3.3 The strategic planning process

　　The rational approach to strategic planning breaks down the process into three distinct steps.

　　1 Strategic analysis – three key areas

　　§ External analysis of markets, competitors, the business environment, etc. to identify opportunities and threats.

　　§ Internal analysis of the firm’s resources, competences, etc. to identify strengths and weaknesses.

　　§ Stakeholder analysis – to understand stakeholder expectations/influence in order to clarify objectives.

　　2 Strategic choice – again three key angles to consider

　　§ What is the basis of our strategy? In particular how are we going to compete – high quality, low costs?

　　§ Where do we want to compete? Which markets, countries, products?

　　§ How do we want to get there? Organic growth, acquisition or some joint arrangement such as franchising?

　　3 Strategic implementation

　　§ Once determined, the long-term strategy needs to be translated into plans for marketing, human resources management, IT, production, organizational structure, etc.

　　§ The strategy may involve major changes so these will also have to be managed.

　　Test your understanding 10

　　Give three strategic issues that should be considered by the headmaster of a school as part of strategic analysis.

　　Chapter summary

　　Test your understanding answer

　　Test your understanding 1

　　C

　　A sole trader would normally be someone working on their own, so there would be no collective goals.

　　Test your understanding 2

　　The committee would give the following benefits:

　　§ It would help overcome your limitations by pooling knowledge, ideas and expertise.

　　§ It would enable individuals to specialise in particular roles.

　　§ It would save time through joint effort.

　　§ It would enable synergy to be gained.

　　§ It would satisfy social needs.

　　Test your understanding 3

　　The reasons for returning services in-house are likely to be:

　　§ Improved quality of cleaning due to better control, thus reducing the risk of infection. This should improve patient care.

　　§ It may be cheaper to perform cleaning in-house as the external supplier will be charging a fee to cover costs and a profit margin. This may improve customer care if, e.g. the funds are used to buy new equipment.

　　The danger is that the decision is driven by cost considerations without a resulting improvement in quality.

　　Test your understanding 4

　　Mutual building societies exist for the benefit of their members. This is reflected in setting:

　　§ interest rates for borrows as low as possible

　　§ interest rates for savers as high as possible.

　　The aim is not to make a profit so the borrowing and saving rates are moved as close as possible with a small sufficient to cover costs.

　　Once it becomes a bank the building society must then seek to maximize shareholder wealth and become profit seeking. This is done by increasing borrowing rates and reducing saving rates.

　　Members will thus find that the terms offered by the building society become less attractive.

　　However, when demutualising most building societies give their members windfalls of shares so members become shareholders, thus benefiting from dividends and share price increases.

　　Test your understanding 5

　　D

　　While protecting the environment is to be encouraged and is reinforced within statute to some degree, it is not a primary objective of the company. Companies exist primarily to make their owners rich.

　　Test your understanding 6

　　False

　　Schools run fund-raising activities to help pay for extra books, e.g. to improve the quality of education given to pupils. The primary objective is educational, not profit. The money made at the fete is thus a means not an end.

　　Test your understanding 7

　　D

　　Demand would be assessed by a market research function within the marketing department.

　　Test your understanding 8

　　The problems this will cause are:

　　§ either the firm will let down its major customer, with resulting loss of goodwill and impact on future orders or

　　§ the firm will incur extra costs to advance production to meet the deadline set.

　　This could have been avoided by the following:

　　§ better communication between sales and production

　　§ ensuring that sales staff are briefed by their supervisor regarding delivery and production schedules

　　§ having an IT system where all sales staff can verify stock and anticipated production times before confirming orders.

　　Test your understanding 9

　　Tactical – the issue is how best to use existing resources (i.e. wards).

　　Test your understanding 10

　　Strategic issues could include the following:

　　Internal analysis

　　§ Review of Ofsted reports to identify areas for improvement.

　　§ Review of government league tables.

　　§ An assessment of each member of staff to identify strengths and weaknesses.

　　§ A review of assets, including buildings and equipment.

　　External analysis

　　§ Local birth rates to anticipate likely future student numbers.

　　§ Numbers of graduate going into teaching to anticipate future supply of teachers.

　　§ Proposed government legislation relating to schools, e.g. funding.

　　Stakeholder analysis

　　§ Feedback from PTA groups and other parent groups.

　　§ Feedback from school governors.