How to write a company strategy plan?

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How to write a company strategy plan?

There is no one way to create a company strategy as the length of the topic on Wikipedia already shows. However, in most articles the following key components of a company strategy plan (in the order in which they are also often determined) are always coming back:

The mission, vision and values of the company

The foundation of a company consists of three elements:

  • Mission: describes the purpose (higher goal) of the company. What does the company actually do?
  • Vision: describes what the company aspires to be. What does the company want to be?
  • Values: describes the way in which the company behaves.

The differences between a vision and mission are often difficult to understand. Further reading Wikipedia or 7Geese, or watching the video included below, may help.

A study carried out by Bain & Company, however, showed that companies that had clearly outlined vision and mission statements outperformed other businesses that did not have clear vision and mission statements. Some examples of vision, mission and value statement include:

External analysis

The goal of the market analysis is to understand what is happening in the outside world in order to identify opportunities and threats. Key components of an external analysis are:

Market analysis

How large is the market (per customer segment, product segment, region, etcetera) and how is the market developing (growing, stabilizing, declining)? This analysis helps identify new potential markets but also declining markets.[1]

Portfolio analysis

How are our products performing? Several methodologies exist like the Boston Consulting Matrix and the Product Life Cycle analysis to create an overview of where the company stands.

Customer analysis

The customer analysis answers 5 key questions:

  • Who are our current (and potential) customers?
  • Where do customers buy our products?
  • Why and how do customers select our products?
  • What do customers do with our products?
  • Why do potential customers not buy our products?

This analysis helps to understand how customer needs can be met better.

Competitive analysis

The goal of this analysis is to understand from where, when and how competition may arise.The five-forces model of Porter is a nice framework to identify:

    • direct competitors;
    • new entrants (companies entering the existing market);
    • suppliers who are moving up the value chain;
    • customers who are moving down the value chain;
    • possible new entrants.
    • What are the strengths and weaknesses of the different competitors
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Environmental analysis

While the analysis stated above look at the current situation, this analysis allows companies to identify long-term developments. Typically, the PEST method is used (e.g. using the PEST analysis framework):

  • What are the Political developments (stability of the country, new laws, taxes)?
  • What are the Economic trends (GDP growth, exchange rates, inflation)?
  • What are the Social developments (population growth, age distribution, immigration)?
  • What are the Technology trends (artificial intelligence, robotics, 3D printing)?

Internal analysis

The internal analysis helps determine the strengths, weaknesses and limitations of the company. Key questions are:

  • What resources do we possess or lack?
    • Financially: What investments are possible?
    • People: What competences do our employees have?
    • Assets: Which fixed assets, like land, buildings or intellectual property, do we possess and can we use to our advantage?
  • At what processes do we excel or underperform (marketing, R&D, production, sales, customer service)? In this regard, Porter’s value chain can help in the analysis.


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Examble of an internal analysis of Walmart

SWOT analysis

Based on the external and internal analyses, a SWOT analysis can be made where the company’s strengths, weaknesses, opportunities and threats are identified. Online several real company examples of SWOT analysis can be found.


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Defining a company strategy

With the SWOT analysis done, the company has yet to determine what actions to take. Several tools can help identify key actions.

SWOT Confrontation Matrix

Based on the SWOT analysis, a SWOT confrontation or TOWS matrix can be created which helps determine what actions (= strategies) need to be taken. This is done by matching strengths and weaknesses with opportunities and threats. This helps create ideas on what to do and which of these ideas (read: strategies) should have priority.

Based on the TOWS analysis the key focus actions can be defined.

The business canvas model

The business canvas model can help create an overview of where the company stands. Below, an example of such a canvas is shown, which describes the key elements of a company in the order in which they are by most considered to be discussed internally.


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By Business Model Alchemist


The elements of the business canvas model are:

  1. Customer segments: The journey starts with determining what customers the company aims to serve. This can be the mass market (e.g. everybody), a niche group (e.g. the super-rich), a segmented market (for example, based on demographics like gender, age, income, interests or location). Personas (yyy) can help define customer segments in more detail.
  2. Value propositions: What added values does the company offer in the form of products and services and how does the value proposition distinguish itself from those of competitors?
  3. Channels: Via what channels does the company sell its products or services? This may differ per customer segment. Key decisions include to what extent you should sell directly (via own stores, websites) and to what extent you should depend on partners (like wholesalers, franchisers, online market places).
  4. Customer relationships: What kind of relationship does the company want to build with its customers? This may be fully automated (e.g. using vending machines), based on self-service via an online shop or supermarket, or increasingly personal like via Skype, chat, store assistants or even counselors who visit the customer at home (in the travel industry home travel advisors are for example quickly becoming the standard). Customer relationships also refer to the way the company embraces the customer. Is the relationship interactive or more at arm’s length, warm, professional, happy?
  5. Revenue streams: How will the company make money. Apart from just selling products, a usage fee, subscription model, lease/rental, commission and several other ways to earn revenue exist. Increasingly the basic product is offered for free where users pay for additional features (like for Google Drive where the first 15 gigabytes are free after which you have to pay). Also many media companies earn their money not by charging their readers but through advertisers.
  6. Key resources: What resources are needed to create, distribute and sell the product or service. The key resources can be human (special skills), financial, physical (buildings, land) and intellectual (like patents), for instance.
  7. Key activities: What processes does the company need to perform itself. Looking at the value chain of Porter may help identify the key processes. Apple’s key processes are probably that of design and marketing as production is outsourced to third parties.
  8. Partner network: The partner network describes the key partners to which processes are outsourced. In addition it includes suppliers essential for the company’s success and companies with which it works together to gain efficiencies of scale/scope or share knowledge.
  9. Cost structure: What is the cost model of the company? If the company is a discounter, steering on price may be more important than if the company focusses on the super-premium segment. Still, an understanding is needed of what costs are fixed and which ones are variable and of how the company can gain economies of scale and scope.


This video gives you a better insight into how a business canvas model can be created.

How to set SMART balanced strategic goals?

With the strategic goals set, progress has to be measured. In order to do this, these the goals have to be made SMART. The balanced score card and strategy map can help making sure all areas are covered and can be communicated both internally and externally.

Making goals SMART

After the strategies have been defined at a high level, they can be made more explicit by making them SMART. SMART stands for:

  • Specific: What actually needs to be achieved? I want to become a millionaire is rather vague while stating you want to start a restaurant chain which makes € 1 million profit in 10 years becomes already more concrete. Key questions to ask are: what, when, where, how, with whom, etcetera.
  • Measurable: If you cannot measure it, you cannot improve it. Goals have to be measured in order to know that what you are doing has the desired effect. Often you have to break a strategy down into several components to measure its success. This can be financial (product margin, sales growth) but can also include other kinds of indicators like net promotor score.
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  • Attainable: It is nice to have the ambition to achieve world peace but it may not be reachable by you (at least not alone). Goals need to be realistic. If the end goal does not seem realistic, make the goal smaller (wanting to become a millionaire seems more realistic for example than wanting to become a billionaire).
  • Relevant: Coming back to the previous example, why do you want to become a millionaire? Is it really what you want to be (or maybe happiness is more important)?
  • Timely: Setting a goal has no value without setting a deadline. When does the target has to be reached (within a year, 5 years, a decade)?<refhttp://www.yourcoach.be/en/coaching-tools/smart-goal-setting.php</ref>

The balanced score card

The balanced score card is a nice method to make sure not only financial criteria are used to measure progress, even though most companies tend to focus on this. The balanced score card forces companies to consider other perspectives as well like that of the customer, the internal business processes and the learning and growth perspective.[2]


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Tesco Business Balanced Scorecard 2013

There are many adaptations of the business balanced score card. There is also an Internet score card which exchanges the learning & growth perspective for that of the website.

The strategy map

The strategy map can help communicate the overall strategy towards employees as well as external stakeholders by relating the different goals towards each other. The strategy map can relate the goals set in the business balanced score towards each other.

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Creating a financial plan

The last part of a strategic plan has to include the financial impact of the actions. What are the costs and expected benefits of implementing the defined strategies? Financial scenarios are usually also part of the financial plan. What if the actions only realize 75% of the expected benefits or what if the costs prove to be 50% higher?

References

  1. https://en.wikipedia.org/wiki/Market_analysis
  2. https://en.wikipedia.org/wiki/Balanced_scorecard

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