Strategic planning tools are important components of any competent manager’s toolkit. However, they cannot replace your individual or organizational ability to execute effectively. Treat the following tools as what they are – aids to competent management.
1. Situational Analysis
A situational analysis allows you to get a comprehensive view of the basic problems facing your organization, as well as the opportunities you may be overlooking. You have to take great care in how you frame and define the problems or else much of your subsequent analysis and corrective actions could be a total waste. An effective situational analysis does not just identify problems or opportunities, it also prioritizes them.
2. SWOT Analysis
A SWOT analysis is a simple analytical framework for deriving strategic implementation options from the results of a situational analysis. SWOT stands for Strengths, Weaknesses, Opportunities and Threats. The results of a SWOT analysis are usually summarized with a simple matrix that categorizes findings under Internal, external, positive and negative groupings.
- Strengths are related to organizational attributes (internal) and positive.
- Weaknesses are also internal to the organization, but have negative implications.
- Opportunities are external conditions that have positive implications.
- Threats are external conditions that have negative implications for an organization.
3. PEST Analysis
The PEST analysis tool is particularly appropriate for really big organizations or small organizations with a particularly large (or international scope). PEST stands for Political, Environmental, Socio-cultural and Technological. It is used to enable brainstorming and help flesh out some of the “biggest picture” scenarios that may affect an organization or enterprise.
4. Boston Matrix
The Boston Matrix (also known as the BCG-matrix or the “Growth-share matrix”) is a strategic decision making tool that can be used to help make decisions regarding business lines, product lines and brand marketing. It is employs a graphic matrix that shows the relationship between market growth, market share and a given opportunity.
In the Boston Matrix, business line or product line opportunities are grouped in 4 areas depending on the combination of market share and overall market growth.
Dogs – These are product lines or businesses that have a small market share in a low-growth market. These are generally the most undesirable to have in your portfolio (unless of course your individual “dog” is highly profitable).
Cash Cows – These product lines or businesses are also in a low-growth market, but have high market share within those markets. Because you have a high market share, it may be possible to extract maximum leverage from that high share position. However, you should be looking for the next growth market even as you exploit this one.
Question Marks – These exist in high-growth markets, but have low market share. They are also referred to as “problem children”. These opportunities give strategists the most headaches and should be carefully analyzed before more investment is poured into them as they could go on to become stars or dogs if the market matures before returns are realized.
Stars – These products or businesses have high market share in high-growth markets. Given these facts, you should prioritize these stars and work hard to exploit the opportunities you find here.
Conclusion
Applying the right strategic planning tools to the right problem is crucial. However, even more important that planning is excellence in business execution.