Strategic Planning Process From Conception to Execution

1. F r o m C o n c e p t i o n t o I m p l e m e n t a t i o n
Strategic Planning Process
By Moazzam M. Rafique
mmoazzamrafique@yahoo.com

2. 1
2
3
4
Identify Strategic Business Opportunity
Evaluate the opportunity for industry prospects
Evaluate the opportunity with BCG Model
Opportunity to Business Plan
Contents
5
6
Decision on Opportunity
Operationalize the opportunity

3. A Strategic Opportunity is the one with significant profitable
prospects reflecting 20-30% growth in revenues and profits
Internal sources
• Managerial Meetings
• Internal dialogue
•Organization’s capabilities
•Gross-root initiatives
•Focused Groups.
External sources
• Customers’ needs
• Competition benchmark
•Technology & innovative
trends
• Industry transformation
A strategic opportunity (SO) needs to be searched and
well-thought. Following can be used to identify a SO:

4. SO should be evaluated for competitiveness and growth
prospects to ensure sustainability and profitability.
Use following table to identify market competitiveness
Criteria Description
Market size and share
How much is total market size of the identified business? Is it significant enough
to current business?
Market niche and unsatisfied
needs of the customers
Un-satisfied needs of the customers should be identified to capture a market
niche. Market niche, by definition, means highest market share.
Price expectations of the
market
What is the price customers are expecting for the underlying product/service?
What are prices of competitors and substitute products?
Market growth rate
Annualized growth rate of the identified market?
Markets growing for more than 10% and GDP growth rate provide sustainable
business.
Can we deliver in expected
price
Our pricing for the identified product.
What are the margins Net profit margins based on our pricing and operating costs.
Barriers to entry and exit.
Barriers to entries like huge investments, legal contracts, etc.
Barriers to exist like reputation, sunk costs, human resources, other losses etc.

5. Based on above information, each opportunity is given a
position in following matrix of Boston Consulting Group
It is important to understand the competitive landscape to ensure right decision
M
A
R
K
E
T
G
R
O
W
T
H
H
I
G
H
Question mark
Question marks are growing rapidly and thus consume
large amounts of cash, but because they have low
market shares they do not generate much cash. The
result is a large net cash consumption. A question mark
has the potential to gain market share and become a
star, or a cash cow. If the question mark does not
succeed in becoming the market leader, then it will
degenerate into a dog. Question marks must be
analyzed carefully in order to determine whether they
are worth the investment required to grow market
share.
Star
Stars are units with a high market share in a fast-growing
industry. The hope is that stars become the next cash
cows. Sustaining the business unit’s market leadership
may require extra cash, but this is worthwhile if that’s
what it takes for the unit to remain a leader. When
growth slows, stars become cash cows if they have been
able to maintain their category leadership, or they move
from brief stardom to dogdom.
L
O
W
Dog
- Low market share in a mature, slow-growing industry.
These units typically "break even" and move gradually
to closure.
Cash cow
- Market is saturated.
- Try to "milk" continuously with as little investment as
possible, since such investment would be wasted in an
industry with low growth.
LOW HIGH
M A R K E T S H A R E

6. Convert the identified opportunity to a business plan by
using following Strategic Triangle Model
Strategy Triangle Model converts a SO to a complete business covering all important areas.

7. Whom
(Target Customers)
What
(Product List)
Where
(Geographical locations of the business)
How Much
(Sale Value for each product)
When
(When to sell each of the products)
For How Long
(How stable is that long-term buying relationship)
Market
Focus
Market Focus addresses six key questions about the target
customers, potential products and related matters.

8. Unique Value Propositions (UVP) are the differentiating
factors on which the Business Model is based.
How do we do and what we do better than our competitors? Unique values reflect the complete
business model including target market niche.
Each UVP should be compared with the competition to ensure it is real UVP. UVPs will always be under
threat from the competition so should be reviewed regularly (every 6 months).
Two generic UVP strategies are Lowest Price Model and Differentiation. Lowest Price Model is not
sustainable without underlying low cost operations. Differentiation identifies un-served, un-satisfied
needs of the customers to create a niche. A differentiation (UVP) addressing a bigger market segment
will lead to a biggest market share.
Must be deliverable
Must be better than the competition
Must be sustained/improved
Must be relevant & attractive
Must be reviewed regularly
UVPs

9. Core Functions cover key requirements to achieve and
sustain UVPs. CFs must be linked with UVPs
Core functions must be evaluated in detail to ensure UVP sustainability.
Financing
Process
&
Policies
Org.
Structure
Informa-
tion
Systems
People
Core
Functions

10. Decision on a SO is based on Financial Goals i.e. whether SO
provides positive returns and increase in shareholders’
wealth. FGs must reflect Market Focus, UVPs and CFs
Commonly used Financial Goals include Return on Capital Employed, Return on Equity, IRR, Net
Present value of Future Cash Flows, Payback period
Normally, a Strategic Opportunity is selected if its NPV is positive or IRR is
more than cost of Financing
It is important to consider opportunity cost to ensure efforts are put on the highest possible value.
FGs should be evaluated over a longer term horizon to ensure profitability and sustainability.
Sensitivity analysis helps to identify the impact of worst case scenarios and survival
Payback
ROE
ROCE
IRR
NPV • Net Present Value of the Future Cash Flows
• Internal Rate of Return. If its higher than cost of
funds
• Return on Capital Employed (Equity+Borrowing)
• Return on shareholders’ equity.
• Payback period of the investment

11. Once an opportunity is finalized, it needs to be operationa-
lized without undue delays to avoid replication by the
competitors.
Operational plan should address all of the actions
and resources required to launch, including
1. Timelines for the actions
2. Required resources (human, financial and others)
3. Planned management structures
4. Scenario planning
5. Training
6. Risk mitigation
7. Budgets
8. Performance measurement and Accountability (use Balanced Scorecards)