strategy.
Monitor and control
This is the process of measuring and checking performance against acceptable standards and involves creating a system of performance reporting and reviewing. Firms usually set schedules to report and evaluate their achievements and forming a basis for checking the implementation and effectiveness of the strategy. Management checks performance reports and takes actions to correct any negative deviation. Besides, they check performance against strategic KPIs, take actions for improvement and encourage teamwork to report and check performance.
This is the process of improving the strategy and involves eliminating causes of failure while reinforcing strengths. The value of this process is that it improves the outcomes and impact of the strategy. Firms encourage suggestions and innovative ideas from stakeholders to improve the strategy. Management usually sets up a system for continual improvement and encouraging suggestions and innovative ideas from inside and outside stakeholders of the firm. They assign teams to the role of managing continuous improvement and holding scheduled meetings to discuss improvement projects. Besides, they encourage and check suggestions and ideas and take action to improve the strategy.
Create a business and financial plan
It is the action plan of an enterprise strategy, and it typically covers a term of one year. It derives from the corporate strategy, and it consists of the targets, activities and resources. The financial plan also derives from the corporate strategy, and it consists of cashflow-ins, outs and funding. The cashflow-ins describe the cash incomes, e.g. sales, operating expenditures, e.g. spending for salaries or purchasing raw materials, capital expenditures, e.g. investing in machinery or building, and final option of funding in case of any cash shortage or deficit. To implement a business plan, management assign and lead team to implement plans, train staff, communicate results and assure quality. In monitoring and control the plan, a system of control is developed and implemented, and it shows how teams measure and check performances based on set targets. It defines who, when and how to measure and check results. Management evaluates results frequently and take actions to ensure compliance and correct any deviation. To implement a financial plan, a similar system of monitoring and control is applied the management to ensure compliance with the budget and make a decision to prevent and correct any deviations.
This article is extracted from my new book- Mastering Enterprise Skills for Potential Entrepreneurs, which can be found on www.amazon.co.uk. If you want to receive more information about the book and our activities, you can register in our newsletter by using this link.
Munther Al Dawood