The goal of developing a strategic plan is to create for the small company a competitive advantage -- the aggregation of factors that sets a small business apart from its competitors and gives a unique position in the market. Every small firm must establish a plan for creating a unique image in the mind of its potential customers.
Small businesses need a strategic planning process designed to suit their particular needs. It should be relatively short, be informal and not structured, encourage the participation of employees, and not begin with the extents of objective setting. Linking the purposeful action of strategic planning to an entrepreneur's idea can produce results that shape the future.
The nine steps in the strategic planning process:
- develop a clear vision and translate it into a meaningful mission statement. Highly successful entrepreneurs are able to communicate their vision to those around them. The firm's mission statement answers the first question of any venture: what business and high-end? The mission statement sets the tone for the entire company.
- Assess the company's strengths and weaknesses. Strings are positive internal factors; weaknesses are negative internal factors.
- Scan the environment for significant opportunities and threats facing the business. Opportunities are positive external options; threats are negative external forces.
- Identify the key factors for success in the business. In every business, key factors determine the success of the firms in it, and so they must be an integral part of the company strategy. Key success factors are relationships between a controllable variable at a critical factor influencing the firm's ability to compete in the market.
- Analyze the competition. Business owners should know their competitors almost as well as an interim company. A competitive profile matrix is a helping tool for analyzing competitors strengths and weaknesses.
- Create company goals and objectives. Goals are the broad, long-range targets of the firm seeks to accomplish. Objectives are quantifiable and more precise; they should be specific, measurable, assignable, realistic, timely, and written down. The process works best when subordinate managers and employees are actively involved.
- Formulate strategic options and select the appropriate strategies. A strategy is the gameplay in the firm plans to use to achieve its objectives and mission. It must center on establishing for the firm the key success factors identified earlier.
- Translate strategic plans into action plans. No strategic plan is complete until the owner puts into action.
- Establish accurate controls. Actual performance rarely, if ever, matches plans exactly. Operating data from the business serves as guidepost for detecting deviations from plans. Such information is helpful when plotting future strategies.
The strategic planning process does not end with these nine steps; however, it is an ongoing process that the owner must repeat.
Three basic strategic options:
cost leadership -- a company pursuing a cost leadership strategy starts to the the lowest cost producer relative to its competitors in the industry
differentiation strategy -- a company following a differentiation strategy seeks to build customer loyalty by positioning its goods or services in the unique or different fashion. The firm strives to be better than its competitors at something to customer values.
Focus strategy -- a focus strategy recognizes that not all markets are homogeneous. The principal idea of the strategy is to select one or more segments, identify customers special needs, wants, and interest, and approach them with a good or service designed to excel in meeting these needs, once, and interest. Focus strategy is built on differences among market segments.
The balanced scorecard
just as a pilot in command of a jet cannot fly safely by focusing on the single instrument, an entrepreneur cannot manage a company by concentrating on a single measurement. The balanced scorecard is a set of measurements unique to a company that includes both financial and operational measures and gives managers a quick yet comprehensive picture of the Company's total performance.
