In previous sections, we discussed the mission statement and corporate objectives.  To date, however, we did not address the relationship each have on one another nor did we elaborate on how each might be achieved. We will discuss this now by introducing you to a process called strategic planning.

Simply stated, short-term objectives are developed to achieve long-term objectives, while long-term objectives are designed to achieve the company's mission. Therefore, your business must set a series of short-term objectives that will achieve each long-term objective. And your business must set a series of long-term objectives which will achieve your company's mission. Lets summarize by saying:
 

• Designing short-term objectives is HOW long-term objectives are achieved.
• Designing long-term objectives is HOW a company's mission is achieved.

 

Let's now assume, the LA Kings set the following longer-term objective - "to be ranked first in their division after all 84 games have been played". This would mean the Kings would have to win more games during the regular season than any other team within their division. Stated another way, the Kings must achieve more short-term objectives (to win on a nightly basis) than any other team in their division. As you can see, by achieving the team's short-term objective, they inevitably edge closer to achieving their long-term objective. As a result, the LA Kings would develop various strategies in order to achieve their short-term objectives, which ultimately achieves their long term objective. Below summarizes the major components of strategic planning.
 

• Designing strategies is HOW short-term objective are achieved.
• Designing short-term objectives is HOW long-term objectives are achieved.
• Designing long-term objectives is HOW a Company's mission is achieved

The process of strategy planning, itself, is rather quite simple. The tough part, however, is designing strategies that will produce the intended results (i.e. achieve short & long-term objectives and hence the company's mission). Furthermore, it is easy for the Kings to set an objective to win each game, but it is rather difficult to establish all the strategies necessary to actually do so. However, the owners, the coach, the assistant coach, the trainers and the hockey players must all work together to develop and implement a variety of solid strategies. To develop effective strategies, the Kings would be required to fully understand their competitive strengths, their competition, and the key factors important to winning each game. The same can be said within a business enterprise.  The company's entrepreneur (owner), the company's key management team (coach, assistant coach, and trainer), and the company's staff (hockey players) must all work together to develop and implement a variety of solid strategies that will ultimately lead to the achievement of the corporate objectives and hence the organization's mission. To develop effective strategies, a company is required to fully understand their competitive strengths, their competition, and the key success factors within the industry. Below briefly discusses each of these areas, beginning with competitive strengths.
 
  

COMPETITIVE STRENGTHS:

A strength is something a business does well. It can also be a characteristic that provides a business with a unique capability. Skills in creative woodworking or the ability to create and implement effective marketing campaigns are examples of strengths. An exceptional management team or selling staff are other examples. Resources can also be considered strengths. For example, having or being able to acquire sufficient financial resources is certainly a strength. Another example of a resource strength would be having modern and efficient capital assets. Below lists a variety of strengths an aspiring entrepreneur or an existing business may possess.

Examples of Personal & Corporate Strengths:

• Strong written and oral skills
• Strong interpersonal skills
• Solid computer skills
• Able to endure long working hours
• Past training in business and business operations
• Prior experience in operating a business
• Management training and experience
• Low cost methods of production
• Low cost methods of distributing products to buyers or consumers
• Sufficient Financial resources
• Excellent merchandising skills
• Ability to change with market conditions
• Creative and effective marketing campaigns
• Recognized as having a good personal reputation
• Strong sense of commitment
• Recognized by consumers and suppliers as highly reputable
• Expertise in quality control
• Ability to build strong contacts and partners
• A strong position in the market
• Strong strategic alliances
• Excellent communication skills
• Reliable service
• Superior product or service
• Strong technical and support system
• Quick and efficient delivery service
• Well designed functional area strategies
• The ability to forecast market trends
• Low priced products or services
• Carry high turnover product lines
• Powerful network of distributors, dealers and/or sellers
• Ability to use technology
• Location of business
• Appealing packaging
• Fast & efficient method of filling order
• Well established relationship with suppliers
• Ability to monitor the effectiveness of promotional campaigns
• High plant or facility production capacity
• Ability to enter markets quickly
• Strong Copyright and/or Patent Protection
• Exceptional leadership skills
• Recognized as a field expert
• The existence of a credit granting policy or extended credit terms
• and millions of others

 

The foregoing list illustrates only a portion of possible strengths an individual or business may have. In essence, the number of possibilities are endless. Recognizing a strength is important, but not as important as isolating one or several COMPETITIVE STRENGTHS. A competitive strength is something that gives a company an edge over all other rivals. In other words, a competitive strength makes a company more appealing and compelling than others within the industry. A business having a proven management team is certainly a strength, but it is not considered a competitive strength if all competitors have an equally proven management team. A high-tech production facility might be viewed as a strength, however, it is not a competitive strength if all other competitors have a similar facility. A superior product, the lowest price on the market, superior technology, strong distribution channels, the ability to quickly develop "needed" consumer products and superior customer service are only some examples of possible competitive strengths.

Identifying competitive strengths is extremely important in the strategic planning process. Strategy formation is based on competitive strengths. In other words, a business's strategy must corresponded to the things it is able to do especially well; - relative to its competitors.
 
  

KEY SUCCESS FACTORS

Key success factors are major variables that lead to the success of businesses within an industry. In other words, they are the characteristics, resources and attitude a business must have in order to be successful in the industry. For instance, a key success factor in the food industry would be "great tasting food".  A key success factor in the fast food industry would be "quick delivery of food".  A key success factor in the discount clothing industry would be "inexpensively priced, quality clothing".

It is extremely important to identify the key success factors of the industry you intend to enter. When attempting to isolate such factors, many inexperienced managers and entrepreneurs tend to create a lengthy list; consisting of between 10 and 15 items. Most industries, however, only have between three and five factors that ensure business success. Therefore, you are required to have a great knowledge of the industry before you can clearly pinpoint its key success factors (do your research).

Key success factors are important to the development of strategies. Moreover, a business can gain an advantage by focussing on being better than competitors in one or more of the industry's key success factors.  A business not possessing the ability or skill to take advantage of an industry's key success factor generally struggles in the marketplace (I.E. the chance for success lessens).  Below lists some examples of possible key success factors.
 

KSF's For the Marketing Industry

• Depth in product line and product mix.
• Excellent merchandising skills
• Precise product fulfillment (filling of orders)
• Appealing packaging
• Reliable service
• Extraordinary technical support and assistance
• Exceptional after sale service
• A well trained, competent selling team
• A powerful network of contacts and distribution channels
• Others

Possible KSF's for the Manufacturing Industry

• Highly skilled laborers
• Access to highly skilled laborers
• Productive and efficient labor force
• Low cost production facility
• Exceptional skills in waste reduction
• Excellent quality control systems and procedures
• The ability to use fixed assets productively and efficiently
• Exceptional Push/Pull Strategies
• Low Cost Production and efficiency
• The ability to manufacture a wide range of products
• The ability to manufacture a wide range of product variations (sizes, styles..)
• Others

Possible KSF's for the Technology Industry

• Highly skilled and technical skilled labor force
• The use of innovative processes
• Ability to enter markets quickly
• Strong Copyright and/or Patent Protection
• Superior competence in specific technology
• Highly skilled research and development team
• Sufficient funds for R&D department
• Cost effective production process
• Others

Possible KSF's for the Distribution Industry

• Carry high turnover product lines
• Powerful network of distributors, dealers and/or sellers
• Well trained and effective sales force
• Internally owned retail outlets
• Quick and efficient delivery service
• Achieving adequate retail coverage (shelving)
• Minimal distribution costs
• Others

Other Possible KSF's

• Exceptional leadership skills
• Recognized as a field expert
• Ability to design creative and effective promotional campaigns
• Superior corporate image or reputation
• Expertise in quality control
• Strong strategic alliances
• Adequate or abundance of financial resources
• Ability to build strong contacts and partners
• Well designed and established functional area strategies
• Ability to change with market conditions
• The ability to forecast market trends
• Excellent quality control
• Ability to develop new products that meet the needs of consumers
• Low production and selling costs
• High return on investment
• Superior managerial talent and skills
• Secure proprietary items
• Ability to identify new markets
• Ability to develop new distribution channels
• Low cost marketing and promotional campaigns
• Superior location relevant to competitors
• Well rounded management team
• Friendly and helpful staff
• Superior product quality
• Lowest price product or service
• Large selection and variety of products or services
• The existence of a credit granting policy or extended credit terms
• Ability to use technology to reduce overall costs
• And millions of other possibilities

What are the Key Success Factors of your industry?  Remember: most industries have between one and five factors.
 
 
 

OTHER IMPORTANT ITEMS OF STRATEGIC PLANNING
 

Personal & Corporate Weaknesses:
As indicated above, a strength is something a business does extremely well and a competitive strength is something that gives a company an edge over all other competitors. A weakness, on the other hand, is something a business does poorly, while a competitive weakness is something that places a business at a major disadvantage (in relation to competitors).

Like strengths, weaknesses do not play as large a role in the competitive or strategic environment. Competitive strengths and competitive weakness, however, do play an important role since they are used to gauge performance, competitive ability and strategic position. In addition, competitive strengths and competitive weaknesses generally can determine the success or failure of your business.

In terms of strategic planning, a company must build its strategies around the things it is capable of doing especially well and not around the areas that it lacks. By identifying competitive weaknesses and taking the necessary action to remedy each weakness, a firm can become stronger and more competitive. In other words, you want to convert competitive weaknesses into competitive strengths so that your business can expand its strategy base. The importance of going through this process heightens when a company's competitive weaknesses match the industry's key success factors. Below lists several weaknesses many aspiring entrepreneurs and existing businesses possess. Your task is to first identify your weaknesses and take the action needed to turn these weaknesses into strengths and/or competitive strengths.
 

Examples of Various Personal and Corporate Weaknesses:

• No prior experience in operating a business
• Lack necessary skills (specify)
• Poor management skills or lack of managerial experience
• High cost methods of production compared to competitors
• Lack of financial resources
• Narrow product line
• Ineffective marketing campaigns
• High cost methods of distributing products to buyers or consumers
• low production capacity
• Poor reputation in the mind of consumers & suppliers
• Poor quality control methods and systems
• Unclear strategic direction
• Inability to build strong contacts and partners
• Communication skills are lacking
• Weak or no strategic alliances
• Unreliable service
• Inferior product or service
• Unable to quickly respond to market conditions
• Weak technical and support system
• Slow and inefficient delivery service
• Viewed as having a weak position in the market
• Unable to enter new markets quickly
• Poor personal reputation
• Weak functional area strategies
• Lack of communication among departments
• Carry slow turnover product lines
• Inadequate merchandising skills
• Weak network of distributors, dealers and/or sellers
• Inability to use technology
• Old and inefficient production facility
• Unable to offer credit or extended credit terms to customers
• Sub-par packaging
• Slow & inefficient method of filling order
• Poor relationship with suppliers
• Unable to monitor the effectiveness of promotional campaigns
• No leadership skills
• Inability to successfully implement strategies
• Poor business location
• and millions of others

DRIVING FORCES OF THE INDUSTRY

All industries change over time as a result of one or several variables. Some variables play a vital role in changing an industry, while others tend to contribute to the change; but to a lesser extent. Driving forces are defined as those variables that affect an industry so much that the industry changes. The change may occur over a long period of time or over a short period of time. Whatever the time frame might be, it is important for you, first of all, to identify the MAJOR force(s) driving the change and secondly, estimate the frequency of each force(s). By going through this process, a business can better respond to or prepare for any expected industry changes.

Identifying and prioritizing driving forces is an important process in strategy development. Furthermore, if you can determine the major reason(s) for an industry change, than you can better prepare your business for the change. In many cases, a single business can actually lead or expedite the industry change. For instance, in industries where product innovation is considered a driving force, a single company can introduce a new or superior technology. On the other hand, businesses operating in industries heavily regulated by government, usually have less power in directing change. In such circumstances, government policies and regulations dictate how businesses operate within the industry.

Below lists some possible forces that may lead an industry to change. Please note: some or all of the following driving forces may contribute to changes in your particular industry, however, the task is to identify the MAJOR ones that drive or lead to the change.
 

Examples of Possible Driving Forces:

• The introduction of product innovations
• Changing consumer behaviours
• Changes in how the product or service is used
• Changes in industry's growth rate
• New marketing methods or approached
• Changes in consumer attitudes, preference, and lifestyles
• Changes in societal concerns and preferences
• The introduction on trends and fads
• The entry or exist of major businesses within the industry
• The development of new or substitute products
• Less standardized products and more focus on differentiated ones
• Technical expertise or know-how
• Changes in the technology revolution (specific)
• New production process or methods
• Reduction in production, selling and/or administrative costs
• Changes in the environment
• Changes in government policy and restrictions
• Escalated globalization of the industry

THE COMPETITION

Competitors play a vital role in the strategic planning process. The more you know about your opponents and how they operate, the better equipped you'll be to develop offensive and defensive moves. In essence, such information can be used to "win the game". Aspiring entrepreneurs and existing business owners must collect and continue to collect information on their competitors. Below provides a list some areas your should consider when analyzing your competitors.
 

• The number of direct and indirect competitors
• The location of each competitor
• The markets served by each rival
• The strategies used by each competitor
• The marketing budget of each
• Who supplies each competitor with raw or direct materials
• How much do each competitor pay for their products from suppliers
• Do their suppliers offer quantity discounts
• The distribution methods used by each rival
• What media do each rival use
• The pricing methods and strategies of each competitor
• Financial strength of each rival
• Market share held by each (estimate if unknown)
• Which competitors pose the greatest threat
• What credit terms, if any, are granted by each
• Which competitors provide warrantees or guarantees, if any
• Do rivals offer after sale service if so, in what form(s)
• Rate each competitor's level of product or service quality
• What product lines or mixes do each rival sell
• How do consumers perceive each competitor
• Who are the top three or top five competitors
• Why do consumers buy from each competitor
• What are the strengths and competitive strengths of each rival
• What are the weaknesses and competitive weaknesses of each
• How efficient is each rival's production plant or facility
• What is the production capacity of each rival
• How many employees do each competitor have
• What employee rewards or incentives do each use
• How attractive or appealing is their faculty (if important)
• What is the size or square footage of each rival's facility
• The scope of each rival's market - local, regional, national, etc.
• and so on....

Analyzing your competitors can reveal many issues relating to how the industry currently operates. It can also trigger areas for improvement within the industry. In addition, a competitive analysis can uncover how rivals view the industry in terms of driving forces and key success factors. And finally, a competitive analysis can reveal each rival's competitive strengths, competitive weaknesses, and use of strategies.
 
  

STRATEGIC PLANNING PROCESS SUMMARIZED
Determining your competitive strengths & weaknesses, the key success of the industry, the driving forces of the industry, and conducting a competitive analysis will generally provide you with sufficient information to develop effective strategies. In other words, upon gathering the above information, an aspiring entrepreneur or existing business owner will better understand the "rules of the game", their abilities & limitations, and who their opponents are or will be.  When this information is known, the process of establishing a mission, realistic objectives (short & long-term), and strategies to achieve the forgoing, becomes a much easier task. Furthermore, the entrepreneur can more effectively establish strategies to achieve the following objectives; Please note, these objectives are samples - you will develop your own objectives. 

• Provide full customer satisfaction with current and future products.

• Intensify the company's effort to develop innovative products.

• Build a strong corporate image with our initial product which carries forward to subsequent products.

• Achieve sales levels of $500,000 in year one, $750,000 in year two, and $1,000,000 in year three.

• Obtain a motivated staff which strives for increasing their efficiency and productivity. Also, one which will play an active role in the new product development process.

• Continuously look for ways to lower production costs by 5% over the previous year while, at the same time, retain quality.

• Receive a market share of .5% to 1% for the first year of operations.

• The company will obtain continued, controlled, profitable growth.

• Create an informal and relaxed working environment for all members of the organization.

• A gross margin of 40% and above is required from all products.

• Continuously upgrade our marketing messages and communication process.

• Maximize current profit while retaining long-run performance.

• and the list goes on and on...

Test your skills and try to create several ways (strategies) to achieve the above objectives. As you might suspect, strategy development is left up to the entrepreneur.